The Breakdown - Crypto Daily 3@3 - 8.1 | UASF at 2 & power in crypto networks / Zcash dev fund / Crypto in the wild

Episode Date: August 1, 2019

It was the two year anniversary of UASF (and the BCH chain split from BTC), which marked a significant moment in the history of Bitcoin. In short, the culmination of the block size war demonstrated the relative power of the distributed network of individuals running nodes over huge mining and exchange interests. In this 3@3, we look at that, as well as a new struggle around dev funding in Zcash as well as some recent examples of crypto in the wild.  Note: the video clip is from Stacy Herbert and Max Keiser's To The Moon, and features Vortex.  Watch the video: https://www.youtube.com/nathanielwhittemorecrypto

Welcome back to another Crypto Daily 3 at 3. All right. So let's dive right in. Today was the two-year anniversary of UASF, the user-activated soft fork. And so this was a really important moment in the history of Bitcoin, and I think in the history of crypto networks in general, that we're going to come back to a lot. And so I wanted to share a little bit about this and just how much of the community is talking about this today.

So Jameson Lopp said today, Bitcoiners celebrate their divorce. from terrible ideas and unacceptable compromises. The market has validated this path for two years by nearly every metric, every conceivable metric. Bitcoin Forks offering nearly free transactions, struggle to find anyone who cares. So what was this? So the UASF, for those who weren't there, it's kind of an interesting thing because on the one hand, there was an uncontentious technical upgrade around this idea of Segwit. There was large agreement within the community that this happened. The question was how it was going to happen, how it was going to be implemented.

And where this really took a turn is that there had been kind of ongoing and simultaneously block-size debates about whether there should increase the size of Bitcoin blocks, in this case from one megabyte to two megabytes. And in May of 2017, something called the New York Agreement emerged. And the New York Agreement was effectively a large group of kind of the biggest businesses who are touching Bitcoin exchanges, mining operations, et cetera. and they effectively came out with a proposal to implement Segwit, but to at the same time implement a larger block size.

And so the community felt very much like this was just business as usual all over again, right? It was large corporate powers meeting in closed rooms, making a decision that would impact huge numbers of people and trying to kind of force it through. It was also in some ways almost a political act in the way that when a bill makes its way through Congress and the Senate, that you know, people might try to stick on amendments that have nothing to do with the original bill, but which allow them to kind of shoehorn in their issues. It was something like that. And so Kyle Torpey wrote this great piece, which I'll link to that I highly recommend

about just why this was so significant. And the community basically came together to fight this large corporate interest. These miners basically threatened to, they kind of imposed it in a way that suggested that If the community didn't go along with them, there wouldn't be miners to actually mine the blocks. And it was a real turning point moment for where power was going to lie in Bitcoin that has shaped the network since. And so, you know, there's other people who could do a much better job explaining this. In fact, much better people who have done a better job explaining this. So I'm going to kick it over to a clip from Max and Stacey Herbert's,

Max Kaiser and Stacey Herbert's To the Moon series on RT, where they did an entire episode about the block size wars, and this is kind of the culmination. July 2017 was the resolution of the block size war. The users of Bitcoin determined the outcome of Bitcoin. It wasn't the powerful miners, it wasn't the billionaires. They introduced BIP 148, and the user activated soft fork. August 1st, there was a soft fork to basically save Bitcoin. At the same time, there was also a hard fork that happened on August 4th.

2017 and that was to Bit Cash or Bitcoin Cash. I know you're not supposed to say Bit Cash because the founders of Bit Cash don't like that word. But that was the fork. Remember the day before everybody was hanging on the edge of the seat that there's going to be a hard fork to Bitcoin Cash and there's going to be the user activated soft fork. Will Bitcoin survive? Nobody knew for sure. And it survived. By the end of the day, August 1st, it was still around. It was still there. And then it set the stage for the second half of the year. And what we actually did was we issued this user-activated software, this ability to, with our own full nodes, decide what Bitcoin is for us.

Because Bitcoin, because it is decentralized, Bitcoin can be many things to many people, but you, the individual, have the ability to decide what Bitcoin is for you by running the Bitcoin software and enforcing the rules that you believe to be Bitcoin. And so that is what we did. As a people, as a community, millions of people across the world, we ran the user-activated software, which was the version of Bitcoin that we believed, to be the real Bitcoin. And so that, of course, might have caused a chain split, and that ended up scaring some of the larger corporations, some of the larger mining companies. They didn't want to see a chain split. So they essentially backed off.

And it was a very public loss and a very public win for the community. This really something that was, what I like to call, is completely unprecedented. This was really the Goliath, you know, type of battle that we saw here. And at the end of the day, it was the users, there was the community that won against these,

large, large corporations. So this matters for obviously more than just, technically speaking, in terms of what the Bitcoin network is going to look like, right? This is, I think it's important to go back to the point, which is easy to kind of say, but hard to actually hold in our heads in terms of just how big a thing it is, that we have no precedent for an economic network and an economic force at the scale of Bitcoin, that isn't run by some corporate structure or some just existing type of structure that we've seen before, right? Bitcoin is it doesn't have a company, it doesn't have a founder.

I mean, it's become a trope to say these things. It doesn't have a marketing department. It doesn't have a PR department. It is this force, which is enacted and enforced by the network of people that run the nodes and the set of miners who interact with them and everyone else who buys and holds and trades and uses it. And it's not clear in that scenario, there's no manual for where power was going to lie in this decentralized network, in this new type of network force. And so this was a major moment in terms of really understanding where power lied, what and

what were the limits of big economic interests that sit on top of the Bitcoin network to influence it and to shape it. And I think it's going to have precedent that continues for both the Bitcoin network, but also far beyond for years to come. And so actually with that in mind and this idea of where power lies in networks in mind, let's move on to number two for the day. So number two, Zcash funding debates. So we talked about this a couple times in the last few weeks.

We talked about it when the Y-Cash hard fork, friendly fork, as they called it, broke off a couple weeks ago. But yesterday, Zuko, the leader of the electric coin company, which is kind of the primary developer of Zcash, wrote Penda a long missive on medium about kind of like how the project had evolved and what they've done so far, where they are today, why it's so important in the context of kind of privacy

and the growing surveillance society, and what it's going to cost to keep it growing and keep it developing and figuring it out. And so this is all in the context of a question that faces the Zcash community next year. So when they originally launched Zcash, they launched the Founders reward, where 20% of the block rewards would go to the team that was kind of initiating the project. And they've gone out of their way to be transparent about where those funds go and who gets what. And the block reward subsidy was meant to last for four years.

And it was meant to never be more than basically 10% total of the 21 million Zcash that would ever be issued. And they're coming up on that. It's October of 2020 is when that is set to run out. And they're basically saying we'd like to re-up. And we'd like to continue building on the basis of kind of a founders reward, dev fund type structure. And so that's the gist of the debate. Now, or that's the starting point for the debate.

Now, you've already seen a lot of kind of conversation in the community about this. you know, most notably when Y-Cash, as I mentioned, hard-forked and left the Zcash community. So basically Y-Cash was a fork that was worried that this would happen, that the community was decided to extend the kind of privileges that went to this Founders' reward or this some sort of dev fund for too long. And so they shifted it. They didn't want to see the Founders' reward ever exceed 10% of the total.

21 million supply. So they changed it forks so that it would be 5% for perpetuity, which would effectively equal the same amount that 10% that was the original target. Now others have come in with different types of proposals. So you have Ryan Selkis from Masari. I'm writing a proposal this month supporting an 80, 10, 10 split in mining rewards between miners, the foundation, and ECC that's the electric coin company. I think that's a winning combo and I'm betting on it personally. Placeholder, I think, wrote this amazing consideration around this. So placeholder, Chris Berniske, for those of you guys who know Chris and Joel Monegrove, this very, very comprehensive, well-thought-out issue or kind of a position effectively. And they're also in

favor of a kind of a modified Devereward. And so this is going to be a conversation that I think continues for Z-Cash probably right up until October 20. I think you are probably likely to see more forks depending on how things go and how this develops. But again, it goes back to this question for me, which kind of is similar to the starting point in our talk today of UASF about where power lies in these communities. And what is their job? What is the balance between fighting the centralization that potentially that kind of concentrated developer groups and rewards represent versus technological innovation that can be incentivized by Founders' rewards. You know, I think that one of the things that makes Zcash interesting in this context for a lot of

people is the extent to which there is technological innovation around privacy, which is Zcash's fundamental point that is yet to be realized that people are kind of the whole point of them being interested in Zcash is that technology innovation to support better privacy, and who they trust to actually do that. And so it's going to be really interesting to watch. I don't think Zcash is the same exact context as Bitcoin, but I do think it's another important precedent as we figure out where power lies in crypto networks.

And with that, we'll switch to number three, which is kind of a different topic altogether. So finally, topic number three, crypto in the wild. So this is interesting. You know, part of the whole idea of the block size debates was that effectively people were arguing that you weren't going to able to have fast enough transaction times to deal with real world use cases on the base chain without some big changes. It's kind of the founding premise of Bitcoin cash in a lot of ways.

And so it's interesting now, you know, we're two years out. I think the narrative around Bitcoin has gotten much more comfortable being not just a digital gold, not just a digital store of value, but a kind of a digital scarcity that represents a hedge against what seems to be a growth in the interest in money printing kind of worldwide. And so that's kind of where the narrative is. But at the same time, you're seeing just actual still upticks in what use actually looks like. So let's actually jump over to Bitcoin first. So you have growth of Bitcoin Lightning Wallet. So Lee wrote this today over a Coin Desk just about kind of how everything is continuing to grow in the layer to wallet space.

And what that might mean, you have Lolly who's just announcing partnerships left and right. Lolly, for those of you don't know, basically gives Bitcoin back. It's kind of like rewards for shopping. So they go out and they find partners of different merchants, different popular merchants, and they use that as a way to introduce people to Bitcoin by actually just giving it to them for free for doing what they want to do. And it's just, it's effectively, it's a cashback reward, but it's in Bitcoin and it creates a form for learning. Safeway, they announced as a partner at Safeway.com specifically about a week ago. And it's obviously one of the, one of the biggest ones that they've done, but they've announced tons of other partners as well.

So this is creating this active force where people, maybe they're not using Bitcoin, quote unquote, but they're starting to figure out how to acquire it, how to hold it. And so that's really interesting to see. You have this happening in Ethereum, too. So you have Joseph Lubin who wrote about how there was a big uptake in Dye CDP creation after Coinbase's Earn.com ran a module about how to learn. So suggests that there's some amount of new interest in learning about decentralized financial products or DFI products or whatever you want to call them. And then finally, you have the MBA who's teaming up with Cryptokitties to launch an NFT basically that is a, collectible where you can kind of get in on, you can trade buy and sell, not just specific like kind of players like fantasy team style, but also their move. So Kevin Durant's three point

shot is one of the examples they used. And again, this is not to say that any of these things will work, but it's interesting to see, you know, just over this, over this week, how many different kind of crypto in the wild stories there are. And I think it's cool. You know, I mean, I tend to be pretty purist in some ways about when it comes to Bitcoin, I think that the, the most important aspect of it is what it represents from a global macro environment as a hedge, as a force in the larger markets. But at the same time, I do think that these, you know, both Bitcoin as a network, as a community, grow stronger the more people that come in.

It has more power to kind of engage in that activity as a hedge, the wider the network is, not just of users and holders, but of people who run nodes. And so I find these things, you know, lightning to make it more viable for day-to-day transactions, Lolly for bringing more people in to be really important as part of that kind of larger mission. And when it comes to these kind of, you know, often Ethereum-based assets that are out in the wild, I think they represent oftentimes totally new forms of entertainment in the case of something like CryptoKitties, you know, teaming up with NBA collectibles that are going to be really fascinating to see how value primitives interact with entertainment. And I think that when it comes to

stuff like the maker CDP launches, you know, it's the whole area to explore with Defi. But the more that those systems can be stress tested with more people, while the stakes are still relatively low, I think the better we understand what those systems might actually be good for and what they can do. So pretty cool to see just how much activity is going around the space, both Bitcoin and beyond. I think it's an exciting moment. Clearly, we're still kind of in a sideways market at the moment, but it's exciting. And we're going to keep watching what happens every day here at 3 p.m. So thanks for watching. Thanks for joining and I will talk to you guys tomorrow. All right, peace.