Unchained - Can Bitcoin Be Secured Only by Transaction Fees? Two Researchers Sound Off - Ep.272

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Starting point is 00:01:04 Please subscribe to laura shinn.b bulletin.com. Again, you can sign up for my Facebook bulletin newsletter at laura shinn. Dot bulletin.com. And now on to the show. Hi, everyone. Welcome to Unchained. You're no hype resource for all things crypto. I'm your host, Laura Shin, a journalist with over two decades of experience. I started covering crypto six years ago. And as a senior editor of Forbes was the first mainstream media reporter to cover cryptocurrency full-time. This is the September 14th, 2021 episode of Unchained.

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Starting point is 00:02:16 Ledger is the secure gateway to buy, exchange, and grow your crypto. No need to use different platforms to manage and secure your crypto. You have one place for all your crypto needs. Visit ledger.com and make your crypto journey easier. and safer. Today's topic is whether Bitcoin can be secured by transaction fees only. Here to discuss our Justin Drake, researcher at the Ethereum Foundation, and Vijay Boyapati, author of The Bullish Case for Bitcoin. Welcome, Justin and Vijay.

Starting point is 00:02:46 Hi there. Hi, Laura. Great to finally speak with you. Yeah, yeah, I agree. So the impetus for today's discussion came about from a previous show I did with Justin, in which he contended that in the not-too-discipline. future, like about maybe 20 to 30 years or now, he believes Bitcoin's block reward will be so low that the system will mostly be reliant on transaction fees and that those will actually not be large enough to secure the network. Since the show that we recorded previously was actually intended to focus on ether as an asset, I decided that this topic is big enough that it needed its own show.

Starting point is 00:03:25 So before we actually get into the meat of that topic, though, let's just have each of the guests state their background in crypto and also what they do now so that people can get a sense of each of your experience in the field. So Justin, why don't you start? Yeah, sure. So I'm a researcher at the Ephemm Foundation. I'm helping design what used to be called Ephraim 2.0, basically a set of upgrades to improve Ethereum.

Starting point is 00:03:53 I've been a different foundation for close to four years now. Before that, I was an entrepreneur building on top of Bitcoin through this project called Open Bazaar. And before that, I was involved, you know, tangentially with Bitcoin by running a Bitcoin ATM and also by running the Cambridge Bitcoin Meetup Group in the UK. Okay, great. and VJ? So I'm a computer scientist by training. I came to the US to do a PhD in computer science, but ended up at a startup called Google. I spent many years at Google. I left to do some political

Starting point is 00:04:37 campaigning, but came back to tech. And I discovered Bitcoin in 2011 in a bet with a friend where I won the bet. And the bet was for a silver coin, but he told me to take the Bitcoin. And I said, and what's that? And I've sort of been going down the rabbit hole for the last decade, trying to understand Bitcoin. And I wrote an article in 2018, which I think has become the most red, non-technical introduction to Bitcoin. It's been read over a million times, translated into 20 languages. I've called the bullish case for Bitcoin, and it's been now published as a book. So I'm really interested in the economics of Bitcoin. I've, you know, studied Austrian economics for a long time. So I'm a computer scientist with an interest in economics.

Starting point is 00:05:23 All right. So now let's get into the topic of today's discussion. And why don't we just have Justin begin by laying out your theory for why you think Bitcoin will not be sufficiently secured by a transaction fees. And then we can kind of, so you can just, you know, say that at a high level. And then we'll like unpack it in greater detail throughout the show. So go ahead. Okay, sure. So I guess, you know, in terms of the basics of Bitcoin security, we have what's called the security budget. And the security budget is basically the rewards that are given to miners to help secure the Bitcoin network.

Starting point is 00:06:07 And this is made up of two components. Component number one is BTC issuance. So BTC is Bitcoin the asset. It's just minted out of thinner and given to the miners. And then there's a second component, which is the fees. Now, to have this 21 million limit, what Satoshi Nakamoto did is that he had a exponential decrease of the issuance. So right now, the issuance is about 1.6% of the total supply. And there's a halving every four years roughly.

Starting point is 00:06:41 So if we look at a multi-decade time span, for example, 20 years, that's five halvings, which is the equivalent of reducing the issuance by a factor of 32. So we go from roughly 320,000 Bitcoin issued every year to only 10,000 Bitcoin issued every year. And there's relatively good reasons to believe that 10,000 Bitcoin per year alone is not sufficient. So we need to, and also this number 10,000 will keep decreasing exponentially. So if you wait another 10 years or never 20 years, it effectively almost goes to zero. So we need to be thinking about the security of Bitcoin from transaction fees only. And it turns out that transaction fees are problematic for various reasons. One is that they cannot, the, the, the, the,

Starting point is 00:07:41 the total fee volume cannot be guaranteed. So you can have periods of time where for some reason or another, the transactional utility of Bitcoin just dips below a safe minimum. And so you don't have this guaranteed security factor that you could have with issuance. Another problem with transaction fees is that they're very volatile. So, for example, during bare bull markets, they could be more than 10 times larger than during bear markets. And so, you know, that leads to various problems. For example, overpayment for security, which is kind of the dual of underpaying for security.

Starting point is 00:08:31 And then there's more subtle aspects related to transaction fees. For example, the fact that they can be stolen. So what do I mean by stolen? I mean that if you have a transaction with a very juicy transaction fee, that transaction could go in a block A or it could go into a block B. It doesn't really have to be assigned to a very specific block. Unlike issuance where every single block kind of has a very controlled amount of issuance. And so there are some instances where you have very,

Starting point is 00:09:09 high variance in the transaction fees in a given block that the longest chain rule starts to break down. It is no longer incentive compatible for miners to follow this rule. And you start having what we call chain on stability. So basically, transaction fees are worrisome from both a quantitative standpoint and also from a qualitative standpoint relative to issuance. So that's in a nutshell the basic argument as to why we should be, at the very least, having the discussion and asking ourselves, will Bitcoin be secure in the context of low issuance? Okay. And BJ, do you want to start with kind of like your just overall basic response? And then we can go one by one through these points?

Starting point is 00:10:07 Yeah, there's actually tons of stuff to unpack. And I think this debate is a great opportunity for education in general. And I hope you'll permit me, Laura, just take a step back and talk a little bit about security and what it means with Bitcoin because I don't think many people have really delved into, you know, what does it mean when someone sends me a Bitcoin? Like, what's the security around them sending me a Bitcoin? To do that, I just want to very briefly talk about the concept of ownership. because sending someone some Bitcoin, they own the Bitcoin.

Starting point is 00:10:42 But in our real world, we have this concept of ownership where you possess something, Laura, so your microphone in your house, you possess that. And we have this social structure around it, which is an apparatus of coercion, which is the government or the state. And the government steps in when someone takes that microphone from you. So this is kind of an imperfect system of ownership. And what Bitcoin and these other cryptocurrencies are trying to provide is a form of ownership over a digital good, which doesn't require an apparatus of coercion. Now, with that background, the concept of perfect ownership would be something like, I give you, Laura, a car or something like that.

Starting point is 00:11:30 And the car has a foreshield around it, and no one can touch the car except you. that would be perfect to ownership. We don't have that, but we try to get close to that with something like Bitcoin. And the way it works is that when I send a Bitcoin to you, your ownership of that, your strength of ownership increases over time as you have a number of block confirmations. And the way you can think about this or try and give an analogy

Starting point is 00:11:59 so your listeners can understand this, imagine I give you a block of gold or a brick of gold. and each block confirmation is like a brick wall that's built around that block of gold. And each time there's a new confirmation becomes harder and harder to get that gold. And so if you have a whole number of confirmations, then it's very, very costly to get that bar of gold because you have to tear down the wall to get to it. And this is essentially the security model that's used by Bitcoin and, you know, various other proof of work cryptocurrencies.

Starting point is 00:12:32 And I think it's important to have that kind of concept in our head that this isn't really binary. When we talk about security, we can't say, when I send you, Laura, Bitcoin, you have it. You just have greater and greater confidence over time that you really have it because the cost of taking it away from you of unwinding the transaction that's sent to you becomes so high that it becomes infeasible to take it away from you. Now, each brick in this wall that's protecting the gold bar that we're securing is made up of two components. It's made up of the block subsidy, which is kind of the reward that a miner gets when they mine a block and transaction fees.

Starting point is 00:13:17 So you can think of the height of the brick as made up of two things. And over time, one part of the bricks is going down, which is the block subsidy is going down. So the size of the bricks will go down. And we don't know how small the bricks are going to go. It's going to become, the bricks are going to be essentially just transaction fees. Imagine the brick has two components, a green part and a red part. And the green part eventually is going to go away. And the bricks are just going to be the red part.

Starting point is 00:13:42 And the red part is transaction fees. So I think it's important to have that mental model because one thing I think is important to understand, Justin brought this up is that sometimes we overpay for security. Currently, the bricks that are being put around each transaction are huge because the block subsidy is really large. And so it's interesting when an exchange receives Bitcoin, they will say, we want six confirmations before we believe that we have the Bitcoin because we want a very low risk that this can be unwound. And what they're saying is we want six very, very large bricks around this confirmation that we received some. Bitcoin. Now, it is possible there are, you know, alternative strategies where you can say, if the bricks got smaller, you just wait for more bricks, right? And this is actually true for other

Starting point is 00:14:40 cryptocurrencies, which have much less work put into each block. So for instance, Bitcoin cash, the amount of mining energy that goes into mining a single block of Bitcoin cash is much, much lower. So if you're in exchange, you're not going to say, we will accept your Bitcoin cash with six confirmations. We might wait for 60 confirmations. I'm saying all of this is kind of like to provide an analogy and to give some context as we talk about this discussion going forward. But my point is it's, I think it's important to, the bigger point I'm trying to make is that we don't know what the right amount of security is. Security is a spectrum. It's not. It's not. not good security or bad security. It's a level of security. And that level of security is actually

Starting point is 00:15:29 a little bit subjective. It's not necessarily the same for everyone. So me accepting a small payment, if you sending me, you know, a few hundred dollars worth of Bitcoin, one block confirmation is certainly enough for me. But if someone's sending, you know, a billion dollars worth of Bitcoin, the people who are, the person who's receiving that billion dollars might want 30 confirmations because the amount of security that they want would be commensurate with the amount or the value that's being sent. Right. But so if I were to summarize where I think you're going with this, you're trying to say that even if part of what Justin is saying is right, or even if someone were to try to attack the network, that there's only so much they could do because just the amount of effort to

Starting point is 00:16:17 really unwind things would be far greater. Is that a fair? Because by the way, Justin clearly disagrees with you, it was making all kinds of faces and whatever. So I definitely want to get to him, but I want to make sure that, you know, we understand your point in terms of this discussion. This is only one of the arguments I have. There's a whole number of them, but most of them center around the fact that I think Justin's argument is kind of a static analysis that doesn't really think about the game theory of what happens when Bitcoin is, you know, widely adopted. And this is more just the context to think about how security is treated from a micro perspective rather than a macro perspective.

Starting point is 00:17:02 From the perspective of someone who's accepting Bitcoin, they are able to change the amount of security that they want for a transaction. So you can conceivably say that right now we're going to. massively overpaying for security. Like Justin, I don't think Justin can realistically claim that he knows what the right amount of security for Bitcoin is. I would actually argue that right now we probably overpaying for security for Bitcoin because the block subsidy makes the reward so high that we have just a gigantic amount of

Starting point is 00:17:35 resources being put into Bitcoin mining. It seems to me that the network could probably get away with less security over time. But, you know, we're going to get into the argument of nation state attacks, which I think is going to be interesting and how many resources they can bring to there. But I think my view is that it's not correct to think about security as a binary thing. Okay, so go ahead, Justin, with your response. Yeah, so VJ is correct that security is a spectrum. If, and this is a very important if, if the attacker has less than 50% of the hash power, then. he is right, the notion of confirmation makes sense.

Starting point is 00:18:16 You know, if you have, you know, six common information, that's better than one confirmation, et cetera, et cetera. But the if might not hold true. There is a possibility that the attacker has more than 50% of the hash rate, in which case it is binary. It's no longer a spectrum. The attacker has essentially achieved God mode over Bitcoin, the blockchain. And one of the things that the attack

Starting point is 00:18:43 attacker could do, for example, is one of the simplest attacks, is simply to mine empty blocks for the rest of the time. And as such, even if you have a Bitcoin, which is a UTXO behind, you know, a million confirmations, doesn't matter. You know, you can think it's yours in the sense that you can look on the blockchain, you know, on blockchain. info, whatever block explorer, you can be happy that you own the one Bitcoin, but you're unable to spend it. Why? Because all the blocks that are empty and Bitcoin has lost censorship resistance. So I would, you know, I very heavily disagree with the fact that security is non-binary. It is binary as soon as the attacker reaches 51% of the hash rate.

Starting point is 00:19:30 Now, you could ask yourself the question, is it reasonable yes or no for an attacker to have 51% of the hash rate? And I would argue that, yes, it is very much reasonable for an attacker to have 50. percent of the hash rate. Even today, it would be reasonable. Why is it reasonable? And the reason is that at the end of the day, hash rate can be manufactured. It can be purchased. And so you can think of it in dollar terms. And so you can look, for example, at the hash rate of the Bitcoin network, which is roughly 150 million terra-hashes per second. And then you can ask yourself, how much does it cost to manufacture and deploy, you know, one terra hash per second? And you can put a dollar amount to that, you know, maybe $50, maybe a slightly different number.

Starting point is 00:20:22 But let's say that we assign $50, then the cost to make the most naive attack possible, which is to manufacture, you know, 150 million terrahashes, and then to just turn all all the hardware in one go and perform a 51% attack. is roughly $7.5 billion. So that is the security shield, right, the economic security of Bitcoin, which in the grand scheme of things is peanuts, right? If you look at the government, like the United States, the military budget is $750 billion per year.

Starting point is 00:21:02 That's for just a single year. So in a single year, the United States has 100 times the budget to go 51% attack Bitcoin, you know, gain this God mode capability and effectively remove all the nice properties that Bitcoin enjoys today. Could I just respond to that, Lauren? Yeah. I want to split this debate into like the incentives to attack Bitcoin sort of endogenously versus ex-ogynously, which is the people within the network, where is their

Starting point is 00:21:39 to attack it versus the people who are antagonistic to Bitcoin and want to attack it. I think it's important to separate that out because I, you know, Justin's making a point, which I somewhat agree with, but he said that, you know, when you have 51% of the network, you're in God mode and you can do anything, you will do anything. That's actually not true. There's been empirical studies where there have been periods of time when more than 50% of the hash rate was controlled by a pool, and there was no 51% attacks. they never tried to do a 51% attack.

Starting point is 00:22:12 And Satoshi designed the system so that it's much better to just mine the coins than to attack the network. If you're participating in the network, there's a huge detriment to attacking. If you're being rewarded in Bitcoin and you're trying to steal some Bitcoin with a double spend attack, you're undermining the network in which you're being rewarded. Right. But I think what he's saying is this is somebody that isn't participating in the network. if they just want to kill it. But also one thing, Justin,

Starting point is 00:22:40 I don't think it's true that if you, 51% that you can just go to God mode, because it's kind of limited what you can actually do. And for other miners that win rewards, they can continue adding to the blockchain. So there's basically three things that an attack can do. The first thing is censorship. And it can be full censorship, as I mentioned.

Starting point is 00:23:02 You just mine empty blocks. Or it could be partial censorship. So you could imagine, for example, if it's the Chinese government that makes this attack, they could say, you know, Chinese transactions can go through or Chinese-friendly, Chinese-friendly transactions and can't go through. And so the associated UTXOs would be essentially lost. There's one type of attack. Another type of attack is reorgs. So, for example, someone spends Bitcoin.

Starting point is 00:23:28 The recipient thinks he owns the Bitcoin, but actually he doesn't really because a re-org happens and the UTXO is. to someone else. And then there's the kind of third type of attack, which is breaking down the light clients. So the way that like clients work, they're not full nodes. What they do is they only check the header chain of proof of work. And for like clients, you can really fool them greatly in the sense that you can make them believe that, you know,

Starting point is 00:24:02 they have Bitcoin when they don't or vice versa. You really do have got mode. over these like clients. And why like clients important, they're very important, for example, in the context of bridges between blockchains. So when you have two blockchains, for example, you know, Bitcoin and Ethereum, and you want to bridge the two, the way you do that is you will build a like clients. So for example, Ethereum, you'll have a small contract which has like client access to Bitcoin.

Starting point is 00:24:34 And, you know, we, there could be, you know, billions of dollars, hundreds of billions of dollars that are on this bridge. And so these these like clients become huge targets for attackers. All right. Let's actually now go systematically, actually through some of the theory. So the first component, at least, and this is based on actually what you had written out before the show. So if it doesn't match exactly the overview at the beginning, that's. why. So, Justin, the first component of your theory is about the security budget and the security factor. You talked about how the security budget is what we pay to minors total. And then you have

Starting point is 00:25:16 something that you call security factor, which is the security budget divided by the market cap. And so one of my questions for you was since the security factor is divided by the market cap, and since both of those are denominated in dollars, why is it that you don't think that the rise in price will just keep up with the halving of the block reward so that the subsidy is kind of either at the same level or even like a greater level in dollar terms. Right. So there's two things you can do. You can look at security from an absolute standpoint. You know, what is the number of dollars required to attack Bitcoin? You can also look at security from a relative standpoint, which is basically relative to its market.

Starting point is 00:26:04 cap. Like how much, how many dollars do you, do you need to break, um, you know, a greater number of dollars? Um, so the, the security factor is going to be the, um, the, the security budget divided by the, by the market cap. And the smaller the security budget, the more leverage you have as an attacker. So, for example, if the security factor is only, you're 0.1%, then roughly speaking, for every $1 that you spend attacking Bitcoin, assuming that you are successful, then you'll be able to break 1,000 Bitcoin. Now, if we take the standpoint that Bitcoin will become the future of money, you know, that it will reach, let's say, a market cap of $100 trillion, then you need to consider nation states.

Starting point is 00:27:04 as attackers. And if your security factor is only 0.1%, then the cost to attack Bitcoin is only going to be $100 billion. And in the grand scheme of things, $100 billion is tiny, right, to break the money of the internet for the whole world. So we kind of went over this. But I guess what I'm asking is, like, So if mining costs and for like equipment and energy are like somewhat fixed, obviously, as the hash rate goes, it's just going to be a greater number of miners. So in that sense, it will, that cost will grow. But like the dollar value of like for, you know, Bitcoin, in terms of the issuance has been halved

Starting point is 00:27:57 every four years, right? So like you would just kind of need the dollar value to double. or I guess it's like the market, you would just need the, not the market, sorry, you would need the security budget just to double in order to keep up with the having of the issuance every four years, which like, that doesn't seem that challenging to me. Am I wrong? Am I thinking about this wrong? Maybe I'm not thinking about it correctly. Okay. I think you're focusing on absolute security. So let's let's focus on that. So there's kind of two problems about absolute security. The first one is that even today absolute security is kind of not satisfactory.

Starting point is 00:28:36 We talked about it, you know, $7.5 billion of economic security around Bitcoin. That's not satisfactory for the long term of future. Okay. So it goes back to the nation state thing. It's just like even, okay. The second problem is that the happening of the issuance, that's an exponential process that's going to last for decades. we cannot have the price of Bitcoin go exponential for decades.

Starting point is 00:29:04 It has to stop at some point. You can't have, for example, Bitcoin as an asset to be 100 times larger than the rest of all the assets in the universe combined. There needs to be a point at which Bitcoin has reached maximum penetration, and maybe that's on the order of $100 trillion. That's kind of the best case scenario maybe for Bitcoin. Beyond that point, you know, it cannot double every four years. The exponential has to stop somewhere. Okay. Okay.

Starting point is 00:29:37 Let's actually, so there are so many components of this, let's just actually keep moving because this one was also really interesting. Can I respond to that? Oh, sure. Go ahead. Yeah. So I actually agree with the point you're making, which is what really matters is the purchasing power of the security budget,

Starting point is 00:29:55 not necessarily denominy in Bitcoin terms and say this is a tiny fraction of the market capitalization of Bitcoin. It's how expensive is it in real terms to attack the Bitcoin network? I think that's important. I think Justin's making the point that as the market capitalization of Bitcoin goes up, the incentive to attack the network goes up. But an increasing incentive doesn't necessarily mean an increasing capacity to attack the network. So I do think the absolute security of the network is an important factor to consider.

Starting point is 00:30:28 The other thing I think is really important to think about is this is sort of theoretical analysis. And I think it's really interesting. You know, I think Justin has laid it out really well. But I think it's much more complex than this because you have to start thinking at this stage. If the mental model is, okay, this is so big that nation states want to attack it, we need to think about the game theory of that as well, right? it means that a lot of nation states have probably adopted Bitcoin, and they have a stake in Bitcoin, and they care about Bitcoin.

Starting point is 00:30:57 You could almost imagine a sort of sci-fi future where, you know, one nation state drops bombs on the mining facility of another country that's trying to attack Bitcoin because they have a stake in Bitcoin. The U.S., for instance, might have Bitcoin as its reserve currency in China is attacking it, and so they go drop bombs on the mining facility in China. So the game theory is much more complex. We need to think about stakeholders.

Starting point is 00:31:25 We need to think about how individuals in these countries will react who own a lot of Bitcoin. Like imagine the United States government decides we want to attack Bitcoin, but all of the large financial institutions have a massive part of their savings in Bitcoin. Are they going to allow that to happen? Would they just sit by idly? From a theoretical model, it's interesting. But in reality, people are going to lobby and people are going to put political pressure, and this is going to be true at the nation state level as well.

Starting point is 00:31:55 Political pressure can come in various forms. It can come through military might. It can come through lobbying. Yeah, it's almost like... So the game theory is quite complex, and, you know, Justin's bringing up a very interesting theoretical model, but we need to sort of expand our scope here. And if we are talking about the case where Bitcoin has become so big that it's the reserve currency of the world or something like that, yet the block subsidy is decreased.

Starting point is 00:32:20 to a very low level, it's mostly transaction fees. There are two things there. It's the security budget versus the adoption. Does the adoption itself provide protection, the fact that people have a financial stake in this? Imagine, for instance, like the politicians in the US try to ban 401Ks. Outright just banning them and saying, all your 401Ks are confiscated.

Starting point is 00:32:42 What do you think would happen? You'd have riots on the street in America. So that's certainly something I think we need to. consider here as well. Yeah, it's like if it gets to the point where a nation state does feel the need to 51% attack Bitcoin, then it's like they already lost at that point. You know, so. Well, and there is one other thing I want to bring up and, you know, Justin and I have spoken about this a few days ago. I think it's important to understand that there is a nuclear option here as well. Bitcoin has a proof of work function, which is SHA-256.

Starting point is 00:33:20 It's a sort of formula that is used to by miners to calculate whether they've got the right pattern to win the block reward. Under an extremely grave situation, it would be possible for participants in the network to say, we want to change our proof of work function. What would that do to an attacker? Every machine that they had bought, all of the electricity that they had put into attacking the Bitcoin network would instantly be worth nothing. It would wipe away the value instantly.

Starting point is 00:33:52 So you need to think about the participants in the network as well. People who have a stake and who would say the value of our Bitcoins are being attacked, what can we do? We can change the proof of work function. That's a nuclear option, which would be very contentious because people, you know, there's a fundamental building block of Bitcoin. But in an extreme situation, you can imagine something like that happening. You could also have people in the network just rejecting,

Starting point is 00:34:19 a particular chain. If you have a chain split where you have an attacker trying to double spend and building their own chain, each individual node can say, I am not going to accept this chain. So you have this internal game theory as well. What do people who are stakeholders do when there is an attack? That's the part which I think is not really being brought up or thought about.

Starting point is 00:34:41 And it's very complicated because we don't know exactly how that would work. People behave in all sorts of crazy ways. And, you know, we saw in the Bitcoin block size war that happened in 2017, there was all sorts of crazy game theory where people, like the miners were saying, look, if you keep mining the legacy chain, we're going to try and kill your chain. We're going to use our hash power to kill your chain. And it wasn't clear what exactly would happen. So there's a lot of complexity to think about, but we need to focus on the stakeholders as well. Okay. So in a moment, we're going to get Justin's response to this, but first a quick word from the sponsors who make this show possible.

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Starting point is 00:37:13 the link is in the description. Back to my conversation with Justin Drake and BJ Boyapati. Okay, Justin, what are you, what's your response? Okay, so I have a few thoughts. The first one is that, you know, I agree with Vijay, you know, that we should be looking at skin in the game. You know, if you have a government, for example, that wants you attack Bitcoin, we need to understand how vested they are in Bitcoin. Now, it turns out that, you know, there's going to be some.

Starting point is 00:37:43 some nation states which are maybe overweight Bitcoin and some nation states which might be underweight Bitcoin. So just to illustrate what I mean by overweight, underweight, let's imagine, for example, that Bitcoin is 20% of the world economy. But that in a specific country, for example, like China, it's only 1% of China's economy. In that situation, China would be underweight Bitcoin. It's not implausible for China to be underweight Bitcoin in 20 years. Why? Because they're preventing banks from dealing with Bitcoin. They're preventing exchanges from dealing with Bitcoin.

Starting point is 00:38:20 They're preventing miners from dealing with Bitcoin. And who knows, you know, the trend is pretty clear that they don't want Bitcoin to be a large part of the economy. So they want to be underweight Bitcoin. In this situation, they have relatively low skin. in the game and they actually have an incentive to go attack Bitcoin because they're essentially short Bitcoin. There's a bit of game theory here to adoption as well. I think if you look at the gold standard, you can say, look, we don't want to be on the gold standard. But eventually there's a massive financial disincentive to not be on the global standard in the 19th century. Eventually,

Starting point is 00:38:57 everyone adopted the gold standard because by not being on it and when everyone else is using it, you're harming yourself and your own nation. Some nations will try to pursue a path of autarky, which is like completely enclosed, having a closed economy, it doesn't interact with anyone. There are massive economic cost to that. My view is that Bitcoin will eventually become the world reserve currency because it has the properties that make it suitable as a world reserve currency. And the nations that are lost in line might be upset because they didn't get the biggest

Starting point is 00:39:29 benefit from jumping on Bitcoin early on, but they'll just inevitably have to adopt Bitcoin if they want to be part of the global market. Well, I agree with Justin that they could, China is a good example simply because of how long they've resisted the normal internet. But I could actually see two scenarios. One would be that they would attack Bitcoin because they don't have it and other countries do. And it's like no, you know, nothing off their back if they attack it. But I could also see that, you know, if they do want to unsee the U.S. dollar as the global. reserve currency, then actually maybe they would assert to suddenly embrace it. So I actually could,

Starting point is 00:40:12 you know, see it going both ways. But anyway, Justin, did you want to continue with your response and your, yeah? Yeah, sure. That's one aspect, you know, trying to look at a skin in the game. And, you know, your response, Vij, is that, you know, it harms them to not have skin in the game. But, you know, that's based on the assumption that Bitcoin will be, you know, the winning monetary shelling point for the internet. And the whole reason why we're having this discussion is maybe to put that to a test. Because if you want to be the monetary shutting point for the internet, you need to have predictability.

Starting point is 00:40:51 And as such, you need to have predictable security for decades and centuries to come. And this is not something that Bitcoin provides out of the box. The other point I wanted to make besides, you know, skin and the game, of governments is that this is not only a game of governments. Attacking Bitcoin is a game that is accessible to individuals, right? It would be rich individuals, but individuals nonetheless. So we could look, for example, at Elon Musk. He has several, you know, whatever it is, 50 times the budget to go attack Bitcoin, single-handedly. This is one single entity. You could look at large entities like microchrategy, right?

Starting point is 00:41:34 Microchrategy have over 100,000 Bitcoin and they have no plans to sell them, right? It's accumulation only. And so maybe in 20 years they might have 200,000 Bitcoin. And that would be 20x the annual issuance. And so if for some

Starting point is 00:41:50 reason or another, you know, this one entity is compromised, maybe they're hacked, maybe they're under pressure by some government or whatever it is, then, you know, they would have have multiple times the budget to go attack Bitcoin. So this is not just a game for nation states.

Starting point is 00:42:10 It's also a game for large individuals. Then another point that VJ put forward is that we always have the nuclear option to replace proof of work. And I don't think that's true. I think this is a flawed argument. And the reason is as follows. if you were to replace proof of work, what would you replace it to?

Starting point is 00:42:37 Now, you don't have time to go build another proof of work system that's based on A6. That's the maturation process, which in the case of Bitcoin, you know, it took many, many years. And so what you have to result to is basically proof of work on commodity hardware. Now, what type of commodity hardware do we have?

Starting point is 00:42:59 We have basically three types. we have CPUs, GPUs, and FPGAs, and you can just go buy off the shelf and use for proof of work. Now, let's assume that it's one of these three. It doesn't really matter. Let's assume it's the GPUs. Well, that's not going to be sustainable defense in the sense that the attacker has now just simply has to buy whatever it is, $10 billion of GPUs.

Starting point is 00:43:27 And now they can go attack Bitcoin. And now you could think to yourself, aha, well, we could do the nuclear option another time, right? And we could change proof of work another time. But what are you going to move to? You know, we no longer have the ASIC. You no longer have GPUs. So now you have to go to CPUs.

Starting point is 00:43:48 And then you might do it again, and FPGAs. But then now you've run out of options. You've covered all your commodity hardware. And there's nowhere else to go hide in terms of change. the proof of work? Well, you have to think about the context in which this argument is being made, but Bitcoin is widely adopted and you switch the proof of work function. Everyone who has Bitcoin and is a stakeholder,

Starting point is 00:44:14 suddenly switches to mining on their computer, and so you have millions or tens of millions of computers on commodity hardware mining, and somehow this attacker needs to accumulate that number of computational power that's being used by all of the stakeholders of Bitcoin who want to defend the network. I think that it's again something which isn't like that you can do immediately. Like an attacker can't suddenly accumulate tens of millions of computers

Starting point is 00:44:44 and put them in a mining facility and start attacking again. I mean, I think that's very, very implausible. Now, I think the model that you're playing forward is implausible. So there's basically three types of models like, that you could try and put forward when you look at Bitcoin security. There's basically the honest majority. So what that means is like basically you have the majority of the network which is honest. Generally, this is not seen as a realistic model.

Starting point is 00:45:15 And so you want to go to the rational majority. So the rational majority will only mine to defend the Bitcoin network if it's, if it's rational to financially rational to. to do so. But the thing is that they only, it's only rational if the, the cost of, of doing the mining is smaller than the rewards that they get.

Starting point is 00:45:40 But, you know, the whole context of this discussion is that we have low issuance and we have totally unpredictable fees and potentially extremely low fees during, during bear markets. And so there will only be so much mining power that will, that will, that will be rational. And so what are you assuming is,

Starting point is 00:45:58 is you have altruistic miners. So these are miners that are willing to pay to secure a common good. And the problem with common goods is that you have the tragedy of the commons. And you can't just assume that people will altruistically burn tens of millions of dollars every day to secure a network and for which the action of doing so

Starting point is 00:46:24 doesn't benefit them directly. It only benefits this common good where we have a tragedy of the comments. Yeah, and even just on a coordination level coordinating millions of people to do something is like really, really difficult. But anyway, Vij, what were you going to say? I want to also talk about another part of Justin's argument that I have a bit of a problem with, which is the idea that Justin's done a historical analysis of transaction fees over time as the block subsidy has decreased and it hasn't dramatically increased. I think it's important to understand Bitcoin's path to becoming the global reserve currency,

Starting point is 00:47:04 because I think that plays into it as well. People's usage of Bitcoin now isn't what it will be in the future. There is an evolution of money where money goes from being, and I talk about this in my book, it goes from being a collectible to being a store of value, then a medium of exchange, and eventually a unit of account. This is a big misunderstanding that a lot of people had when, Bitcoin's first created, they thought, oh, this is a medium of exchange. We should be using it for buying and selling things in commerce. And they were really confused why no one wanted to do that.

Starting point is 00:47:37 So part of the reason I believe that we don't see, you know, a really large increase in transaction fees right now is that Bitcoin is transitioning through this phase of becoming a store of value. It's a nascent store of value. And people largely use Bitcoin as a means of savings. They don't move it around very much. I think this is going to change. change over time. I think eventually Bitcoin is going to become more of a medium of exchange. And as it does, we're going to have much more movement and much more transaction fees. Ultimately, though, I think most medium of exchange usage is going to happen on second layer networks and that what Bitcoin at the base layer is going to be used for is settlement between

Starting point is 00:48:20 banks. So large financial institutions are going to settle with each other on a daily basis. So JP Morgan and Citibank, for instance, will settle three billion dollars worth of Bitcoin on a daily basis because their customers are sending funds back and forth and they'll have some difference in balance and they'll settle with each other on the blockchain. Once we get to that stage, I think the fees that are going to be used on the Bitcoin network are going to be much, much higher. This is under what I think will be a Bitcoin Global Reserve standard. And I think we could easily see Bitcoin fees in the thousands or tens of thousands of dollars

Starting point is 00:49:01 because people are settling very large amounts of money. And I think the demand for the block space will be much higher in the future than it is now, which is going to drive transaction fees. I don't think the historical analysis is, you know, what they say in the stock market, past performance doesn't guarantee future returns. I think past transaction fees for Bitcoin doesn't necessarily predict what the transaction fees are going to be in the future. And I think that really is because of the stage of monetization that Bitcoin is in primarily a means of holding savings. And Justin's talking about how, you know, the fees go up during bull markets and go down during bear markets.

Starting point is 00:49:44 This, again, is part of the process of monetization. It happens we've kind of learned. we've never seen this before, by the way. We've never seen a monetary good being monetized in real time in the space of like a few years or a few decades. The process of monetization for gold took millennia. And we've seen this very compressed time frame. What we've learned is there are these hype cycles. And I agree with Justin that, you know, the transaction fees increased during the boom phase or the parabolic phase of the hype cycle.

Starting point is 00:50:16 Because people are just trading back and forth in this speculative frenzy. and using the block space just to move to exchanges. But that won't be true in the future. These hype cycles are going to diminish in magnitude as Bitcoin becomes more widely adopted. We're not going to see a hype cycle in 20 years from now where Bitcoin drops 90%. As Bitcoin gets to the market capitalization of gold and surpasses it, as I believe it will, its volatility will be commensurate with the volatility of gold and eventually decrease below that volatility. So the model that we're thinking about is like a sort of looking in the rearview mirror.

Starting point is 00:50:55 It's not looking forward. To look forward, we need to think about how will Bitcoin be used? What implications will that have on transaction fees? How much demand will there be for block space? And I think all of those things are going to change very dramatically as Bitcoin becomes adopted by financial institutions, by nation states, by wealthy individuals. It's going to change a lot. Justin, what's your response?

Starting point is 00:51:22 Yeah, so I guess my first response, which is kind of qualitative, is that it's for me, at least, as a kind of design of blockchains, as it were, it's unsatisfactory to have the security of the blockchain rely on something which is unpredictable. And it's almost as if Bitcoiners are assuming the best possible case for Bitcoin, you know, is going to be money for the Internet. And in that situation, you know, and this very large transaction sees, then, you know, maybe Bitcoin can be, can be secure. But, you know, that is quite a bit big if, right. But, you know, I'm happy to make that assumption.

Starting point is 00:52:02 I'm happy to, you know, put aside, you know, the past, which is the past and which doesn't predict the future. I agree with that. And just assuming the best case scenario. So let's assume that the Bitcoin network is the Bitcoin. asset, sorry, is worth $100 trillion. Now, let's say that we want to have a security factor of 1%. 1%, by the way, is smaller than the current security factor, which is at 1.6%. Now, because there's only so many transactions that the Bitcoin network can do every year

Starting point is 00:52:39 because of the block limit, which is fairly small, it turns out you can only do roughly the 100 million transactions every year on Bitcoin. And so to achieve this 1% security factor, as VJ said, you actually need $10,000 average transaction fee. Now, $10,000 is an insane amount of money to do one single transaction, even in the context of settlement. Now, one of the reasons is that there are, are ways to settle other than doing a transaction on the layer one Bitcoin blockchain.

Starting point is 00:53:22 And if you have two ways of settling and one is significantly cheaper than the other, then you will go with the cheaper one. That's just the rational aspect of the model that we have, the rational players. Now, let me give an example, right? you have a lightning channel, right? When you make a transaction, you know, you want to, let's say, settle some amount on the, on the lightning network, that doesn't accrue fees to the Bitcoin network. Or you want to settle on the liquid network.

Starting point is 00:54:00 Or you want to settle, for example, wrapped bitcoins on Ethereum. or there's various other ways to settle than to use the layer one. So I think there's basically three big assumptions. Assumption number one, Bitcoin will take over the world. Assumption number two, that even if there was no alternative to settling and the only way to settle Bitcoin was using layer one, that these institutions would be willing to pay $10,000,

Starting point is 00:54:36 per transaction, which is questionable. But three, that there's no competition to the settlement of Bitcoin. That I don't think is true. I think there's a disagreement of terms. I mean, I think there is a huge difference between payment and settlement. Like using the Lightning Network to do a payment is not the same thing as settling Bitcoin. Settlement of Bitcoin is having confidence in final possession of the Bitcoin that you think you own.

Starting point is 00:55:09 Like financial institutions in the 19th century when they're under a gold standard, they had customers paying back and forth with pieces of paper, but that didn't mean that they believed they had the gold. They had the gold when they settled the gold and when the gold, you know, entered their vaults and they had the gold. The equivalent for Bitcoin is settlement on the blockchain. Like a lightning payment is definitely not a form of settlement. I would disagree.

Starting point is 00:55:34 the lightning network is designed in such a way that receiving X amount of Bitcoin through the lightning network is essentially the same as receiving the real thing. It's designed to be trustless. There is this one assumption that basically the base layer is sensitive resistant. But if you have that layer,

Starting point is 00:55:59 which you need in order to have this monetary status, then the Lightning Network is designed such a way that Bitcoin that you receive is as good as the real thing. And so, you know, transactions on Lightning are effectively settlements, at least from a security standpoint. I mean, the one thing I will say about what Vijay said was the idea that Bitcoin will be a settlement layer for big banks, I think it just means like we're sort of in the same system. We are now where we're all bank customers and we don't. you know, like, it's almost like the technology, like nothing changed, at least from the user point of view. And so in that regard, like I feel like that, that I think I would disagree with

Starting point is 00:56:45 that. I think that something very important changed, which is that the money is not owned or controlled by any government and can't be inflated. That's very, very different to what's currently the case, which is banks settling with each other using dollars because the underlying, underlying monetary system that's being settled on is very easily politically coerced, very easily inflatable. This is where I think the biggest impact of Bitcoin will be is that it is a new monetary standard that can't be inflated and it can't be politically manipulated. The fact that we have a financial system on top of it, I think, is inevitable. And Hal Finney, the guy who received the very first bitcoins from Satoshi, he wrote about this

Starting point is 00:57:27 all the way back in 2010. He said we need second layer systems. We need banks on top of Bitcoin because Bitcoin is designed in a way that it's very hard to change. And Satoshi wrote about this a long time ago as well. He said, as soon as Bitcoin version 1 was released, it was set in stone. It's designed in a way that's very, very difficult to change. And that's a good thing because we can rely on Bitcoin's inflation schedule. We can rely on the fact that there's only going to be 21 million Bitcoins.

Starting point is 00:57:57 It was easy to change Bitcoin, as I think very easy to change most old coins. I have no trust in their inflation schedule. So I don't think the fact that the financial institutions that are built on Bitcoin look somewhat similar. I think there would be big differences. For instance, they'd be like using lightning instead of using the Federal Reserve. That doesn't mean that the change isn't profound, but very geopolitically profound to have a different monetary base, which is non-political and non-inflatable. But then when you said, like, it'll be J.P. Morgan settling.

Starting point is 00:58:34 Will I, as a customer of J.P. Morgan? I was just giving examples. It won't be J.P. Morgan. But like, so will I be transacting in Bitcoin on my end or will I still be using dollars? You will probably be using the Lightning Network and you'll be connecting with some node operator on the Lightning Network. Okay. And that may be J.P. Morgan and maybe someone who's currently building out their lightning node now. I think it's probably not JPMorgan. Yeah, I hope it's not JPM Morgan. But also they're doing their shoot quorum or well, I guess they sold that to consensus. But anyway, okay, Justin, I think you wanted to respond.

Starting point is 00:59:15 Yeah, I think VJ is heavily downplaying the lack of self-custody. You know, I see it as a very problematic for Bitcoin. I mean, in a similar way that a lack of easy self-custody for gold, you know, didn't turn out so well for gold, right? Gold has all the properties, you know, that Vijay was talking about. It can't be controlled by governments. It can't be inflated away. And yet, gold hasn't, you know, really succeeded in modern society.

Starting point is 00:59:47 And part of the reason, I believe, is because it's difficult to self-custody gold. And so what happens is that you have banks, right? You have these financial institutions, just like the future that Vijay is talking about. And the problem is that these central entities now become pressure points, right? So they become pressure points for governments to start coercing. And so, you know, one of the beliefs of the Ethereum community is that, you know, you can only achieve true, resistance to coercion from governments if you remove, you know, these these custodians and you have self-custody of your assets. I mean, another thing that VJ talked about is that you can rely

Starting point is 01:00:41 on the 21 million limits. And actually, I think this is an illusion, a dream. I think it's a meme that has weak fundamentals. And the reason it's a meme with weak fundamentals, is precisely because of the topic of today's discussion, which is security. If you have an asset which is insecure, then its basic livelihood is jeopardized. And so basically what I foresee is the situation where there's going to be two bitcoins, like the unsustainable Bitcoin from a security standpoint, will continue on living. And then there might be a group of people who say, hey, we're going to fork out the 21 million limits, and then we're going to have sustainable Bitcoin.

Starting point is 01:01:24 And then guess what? Market forces will come at play. The unsustainable Bitcoin will likely die off because it's insecure. And then the sustainable one will be the next best thing that we can have because we don't even an ideal world and we can't always have the dreams that we dream. And so in that situation where the sustainable Bitcoin wins out, you've effectively been debased. And this is kind of, there's the saying, right,

Starting point is 01:02:00 that, you know, fate loves irony. And it's, you know, the Bitcoin philosophy is to try and be as ossified as possible, kind of for the sake of ossification. But it's quite possible that the premature ossification of the, of the Bitcoin network will lead down the line to a necessary change. And so Bitcoin in that sense has sacrificed long-term predictability for the benefit of short-term predictability. In the short term, we can predict what will happen.

Starting point is 01:02:39 But at some point, things become so unsustainable that something has to change. And one of the easiest things that could change is simply removing the 21 million limit. Wow. And in that instance, would it then become just a perpetual issuance? Or is that what you would propose? Yeah, I think a 1% tail issuance is a pretty good design. At least it provides a guaranteed security factor. And this is something that I believe other bitcoins, I think, this is, Vijay told me this, that it's one of the, the things that Peter Todd,

Starting point is 01:03:23 not I agree often with Peter Todd, but in this specific instance, Peter Todd wished that Bitcoin from day one had, you know, this tail issuance to provide guaranteed security factor. Okay. So, Vij,

Starting point is 01:03:38 do you want to give one last response? Because, I mean, by the way, you guys, I had like so many questions and we didn't even get to all. I mean,

Starting point is 01:03:46 I think we hit on most of the topics. This is just like there's just, much to it. But there is one last question I do want to ask after BJ gives his last response. Yeah, I don't want to get too wedded to this idea. I think part of your response to Justin's response to the financial institutions was like, oh, you know, everyone's going to be using JP Morgan. I think it would look very different that there'd be far more financial institutions. And there would still be in some individuals who did self-custody Bitcoin. But if you look at it mathematically, it's simply not the case that everyone is going to own on-chain Bitcoin. It's just impossible.

Starting point is 01:04:20 There are 8 billion people. There are 21 million Bitcoin, and a person owning that tiny, tiny fraction of a Bitcoin is not going to be able to transact that Bitcoin. It's just not going to work. So some very large fraction of the world's population is going to own Bitcoin through custody, through a different kind of financial institution, a much smaller, I think, financial institution. They will interact with someone who's on the Lightning Network. The other thing is, I think Bitcoin is not going to change the 21 million. supply limit. I don't think it's ever going to happen. I think Bitcoin is treated much more like a protocol than as a piece of software. I think Ethereum is treated more like a piece of software than

Starting point is 01:05:01 as a protocol. And the difference is with protocols, immutability is incredibly important. I'll just give one quick example. There's a protocol for power sockets in the United States, which is the shape of the power socket and all the devices that use it. You do not want to change that protocol. You don't want to change the shape of the power socket because everyone who's using that power socket is suddenly unable to use it. Now, you can make backwards compatible changes. So, for instance, with the power sockets in the US, they didn't use to be a ground. They added a ground, which didn't make it so that all the devices which use the old power sockets couldn't use them anymore. So Bitcoin has this philosophy. It's a value transfer protocol. And it's incredibly

Starting point is 01:05:45 important to stay backwards compatible. It's very strongly ingrained into the culture of the community. And I think if you embrace a different culture where, oh, we can just change the protocol whenever we want, the trust in the protocol that you can build on the protocol is severely undermined and the properties of the protocol. So Ethereum, for instance, has made the so-called ultrasound money by changing the issuance of Ethereum. I think this only proves that Bitcoin, sorry, Ethereum's issuance can be changed and could potentially be changed in the future if enough people in the Ethereum development community became Keynesians and started subscribing to Keynesian economics and said, well, we need really good inflation here because we believe that it's required for growth,

Starting point is 01:06:28 then that could happen. I think that's a big difference. And I think that's one of the reasons that Bitcoin is not going to change, is this belief that it's a protocol, not that it's a piece of software. Okay. So I'm glad you brought up Ethereum, because this was the last question I did want to ask. Justin, you said in the last show that we did that you felt Ethereum was the fulfillment of Satoshi's vision. And as I'm sure we all saw on social media, that was a very controversial statement to say the least. I mean, I knew it at the moment. I was trying to wrap up the show, so I didn't want to go there at that time.

Starting point is 01:07:04 But can you explain what it is that you mean by that? Yeah, sure. So one of the things that, so by the way, I regret using the term Satoshi. Vision because there's literally a project called Satoshi Vision. And I didn't mean to align myself that project at all, if anything. But yeah, after the show, one of the things that I did is I tweeted Satoshi's very first commit, right? So we have a very good record of Satoshi's very first piece of public code for Bitcoin.

Starting point is 01:07:41 And one of the things that you'll find, and this is not at all kind of obfuscated or hidden in any way, like in the code, Satoshi was thinking of building a marketplace on top of Bitcoin. When you want to build a marketplace, you basically use money as one of the Lego blocks. But you're going to need many other decentralized Lego blocks in order to get a marketplace running. You're going to need decentralized identity. You're going to need decentralized escrow contract. You're going to need decentralized stable coins. You're going to need decentralized reputation.

Starting point is 01:08:17 You're going to need decentralized file storage. There's lots and lots of things that you're going to need to build in order to get a decentralized pay-to-pay marketplace, which was the vision of Satoshi literally in the code, the very first commit that he put forward for Bitcoin. Now, unfortunately, Bitcoin has become. well, maybe not unfortunately, but the fact of the matter is that Bitcoin has become digital gold. Now, gold is this very interesting asset. It's literally a rock, a shiny rock, that you spend a ton of energy to get out of the ground, dirty ground, and then you just put it back in the ground just in the vaults of some bags.

Starting point is 01:09:01 It's kind of this somewhat crazy concept, but, you know, that's what money is. But the thing that's a little bit disappointing is that it's not a Lego block in the sense that the idea of Bitcoin is that you hold it in a vault for decades and you just don't touch it. You just look at it. It's shiny and you enjoy just looking at your pet rock. In the context of Ethereum, we're trying to build these money Legos. That's literally what we call them. And we want to stack things together. and we want to build cool stuff,

Starting point is 01:09:37 such as decentralized peer-to-peer marketplaces. And by the way, this is part of the reason why I was working on OpenBazaar is because I felt that this was kind of quotes to show us the vision, and I wanted to help out. It turned out that I was maybe 10 years too early, right? All the building blocks were not there.

Starting point is 01:09:57 You know, we had escrow contracts with Bitcoin script. We had Bitcoin, but we don't have, you know, many of the things like stable coins and, a reputation and identity and all these other things. So yeah, long story short, I see the opportunity kind of this total addressable market for blockchain technology to be maybe 100x larger than this digital gold aspect,

Starting point is 01:10:25 which is interesting. But in the grand scheme of things, is missing the big picture and missing the wider opportunity. And Vijay, what do you have to say about that? I think Ethereum is a big experiment. As a computer scientist, I think it's doing something that I think is actually not possible. I think, you know, the saying smart, sexy, sane pick two. I think there's the equivalent for blockchains, which is decentralized, touring complete, and scalable. And I think Ethereum is trying to be all three, but one of them is going to fall apart.

Starting point is 01:11:05 And I think the thing that will fall apart with Ethereum is the decentralized aspect. I think there's another problem with Ethereum, you know, sort of taking this approach. This is cool software and we can upgrade and we add all of this stuff, is that anyone can do that too, if it's a piece of software.

Starting point is 01:11:21 If it's not something that's immutable and you trust it and you believe that it's something you can store value in, you have these other projects coming along saying, oh, we'll just copy the things that we like in Ethereum and add all this new stuff, if you're Ethereum and you're trying to make a change to help the scalability,

Starting point is 01:11:39 because Ethereum right now is almost unusable. The fees on Ethereum, if you worry about fees. I don't worry about fees as a settlement system, but I worry about fees if I'm trying to do these tiny smart contracts. The fees on Ethereum are insane right now. So you have these other platforms coming along like Solana saying, look, we can do the same thing with way, way cheaper fees.

Starting point is 01:12:01 And we can scale way far. faster than this and we can do all these new things. It's very hard to change something like Ethereum when it's at scale. It's like changing a plane that's flying and taking the engine out while it's in midair and changing the engine. So they're trying to do this kind of thing and they're trying to make Ethereum scalable at the same time as allowing it to do all of this stuff. I think at best it's an experiment.

Starting point is 01:12:28 I think it's a very, it's an experiment is very unlikely to succeed. because I do not believe it's possible to have these three attributes at the same time. Decentralized, Turing, complete, and scalable. But, you know, Justin is working on this. Justin, just from speaking here, he's an incredibly smart person. I commend the efforts of people who are working on this thing. It's worthy of effort. I just think it's a doomed to failure.

Starting point is 01:12:57 All right. Well, we're well over time. and I feel like this conversation could have gone on a lot longer because, as I said, I mean, there's just so much we didn't even discuss that I had on my list. But maybe we'll, you know, revisit this because this is a kind of perennial topic. I remember learning about this potential issue back in 2015 when I first started learning about Bitcoin. And I was like, I know I've said this before, but, you know, I was thinking, oh, you know, that's going to happen in 2140 and I won't be around to see it and I wanted to know how it would turn out. But apparently Justin thinks that it'll

Starting point is 01:13:35 happen in a couple of decades. So maybe I will get to see what happens. But, you know, people are constantly, you know, writing pieces on this issue and talking about it. So I think maybe we could revisit in the future. But in the meantime, you guys, this was super fun, very thought-provoking. And for each of you, why don't you say where people can learn more about you and your work? Sure, happy to go first. You can find me on Twitter, Drake, F, Justin. VJ. You can find me on Twitter as well, Real underscore Vijay, and you can find my book, wherever books are sold. Perfect. All right. Well, thank you both so much for coming on Unchained. Thanks, Laura. Thanks again. Thanks, Justin. Thanks. Thanks so much for joining us today.

Starting point is 01:14:24 To learn more about Justin, BJ, and the issue of whether Bitcoin can be secured, By transaction fees only, check out the show notes for this episode. Unchained is produced by me, Laura Shin, with help from Anthony Yoon, Daniel Ness, and Mark Murdoch. Thanks for listening.

Unchained - Can Bitcoin Be Secured Only by Transaction Fees? Two Researchers Sound Off - Ep.272

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