Unchained - Does Maximalism Help or Hurt Bitcoin? Lyn Alden and Udi Wertheimer Debate - Ep. 417

Episode Date: November 8, 2022

Lyn Alden, founder of Lyn Alden Investment Strategy, and Udi Wertheimer, a recovering Bitcoin maxi, talk about Bitcoin Maximalism, how Bitcoin is developing, and what’s the future of Bitcoin’s security model.    Show highlights: What the definition of Bitcoin maximalism is whether BTC maximalism is toxic whether Vitalik Buterin is still a bitcoiner and how Bitcoiners became the 'token police', according to Udi why Lyn thinks Bitcoin has been attacked by the media since the beginning the attacks by Bitcoin maximalists on Nic Carter and Andreas Antonopoulos how adoption kicked in during previous cycles and why it benefitted BTC what the different types of Bitcoiners are what developments are being made around Bitcoin the importance of Bitcoin being permissionless what the use cases for Bitcoin are and whether it’s still a highly speculative asset whether people care about using decentralized payment tools how Lyn defines ‘ultra sound money’ and why she thinks that Bitcoin is better at that than ETH whether Bitcoin’s security model needs to be fixed  why being able to run a node is essential for censorship resistance Take Unchained's 2022 survey!   Unchained is doing its annual survey. Tell us how you think we’re doing and how we could improve, whether it be on the podcast, in the newsletter, or in our premium offering. Looking forward to hearing your thoughts!    Thank you to our sponsors! Crypto.com Chainalysis Minima   Udi: Twitter Substack Previous Unchained episodes: Why Bitcoin Maximalism Is ‘Like a Shitcoin Community’   Lyn: Twitter Website Previous Unchained episodes: How Will Inflation Impact Crypto? Is Ethereum a Good Investment?  Why Bitcoin Now: Meltem Demirors and Lyn Alden on the Perfect Conditions for Bitcoin Episode Links Previous Coverage of Unchained: Is Bitcoin Doomed to Fail? Eric Wall and Justin Bons Face Off Arthur Hayes, Former Ethereum Skeptic, on Why the Merge Makes Him Bullish on ETH  With the Merge, Will Ethereum Take Over Bitcoin’s Title as Digital Gold?  Bitcoin’s culture and security Bitcoin Maximalism Is Dead, Long Live Bitcoin Maximalism by Pete Rizo Setting the record straight by Nic Carter The Rise and Fall of Bitcoin Culture by Paul J. Dylan-Ennis Geeks, MOPs, and sociopaths in subculture evolution by David Chapman Surprisingly, Tail Emission Is Not Inflationary by Peter Todd Justin Bons’ thread on BTC security model A (brief and incomplete) history of censorship in /r/Bitcoin by John Blocke Ultra sound money Learn more about your ad choices. Visit megaphone.fm/adchoices

Hey everyone, just a quick note before we begin. Unchained is doing its annual survey. Head to surveymonkey.com slash R slash Unchained 2020 to tell us how you think we're doing and how we could improve, whether it be on the podcast, in the newsletter, or in our premium offering. Looking forward to hearing your thoughts. Again, the link is surveymonkey.com slash R slash unchained 2022. And you can also check the show notes for the link. As for today's episode, this debate over Bitcoin maximalism between Lynn Alden and UdiWart timer started off in a Twitter thread, and it ended up being a really thoughtful discussion about the Bitcoin community and how Bitcoiners should handle the ways in which Bitcoin is distinct

from other crypto assets. Lynn makes a strong case for all the ways in which Bitcoin is unique, especially in terms of how decentralized it is. While Udi wonders why Bitcoiners have turned themselves into the token police, and why morality forms the basis of the identity for a number of Bitcoiners, he takes a more practical approach looking at how people have recently been entering the space and pointing out that they're probably not starting with Bitcoin. Lynn pushed back, noting that Bitcoiners have been entering in bottom-up communities in developing countries. What was interesting to me was that they actually agreed on a number of things, but have different conclusions. I'd be interested to hear what you think, either on Twitter

or if you're in our Discord, then over in that forum. And now on to the discussion with Lynn and Udi. Hi, everyone. Welcome to Unchained, your no-hype resource for all things crypto. I'm your host, Laura Shin, author of The Cryptopians. I started covering crypto seven years ago, and as a senior editor at Forbes, was the first Main Tree Media Reporter to cover cryptocurrency full-time. This is the November 8th, 2022 episode of Unchained. Want to keep up with the biggest news plus market updates in crypto? Get Unchained in your email every morning Monday through Saturday. Go to Unchained Podcast. Podcast.com to subscribe.

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providing industry-leading compliance, market intelligence, and investigation support for all crypto assets for organizations like Gemini, crypto.com, and BlockFi. Maximize your potential with the leading blockchain data platform by visiting chainalysis.com slash unchained. Today's show features a debate about Bitcoin maximalism. Here to discuss our Udi Wertheimer, recovering Bitcoin Maxi and Lynn Alden, founder of Lynn Alden Investment Strategy. Welcome, Lynn and Udi. Hey, it's great to be here. Thanks, have me back.

So for those of you who are watching on the video, you may notice wearing sunglasses, which we decided to do to kind of poke a little bit of fun at Udi. What kind of person wears a sunglasses indoors? Exactly. What are you doing? Although, you know, it's a pretty sunny day where I am, so you know what? I'm kind of grateful for it. Not sure how long we'll keep this up, but for now, let's go with it. Okay. So before we dive into the meat of the discussion, let's just define our terms. How would you each define Bitcoin maximalist or Bitcoin maximalism? Do you want to go first, Lynn? Or should I start? You go first because you're on the prior

show. All right. So it's a tough one, right? It's funny. I think that I think we totally coined the term Bitcoin maximalist probably many years ago. I don't know. know, 2015, roughly. And he definitely didn't mean it in a, in a flattering way. I think that a big part of the Bitcoin community kind of adopted the term later, maybe half as a joke and half just because I guess they felt like it's right or a good description. But it's kind of, you know, like some people would say a Bitcoin maximus is just someone

who focuses only on Bitcoin, right? and just doesn't care about the other cryptocurrencies, doesn't find them interesting or just think they're too complicated or don't find any benefit in using them or looking into them. And I think that, you know, that definition and that, you know, position is very, very reasonable. Like, there's, you know, there's nothing, there's nothing bad to say about someone who just chooses to focus on one thing.

That's great. The other definition of Bitcoin Maximus is almost has nothing to do with Bitcoin. So it's kind of the other type of Bitcoin maximalist is defined by what they don't do, right? Like they don't touch other coins. They maybe don't eat vegetables. They may be, you know, it's really defined by what they do not do and not really but what they do do. So it's kind of hard to come up with a definition that explains it very clearly, at least for me. I know I should be able to, but it's really hard.

But but like you you are against why? So I definitely am not against focusing on Bitcoin. That's definitely not something I'm against. I think that's great. Like, you know, people can focus on cooking and other people can focus on Bitcoin. That's great. That's awesome. Usually the best things happen when someone focuses on one thing.

There's really nothing wrong with that. I think that the part that I'm kind of against is the moralization or, or, assigning immorality to any other type of asset. I think that that's what I'm kind of against. And I think that it's, in a way, hurting Bitcoin, too, because I think that, or, you know, Bitcoin itself is a digital asset. Nothing can hurt it, right? But I would say that it hurts the adoption of Bitcoin in a way because I think that

we could do better job without reach. If we, for example, understood why some people choose to trade those coin or trade NFTs. We don't have to encourage them to do that, but we can still go and say, hey, you're an NFT trader, you're a dose trader, good for you. If you happen to manage to make some money, if you didn't lose all of your savings, I think you should put 5% of your wins in Bitcoin for the long term, right? So, and I think we kind of miss all of that. Lynn, what about you? How would you define it? Yes, I think you point out, you know, the fact that it was coined by, you know, someone who's not a bitcoiner, or at least not at the time. Oh, Vitalik is a very much of

Bitcoin. He was then. He was at that time. Yeah. Yeah, he was a journalist covering Bitcoin at that time. Yeah. So as that term came out, right? So as that, and you went in the other direction, obviously, towards Ethereum, you know, it's coined by someone who at least at the current time is not a Bitcoiner, and it was kind of against a certain segment of Bitcoin. And so that's part of why it's a complex term is because, I mean, we see about history that often terms are taken by the, you know, someone is first used against you and then you kind of turn it back on them as like a proud thing. And so that's always going to be a shifting definition of what Bitcoin maximal is. I think what I would focus on is the idea that there is an important element in the Bitcoin

space that I think pushes back on a lot of what other happens in crypto space. And of course, there's a spectrum for how they do that. There are some people that are like, you know, absolutely Bitcoin only. There are other people that are Bitcoin and stable coins. to other people that are, you know, Bitcoin and privacy coins. But then as you go out, as you kind of broaden that, I think there's a recognition among a lot of people that are very interested in Bitcoin that, you know, the vast majority of what we're seeing in this space is largely scams. And I think Pete Rizzo does a really good job, for example, of articulating in detail a vision

of Bitcoin Maximilism. He has got like an article on Forbes called, you know, How to Be a Bitcoin Maximilus. And it has like nine points. People can check that out if they want. One way I would boil it down, I think, or at least a vision that I look at, when I kind of analyze the Bitcoin space and why a Bitcoin-only or a Bitcoin-focused view makes a lot of sense, or how I would phrase it, is that, you know, Bitcoin Maximus is the rejection of undeserved seniorage, right? So it's the rejection of fiat currencies where, you know, governments and, you know, central banks can create more. They can adjust the ledger in their favor whenever it's politically important for them to do so. And then also in the crypto space with pre-mines and with changing

monetary policies and very centralized types of systems that are prone to change over time, that kind of give more of the power to developers and VCs and less power to node operators, if people can even run a node and they can therefore change the system over time, they can change the rules rather arbitrarily or as they see fit, which is much like a normal software project, a normal centralized software project. And so I think a big, distinction is that in the Bitcoin space, that idea of self-sovereignty is a really big factor. And part of why I was drawn to the Bitcoin ecosystem is because of the outcome of the block size war, so during that bear market, as that played out, I think it showed the importance of

having that power in the user base and not in the developer base and not among large, centralized companies, exchanges, different companies with interests. And to this day, I see Bitcoin is the only one that has, I think, a rightful claim on decentralization and immutability or as close as you're going to get to immutability. I would phrase it as, you know, in software, self-sovereignty is like a platonic ideal. You can ever reach it, but you can get as close as you can as possible, right? So you can run a node. Then you can interact with the network on your own. Of course, there's always the risk of bugs.

That's why you can never reach, you know, fully, you know, complete perfection. But a lot of these other systems, what they do is they take some element of that away. They give it more to a centralized set of participants, but then they still try to assert that it's essentially the same thing, that it's still decentralized, and that they somehow made a strictly better improvement over Bitcoin. Another way that I focus on it, because my background is multi-acet. I cover equities. I cover commodities.

I'm known for diversification, but in this space, I don't diversify. And, you know, I think the one lens I look through is that Bitcoin is the one system that I think is still kind of focusing on the initial purpose of having an actual decentralized open protocol. And that most of these other things in the space, to varying extent that they might be interesting or exploring interesting ideas, look a lot more like equities, where you're relying on a centralized team to do something to advance that ecosystem. And that that, you know, to some extent, is fine. But I guess where I push back or where I kind of published research reports or things like that is areas where they try to argue that they're that they're strictly better in Bitcoin in some way. Right. So I don't sit there going after some like token on like a defy exchange, for example. I focus on L1s that would claim that they're just as hard money, for example, or just as decentralized as Bitcoin.

Or in some cases they argue that they're more so, but I think the evidence shows that they're not. And so, Lynn, just so we're clear, and do you consider yourself a Bitcoin maximalist or no? So I'm not a fan of labels. I'm firmly in the Bitcoin focus camp, right? So, I mean, I, you know, I'm on the board of a Bitcoin only company. I, you know, I work with a Bitcoin only VC advisory firm. You know, I've been openly bullish on Stablecoins. Obviously, I'd like to see more of them on Bitcoin again. I mean, they started on Bitcoin. I like to see them back on Bitcoin, but I think stable coins on multiple platforms are serving an actual purpose for a lot of of people, especially in countries where they have very high inflation. So, you know, I'm not sure I would stick to a specific term, but I certainly identify with that group. There's even people

that would be classified as Bitcoin Maximus that don't like that term specifically because it was kind of coined against them. Right. So label aside, I would consider myself a Bitcoiner. Well, one thing I want to ask about was that panel that happened in 2021 at Bitcoin, Miami. that was basically about why toxic Bitcoin maximalism was good. I have a feeling that that's really the element that Udi, when he denounces Bitcoin maximalism and that he's against. Udi, would you agree with that? I mean, you know, it really depends on definitions.

I wouldn't say that the main thing I'm concerned about is people being, you know, not nice online. That's, you know, whatever. That's not something that, you know, people can do whatever they want. I think that specifically the dismissiveness. And you know what? It's even okay to dismiss. But the painting other projects as immoral just for being other projects that are not Bitcoin is the main thing that I'm concerned about.

And, you know, as far as, you know, if someone sits down and analyzes the risks in another asset and explains why. an asset is risky and where you're holding it might be a problem, then that's fine. But as long as we understand that it's a question of risk and not a question of morals and injustice, then the discussion, I believe, is much healthier. And it allows you to connect to people who are, you know, not in your same camp, who are, you know, have other interests and motivations in life and still, you know, show them how, Bitcoin can be a fit for their needs. So two things are true. One, the majority of Bitcoin holders also hold old coins. I believe that in the U.S., Grace-Cull has a research that says that in the

U.S., the number is around 80% of Bitcoin holders also hold other coins. And I think that the reverse is true as well. So most alt-coin holders also hold Bitcoin. So, you know, we're not that different, at least in asset locations. And it's funny. I think that, you know, me and me and Lynn are probably, probably share an opinion on most, you know, most Bitcoin related and Bitcoin maximum issues, too. You know, like I, my portfolio has been very heavy on Bitcoin for many years and continues to be, you know. I believe that it is the only decentralized cryptocurrency, and the rest are at best, maybe one day will be, and probably not that even. I, I do. I, you agree that most of them are very similar to equities.

I just think it's fine. So, you know, like, I think we would agree on a lot of things. I think the main thing that we might have a disagreement on is that I think that the assignment of morality to assets is not beneficial, not to the person who holds that view and not beneficial for Bitcoin either. I wonder if I should kind of address some of the points that Lynn talked about. Yeah, go ahead. So, you know, the first one, and it's maybe a little bit of a nitpick, but, you know, I think

Vitalik is a bitterner in the present, you know, he definitely was a bitcoins. He was a Bitcoin developer, prolific one that, you know, had a lot of influence on, on just the Bitcoin technology stack early on, and also on Bitcoin journalism early on and a lot of influence and just getting a lot of people to know about Bitcoin. So he definitely was a bitcoiner. But I would say he's a Bitcoinser today as well, even though he obviously thinks Ethereum is better. I think he wants Ethereum to be more successful. I don't think that makes him not a bitcoiner. I mean, he holds Bitcoin. He's public about that. And I think that makes him a bitcoins. There seems to have been this shift in some sectors of the Bitcoin community where the definition of Bitcoins

is become very, very narrow. Like, in order to be a Bitcoiner, you have to be a Bitcoiner, you have Bitcoin only. And that's very new. I don't know. That was definitely not the case when I joined. You know, like almost all bitcoins were exploring other old coins because that's, you know, we still didn't even figure out the difference, you know. So and new people who joined today, they also didn't figure out the difference yet. So of course, they're exploring other assets. And even people who do figure out, and I'm sure the Vitalik is very well aware of the differences between Bitcoin and Ethereum, I still think they're bitcoins if they own Bitcoin. I would you know, if we want to have a definition for a bit with a bitconer is, it will probably be someone

who, one, has some financial interest in Bitcoin and two is willing to identify as a Bitcoins, right? If those two terms exist, then it's probably a bitconer. I think that's enough. And I kind of reject the idea that anyone who doesn't fall into the specific maximalism is not a bitcoiner. And, you know, if we're thinking about bitcoins, then, like, it's true, and it's really true that a lot of Bitcoin maximists do a pretty good job at pointing at problems at these other coins, many of which are really actual scams. And I think there is value in that. But the thing that I'm a bit surprised about, and Lynn, maybe you can help me figure that out, like, how did it become? the job of Bitcoins to do that. Like, how did Bitcoiners become the token police?

Like, why is it not lawyers who do that or, you know, regulators or gardeners? Why is it Bitcoiners specifically? We took that job of policing the tokens of the world and saying which ones are right and which ones are wrong. And obviously they usually say that all of them are wrong. Like, how did that happen? How come we don't see Ethereum people making it their, you know, culture to the miss other coins. Like, why is that a Bitcoin thing? Well, I don't speak for, you know, Bitcoiners

or maximalism, but I'll give my view on that. And I'll, I'll kind of address a couple other points that came up there. I think it's all kind of tied together. You know, when it comes to ethics, obviously people have different views on this. I think where ethics comes into play is the people that are generally trying to gain undeserved seniorage. So it goes back to that kind of prior argument of who controls the ledger, who wants to manipulate other people to come into the ledger so that they can, for example, exit the ledger at an opportune time. And so what you see a lot of in the crypto space is, you know, let's go for actually like a normal startup, for example. If you do normal venture capital, you know, you're trying to build an actual business with a user case. It's not primarily about

speculation. And then over multiple years, if your project is successful, you get an exit either from a, you know, a company actually choosing to, you know, buy your company with real money, or you go public if you're big enough. And you have to go through a series of disclosures. There's kind of a hurdle of quality there. And so they go through that whole thing. And then the developers, the VCs, they can get an exit after they build something that's actually to some degree self-sustaining or valuable. Whereas what we see in the, you know, in the crypto space, this technology, the same technology allows for peer-to-peer money also allows for, you know, kind of like scam to end user direct marketing on the internet, right? It kind of amplifies.

You can sell penny stocks to the public. You can kind of create anything you want to do. You have a global kind of playground of different jurisdictions you can bounce around. And so this is like a known issue in the space where, you know, developers and their VCs and what they're essentially trying to do is they build this like quote unquote company and the idea of fast exit liquidity, that they can get out of their position or a part of their position onto essentially what are retail investors often before their product has any sort of long-term viability. And then we know from this, you know, kind of the, the history that we've had so far

in the space is the vast majority don't have any sort of long-term sustainable use case, that they were only based on speculative tokenomics. So I think there's certainly ethics there. And then there's ethics around people that promote them, influences that, you know, get into a position, promote it. And then they might be exiting the position while they're still promoting it. Anything that I think goes in that line and that, you know, takes like valuable market share either away from Bitcoin or that gets people into things that are highly likely to be scams. That's different than a professional trader or someone who's very, very tech savvy going through different projects, looking for novel ideas that they might put to explore something in.

I think the vast majority of what we see in the space does have that ethics component to it. When it gets to the idea of toxic, Bitcoin from its beginning was under attack. I mean, the whole, you know, it started as this technology that's, you know, it's against central banks, it's against censorship. You know, it's a, you know, it's not partisan, but it's a politically charged technology from the very beginning. And from the very beginning, it's been under attack by media. It's been under attacked by people that want to change it from within, different divisions of how they perceive what Bitcoin's future should be. Should it be this more centralized type of thing? Or should it be that, you know, node runners essentially control it? And so I think there's

that long history of defense and protection. You know, Bitcoin's and munitions. You know, system around bands, around being unfairly described in the media among the block size war, for example, the majority of miners and exchanges and large entities wanted to change it in such a way that they'd make it harder to run a node in exchange for more throughput and more scaling, which would risk decentralizing it and also threatens the immutability of the whole project. And so I think that there's this healthy level of defense. And I think that, you know, if you look back in the history of the cypherpunk movement, It's kind of inherently disagreeable people.

They even kind of claim often, it's like not all of them, obviously, but a lot of the times it's like the whole thing of like kind of that self-sufficiency or that distrust of large corporations, that distrust of large governments, people that don't go with the crowd very easily. And so I think that culture is still intact in large part in Bitcoin. And so I think they're very healthy, you know, toxic is obviously a load of term, but I think that there are, for lack of a better word, there's healthy. toxicity or there's healthy disagreement among Bitcorners. And I think that's best expressed when

they do it accurately and with humor and things like that, memes, making fun of those, but in insightful ways versus like the actual toxicity of like harassing people, making threats. You know, that's obviously the gross type of toxic. And I think that's a, that's a small minority. That kind of thing is always present in any group. And when it comes to like, you know, morality police, obviously there's different parts of the. ecosystem there, but I think essentially because Bitcoin's always been under attack, and one of the attack factors is these altcoins. They say, hey, we're like Bitcoin, but we scale better. So we're just strictly better. And they don't show their tradeoffs. They don't say, oh, well, the problem is that

the node is much harder to run, and therefore far fewer people are going to run a node, and therefore it's going to end up being more centralized. And so I think a lot of what the Bitcoin space has had to do, a lot of people in that space have to say, look, all of these things dilute Bitcoin's adoption curve. While at the same time, you know, convincing people that there's this other thing that's better without giving off all the tradeoffs that are usually around centralization in that space. And so I think it's kind of sort of become Bitcoiners job to push back on those. Another thing is that, you know, when you look at media, they often lump Bitcoin and all these other crypto projects together. I see it among like macro colleagues, like, you know, other investors kind of

from a more traditional asset space. They're like, you know, isn't that like all scams? Like, what's the difference between Bitcoin and Dogecoin, for example? Or like, isn't that Luna thing blew up? I mean, why did Bitcoin blow up Luna? Right? There's like, there's that level of, of, you know, connection that the media and that people make. And so I think there's a very large or a meaningful percentage of Bitcoiners that want to say, look, there's, here's this thing, Bitcoin, here's why it's interesting. And then, you know, this vast majority of other stuff that's happening, scams and rug pulls and things that are like, you know, marketed poorly. and fast exit liquidity, that's a very different thing that's happening compared to Bitcoin.

And I think that it's natural that Bitcoiners want to make that distinction. Obviously, we can go to the definition of what is a Bitcoin. Many people will hold multiple coins. But people that actually are very focused on, I think, advancing the Bitcoin ecosystem have an interest in pushing back on a lot of projects that claim be better than Bitcoin to some way or always, or that I think that they, solely Bitcoin's brand by introducing that repeated scam element. Yeah, and one data point in favor of what you were talking about there is I saw literally

like right before we went to record that 98% of the tokens that were launched on Uniswap were rugpoles according to a recent study. So it just goes to show that. They must have missed them. There's no way just 98%. Yeah. So Udi, you can respond to that. But one other thing that I did want to bring up is like I feel like a. really good example of kind of where the Bitcoinser versus the toxic element sort of came to a head was obviously kind of the event that sort of kicked off this whole trend of Bitcorners coming out

and denouncing maximalism, which was when Nick Carter was attacked by Bitcoin Maximilist because his venture firm made an investment into a blockchain-based identity startup. And he ended up writing this huge blog post called Setting the Record Straight. in it he wrote, I am not a Bitcoin maximalist. I have never been one. I will never be one. So you can abandon that delusion right now. And then he went on to criticize certain tenets of Bitcoin maximalism, for instance, this notion that all all coins are crap, that all banks should be full reserve. He criticized the stock to flow model, et cetera. So I feel like that's like kind of one of these sort of pivotal moments. And I was curious for your thoughts, both of you on what happened at that time.

Yeah, I think, you know, there seems to be, and it's not the first time this is happening, that there's so sort of, at least from my point of view, there's sort of a narrative collapse in the Bitcoin space. And this happened before. It's not the end of the world. You know, there's always a small war when that happens and things settle down and it's not the end of the world. Really isn't. But, you know, a lot of the narratives that people have been talking about, the last market just didn't work out. You know, definitely the S2F, the stock to flow thing was probably not the best one that we had in Bitcoin. The inflation hedge narrative seems kind of silly now, although I do think that Bitcoin will prove to be an inflation hedge in the long term. You know, perhaps it's perhaps the reason that it's not doing that well right now is because people expect inflation to go down.

You know, a lot of those narratives just didn't really work out. and I think that a lot of people are kind of disillusioned. And some people are expressing that disillusionment and some people aren't. So there are a lot of people who are expressing this privately. You know, both in conversation I have privately with a lot of people. And also there's, you know, there's a lot of well-known Bitcoin or groups where people are kind of expressing certain levels of disillusionment. And it happens and it's part of the bull bear bust cycle.

And it's fine. more than anything else, for someone like Nick Carter, you know, he's obviously a net positive for Bitcoin, right? I think every Bitcoiner who's not completely insane would agree with that. He's obviously a net positive. So even if there are some disagreements with him over the investments that he makes or the things he chooses to focus on in his life, I think it is obviously a loss to not have him on our side. And I hope that he does stay on our side because it would be really sad if this is the end of the Nick Carter episode in Bitcoin. You know, no one is irreplaceable, but it's not like we have hundreds of people who are both educated and eloquent in really understanding these topics and really good at explaining them. And, you know, it reminds me of Andreas Antonopoulos, who was a very big and very well-known Bitcoin educator back in. Well, I mean, definitely when I joined Bitcoin, he was like my hero and everything I know I learned from his lectures and videos and books.

And he kind of was chased out of the Bitcoin Maximus community too. And, you know, we could argue about why that is. Some would say that he was open to some ideas of changing the Bitcoin protocol and that that was his sin. Some would say that his involvement in writing a book about Ethereum and talking positively about Ethereum in some of his lectures, that was maybe a sin. But it came to a point where, you know, whenever Andreas would show himself on Twitter in Bitcoin circles, he would literally be chased out of the conversation, which is, you know, to me it's amazing because he single-handedly minted, you know, I don't know, thousands, tens of

thousands of Bitcoin millionaires, maybe some billionaires too. A lot of people who listened and learned everything from Andres, and owe their entire Bitcoin existence to him. And he ends up being excommunicator from the Bitcoin community because of, you know, things that really don't matter. Like, I don't care if he likes Ethereum. You know, it's just a shame. No, you could say, you know, it's on him.

He shouldn't be so soft that he, runs away whenever a few malbehaved people on Twitter are calling him names. And okay, maybe, but shouldn't we have those people too who are soft? He was really great. So even if you think that he's soft, shouldn't we still find a way to be welcoming to people like him? Because he was very beneficial, instrumental to the success of Bitcoin. Really was.

And I think that Nick Carter is, you know, very similar. Definitely in a different period of time in the Bitcoin story. So maybe he's not going to mint hundreds of billionaires. But he's very influential with the Bitcoin space and is very beneficial to Bitcoin. And those kind of events where we kind of kick people out for very minor offenses is, I think, not good for anyone. And it's it also, you know, if someone looks outside of our community and, you know, I I agree with Lynn that a lot of people definitely when they're new, they don't understand the

difference between Bitcoin and let's say Luna. They think they're exactly the same thing, right? And getting to a point where you explain the difference that takes probably hours of learning. So they get into the community. They don't know what the difference is between those different coins. So they just look at different communities on Twitter. And the Bitcoin community is possibly the worst one. Like if you're just if you're just looking at them, right? If you're just sitting down there and trying to figure out what kind of community you want to be a part of, it's very unlikely that you'll choose the Bitcoin one. Some people do. I'm not saying no one does, but it's kind of unlikely that you will. Now, there are reasons for that, right? Like there are reasons why the Luna community

would maybe be very nice to people while the Bitcoin community will not, right? Like, obviously if you're an actual scam and you're being very nice to people, then maybe they will not notice that you're a scam, and they will happily put their money into your scam. So I'm not saying that being nice is the most important thing here, but there is value to being welcoming. I think that's obvious. Now, you know, then you have people, again,

like Lynn, like many other people in the Bitcoin community, who I think do a lot to welcome people into Bitcoin, right? Like either they write very useful research or, you know, they go on mainstream media. They explain the benefits of Bitcoin. Those things are great. People who are focused on Bitcoin are great. That's very good. But then there's that other part, which again, I wouldn't call it.

It's not a toxicity that I'm concerned about. Like they can be toxic if they want. It's just that their approach is not convincing. You know, if you want to be toxic, go ahead. But you need to be convincing. And the results speak for themselves. Like if we look at the people who joined the crypto space in the last year, I don't have the hard numbers, but I think we probably can all agree that most of them did not start with

Bitcoin, right? They probably started with other coins. I'm not saying all of them. Definitely some people chose to go Bitcoin only from the Go get-go. That's great. But most didn't. Well, probably, frankly, they mostly joined via NFTs. So you're right.

They probably went with Ether Sol. Yeah. Or Doge at the top. That was a huge influx. people probably went to Doge at the top. There were like Uber drivers, you know, trading Doge and things like that right near the peak. And there's this huge gigantic hype bubble, you know, from stimulus money from zero industry rates and things like that. And people poured into like the riskiest, silliest scheme as part of the whole market.

Right. But I think that will continue to happen. So here's the thing. I agree with that. And that's, of course, horrible. Right. But that will continue to happen, I believe, every cycle. So I'll just share kind of my experience.

when I probably joined the Bitcoin around the bull market of 2013, 14, probably. I'm hoping that the last podcast I said the same thing because I tend to make things up. So hopefully if someone cross-references this with the last podcast, it will check out. So the first time I experienced a bull market seeing new people sitting there as a Bitcoiner, seeing people coming in was in 2017. and the interesting thing that happened back then, in order, they were only interested in buying Ayota and Ripple

and whatever scam of the year was back then. But the interesting part was they had to buy Bitcoin in order to get those. So they came to us and they said, hey, how do I buy Bitcoin? What's the best way for me to buy Bitcoin? What's the best wallet I can get? How do I keep them safe?

Because I need them in order to trade my scam coins, right? and then they went and traded their scam coins. Some of them made a lot of money, but the vast majority of them lost almost everything. The nice thing was, though, even those who lost everything on the things like Ripple and Iota, they ended up withholding some Bitcoin in their Bitcoin wallet because they used Bitcoin.

They bought Bitcoin in exchange. They transferred it to their own wallet. They had to transfer it between exchanges because the exchange that would sell them Bitcoin would not sell Ripple. had to buy Bitcoin 1 exchange, transfer it to their own wallet, and then transfer it to another exchange. It was unregulated and would sell them those other coins. So they used it. They understand how it works. I would say probably better than most of the newer Bitcoin maximalist of 2021, some of which have never really transacted with Bitcoin directly. So they had a very good understanding

of it, and they kept some. They kept some just like they had a portfolio. They had a portfolio, of 5% Bitcoin, 10% ripple, 15% aorta, whatever. The 10% ripple in Ayurta went to zero. But the Bitcoin part became from 5%, 100% of their portfolio, and they became Bitcoiners, some of them. This cycle, this doesn't happen at all because when someone wants to go into that crypto frenzy of 2021, one, they don't need to buy Bitcoin

because the exchanges can sell them the other coins directly. And also the Bitcoiners tell them, go, wait, we don't, we don't want anything to do with you. You're a scammer or an idiot, and we don't want you to be part of our community. So when their, you know, their Luna goes to zero and there's several coins get frozen and so on, those goes to zero, but they don't have any Bitcoin that remains for the long term because they never, they don't even have a Bitcoin wallet. They don't know how it works. Amazingly, most of the new newcomers to the space, you know, they probably use MetaMask. They know how to use an Ethereum.

world really well. And if you showed them a Bitcoin wallet, they would not know what to do with it. Because it is a little bit different. So yeah, Udi, you've been chatting for a while. So we'll have Lynn talk. But first, we're going to do a quick ad break and hear from the sponsors who make this show possible. Eager to make more informed decisions around crypto using data you can trust, chain analysis is here to help. Chainalysis demystifies cryptocurrency by providing industry-leading compliance, market intelligence, and investigation support for all crypto assets for organizations like Gemini, Crypta.com, and BlockFi. Gain unparalleled visibility and maximize your potential with the leading blockchain data platform by visiting chainelysis.com slash unchained.

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So I actually want Lynn to be able to talk about the next. Carter incident. And I actually wanted to just quote from a description that he had in his medium post, which I think is sort of characterization of Bitcoin Maximilus and that we've been dancing around a little bit. He said, it's clear that there's an awful sickness pervading the Bitcoin space. There's a subset of people, a small flailing, shrinking group who are mostly new to Bitcoin. It made Bitcoin their entire personality and became completely emotionally invested in it. They are spoon-fed on a diet of the same half-dozen thinkers and suffer from an ideological monoculture. They cannot extricate themselves from their lifestyle or environment. And so when anyone in

their tribe or adjacent says anything that remotely contradicts their established dogma, they go on the attack. Now, they've all less money and treasured ideas like, we never draw down below previous cycle highs. And also now the having in stock to flow ratio are discredited, so they feel deep within them the intellectual poverty of their thesis. So they lash out. Everyone in Bitcoin and the crypto industry knows what I'm talking about. The moral basis of these people is cartoonish. It's something that might appeal to a toddler. So, you know, I feel like this is maybe, because like both of you, I think, sort of agree, or just like on slightly different sides of a divide. But I feel like this is kind of that element that we've kind of been talking about. So Lynn, I was curious for your

thoughts on what happened in Nick. And then as Udi brought up, you know, and Andrea Santinoplas is also a great example. And I was curious for your thoughts on, you know, how some of some of these sort of true bitcoiners have been attacked by the community? Well, I think Nick does great work, a big fan of Nick. And I think, you know, he got the initial pushback I think he got was unfair. And it came out of nowhere because it was not different than what he was already doing, right? So it just kind of, I think it came to surprise to people. And I think where the real trouble started was when he kind of pushed back and went on bankless and some of the comments there.

I think that's when it kind of hit that whole crescendo. And he's, I mean, he's still a bitcoiner. And, you know, he would say that himself, I think. It's funny because I like his work. And I also like the work of the people that he called repulsive. He had that tweet where he called like three people repulsive that are kind of, you know, in the Bitcoin maxi camp. And I like their work too.

And so I just kind of watch that whole thing play out. I think the way I would phrase it, I think UD made a good point about how, you know, in prior cycles, people had to come in through Bitcoin to other things, right? Instead of using, say, for example, stable coins is a trading pair. they would use Bitcoin as a trading pair and they're going to these exchanges. And now we don't have that. And I would say that's currently not a failing of Bitcoin. I would say that's more like that prior level of demand was artificial and that that demand's not here anymore. It's only demand for Bitcoin itself. And we have, you know, for example, huge, just massive billions of dollars of VC funding

going into a lot of these other things, most of which turn out to be scams. And then huge marketing budgets for things like, you know, putting your name on stadiums, putting your getting Super Bowl, ads, things like that. And so there's there's kind of been this separation of say, we've had breakouts of Bitcoin-only companies, which I think is actually healthy because I think that, you know, a casino type of trading environment is not necessarily the best place for a lot of people to be to buy Bitcoin. It doesn't mean that, you know, that those can serve some people, but I think there's also a place for Bitcoin-only purchases or Bitcoin-focused purchases. And so we've had, we have had this segmentation. And that, you know, that could have hurt the

price, I think. But I think it's healthy and inevitable in the long run because if some of the demand there is artificial and only there for those other things, then it was never really there in the first place. But it is kind of just a reality of the way that the industry has gone in. For example, in the prior episode you did that kind of was the catalyst for this, where you and Eric were talking about kind of the state of, you know, Bitcoin thought. And this ties into, you know, the comments that you quoted from Nick. You know, that's where I would disagree because I think that from looking at it with my perspective, which is, you know, I came into the space, I looked at the cultures, I looked at the technology. Definitely, you know, I did like the Bitcoin

space. I liked the fact that it was very user-centric, that node-centric, that decentralized, long-term thinking type of approach. And, you know, when you look at the space now, for example, one thing I've been highlighting here in 2022 is that there's been this rise, for example, of progressive bitcoins. You know, Bitcoiners that identify as progressive or left-leaning people that is somewhat different than what you've normally seen in Bitcoin's history, which is that more libertarian or somewhat conservative side of things. And the funny thing is a lot of them have actually been there for a while, but they've kind of hit critical mass in terms of having appearances, getting to know each other. Peter McCormack intentionally had a lot of them on his

show to give them a platform. And a lot of them are actually like philosophy professors, right? So there's a bunch of philosophy professors that, you know, kind of came into prominence in the space. And I would say that the Bitcoin ecosystem is actually in some ways more decentralized and more, you know, there's no central hub in the way that there might have been in prior cycles when it was smaller. You have progressive bitcoins. You have libertarian bit corners. You have very conservative bit corners. There's Muslim bit corners that specifically view it through the lens of Riba. You know, for example, the idea that interest or certain types of interests are, you know,

around and that Bitcoin is kind of a solution to that, there's still the tech focus people. And the difference in, you know, compared to other spaces where you have this kind of rapidly iterating technology, right, where you have developers able to kind of change the code, push, push updates onto users. Bitcoin is obviously all about that immutability. So you have that more slow, deliberate change over time. And I think what makes Bitcoin different from a lot of the space that, you know, from the beginning, Bitcoin was already a largely finished project. Obviously, it had to go through bug fixes. It had to go through evolution over time. Seguet was obviously the largest update.

But most of the refinements are around how to make Bitcoin better at doing what it already does, right? So taproot adds certain efficiencies and certain long-term privacy improvements as it gets used over time. That'll take a while. There's recent updates around improving the bandwidth characteristics of nodes to basically reduce the effective bandwidth of running a node. That's not in place yet, but that's an active area that's being kind of pushed forward. There is the stratum v2 update. So it changed like the mining software. That's kind of a new thing that's being rolled out, that there's been a lot of work on that over the past couple years. And then there, you know, there has been research on things like roll-ups.

There's also, you know, I know that Udi's been critical of the lighting network, but we've actually, you've seen in the past two years specifically, that's growing pretty rapidly from a small base, right? So even though the actual medium of exchange market for, let alone Bitcoin, but all are crypto, there's not a lot of people that want to use crypto or Bitcoin to buy something physical, right? But to the extent that that is taking off, lightning is actually, I think, in a pretty healthy space, and they've been improving liquidity, and they've been improving usability on that for a long time. And so, you know, there's this pushback that among some people that Bitcoin is too much of an echo chamber or that the technology is stagnant. Whereas I view one,

I think the first one is wrong. I think that it's actually in a very healthy, diverse space and that people can kind of find the niche that they most resonate with. And then two, I think that the technology, you know, to the extent that it's stagnant, it's mostly on purpose. That's a feature rather than a bug of Bitcoin that is purposely hard to change. And number two, to the extent that there are technology changes, they are around making Bitcoin better. There's also been developed in the ecosystem around it. So a lot of actually, a lot of the developments have been in hardware, you know, better wallets, better kind of cards and things like that to make self-custody

cheaper. And then we've also seen this kind of rise of these Bitcoin Beach communities, right? So obviously started with Bitcoin Beach and El Salvador. That's a different thing than the broader El Salvador situation. That was like this more localized community bottom-up type of thing. And then from that, it's kind of meaned itself in some ways and small areas around the world. We have Bitcoin Lake. island. You have in jungle, for example, there's communities popping up in Guatemala,

communities popping up in Costa Rica, Vietnam, Switzerland. There's places around the world that are these kind of like little bottom-up communities. And I think that's going to be a thing for the next couple of years. And that's largely separate from this whole kind of like, you know, Twitter podcast, you know, kind of, you know, sort of smaller segment. I think the vast majority of what we see in Bitcoin is underneath the surface, right? So the developers are, you know, they're doing tons of work and a lot of them don't have gigantic, you know, social media of dollars. They don't do a ton of media, but they're constantly working and developing things either for Bitcoin itself or something in the surrounding ecosystem. And it's a rather international

movement. I mean, for example, Nigeria has a gigantic Bitcoin scene. And of course, there's also a lot of other cryptos there. You know, there's large companies that come in and try to get people to go on board. But I think that, you know, kind of just to sum that up, I think, you know, from what I'm seeing, I think Bitcoin's in a healthy space. And I think that it's attracting, you know, maybe it's filtering better than it did before. Maybe that, you know, the idea that people used to come through Bitcoin into other things. And now they're more separate. And now the people that go into Bitcoin are more specifically seeking Bitcoin. Yeah.

So, you know, you brought up that idea that maybe the demand in 2017 for Bitcoin was artificial in the sense. that people would acquire Bitcoin only so that they can buy some other coins. And I mean, it's definitely true to an extent. I would say, though, the special thing about Bitcoin and the thing that makes Bitcoin, to me, so great. And I think for a lot of Bitcoiners, is that it is permissionless, right? You can do whatever you want with it. And that enables a lot of use cases that we cannot think about. We cannot come up with them ourselves.

And definitely Satoshi didn't come up with them. And the early cyphre punks didn't come up with them. And the early Bitcoin developers didn't come up with them. That's the great thing about it. That's why in many ways it is better than digital dollars. Because people can use them however they want, then use cases pop up. And the interesting thing about how it works is take Silk Road, for example, a lot of people got into Bitcoin through Silk Road in, I don't know, 2012, 2013.

They just wanted to buy drugs. Some friend told them they can do it on Silk Road. They told them they need to get Bitcoin in order to do that. So they did. And, you know, after they maybe grew up a little, they realized they still have some Bitcoin in their wallet. And they realized it's worth something. So they started learning about that. That might have been years later.

That's a very common story, actually, within the Bitcoin community, at least the early Bitcoin community. I literally saw one of those coin fessions the other day that said exactly this. And it ended with, thanks marijuana for helping me find Bitcoin. Yeah, you buy some marijuana and you end up with generational wealth. That happened to a few people. So, you know, and then that use case of buying drugs online is probably not going to stay a Bitcoin-only use case. As that gray industry kind of flashed itself out, they realize that there are other ways for them to accept payments.

It doesn't have to be only Bitcoin. Bitcoin was the easiest first available way, and now they can use some other payment mechanism. Most of them are crypto-related. Some of them are better for privacy. It doesn't really matter. The point is that Bitcoin, because it's permissionless, it allowed that thing to exist, that if anyone needed to make the decision of should Silk Road exist, they would probably make the decision of no, it shouldn't exist because, for the very least, because of the legal

implications, because of Bitcoin, no one needed to make the decision and it was allowed to exist. And as it flourished, they realize that there are other ways to do what they need to do that aren't just Bitcoin. And that use case sort of died down a little bit. And then I think similarly, that use case of cryptocurrency, you know, of trading and speculating on cryptocurrencies, it used to be really necessary to use Bitcoin for that, but as that industry kind of fleshed out, they realize there are other ways to achieve the specific things that their users need,

and maybe that doesn't go through Bitcoin. But the one thing that remained very Bitcoin-related in the cryptocurrency industry is that Bitcoin is still a speculative instrument and still a largely unregulated speculative instrument. And the same audience that wants to trade dog coins and cat coins also seems to want to trade Bitcoin for similar reasons. They are not interested in Bitcoin because of its ability to improve human right

or stop human right violations. They are interested in Bitcoin because of its speculative nature. But that is probably the number one use case of Bitcoin, not only by volume, but probably also by a number of people. I think that saying that that's artificial is very subjective. You know, like there's, those things, you know, those things are real. The use of Bitcoin in Nigeria is real. The use of Bitcoin in small micropayments is real.

The use of Bitcoin in speculation is more real. And some of it is through regulated institutions and a lot of it, probably the vast majority of it is through unregulated institutions. Most of the people trading Bitcoin do not do it through Bitcoin-only exchanges. They do it through crypto exchanges. the vast majority of them, they usually give better terms too. On most crypto exchanges these days,

you'll find that Bitcoin trading is free, actually, with no trading fees and very low spreads because they use that as a way to promote the exchange. So definitely most of the Bitcoin users are using Bitcoin for speculation. I think that's just a fact. So I wouldn't call it artificial myself, but I think it's maybe,

a mistake that the kind of hardcore Bitcoin community is not kind of lost the interest in appealing to that group because that's the majority, right? So if someone comes into Bitcoin and says, well, I want to speculate on Bitcoin. The Bitcoin Maximus community will usually say something like, well, you shouldn't speculate on it. You should buy and hold and stack stats and DCA. I would say that's a form of speculation too. But, you know, that's the recommendation. they would get, that's just not what they want to do, you know. So I think if we have those people, they are interested in Bitcoin, I think we maybe should pursue, you know, connecting with them and not rejecting them. That's kind of my view. That's been my approach, too, you know, over the years.

Well, I'll jump in there just to clarify. Basically, I'm not saying that speculation is artificial. I'm saying that in the early days when you had to purpose to speculate through Bitcoin to get to them, that was kind of this thing that was it was inevitably going to open up, right? So the fact that there are some people that at the time, if they would have, if, if, if they had the option, they would have just gone straight to whatever, you know, spam, like scam coin they wanted to do. And that they, they went through Bitcoin out of necessity. I'm saying that that, the fact that that that opened up, I think was inevitable and that it's natural that some of that went away. Not that, not that the idea that, I mean, any of any asset of this level of volatility is going

to attract speculators. And Bitcoin is, obviously, it's got tons of liquidity. And it's got the one with the most brand, the most staying power. So it's going to, it's going to naturally pull in some speculators that some of them later, as they, as they, you know, put more time in reading it, then they actually, you know, they decide to change their approach with it or that they view as, they view Bitcoin as more than something they might want to hold for six months, right? So that's obviously a, that's a funnel that brings people into the space. And so my only point was that that Bitcoin has a gateway to the other things, I think was at the time, just a natural part of the industry, but that was always going to go away.

Yeah, I agree with you. I think it was very much like the Silk Road of the cycle before. It was this artificial thing that needed Bitcoin and stopped needing it. But the core interest in speculation, I think, remains. And I think we need to kind of try to appeal to that. I want to talk about lightning. You know, it's definitely true that lightning is growing fast. There's the fairly recent research by Arcane.

It was probably middle of last year, I think May or April last year. And if I recall correctly, they're saying that at the peak of what they were able to record and observe in 2021, they observed about $30 million in transactions per month at the peak. It's possible that they grew since then, I guess, although that would be difficult because prices of the price of Bitcoin dipped dramatically. So I don't know if we would grow in dollar term. So let's assume we're talking about 30 million dollars a month. That's, you know, about $1 million a day in transactions. And, you know, that ends up, I think I made that analogy before. That's, that's similar to, you know, that's in the ballpark of the, you know,

the revenue or the sales of a single Walmart brand. is around $1 million a day. So that's roughly the size of the entire Lightning Network. It's roughly the size of a single branch of Walmart. Oh, it was at its peak. Now, obviously, on the global scale, that's nothing, right? I'm sure we both agree on that. It did grow.

It was less than that before. I think it grew in many multiples. It probably grew like five times during 2021. And hopefully it continues to grow. But I think that there's the correct way, in my opinion, to compare this is obviously not to Walmart. Walmart is already established.

The best way to compare this to anything, in my opinion, is to compare this to payments in crypto. So when you said that people don't want to spend their Bitcoin, I kind of agree with that. You also said they don't necessarily want to spend their crypto. And that's, you know, people do spend their crypto. So there's a very interesting. interesting presentation by Sergey from Bitrefield.

Bitrefill is really a Bitcoin-focused company. They sell gift cards for Bitcoin and for other cryptocurrencies. And he's talking about the usage. They were one of the earliest pioneers of Lightning. Bitrafil was. So a lot of the early research and development of implementing Lightning in, you know, in practical actual merchants was done by BitRefil. So Lightning Labs is really a company, and Blockstream are really focused on the infrastructure of lightning and they're doing a lot of impressive work there.

But Betrofield was one of the first to take that and really put that in practice and put it in front of a relatively large audience of users. So they are very, very familiar with lightning. And, you know, what Sergey is saying is about maybe four to five percent of the. transaction volume and number of transactions is enlightening through their website. And the rest of the other is either in Bitcoin Mainet or in other coins. So I think about 15 to 20% is Ethereum, if I recall correctly. 10 to 15% is in stable coins. I think 10 to 15% is using Binance pay, which is a centralized payment processor by

Binance that lets you use any cryptocurrency you hold on your Binance. account. And, you know, the list goes on. I think Lightcoin has more usage on Betrofield than Lightning does. The usage of Lightning seems to be very low. And I think, you know, the reason, you know, who knows, right? But from my experience, you know, I've been trying to promote Lightning for years. I've been helping merchants implemented. I've been helping events implement payments with Lightning. So with my experience with how users interface with it, I think that it, it's doesn't really answer any of their immediate needs. So most people don't want to spend Bitcoin.

That's probably true. And if they do want to spend Bitcoin, that would often be because maybe they're kind of all in on Bitcoin. Maybe they bought Bitcoin early. And now they have, you know, a lot. They want to just spend Bitcoin and not anything else. But they still usually don't particularly care about the, you know, the payment infrastructure being decentralized.

They just want to make a payment, right? they don't really care about how the infrastructure works. They just want to make sure that they can make the payment somehow. So if they happen to have their Bitcoin on Binance, because that's where they trade, they're happy to use Binance pay in order to transfer their bitcoins and pay with it. If they happen to have some Bitcoin in their main chain wallet, they're happy to use that in order to pay for something.

And very often they don't have Bitcoin. They're happy to pay with stable coins. But the group of people who want to specifically use a decentralized, payment system and not any other payment system is, I think, very small. Maybe there's a fit for, you know, something like Silk Road, right? Maybe they cannot use centralized payment processors because of the nature of their business and they will maybe want to use Lightning. That's possible. Maybe in some countries where you don't have access to some payment processors, maybe that's where Lightning will be more useful. That's definitely possible. But I think for the vast majority of people

and the vast majority of payments, even within crypto, lightning seems to have a very small presence there. So, you know, that's not to say lightning is bad. I just think that the impact of it compared to other crypto solutions seems to be relatively small. Yeah. So let's have Lynn respond. And then I have two topics we absolutely have to hit before we end. Sure. So I think when you talk about lightning, we have to kind of focus on what are the specific things that it's good at, right? So one thing is it's good at lowering fees and two is it's really, really fast, right? So if you're, if you're buying something online in the comfort of your own home, do you care if you need to wait for a Bitcoin confirmation or two rather than, you know, lightnings like a couple seconds? Not really, right? So I'm not surprised

that online purchases, especially when fees are low, are still primarily on the Bitcoin main chain, especially when that's where people have their money, that's where it's at scale. They're transferring out of wallets or exchanges and things like that where they're just holding Bitcoin itself. And of course, because Ethereum's a large ecosystem and stable coins are widely held, it's natural that a lot of those types of purchases are with those assets. And so the question is, what is lightning specifically good at? It's good at when you need something both fast and decentralized and then usually low fee. So, for example, lightning is better for in-purchase transactions by a mile than Bitcoin and many of these other type of things because it

can resolve so quickly. Right. So just on the spot, you go to merchant, you buy the thing. You're out of there as fast as you would if you did a credit card, if not faster. And then two, the whole premise of Bitcoin is that kind of permissible, essential, resistant, decentralized money. And I think lightning specifically advances that mission, even though I would agree that the current demand, the current use case for that is not super high compared to these other types of activities in the ecosystem. So I think a lot of people use the wrong measuring stick for what they expect lighting to be in any sort of time frame. I think the medium of exchange market for decentralized fast payments is something that's

going to take a long time to develop. And the important thing is the technology there is there now. It works. The more people use it, the more liquid and more usable get. So it's got that kind of flywheel, that network effect. And so I think it's actually in a really healthy space for what it's trying to do. I think a lot of people make mistakes when they compare it to things like wrapped a Bitcoin, which is centralized and used for leveraging and trading.

So, for example, I would compare rapid Bitcoin instead to the number of Bitcoin on major exchanges. I would compare it to the number of Bitcoin on Coinbase. I would compare it to the number of Bitcoin on Cracken, for example. And if you look at that, wrapped Bitcoin on Ethereum is something like, say, the fourth, you know, biggest Bitcoin exchange, Ethereum. And that makes sense, right? And so I would consider that like, say, an apples to oranges comparison, even though a lot

of people make that comparison. And I think the better thing is, you know, what else is competing in terms of decentralized and fast in-person payments when you need them? Even things like roll-ups, for example, don't, even though they can solve scaling issues, they don't solve speed issues necessarily in the same way. You know, long-term, we'll see what happens. But the point is the lighting is a solution that's in place now. It's getting better. And for the specific use case where it shines, I think it's doing quite well. And it kind of increases the censorship resistance of the whole Bitcoin network. And it also answers the.

question for people of how that, you know, one of the ways that this is, this is going to scale over long term. And of course, there's always other areas that they can explore long term if the current level of scaling is insufficient. I'll just be really quick, Laura. So I, yeah, I got a chance to try and we're not trying to show anything here, okay? Don't, don't buy it. But I, I got a chance to try Solana pay in a couple of physical locations. Really, just a way to send stable coins with a Solana a wallet to a merchant. There's really nothing too exciting about it. It's very simple. And, you know, the stable coins are obviously centralized. Solana itself is arguably centralized, I would say. You can't even run a node for Solana as a normal user. Right? So it's entirely trusted system.

And so that's comparing it to like a credit card or something like that. Lightning is for people that want to hold Bitcoin, want that decentralized approach and then want to build a pay with that in an environment where speed matters. We agree 100%. We agree 100%. Solana is centralized. You can't run a note, it's not for you if you want to be a Bitcoin holder. It's irrelevant. But if you're a merchant and what you want is to accept payments quickly and you want to bypass the credit card companies and you want to not pay their fees or you want to, you know, not adhere to their regulations and laws and you just want to be able to accept payments from anyone, then you can use Solana pay. You will get USDC stable coins. The entire process is 100% centralized.

But you will get what you want. The merchant gets what they want. The customers get what they want. And then my question is, why would they prefer to pick Lightning, which I assume, I agree, there is a subgroup of people who really want to use a decentralized payment system, but most people just want to make a purchase. So what I'm saying is it seems in practice, too, that even if what you want is fast payments in a physical location,

most people will choose the centralized option. like Solana or others, just because it's easier and faster and cheaper and, you know, and it's stable. It's using stable coins instead of using lightning. That's the reason I'm saying that the impact seems to be kind of low right now. It's because those people who want the specific thing of buying in a store, they have a solution if that's really what they want, right? If they, if they want a permissionless payment system, they can use that. And if Solana stops working one day or USDC stops working one day, then they can go ahead and use another blockchain with a another stable coin, but for now it works. So that's why I kind of feel like Lightning is a solution

for a very, very specific group of people that seems to be kind of small. Yeah, I would say at the current time, the people that want that is low. And you can always have these other solutions. The problem is that, you know, to the extent that they're engaging in regulatory arbitrage or they're buying something that, say, governments would prefer them not to, that's always something that could be centralized and censored in the future. And so I think, you know, I do agree that most people when they pay, they're happy to use these centralized systems where it's available. And so I just viewed as an apples to oranges comparison when lightning is compared to a more centralized thing. And I agree that the current market is small. And I think long term, the question is, you know, in five, 10 years, you know,

if Bitcoin's larger, if more people hold it, more people are wealthy in it, they want to spend with it. And they want to do that in a global decentralized, very hard to censor way with some privacy benefits. And it's also getting more private over time. There's still things that they can do. their specific upgrades they can do to further make it private. And I think that's, that's, you know, it's just a different market. And I think it's, it gets criticism, even though I think it's increasingly good at serving the market that it's designed to serve. All right. So now let's talk about Bitcoin's changing narrative, which we, you know, have alluded to at various points in this conversation. But I actually want to talk about it in the face of what's also a changing

narrative from Ethereum. And there's a couple of ways that this is playing out. But maybe the first really basic one is, as I'm sure you're aware, in Ethereum, the monetary policy has changed. And so a number of pro-Etherium people have now been saying that ETH is actually ultrasound money, that it's, you know, harder money than Bitcoin. They talk about how the inflation rate is lower or the issuance rate is lower than on Bitcoin about how, you know, at times, obviously when usage goes up, it's actually deflationary, whereas Bitcoin will be inflationary for still another hundred or so years. So I was curious for your thoughts on just Bitcoin's narrative in the face of Ethereum

sort of maybe competing on similar grounds. I could take that one or at least to start it. So I would say that basically, because this is something I've focused on a lot, I would define sound money or hard money as something that no centralized entity can print, not how much they're choosing to bring at the current time. So for example, in 2022, if you look at a dollar broad money supply, It's been like flat all year. Is the dollar ultra-sell money this year?

I would say no because we know that there's a handful of people that can expand that at any given time. And I would also point to things like Apple stock, right? So Apple stock went from 26 billion shares down to 16 billion shares over the past 10 years through share buybacks. Right. So it's actually, it's a deflate, you know, and a lot of people use the stock market like a store of value money type of thing. It's just liquid fungible asset that trades around. Obviously, it's very centralized. You have to go, you know, you can't, it's not a bad.

bear asset. And people access that. And it's just, it's, it's, is it, you know, is Apple stock ultrasound money because it's like, you know, outright deflationary? And I would say no, because of course, at any given time, if there was an acquisition or something they wanted to do, they could, they could change their rate of what they do with their shares. And so, you know, when we look at, say, for example, the theorem space, they, it's not, in my view, the value is not in, in maintaining a low or even deflationary supply. It's, it's the fact that the Bitcoin space, there's no one that even could change that, that the monetary policy remains fixed, and that, you know, the assessment of how hard it would be for any sort of entity to try to

change that is, you know, very low. Whereas we look at, you know, there is a good price impact from cryptocurrency to try to have a more deflationary supply. I mean, if you look at the ETH, BTC ratio right now, if you ask me, is that look like a bullish chart? I always say, it looks like a bullish chart, right? Just if you don't put the title on it, just show me the chart, looks, looks bullish. And when you have that combination of basically no supply issuance, and then you have people that stake and still can't withdraw until the devs let them, right? That's a decent, you know, mix for price. But I would separate that from kind of the purpose of what, you know, kind of the concept of digital hard money is. The same thing is true if you look at Binance,

right? So, finance is an outright deflationary currency. It's more deflationary than Ethereum so far. the price is also, it's been one of the best performing alt coins. If you look at its price relative to Bitcoin or Ethereum, it's an upward, you know, bullish looking price chart. But again, of course, it's a very centralized system, right, where they could change that policy over time. And so I think that the people have been caught up in the idea of defining sound money as what is the inflation or deflation rate.

And I would say it's more about the immutability or the decentralization, the ability to affect that. And, you know, with the theorem specifically, now that they've gone to proof of stake, right? So, for example, you know, if you were running a node, if you go offline for any amount of time and you come back online, you have to reach out to trusted entities to find out what is the state of the ledger, right? Because any time part of the network is offline, there's that infinite ledger problem, right, the long range of tax scenario where you can basically create any number of them. And there's no way to actually verify which one was the historical ledger. And if a whole proof of stake network goes offline, like you see in Salata, for example, the people that run it have to get into a discord and kind of manually figure out where that started.

Whereas with something like a proof of work system, the whole purpose is that even if the network goes offline, even if the internet shuts off for a week and then, you know, let's say a solar flare brings that internet, goes off, it comes back on, Bitcoin can start trustlessly from where it left off because the longest chain is still like an irrefutable evidence of what had happened. And it would take years to come up with a longer chain. And so I think it's just categorically different to compare supply, you know, kind of tokenomics with actual, you know, hard money. So, yeah, I obviously agree with the, you know, the definition of sell money. And, you know, we talked about this, Lauren, in the previous podcast, too. I think that the main differentiator is Bitcoin's predictability. Ethereum, you know, it's the proof is in the pudding. The way you

you formulated the question was, recently, Ethereum changed the supply dynamics. And that's exactly it. They changed it recently, and they'll probably change it again. And with Bitcoin, it's just predictable. So that's... Then a question for both of you, because, and this came up in the discussion, well, actually, it came up first with the discussion I had with Eric Wall and Justin Bonds. But basically, you know, a number of people are saying that within the next decade or so, the emission of Bitcoin will go down so much that the network will basically be reliant on transaction fees and that that will be insufficient to secure the network. So do you guys think Bitcoin will change at that time or will they not or what's going to happen? I mean, the best answer is that,

you know, we don't know exactly what will happen fee-wise in 10 years. I think that I think that the odds that this will become a problem in specifically 10 years is pretty low. It could become an issue later on. If it happens in the next 20 or 30 years, then, what do you think? I mean, you know, at some point I don't care, right? Like if it's in 100 years, I can tell you that I don't really care. But let's say that if, you know, in 20, 30 years, it's, it's, there are a bunch of things we could do, right?

Making the supply bigger is not the only thing we could do. There's a bunch of other things we could do. the thing that Ethereum researchers like to call securities is a very complex thing, right? Or security budget. It's actually a very complex thing. We specifically talk about the ability to roll back a chain and rewrite a transaction that happened in the past by applying more proof of work. You would be able to apply more proof of work because the price of applying more proof of work will be lower because, the rewards would be lower. That's what the thinking, that's how the thinking goes.

But the, you know, there's a question of why would you even want to reverse a transaction? And if you're making a transaction that you think someone else might want to revert, you can just pay more in fees, right? So if, for example, you have a very important transaction and you want to make sure that no one is trying to undo it, you can just pay a lot in fees in order to make sure, you know, really a lot, in order to make sure that it happens. And then you don't have to worry about those things. So the way that people use Bitcoin might change.

Like, for example, maybe in 50 years from now, people would expect reorg of five, six blocks to be relatively common. That's possible. I don't think so, but it's possible. But that doesn't mean you can't use Bitcoin. You just need to adjust the way that you use transaction fees in order to support the idea of the occasional reorg. As long as you know that your transactions, the transactions that you received are not going

to get reorg, you don't really care about what happens to other transactions. But how would you know if it was your transaction versus someone else that's going to get reorged? So again, if your transaction pays enough of a fee, then you know it's going to get included because any minor who wants to reorg would include it, right, because there's a fee. Yeah, I mean, I think it just limits it to like wealthier people then. And I think both for Bitcoin and for Ethereum, the expectation is that there would be very few small transactions by end to end users using the main chain. So Bitcoin would probably encourage things like side chains and lightning on Ethereum would probably encourage things like roll-ups. But at both ends, I think the expectation is that for the very long term, people are not.

not going to use the main chain. They're not going to be able to afford the main chain. And, and that's just, that's just the way it's going to be. Okay, Lynn, you were going to say something. Yeah. So I think aside from a couple serious researchers, I think largely this is kind of like a meme. And it's funny because, like, you know, in the prior chat, UD and Eric talked about how like in the Bitcoin space, so, you know, supposedly leaders would say something and then people on the bottom just parrot it, right? And it becomes like a non-thought thing. And there, there have been a couple, you know, intelligent people that do kind of long-term analysis on this and then they pose a question. And now because of the Ethereum Proof Switch, there's just like, you know, I'll post something about Bitcoin or Lightning and I get like a bunch of replies. It's almost like word for word. They're like Bitcoin's the security budget is not going to be good, as though it's like guaranteed as though they know it's going to happen.

And they're just parroting what they hear from, from, you know, a handful of researchers. And the way I would, the way I would phrase this is it's almost entirely an adoption question. Right? So the same people that criticize Bitcoin for supposed to not having a good security budget are also saying that Bitcoin's not scaling quickly enough, right? That it's not, you know, it's not innovating enough for scaling. And it's, well, which is it? Is block space going to be so in demand that the current scaling efforts are insufficient? Or is Bitcoin block space going to be so barren and so unwilling and undesirable to pay fees to access that doesn't even need scaling, right? It's like people. I think what they're talking about is the block size limit how there's only so much that can fit. And once the emission goes down, that unless price jumps really high. No, that becomes, that's my point. It becomes a fee market, right? So right now and for the foreseeable future as long as the block size does not change,

only a few tens of millions of people per month can use an on-chain Bitcoin transaction. Right. And so if in the future, 5, 10, 15, 20 years from now, you know, if not that many people want to use an on-chain transaction, that's an adoption problem, right? That means that means just Bitcoin did not grow as, as, you know, a desirable settlement and payments network, right? Whereas on the other hand, you know, if there are a billion people or 100 million people that would prefer to use the Bitcoin blockchain and only a few tens of millions of them can get in per month, that's going to be a fee market, right? And so I think it's entirely almost an adoption question rather than kind of the way that is currently being framed. And so that's why I tie it to scaling because people, you know, they say, well, Bitcoin's not scaling enough. In the other hand, they're saying it even in the current tight block space, they would

have trouble generating a fee market long term. And the only way that it fails to generate a fee market long term is if adoption stagnates at pretty low levels. And another, and Udi touched on this, which is, you know, you know. I see this in macro analysis a lot. People will look at a complex system and assume that, you know, this thing's going to happen and then they don't take into account responses, feedback loops that happen if that thing should occur. So for example, you know, it's not the miners that enforce the rules. It's the nodes that enforce kind of the rules of the network. And what miners can do is either reverse transactions or censor the network. And so if you get that environment where block reorgs become more common or if the network gets outright censored because the cost of attack, it becomes too low, then that generates a response in terms of fees to, you know, change the dynamic, right? So, so you can get in an environment where you can be complacent paying low fees. Maybe there's not a lot of demand for block space, but if then there's censorship on the network,

then you get that response. You get, you know, people willing to pay higher fees. And if you've run the numbers, I mean, you know, people are willing to pay $10, $20, $30 per transaction, which, again, are settlement transactions, large, large settlement transactions. that's billions of dollars per year in fee revenue, which is backed up by billions and billions of dollars worth of basics that you'd have to acquire 51% of if you wanted to attack the network. And so I think long term, it's almost entirely an adoption question.

And then when it comes down to making it affordable for other users, that's where things like lightning comes into play, right? So you can do like a one-time transaction, you know, even if it costs $50, you do a one-time transaction. It's like buying a modem, you know, it kind of like it's a one-time transaction to buy a computer, to buy something that gets you online, and then you're online. Right. So, and, you know, people can do a one-time transaction, get on lightning, and use it that way. And then there can be side change. There can be other sort of scaling mechanisms. Some people prefer to do

these kind of custody solutions if they want to access it. You know, like Udi pointed out, a lot of people just are happy with a centralized solution. They're happy to use cash app. They're happy to use, say, FedExitment, you know, kind of private custody while it's local, local, you know, like Bitcoin, Beach kind of local community bank type style wallets. There's a lot of different ways to scale that and make it so that people kind of choose or an adventure on what level of the stack they want to go to. But I think the long-term question about security budget is the simple question of in 10, 15, 20 years, do more than a few tens of millions of people want to use Bitcoin on chain

or no? And I think that's the biggest question for whether or not it's going to be, you know, censorship resistant and secure. So essentially what you're saying is that enough people will, like, so adoption will happen through lightning, but then larger players will be the one paying these bigger fees to settle on the main chain. Is that kind of how the fees? Yeah, there are, I mean, there are multiple million dollar transactions that happen all the time, trillions of dollars per year, even after adjusting for some of the noise. I mean, there's a lot of

value that settles on the Bitcoin network, even at current usage, let alone, what uses might look like in five, 10, 15 years. And so to the extent that it's used as this large global payments and settlement network, there's always gonna be, if that adoption stays strong, there's gonna be people that wanna send substantial payments and that are willing to pay a substantial fee,

which is still a tiny percentage of the payment that they're making. So that's why I viewed as entirely an adoption question. And to the extent that scaling matters, it's about having kind of a, you know, sort of like balanced solutions for people that wanna access some of that, some degree of that decentralization that might not build a pay a fee for every transaction of that size. And so that's where things like lightning and side change and other sort of scaling solutions come into play. People have been researching roll-ups,

you know, we'll see where that goes. But there's multiple different solutions that you can do for long-term scaling. And I think, you know, to the extent that there's not a fee market on the Bitcoin base layer in 10, 15, 20 years, that's an adoption question rather than a design question. Udi, go ahead and respond to Lynn, and we'll have to end after that. Yeah, so I agree 100% with Lynn that it's really fully a meme, the whole ultrasound thing and the whole, you know, security budget thing with Bitcoin. And, you know, it's funny because the Ethereum narrative is trying to kind of dance on both of these weddings. You know, what the tradeoff really is is between prioritizing minor revenue or block producer revenue

and prioritizing the inflation schedule of the coin. You kind of can't have both guaranteed. You have to sacrifice the guarantee of one of them. Bitcoin obviously puts the inflation schedule above all and kind of says, you know, the security thing will deal with it. Ethereum is kind of saying the opposite. Ethereum is saying we put the security budget above all and, you know, the inflation schedule will probably be fine.

But it's important to be clear. Having not enough adoption to pay for fees is something that can happen both in Bitcoin and Ethereum. The difference is that Ethereum solves this by increasing inflation. So Bitcoin just chooses not to do that. But Ethereum solves this problem by increasing inflation. So it prioritizes block producer revenue on top of inflation schedule predictability. The funny thing is that the way that the Ethereum narrative is built, they're trying to present this as Ethereum having ultrasound properties due to that trade-off that they're making. But it's really the other way around because they can't have both things.

You can't both have guaranteed inflation schedule and guaranteed security budget. So Ethereum specifically chooses to have a guaranteed security budget and forego the inflation schedule. So that is the exact thing that makes Ethereum not, or that's one of the things that make Ethereum not sell money. Ethereum has the same problem in how you have to choose between scalability and main chain usage. So you can't have everyone using the main chain. So Ethereum people do want people to use roll-ups in other layer two solutions in order to remove usage from the main chain, which would increase inflation. Because again, you can't have both. So you have to decide, do you want to have roll-ups with scalability, or do you want to have low inflation or deflation?

But you can only have one of those two things. And Ethereum makes it very clear you can only have one. But in the narrative wars, Ethereum is trying to present itself as having won both sides of the tradeoff. They both have deflationary supply and they also have high security budget. But what we do know is that they'll have to choose between one. They can't have both of them. And I'll make, I want to jump into a point. I know Laurel's little, you know, you want to end this.

I would just say a big aspect of security is being able to run your own node and then access the network privately if you choose to, right? So they access it, to be able to be center-sit-resistant. Right now, for example, the major Ethereum node providers, the infrastructure, they, for example, censor-tinator cash. We're going to see what happens with, you know, the whole MVE boost validation, OFAC compliance thing. It's a growing part of the network. We'll see if that ends up censoring at the base layer and what the response will be. But another issue of the Ethereum and many other blockchains, and for example, Salon is worse on this metric, is the bloat and the scale of running your own node, a fully validating node, that lets you

participate in the network fully. And we don't know what, for example, Ethereum block size is going to be in five, ten years. We don't know what the bandwidth and storage requirements of running a node is going to be like, whereas with Bitcoin, we actually have quite a bit of predictability for that. So I think actually a huge part of security for any blockchain, let alone the minor validator revenue for, you know, censorship resistance, a big part of security is that ability to run your own node. And that's one of the things that Bitcoin optimizes for above just by any other blockchain is keeping that node tight and small for the user.

All right. Yeah, I didn't expect you both to not agree with that because I definitely know some other Bitcoiners do agree that this could be a problem in the future. In particular, I guess Eric is one of them. And Odie, this is one way that. you and Eric are not aligned. You guys, this has been super fun and fasting, and I loved the points that both of you made, you know, especially, you know, you guys didn't like always completely disagree,

which I think is, you know, really good. But clearly there are also points where, you know, I think each of your thoughts will sort of get the listeners to, you know, think more critically about, you know, what their opinions are. All right. Well, where can people learn more about each of you and your work? For me, just don't.

You can look up my Twitter account, but it's really hard to type my full name. It'll be the link will be a little. Okay, we'll put it in the show notes unless Udi prohibits us from doing it. Lynn, how about you? I'm at Lidolm.com if you want to check that out. Awesome. All right. Well, it's been a pleasure having you both on Unchained.

Thanks a lot. Thanks so much for joining us today to learn more about Bitcoin's culture, Lynn, and Udi. Check out the show notes for this episode. Unchained is produced by me, Laura Shin with Elfram Anthony Yoon, Matt Pilchered, Juan Ovanavish, Sam Sribam, Pamma Jim Dar, Shishonk, and CLK transcription. Thanks for listening.