Unchained - What Will Happen At The Time Of The Bitcoin Hard Fork?

Episode Date: October 31, 2017

As Bitcoin faces the biggest test in its nine-year history, two players on opposing sides -- Mike Belshe of BitGo and Bitcoin protocol developer Matt Corallo -- debate how the community got here and what the definition of Bitcoin is -- whether the white paper or price determines it. We also look at how the upcoming hard fork could affect Bitcoin Cash, and debate whether or not censorship on the Bitcoin subreddits has influenced people’s views on the block size debate. Plus, they give their best post-hard fork predictions. For reference: Will This Battle For the Soul of Bitcoin Destroy It? https://www.forbes.com/sites/laurashin/2017/10/23/will-this-battle-for-the-soul-of-bitcoin-destroy-it/ Show notes: http://www.forbes.com/sites/laurashin/2017/10/31/what-will-happen-at-the-time-of-the-bitcoin-hard-fork/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi everyone. Welcome to Unchained, the podcast where we hear from the innovators, pioneers, and thought leaders in the world of blockchain and cryptocurrency. I'm your host, Laura Shin, a senior editor at Forbes covering all things crypto. If you've been enjoying this podcast, please help get the word out about the show. Share it on Facebook, Twitter, or in your secret slack and telegram channels. And if you have a chance, give the show a rating or review on iTunes. And don't forget to follow me on Twitter at Laura Shin. This week's episode is brought to you by OnRamp. Your branding and website are the first things your users will see, and in the current wild west of ICOs and blockchain startups, you need to stand out from the pack. OnRamp is a full service creative and design agency that will help amplify your brand with the perfect website, logo, collateral, or custom design project. Get big results in no time by visiting thinkonRamp.com. The topic of today's episode is the upcoming Bitcoin Segwit 2X Hard Fork. If this is a topic you are not familiar with, I suggest you go. read an article I wrote that came out last week called, Will This Battle for the Soul of Bitcoin Destroy It?

It's a long read. It's actually the longest article I've ever written, I think, but it describes the philosophical differences between the two sides of this upcoming hard fork, the political differences, and how the hard fork itself could play out. You can also refer back to a couple episodes I've now done on this topic. Episode 19, Why Bitcoin May Split in Two and How to Prevent It with Jeff Garsick and Charlie Lee in April. and episode 26, why November will be the real test for Bitcoin with Eric Lombozo and Brian Hoffman,

and that came out in July. The very brief background here is that blocks in the Bitcoin blockchain have been getting full, which has been driving up fees as people compete to get transactions included in the next block or one soon after. It's come down to two proposals to increase the number of transactions that can be processed at any given time. One is called Segwit, which is a different way of organizing the information in the block. and the other is a compromise solution that includes Segwit, but also just doubles the size of the block. And that's called Segwit 2x. The first proposal, Just Segwit, is mostly backed by the developers and a vocal contention of users.

And Segwit 2X is mostly backed by some of the largest startups in the space, such as Coinbase, blockchain, Zappo, Circle, and Block, as well as the vast majority of the miners. As of today, which is Wednesday, the Wednesday before this episode comes out, about 80 to 85% of miners are signaling their intention to put their hash power to Segwit 2X as of the time of this recording. However, a few markets have opened for so-called chain split tokens, which functions sort of like futures markets, and those are the exact opposite. They show 85% support for the one megabyte chain and only 15% support for the Segwit 2x. chain. So around November 15th or 16th, this hard fork to a chain featuring a two megabyte block

will occur, creating possibly temporarily, possibly permanently, two blockchains, both with Segwit, but one with a one megabyte block and the other with a two megabyte block. Here to discuss how and why it's reached this point and what could happen next are Mike Belchie, CEO of BitGo, and one of the developers of the Seguet 2X hard fork and Matt Corallo, a longtime Bitcoin protocol developer. Welcome, Mike and Matt. Hi, Laura. Hey, thanks for having me. Mike, can you briefly tell us your role in Seguet 2X? Sure. Well, Bickko did not sign the New York agreement, which is kind of what kicked off the process for Seguid 2X. I think my role in this debate goes back a couple of years now, you know, as does Matt's. We've all been working hard to figure out how do we move forward with

improving scalability for Bitcoin. There's a lot of different approaches that have been talked about over the last few years, and there's been a lot of heated debate. Overall, we get excited about this as though it's all contentious and we want different things, but are actually probably more common than we're not common. So anyway, in May of this year, what did lead to this is, you know, Seguet had been out there. We had been unable to achieve consensus to activate Segwit, largely blocked by the market. lining contingent. The community, as you know, is made up of many different folks. But a lot of us

wanted to see Segwit go through, and we wanted to figure out how to how to increase capacity more generally as well. So we actually, a group of folks led by Barry Silver got together, said, hey, how can we get past this impasse? How can we get Segwit activated? How can we make everybody come together with consensus to get this done? And we came up with basically the same plan that had been come up with a year ago before at the Hong Kong agreement, which was to do Segwit and a two megabyte increase. So that's what we came up with. And I've been interested in that.

I think that, you know, Bitcoin has a long, prosperous future ahead of it. And it's going to take a lot of changes, good ones. It's going to take good engineering. It's going to take hard effort. We're going to have to get consensus again and again to do different types of things. That's what makes Bitcoin great. So there'll be more things that we have to do. to make it available to the world.

Yeah, so my involvement to promote both types of capacity increases and looking forward to that going through. And so why did Bicco not sign, but you're working on this Seguid 2X code? Yeah. Well, sometimes I get, you know, probably just an ignorance CEO,

but actually my background is in technology. I've been involved with standards processes for protocols. You'll find my name at the top of the specification for HTTP 2.0. So, you know, the Internet protocols mostly have been developed through a process, which is chartered with the IETF, which is the Internet Engineering Task Force. And that's where my background comes from. I don't like the idea of company signing agreements and saying, hey, we're going to do it. I think the great ideas start from the ground up.

You start with development. You get a good group of people together. Every idea, it starts with one or two people. They work together. they figure out how to make a little better, you start to socialize it, you grow it, you grow it, you grow it. And the IETF is very much about individuals coming together and trying to break chains of whatever corporate sponsor they may come from. So, for instance, when an individual comes to protocol development of the ITF, they know that they vote as an individual. And even if a company may send, you know, five, ten, a hundred developers to a conference, each of those developers speaks for themselves and not for their company.

So, I mean, the New York agreement, I'm not trying to discredit it. It's fine. It's just not for me. I think about it. They'll go first. And then, you know, people want to say, hey, yes, I support this. I don't support this. I mean, ultimately, you need sign-offs, right?

So that's all fine. But we didn't like that approach. It had been done a few times before in the Bitcoin space to try to just get a paper right off. And, you know, they haven't worked. And folks from all sides have tried that, right? I mean, folks on the core development team assign these things. Corporate folks assigned these things. The Bitcoin Satoshi Roundtable put one together.

I mean, they just haven't worked very well. So I was looking for something different. Okay. And that would explain why I don't know if any listeners saw this one on Twitter. People, and I think this was on Reddit. People were laughing because there was a Twitter exchange between you and some of your own employees where you guys were arguing about one megabyte versus two megabytes. And they thought it was funny that you are publicly airing your differences.

And I also just actually wanted to reference for listeners. Earlier, Mike talked about the difficulty in getting Segwit 2X adopted. And that was, sorry, Segwit adopted. And that was because after the developers created that code, they said, oh, well, only adopted as long as 95% of minors signal that they would like it. And only about 30% did. So obviously, it didn't get adopted. And then he also mentioned Barry Silbert, who if you don't know, is the head of the digital currency group,

which is one of the biggest investors in the space. And they have invested in, I think, almost like 100 different Bitcoin and crypto companies around the world. Okay, so let's turn to Matt. Matt, what is your role with the Bitcoin Protocol? So I've been a developer on various Bitcoin projects since 2011, early 2011, which puts me at, I believe, roughly the sixth publicly recorded person to contribute to the Bitcoin project, as it was called at the time, now Bitcoin Core. I've also contributed to numerous scaling proposals and implementations of a number of projects across the Bitcoin space. Yeah, so I just have a long

background developing various technologies in and around the Bitcoin space. I want to push back on a few things and a few characterizations here, first of all. I think viewing Segwit 2X in the context of just a block size change or just a block stage debate is frankly somewhat myopic, right? I thought your article, Laura, it was really great. It gave a lot of background, a lot of detail, but it did miss kind of the fundamental reason why so many people are stanchly opposed to Segwit 2x. Right. And that's because it, like every other hard fork proposal and hard fork attempt over the last four years. As Mike mentioned, there's been numerous ones, numerous sign-on letters, numerous proposals, numerous whatever, have baked in a kind of proposal for how to change

the governance in Bitcoin and how Bitcoin should be changed in the future. And we've seen Segwit 2X, I think has been really interesting because it is cut right at the heart of how people define Bitcoin. And there are numerous different answers to this question. And I think all of them are valid, but we really need to be focusing on what are the kind of core beliefs that lead people to have such strong feelings about this kind of change. And there's a lot of people coming down on different sides, and I find that really interesting, right? There's a lot of companies who've come out and said that they will call Bitcoin, the thing that has the most hash power over time. There's some companies that have come down and said they refer to Bitcoin as the thing

which is defined by its rules as written in software, and that changes to it require some level of fairly broad consensus, and that if there isn't such a thing, then the default is that there should be no change. Some people are defining Bitcoin according to the markets and according to which one has the most value and which one people are willing to purchase for more money. And I think it's been really fascinating to watch how people define Bitcoin

and how people just talk past each other and many of these issues, because so much of it has been focused on that, but people are often not willing to have those debates directly. Yeah, actually, it's funny that you mentioned that I didn't put that in my article, because I don't know if you remember, like I framed it as like, oh, these are some of the different divides. And there are parts where I talk about how like some people define Bitcoin, you know, this way and then others, like I do mention like, oh, some are saying they're following the white paper, which says like it's the longest chain, which they're describing as accumulated difficulty.

And then others are saying it'll be determined by price, by users. So I actually did include that, but I didn't make it a section the way that I did, some of the other divides. But I do agree with you that that is actually a really, really, really interesting debate that's popped up. I do actually have a question later on to get back at to this point. So I'd like to actually circle back to it later. But first I want to turn back to Mike.

and just to ask you, Mike, why not call off Segwit 2X at this point? The chain split tokens across multiple exchanges are trading 85% for the 1x coins and 15% for the 2x coins. And the split is going to create havoc across the world for both users on exchanges and hosted wallets, as well as users who manage their own private keys and their own wallets. So why even follow through at this point? Well, I don't think it's going to cause havoc at all. Actually, I'm pretty confident. that coming out of this, one way or another, the community is going to come together. I think we've actually seen this type of debate. You know, right where we're at today, it seems like there's just no way it's all going to come together.

But we've seen this before. If you go back to Internet protocols in the mid-90s, we had a problem which was actually pretty much the same set of debates about centralization versus scalability. At that time, it had to do with routing tables. And honestly, you know, the folks involved. in those debates, they were so extreme on their different views. The name calling, the arguments is so similar to what we have today. And the debate was that we had grown to a point where the existing protocols, you took a lot of RAM. And so you had a really large router box

and you had like two gigabytes of RAM, right, in order to hold the full rounding tables. And so some proposals were on the table for how to make it scale better. And of course, as you start to think about what the tradeoffs are going to be, you end up with the exact same set of tradeoffs that we have today with the Bitcoin debate here. Is this centralizing? Is this giving too much power to one group? And how are we going to scale if we don't do it? So we've been through these things before, and they do resolve. So the one thing I would say to the world is like, look, you don't have to worry. This is going to be a little bit chaotic for a little while, but we're going to get through it. In terms of the futures markets, I think that's a

It's definitely something to look at. I wish we had a really good indicator that you could fully rely on. One thing you've got to remember is that these are run through exchanges. It requires you to put your coins on those exchanges. It's going to be interesting to get the market price to really settle out. It's certainly something that I'm watching. I think it's the best indicator of all. And, yeah, you know, when you talk to folks on both sides of the fence,

people are weary about putting their money on BitFinex. There's a couple of other exchanges doing it as well now, but it's not like we have a full, open, deep orderbook. It's a very thin market. We know what happens with thin markets. You end up with prices that are manipulatable. It's not much of a thin market, though, right? There's about $2 million a day traded on the BitFinex market,

and there is quite a decent amount of volume traded on the Hwobie market as well. So it's really not that thin of a market, right? If you're looking at this and you're saying like, oh, well, I think it's clearly going to go the other way or even the market is off by more than 20%. There is a lot of money to be made in betting the other way and writing it off based on, well, you know, some people aren't willing to put their coins in the exchange. That's true. But there's some people on both sides of the fence, as you point out. So that shouldn't materially affect the price more than one way or another. I think it's, you know, these prediction markets are actually very important in looking at where things are going to go here.

Well, a $2 million a day market is a tiny market. There's no doubt about that. Very manipulable, very, very thin. So there's still a lot of money to be made there, though, right? I mean, you can make $10, $20 million if you think it's going to go the other way. Why haven't people then? Well, it takes a lot of time for people to move cold storage, as you know. I mean, you know, people are apprehensive about moving large amounts of coin.

And I think, you know, we probably both agree that the bulk of Bitcoin users out there are fairly neutral on the topic. They're like, hey, can't this just be solved already? I've certainly pulled our customers and I know where they're at. I do think that the markets are important. Don't get me wrong. I think they're very, very important. I think that the best indicator there is. But I don't think that we have a great indicator yet.

still watching it. Okay, and Matt, I also have a question for you. Why not capitulate? Why don't the Bitcoin core developers just adopt a two-megabyte block size limit into Bitcoin core and say, hey, it's dangerous to have a chain with only 15% of the hash power. You know, it can be so easily attacked. Let's just work together with a miner since they're part of the Bitcoin community too and do our best to ensure that this hard fork is not contentious

and also that Bitcoin Core retains control of the protocol. Yeah, I've heard that argument a lot, and I'm actually really glad you brought it up, because I think it's rather fundamentally misunderstands what Bitcoin Core is. Right, Bitcoin Core is not an organization. It's not really even a group of people. It's more about it's a process. And you can maybe argue that it's a group of people who believe in a process, but it's a process. And it's a process whereby changes are thoroughly fedded. Anyone can participate in this process. It's very open. Even though. the top people who contribute a lot are very active in contributing in the open on a public mailing list, on discussion on GitHub, in various places. And when you look at Segwa 2X, there are, you know, all of these features that are key to the process of making changes in Bitcoin Core. and I believe that most of the community holds dear as the process of making changes to Bitcoin just aren't there. This is why you saw the sole Bitcoin meetup, the Israeli Bitcoin Association, the Bitcoin Argentina meetup, the Bitcoin Munich meetup, all release statements from their members,

from large groups of individuals who care deeply about Bitcoin are heavily invested in Bitcoin and are very knowledgeable about Bitcoin denouncing Segwit 2X and saying, that this just isn't the process by which changes should be made. There is no discussion. As Mike kind of said, this New York agreement was pretty much a declaration. It said this change is happening. Most of the writings on Segwood 2X on the Segwit 2X mailing list and from people pushing the project are simply stating that this is going to happen and miners are going to switch to it and that'll it had to be the end of it. And so this is kind of fundamentally incompatible with the process that is Bitcoin core and with the process that is Bitcoin and defines Bitcoin to so many of its

users. Matt, I didn't say that this is like a de facto, it's got to be this way. And the New York agreement didn't say that either. What we did say is like, hey, we would like to go figure out a mechanism to look at increasing the block size through a hard four. Yeah, that's in there. It wasn't even created by the Segwit 2x team. This is an idea that's been battered around for a long time. Part of why I didn't sign the agreement is because I think the process is to go figure out how to do it and make sure you can do it, test it, do all those things. Those things have happened. And this characterization that, you know, the Segwit 2X team did not do those things is just a myth. People like to, you know, criticize things. You won't find me.

You're focusing on the wrong part of the process, though. You just mentioned testing and engineering effort. But that is like the last 10% of the process. of the process. The first 90% of the process by which all of these meetup groups, all of these users who care deeply about Bitcoin and people who are contributors to Bitcoin Core care deeply about is consensus and asking people what their view is. I'm glad you mentioned the Hong Kong agreement that I was a party to and some other people signed. I believe it was about a year and a half ago and compared it to Segwit 2X, but the reality is it's fundamentally different. It was very, very carefully worded, and it says that if there is strong community support,

but there wasn't. And so it was largely dropped. But Segwit 2X, instead, you look at comments from many of its most vocal proponents, and they say very clearly, Hashpower is going to adopt it, and then this is going to happen. And sure, you know, I think a lot of people have somewhat backed down from that view and said, well, you know, if the market doesn't support it or if hash rate doesn't support it, that's okay. But this is still cutting to the fundamental question of how you define that call. Is it based on hash power defining it? Is it based on users and consensus for changes?

And what does that process look like? With Amex Platinum, almost every purchase made with your card can be covered with points, including new tastes, new fits, and virtually everything in between. That's the powerful backing of Amex. Conditions apply. Well, mate, but Matt, I have a question about if you turn that same lens onto adoption of Segwit, where only 30% of miners wanted Segwit, and you're saying like, oh, you know, you shouldn't force things onto other people and stuff like that.

Some of the people on the 2X side say, oh, well, then, you know, this user-activated software tried to force Segwit onto the miners, and Bitcoin, didn't denounce them, and yet they're denouncing Segwat 2X, even though they're saying that they're doing kind of the same thing. So why is that? I mean, the reality is many, if not most of the people contributing to Bitcoin Core very, very strongly denounced at 148 in the UASF moment, including myself, including several other people at Chain Code, the research and development lab I work at, many people very strongly denounced it because it didn't have that level of consensus. There was a large part of

the community that backed it in spite of these denunciations, but claiming that people working on Bitcoin Core didn't denounce it is just a misnomer. There were one or two people. But didn't Bitcoin Core come out with like an official denunciation against Segwit 2X, but it didn't against the USF. The problem is Bitcoin Core is, as I mentioned, kind of a process and the process for making any kind of formal announcements or any formal declarations or formal statements or taking a formal position is about getting consensus across all of the major people who contribute. And as I mentioned, there were one or two people who contribute to Bitcoin Core, even often in a minor capacity, who were in favor of the UASF movement and were pushing for it. And so no such statement was possible.

Whereas with 2X, there were no such people. There's no one who contributes to Bitcoin. Core who has kind of any interest in it. And so such a statement could be made that does not, however, mean that the individuals involved in Bitcoin Core weren't loudly and as a group, with the exception of one or two, denouncing BIP 148 because it just simply didn't have the level of consensus that people wanted to see. We're getting really super deep into the weeds. So I actually just want to take it back to, oh, no. I mean, I also, you know, I'm interested in these details, but I also want to take it back to a little bit of a higher level and just ask to an outside person, a one megabyte block versus a two megabyte block seems like a pretty

trivial difference. So why is it that you believe so strongly in your, in your, you know, that your way is the right way? Well, I think everyone, Matt included, don't want to speak for you, Matt, but would agree that, you know, there's a lot of work to do on Bitcoin scalability going forward. Two megabytes by itself is not the end. There will be layer two solutions as well that come on in the not too distant future. So there's a lot of changes that have to happen. But you've got to remember the genesis of where this comes from. At the time that we created this proposal, we didn't have Segwit and we didn't have anything else on the table that was shipable anytime soon. We do know that, you know, significant changes to the protocol

take years to get through. Part of that's technical. Part of that's consensus. So we do need to get to a world where we have a steady stream of like things that are coming so that we can get that consensus on time, you know, makes a while.

Anyway, what we unblocked. And I actually, I wanted to just define this word consensus because both of you guys are talking about it a lot. And, you know, as we mentioned with the Seguet proposal, when Bitcoin Core released it, they said, oh, it'll only be adopted if 95% of the miners want it.

Is there anything in this world that gets 95% support for anything? And, you know, if so, like, which I just, I don't even know if that's possible for anything. And if that's the case, then what percentage is consensus? Like, you know, Segwit 2X defined it as 80%. But I just, I don't even know kind of like, you know, how you figure out what that even, how you define that word. Well, let me start with one minor correction. Segwit wasn't released just based on hash power consensus or based on miners supporting

it. Before Segwit was put in a formal release, several contributors to Bitcoin Core reached out to every major ecosystem company they could find, every single one. Some of them didn't respond, but of those who did, not a single one was negative. there was not a single response that said, no, we don't want this. There were some responses that said things to the effect of like, yeah, you know, it'd be nice if it happens, or it's not a massive deal for us, but it would be good. But there was not a single negative response. Okay, just as a reporter, I will tell you that definitely there are two major companies in this space, the two biggest, who privately complained to me about Seguin.

because I guess on their side, they have to do a lot of changes to their code to implement it. So I do know that, and this was all back in 2016, this is not a recent. There were some who responded that they don't think it will happen quickly or that it's not a replacement for other changes and that they still wanted to see other changes and that they would have to make significant changes to their code to adopt it. but they, and thus they might not adopt it quickly, because remember with Segwit companies and people writing software can adopt it over time, there's no kind of requirement that they make those changes right away. But there wasn't, there weren't any responses that said no. And maybe some folks who just had such a strong opposition didn't bother to respond.

I don't know. But there weren't any folks who came out strongly against it. And even some of the most vocal voices against Segwit, from people who have now often migrated to Bitcoin Cash, viewed it as just not a replacement for other changes and thought that it was the wrong focus. Well, so actually to that point, I want to ask, do the core developers think that the block size should ever be increased?

Because the one megabyte limit was introduced sort of arbitrarily, and it was only put there to prevent spam, But Satoshi felt it was just like a temporary measure. So is this something that you guys think you can never increase? Well, I mean, remember that Segwit does have the same effects as a block size increase. It is a block size increase. Blocks are now larger than one megabyte. Well, but I mean, actually raising the block size limit.

Well, it did raise the block size limit, right? There are blocks greater than one megabyte on the network today. No, no, no, no. But I'm talking about the actual cap on the block. rather than, do you know what I mean? Like, here's... Yeah, I mean, we're talking past each other. It's a misnomer to say that Segwit is not a block size increase.

Segwit is a backwards compatible blocks as increase, which has technical implications, but it is still a block size increase. Now, that said, I don't think there are many, if any, core contributors or members of the broader technical community in Bitcoin, right? The technical community in Bitcoin is much larger than Bitcoin Core. a lot of people who believes that, no, the block size should never be increased. But again, I think the focus of many, if not most of folks who contribute to Bitcoin at a technical level view that changes to the block size and changes to Bitcoin's core consensus

rules and the rules that govern everyone who uses the system should be done only with broad consent of the users who are going to be affected by this change. And so it was important with Segwit to reach out to a lot of people. It was important to ask people at meetups and ask people online and ask companies and then also require adoption from minors. Just like I think it should be important for any changes to Bitcoin to meet similar thresholds. And I do hope that in the future we will reach those thresholds for changes to further increase Bitcoin's on-chain. capacity, but we certainly haven't reached those yet. And I think a lot of changes to how proposals like Segwit 2X both get made and are implemented are going to be required for that

level of agreement across the community. So I'm going to keep each of you in the hot seat a little bit longer, but first, I'd like to take a quick break to tell you about our fabulous sponsor, OnRamp. If you're starting up a new project or needs some design or branding help on an existing one. OnRamp has you covered. OnRamp is a full service creative agency that has helped numerous companies, including many in the crypto space, maximize their brand awareness, gain traction, and accelerate growth. OnRamp has a passion for ramping up brands and boosting business results and can help with everything from website and logo design to social and content strategy. Focus on your core technology and leave the rest to OnRamp. To learn more and see how they've helped passionate

entrepreneurs achieve their dreams, go to thinkonramp.com. Thanks to OnRamp for being a supporter of this podcast and all of our listeners. I'm talking with Segwit 2S developer, Mike Belchie, and Bitcoin Protocol developer Matt Corallo. So, Mike, what do you say to the accusations that Segwit 2X represents a corporate takeover of Bitcoin and that this turns what is a decentralized project into a centralized one? Well, I don't think that has any truth. I don't think that anyone really can say that with a straight face. If you look at the folks that are behind, that support Segw2X. I mean, you're going to find folks that have helped build the ecosystem.

You know, everybody in the Bitcoin world helps make Bitcoin better. The businesses help make it better. The exchanges help make it better. The payment processors help make it better. The folks that want to run funds help make it better. So if you think that Barry Silbert or, you know, Wences Casares or Stephen Pair or, you know, Peter Smith, These are the leads of major companies, Brian Armstrong, Coinbase. If you think these guys are trying to take over Bitcoin, I mean, you're accusing them of exactly what they're against.

We're all completely in favor of the Bitcoin ethos. We believe that Bitcoin needs to be more decentralized than it is today, not less. Segwit 2X does nothing to change the centralization properties of Bitcoin. So actually, we are going to be working in the future on making it better, not. the opposite. So I don't know where that comes from. I think it's just all part of trying to attack. All Segwit 2x is a proposal and it's a proposal for how to increase capacity on chain. Matt says that, you know, Segwit was there and supported. It's there. You know, it's been active for three months and two months, I guess. And it's got all of about, you know, a 5% increase

on chain today. That's good. I'm glad Segw's there. Bickgo was one of the first to implement Segwit across all of its wallet. So it was a lot of work to be done. But, you know, we think we can do better and we think we have to do more. So it's not a corporate takeover by any means. And actually, it is completely open. So this is just an argument to try to sway things in a dramatic fashion. It's just not true. I just wanted to agree with Mike here.

Like I think, like you were saying earlier about the IETF, you know, no matter how many people you send to a conference, people are still speaking on behalf of themselves. And whether the people who are pushing for Segward 2X are pushing for Segwit 2X or primarily some CEOs of some Bitcoin companies or whether there are other individuals shouldn't really matter what we should be looking at is what is the level of support from all of the individuals across the Bitcoin community. Like you said, everyone who is interested and who works on Bitcoin in one capacity or another or even just who supports Bitcoin is helping make it better.

And we should be looking to all of them for changes to Bitcoin and not just a few individual. Wow, I'm so glad that I got a moment where you guys both agreed on something. I'm going to turn that into a little clip and put it on Twitter so that I'll be nasty Twitter, a crypto Twitter going on right now. Maybe it gets a little bit nicer. Matt, what do you say to the people who contend that the only reason we see such rabbit support for one megabyte blocks is due to a long history of censorship on the main Bitcoin

subreddit are Bitcoin, which they say shuts down any dissenting views? I mean, I guess I have two answers to that. First of all, it's somewhat of a joke, right? The R-Bitcoin subreddit had huge issues with spammers and very blatant vote manipulation and bots that were just posting the same thing over and over. For those of you who are unfamiliar, Reddit is a platform where comments which appear and comments which appear near the top of the page are the ones that are most voted on by users of the system. But it's also very easy to manipulate. by getting a bunch of bots and automatically upvoting comments you support, which results in significantly changing the context of conversation going on. And so they tried to fight back. Some people thought they fought back much too hard. Some people thought they didn't fight back enough. Whatever.

Honestly, I think it's not all that interesting of an argument because most people I talked to stop reading Reddit a long time ago, just because it became a mess. As you point out in your article, the both Reddit, are full of people just denouncing the other side and declaring that they're guaranteed to win and they don't care or even bother trying to understand the views of other people. Everyone here is trying to make Bitcoin better. Everyone is trying their best to push Bitcoin forward. And the thing people need to be focusing on is understanding where other people are coming from,

understanding why they're pushing for certain changes in certain ways, and trying to work with that and come to some agreement. instead of just attacking the other side. And so most people I talk to in person and meetups and most of the developers I know, just barely, if ever, read Reddit because it's just not interesting. Yeah, but I think like, I think new users who don't know much about Bitcoin, who go to Reddit, they're obviously, just because of the name, our Bitcoin is just going to attract more of them.

So I do think some people on the bigger block side feel like, oh, they're only being presented one view, which, you know, it's just, I mean, it's just an interesting thing. If for any listeners who have not checked out both our BTC, sorry, our Bitcoin and RBT, you should definitely look at them both because they are just completely different. And it's, it's actually somewhat hilarious to see just how different they are. And I guess like in a way, maybe it's just because it's so unpleasant maybe to go to a forum where you're just going to get in fights all the time. so there's like a natural kind of like divergence to find your own like-minded people,

but it is quite the sight to behold. Mike, I want to ask you, why has minor support for Segwit 2X been dropping in recent weeks? When I began reporting my huge story on Segwa 2X, it was at 95% support, minor support for Segwit 2X. And in the two weeks that I was working in that story, it dropped down to 80%. And this morning is actually at 77%. you know you'd have to ask the miners to get the answer to that question i mean you know one of the struggles we have with getting consensus is trying to figure out how people feel and then you know trying to to understand if they're going to change their mind or if they're not going to change their

mind so you know often you hear criticism saying that like these types of events are uh or these types of signals are not valid because people can change their mind and of course there's truth to that um but does that make you worry at all about pulling up off your, because I know you view Seq2X as like an upgrade to the network. So doesn't this reduce the chances that you're going to be able to pull it off in that fashion? Yeah, I mean, absolutely, right? If you don't have minor support, like, you know, then this isn't, this isn't an interesting thing to do. So, I mean, at 77%, you know, I'll have to have to look at it a little bit. If it goes way down, then eventually you do have to say, okay, this isn't going to work. Of course. I mean, a key part of

This is bringing everybody together and getting them to signal in the various ways we can. The problem is until it goes active, you don't know what people really vote. Is there some threshold at which you would call it off? Like if it falls below some certain percentage, you would say, okay, we're not going to do this hard fork? I don't know what call it off means for me. I mean, so what happened here is we put together a package, which was Segwit plus two megabyte, which people agreed to, you know, two months ago. and that's what got Segwit turned on, and now, you know, this is the two megabyte part.

So we put it in a disjoint time activation because we recognize that the two megabyte hard fork portion required more prep time. So that's fine. Now people are, that gives people the opportunity to change their mind, which is an, you know, an undesirable consequence from my perspective, but it's the right thing to do. So I don't have an answer for you in terms of like what's the what's the magic number at which point it makes no sense But certainly if you don't have minor support then it can't go through So at some point it just it just doesn't work that way and in terms of call it off I mean it's already activated With the folks that have turned it on so they're changing their minds

That means they're right they're going to change it They're not going to follow through with the second part of the process Then that means they're actually changed their mind kind of midstream and that's always been one possibility for this proposal. Well, remember, at the risk of getting in the weeds too much, I wanted to add one more clarification. I mean, Mike, you characterize this as miners changing their mind, but remember that mining has become a specialized industry.

So the people who are signaling for Segwit 2X and the people who are responsible for the day-to-day operation of selecting the thing to mine on are the pools. But the pools, very rarely, if ever, are actually the people who are. own the hash power. Many of them own a small fraction, but not enough to matter. They're not the people who can actually make the decision of what to mine on if they really feel strongly. So we saw this with the Bitcoin Cash Fork, and I think this is maybe more of the reason why people argue that signaling is less interesting and less because people could change their mind. We saw with the Bitcoin Cash Fork, what happened was it became briefly more profitable to mine. And after a day or two or three or

five, the miners themselves, the people who own the hash rate and are responsible for making a profit on their investment, pressured their pools and said, look, if you don't activate this, you mine on the thing that's more profitable. If you don't optimize for the amount of money I'm making, I'm going to go elsewhere with my hash rate. Sorry. And one of the major, one of the CEOs of one of the major pools out there told me that he had 30% of his hash rate threatened to leave if he didn't implement automatic switching based on what's more profitable immediately. And so there's more nuance than just people can change their mind. Oh, interesting. Okay, well, this then gets us to sort of what might happen after that fork.

So let's just assume, just because we have to pick something, that the 2x chain has 85% hash power, and that 15% of the hash power remains on the original chain, what are all the ways that a blockchain with only 15% of the current hash power can be attacked? I think there are many ways, but they all cost something, right? So even if you want to say, okay, I'm going to attack this 15% hash power chain and I'm going to make it unusable, you have to have double its hash powers. You have to take 15% of the hash power globally. that you have and attack this chain instead of mining something useful.

And I assume if your attack works, that all this effort, all of this money you spent on mining these blocks is useless. And that is a ton, a ton of money to just throw down the drain to make your voice heard and make a decision here. And I, if you're looking at 15%, and especially if you're looking at 15%, and especially if you're If you're looking at 15% of hash rate, which is going to follow price after a few days or after a week, and things might not look the same after a few days, it's not clear to me that any attacks are feasible at kind of the 15, 20, 30% threshold as much as they would be at the 1% or 2% threshold. But what about, like, can't you make a lot of money in the short term before the price drops?

And do you know what I'm saying? Like, you could make a lot of money just right off the bat. And then, you know, later people might realize like, oh, there was an attack on the network and then the price would drop. But at that point, you've already made your profit, like if you exchange, right? Well, not quite. There's a few things which kind of slow you down there. First of all, people would notice that there's an attack going on immediately. when the attack occurs.

And I assume, I know at least several exchanges, I assume many exchanges have automated systems, which will... Even if it's a Sibyl attack, would they know? Well, a Sible attack is very different. A Sible attack doesn't allow Hashpower to do anything. A Sible attack is purely at a non-hashpower level. And most people would relatively easily not have this issue.

And so for listeners, you don't know what a Sible attack is that's where you are one person, but you make up, you make it look like you're a whole bunch of different people. But couldn't you make it look like you're a number of different miners? And do you know what I'm saying? So you make yourself look like you're like 10 different miners? It doesn't matter if you pretend to be 10 different miners or not. If there is a reorg, which happens and a large amount of hash power, just by the amount of hash power happens and triggers a reorg, then you know there's something going on. And there's systems in place, some exchanges to just pause deposits and withdraws of something like that happened.

Okay. And a reorg is where basically the previous transactions that had been mined in blocks get undone or just like reorganized. Is that it? Yeah, pretty much. And there's one other thing, which is kind of important to realize, at least from the point of view, of exploiting these kinds of attacks, all of the mining reward that you would be getting on this chain is not immediately spendable. So you can't take a mining reward that's mined in a block and immediately in the very next block or in the same block go in deposit at an exchange. You have a pretty significant waiting period that's enforced by the Bitcoin network. And then on top of that, many exchanges require a few extra confirmations. And so once you start talking about these kinds of big attacks, it becomes

very obvious and people can pretty quickly shut down until things are looking more stable. And in fact, we see the exchanges and most businesses have already- What do you mean by shut down? Pause deposits and withdraws. Okay. Oh, like on the exchanges, but the chain itself would keep going? Sure, the chain would keep going, but all of these people who would be subject to these kinds of attacks would simply not be because they're not accepting new payments at the time.

And we've already seen many, if not most, if not the vast majority of startups and Bitcoin exchanges announced that they're going to pause deposits and withdraws right before this hard fork until things have stabilized and are clear, irrespective of whether or not there are any obvious attacks. And then what about people who manage their own private keys and user-controlled wallets? Does that mean that they also are likely not to lose money in an attack? I would recommend that they also follow the guidance that the exchanges and many businesses are giving and not transact during that time. It's just easier to be safe that way. But there are warnings and many clients that would notify them in cases of these attacks.

Some clients don't. And thus, you know, wait three days, wait seven days, wait a month, look at what's going on and figure out when things look stable before you start to be very active. and accept payments from people you don't trust. Okay, so this is interesting because I just was thinking like, oh, a chain with only 15% hash power is going to be so prone to attacks that it's going to be very unsafe and unstable to use. But you are saying that in a way, the economic benefit you could possibly get from that

is just like immediately negated because people will realize that there's an attack. And so the value of those coins will drop. And so that sort of like kind of deterred people from doing an attack in the first place. That's fascinating. I think that's a huge part of it. I mean, look at Bitcoin Cash, right? Bitcoin Cash has the same proof of work algorithm, but a significantly, significantly lower hash rate than Bitcoin on most days. And a hash rate could easily switch over and attack Bitcoin Cash in a large ways.

But A, it hasn't. And B, if it were to, the price would probably almost immediately drop to zero. And people would stop accepting. it because it has been made clearly unusable. This is why I love what people call crypto-economics, although I did see someone on Twitter was like, crypto-economics is just economics. Anyway, okay, so actually let's go back to something that you brought up earlier, which is how people are defining Bitcoin.

I wanted to talk about how some of the exchanges and services are deciding to handle this and how they're naming the chains. I did see that Coinbase Zappo and Gemini, they all stayed at. that they're going to give the name Bitcoin to the chain with the most accumulated difficulty, which, as I mentioned earlier, seems to follow the Bitcoin White Paper, which several times mentions that Bitcoin is defined as the longest chain or the longest proof of work chain. There is a line in the abstract of the white paper that says, the longest chain not only serves as proof of the sequence of events witnessed,

but proof that it came from the largest pool of CPU power. Although now I guess that would be ASIC power because we don't, We don't need, sorry? The white paper does not define Bitcoin in the context of changes to the consensus rules by Hashpower. It defines Bitcoin in the context of if there are no changes to the consensus rules. If there are no changes to the rules, if there are no hard forks more specifically, then it is defined by the largest hash power. In fact, the white paper also goes on to talk about how all clients should be rejecting blocks, which are invalid according to the rules of the system. But more importantly, I don't think that's an interesting debate, right?

This is something that was written however many years ago now. And it's like trying to read way too much into something based on a time where we just didn't know anywhere near as much about how Bitcoin operates and how people wanted to operate and how people use it than we do today. Yeah. So that was the other side that I wanted to bring up, which is that because of these, chain split tokens, we see that a lot of users, or rather, yeah, that a lot of users going into this believe that the chain that is the real, the coin is probably the one that won't be the longest chain. So what do you think is the way that the different exchanges and services should handle it? So the longest chain is the ones that the largest amount of hash power went behind for supporting

some set of rules. And that's a unified set of rules. So what Matt said is, right that, you know, the overall system is resistant to folks changing, you know, critical rule sets in some ways. And for the most part, that's the, that's thought about as like selfishly changing things. In this case, what's happening is if the longest chain gets on the two-x side, it means that the bulk of these guys think that actually that is the right consensus rule that they would like to support. So it's still adhering to kind of, not kind of exactly, the original definition of what Bitcoin is. I think all of the businesses out there,

the exchanges, payment processors, wallets, et cetera, in terms of what happens at this fork, they've currently got software, which has something called Bitcoin. And it follows this longest chain that we have today. What's happening after this fork is that there's going to be two different chains, and these software programs out there need to pick which one

it's called Bitcoin and which one is not. And it's a tricky problem. I think this is going to sort out really quickly. It'll initially be based on longest chain, but the market value is going to speak, and that's going to influence who's the longest chain. So at the end, it's going to be market value. And I'm pretty sure Matt agrees with this. There's not really much controversy.

So if the market is signaling strongly, in favor of the 2x chain and the chain is the longest, it's going to just have this magnifying effect, multiplying effect, I should say, where it's going to just take it even more dominantly forward. Yeah, but in this case where most likely what's going to happen at the fork is that the hash power and the markets are going to be the exact mirror opposite of each other where one has 85% hash power and the other has 85% value, then what happens? Well, that's if you think that the current signals are perfectly accurate. I mean, we just went through is how some of these signals change, right?

So, you know, a couple of months ago, we had minor signaling in a particular way. And then we talked about, like, what does it mean? Or why did they change their minds? Have they changed their minds? Is it the pool? Is it something else? All of us can speculate on what that is. The futures markets, which just came up, are pretty thin.

We talked about that. We have different views on it. But we'll see. But what will happen is at the time of the fork, these things will get very concrete. And very quickly, we're going to figure out which change. chain is valued. Yeah, I have to agree with Mike there. I mean, it depends on how you define very quickly, but absolutely, I think we'll see over the first few days, over the first week, there's a pretty good shot over the first few hours, but I think that is very likely to change over the

first few days. We'll see things pretty clearly stabilized. We'll see hash rate try to follow price, and then people try to discern which way things are going to go in the market. And as well, it'll stabilize in some way. So the other wildcard that I want to throw into all this is Bitcoin Cash. You've got Jehan Wu, the CEO of Bitmain, which is the largest Bitcoin mining equipment manufacturing company. And he's also the head of the largest mining pool operator, ant pool touting Bitcoin Cash. And right now, BitMane is actually only accepting Bitcoin Cash as payment for its latest

mining equipment. Then you've got Roger Veer, who he's one of the earliest Bitcoin holders, or Bitcoiners and also one of the largest holders, who owns Bitcoin.com. And he's saying that Bitcoin Cash is closest to the original vision of Bitcoin, which is actually true in a technical sense, because it doesn't have Segwit, which is obviously how Bitcoin launched without Segwit. And it also has eight megabyte blocks. which is plenty of room for current transaction volume, which, of course, when Bitcoin first launched, there was plenty of room for transaction volume.

So these two guys are running around saying that this is the true Bitcoin or closest to the true Bitcoin. So if the one exchange prevails but continues to have scaling issues, do you guys think that Bitcoin Cash should be the ultimate winner? I want to push back very briefly. I mean, I think this highlights maybe the difference of how people interpret, you know, people try to divine certain things about Satoshi's vision for Bitcoin and the early vision for Bitcoin. And people strongly disagree about what those are

people who got in at the same time, people who spoke with Satoshi, all have different opinions about kind of what the early vision was. But as to your point, I think the Bitcoin Cash is frankly kind of a side thing at the moment, right? It's so small in terms of market value, in terms of hash rate, and in terms of support from businesses, from the community, from users. There is some traction in it, but I am skeptical it makes any difference in the Segwit 2x context. And Mike, what do you think? So they took a different approach. I mean, they just created a new coin, which is not compatible with any of the software out there today. So everybody had to go do a mad dash to change everything. And that's not what Segwit 2X is trying to do. Segwit 2X,

some people say it is trying to change things, but really it's not. It was designed not. It was change the transaction format so that's compatible with the vast, vast majority of existing systems everywhere from exchanges to wallets. So anyway, I consider Bitcoin cash just to be something different. I would not want to put words in the mouth of Roger or Gihon. Have you spoken to them, Laura? I was spoken of Roger and Gihon would not talk to me for this particular article. But Roger, you know, he, like, I don't know if you've seen those things on Bitcoin.com, But he has like all these charts comparing Bitcoin Cash to Bitcoin in its early days. And then there's this like little evolutionary tree that they've got going where he tries to show that Bitcoin.

Or sorry, Bitcoin Cash is like basically an extension of Bitcoin and that Bitcoin with Steckwood is like a totally different animal. And it's very, it's very interesting. Yeah. Have you guys seen that? We'll do better is to not not try to answer for other people. obviously the things that he posts are the things that he posts. I mean, he's very interested in that coin. I just consider it to be a different coin.

It's got its own set of properties and it's divorced from Bitcoin. So I want to ask a little bit of a different question now. So I was wondering, are there any women that have been involved at the center of the block size debate? And if so, do you think that things would have gone differently if we had been more women involved? Yeah, I think they would have gone. differently. There's a few folks who have been involved. Probably maybe the most obvious is Elizabeth Stark, who's the CEO of one of the companies implementing Lightning and has their implementation in beta right now on Tessna. I believe they're looking to do a beta on Mainnet relatively soon and

support people using Lightning for instance and small value transactions. And I think, yeah, there is, as I kind of mentioned briefly early on, there's so much of the community right now that almost in a sense refuses to try to understand the viewpoints and the kind of where people are coming to these different conclusions based on it and try to get to the heart of where people are disagreeing and try to really understand what people's thoughts are. And There's a lot of that, I think, that is ego-driven. There's a lot of it that is this is a community primarily of upper middle-class white men from similar Western backgrounds who all have a pretty strong ego. And often that gets in the way of having a good understanding of where other people are coming from and taking their position sometimes, at least to be able to sympathize and be able to,

come to some agreement instead of just arguing past each other all the time. I think the Chinese miners would disagree with being characterized as middle-aged white men, but there's plenty of studies that have shown that women make great managers, often better than men. We have a problem, and it's not specific to Bitcoin, but the technology field just doesn't have enough women. So I think that, yeah, if we have, had more women on the teams, we probably would see more even keeledness. I think some of the

aggressive traits of men that are debating can be amplified if it's only men in the room. And if we had women as part of the team, I think it'd probably be better. I wish I could confirm that true or false, but that'd be great. And then, so let's do predictions. What do you think is going to happen at the time at the hard fork? Go ahead, Mike. You can start with this one. You guys are like, oh, man, like people are going to ream me forever if I'm wrong. Yeah, I look my crystal ball at home. Sorry. I think this, I think Cyber 2X is going to go through. I think actually there's a lot of folks that have been staying on the sidelines that are going to come in.

Obviously, I've spoken to a lot of folks in the industry. The vitriolic language on social media is problematic. It makes a lot of people just not want to participate. I think that's a long-term thing that the Bitcoin community needs to figure out how to address. I think as we get past this, some of that will resolve itself, kind of like as I refer to with, you know, previous heated, intense debates. But I think the economic power is going to come out in a massive way to make this happen. And I think although there's a lot of activity on Twitter and Reddit, it actually is a small, piece of the ecosystem.

I know if you go to China and you ask them about Bitcoin, and they're not participating on Twitter that much, which is mostly a Western thing, you know, they feel a strong pride about their contribution to Bitcoin and how they feel about it. If you go into Europe, you see a lot as well. So this is a global effort. And while Twitter and Reddit seem to indicate one thing, I think that actually is kind of the centralized Western view. But the global view is going to come out.

And we're going to initially start with a lot of hash power behind it. So by default, it will be the longest chain. The value is going to go strongly in favor of Segwit 2X. That's going to reinforce the miners, and then it's going to go even farther. There will be a long-term chain. It looks like there's some folks that want to stay with the one-megabyte block. And I think they're willing to do that basically forever. And then, you know, for the folks that are pushing for Segba 2X, we really just want to help this thing scale better.

I hope that the noise about like corporate takeover or things like that goes away. The process, you know, if you look at the core process, they've been around for nine years. And, you know, they've got a good process, I would say. I think they could learn a lot actually from IETF. I think they're kind of recreating structures and trying to figure out similar things about how to get decentralized voting to really be good. and also to have it be open. I know that they're open to improving that process. I'm not trying to criticize.

You know, the Segway 2X or slash BTC1, really I think the best thing would be if everybody just kind of pulled it in and figured out how to make it happen on Bitcoin Core as well, and we didn't get sidetracked with these other debates, but it's really just a technology proposal. It's nothing else. So to get past this,

we can figure out how to scale it for the long term too. Yeah, I think as you mentioned early that I think we will see, and as Mike mentioned, I think we will see hash power start on the Segwit 2x chain. And we'll see, you know, 80% or whatever hash power start on the Segwit 2x chain. But I think discounting the futures market and the community to that an extent doesn't really work. Right. Anywhere you look in the community, the most vocal and the vast majority of voices are strongly. in opposition to Segwit 2X. And it's true, there are a number who aren't, but you go look at these meetup groups. You look at people in person. You go ask them, the like, as I mentioned earlier, there's what, four or five Bitcoin Meetup groups who have never taken a position on anything. You know, meetups try to avoid alienating any members.

And yet they still felt it necessary and possible for them to take a strong position denouncing Segwit 2X and declaring that it. shouldn't be the Bitcoin or it is not the Bitcoin, right? And you look also at the futures market. If there were people who were really going to come out strongly in favor of Segwit 2X on the markets at the fork, and I think, you know, Mike mentioned earlier, and I agree, I think we're going to see the markets play a very strong world on where things go a week or two weeks after the fork, maybe not how hash power votes or how hash power mines for the first day or two. But the pressure on pools to mine the thing that is more profitable is going to be immense.

And these futures market, you can make tens or 20 million dollars if you think that things are going to go the other way. But we don't see that. We don't see the Chinese community participating on the Chinese exchanges, which have futures for this. We don't see anyone in the Western community voting strongly in favor with their dollars of Segwit 2X. There are very few people who are staunchly in support of Segwit 2X. There are many people who are, you know, okay.

If it happens, that's fine. We'll use that. Or if it doesn't, that's also fine. But I am highly skeptical there's going to be many people who are willing to put their money where their mouth is, as it were, and risk all of their capital in Bitcoin. by selling Bitcoin for Bitcoin 2X or by selling the legacy token for Bitcoin 2X in order to shift the price enough to really make a difference. Whereas there are clearly a lot of people who are willing to do that on the other side. Well, we'll see how it plays out. This is going to be the most.

I truly think it's actually the number one most interesting thing to happen in Bitcoin since its inception. but this is all the time we have for today. So how can people get in touch with you? I'm at V-Blue Matt on Twitter, and you can find the rest of my contact details if you look me up there. And Mike? I mean, a number of different places,

so I'm easy to reach. Okay. All right, well, thank you both so much for coming on the show. Great. Thank you for having us. Yeah, for the industry and brighting up this stuff. It's really important stuff, so thank you. Oh, thanks.

Thanks, everyone, for joining us today. To learn more about Mike and Matt and to find previous episodes of the show, check out my Forbes page, Forbes.com slash sites slash Laura Shin. Also be sure to follow me on Twitter at Laura Shin. New episodes of Unchained come out every other Tuesday. If you haven't already, rate, review, and subscribe on iTunes, or wherever you get your podcasts. If you like this episode, share it with your friends on Facebook, Twitter, or LinkedIn. Unchained is produced by me, Laura Shin, with help from Elaine Zelby and Fractal Recording.

Thanks for listening. listening.