Unchained - Why November Will Be The Real Test For Bitcoin

Episode Date: July 25, 2017

Bitcoin core developer Eric Lombrozo and OB1 CEO Brian Hoffman debate whether SegWit2x is the best path forward, discuss who supported it and why, and whether the potential for a hard fork harms the price. They also discuss what happens to the power of core developers now that a change they didn’t support might get pushed through, what their ideal solutions for increasing transactions on the network are, and how much power miners should have. Show notes: http://www.forbes.com/sites/laurashin/2017/07/25/why-november-will-be-the-real-test-for-bitcoin/ Back story referenced in this episode: The different sides in Bitcoin threatening to cut each other out: https://www.forbes.com/sites/laurashin/2017/03/21/is-this-massive-power-struggle-about-to-blow-up-bitcoin/#33e4c5047325 New York agreement: https://www.forbes.com/sites/laurashin/2017/05/23/bitcoin-agreement-promises-to-resolve-years-long-impasse/#6ed7d8dd448d Economic activity moving to other blockchains: https://www.forbes.com/sites/laurashin/2017/06/07/bitcoin-is-at-an-all-time-high-but-is-it-about-to-self-destruct/#2c563f8dcb31 Brian's company: https://ob1.io/ Eric's company: https://ciphrex.com/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi, everyone. Welcome to Unchained, a podcast engineered by Fractor Recording and produced by me, your host, Laura Shin, a senior editor at Forbes covering all things crypto. Thanks for tuning in. If you've been enjoying this podcast, please help get the word out about the show. Share it on Facebook, Twitter, LinkedIn, or in your secret Slack and Telegram channels. And if you have a chance, give the show a rating or review on iTunes or wherever you listen to your podcasts. Big thanks to our sponsor, OnRamp. If you're having an ICO, a token sale, a token allocation event, a token generation event, or whatever other phrase you come up with to try not to get on the SEC's radar. You need a website. Check out on Ramp. This full service creative and design agency provides its clients with attractive and persuasive branding, websites and marketing materials. Spark interest in your project, generate buzz. Check out thinkonramp.com. The topic of today's episode is Bitcoin's intense and incredibly expensive game of chicken, which is nearing at least the first cliff. With me today to discuss the upcoming events of this asset, this digital goal that has

started all this Cryptomania are Eric Lombroso, a Bitcoin Core developer, and Brian Hoffman, CEO of Obie 1, which runs the project at OpenBazaar, the eBay of the decentralized web. Welcome, Eric and Brian. Thanks for having me, Laura. Yeah, thank you. Thank you for having me on. Okay, so I'm going to start this discussion with a little framing for our, listeners, as particularly those who are new to the space, so that we can dive into the meat

of the discussion. About three years ago, the Bitcoin community began to face the question of how to scale the network. Some of the early core developers that had been deeply involved in the project wanted to lift a cap of one megabyte that limits the amount of transactions that can be processed at any given moment. They wanted to lift that, you know, from one megabyte to different caps, such as some of the different proposals were like 8 megabytes, 20 megabytes, a flexible cap. But that cap at the moment,

or the new proposal, that seems to have the most support from people is 2 megabytes. However, that framing of big blocks versus small blocks is only one way of looking at this question. Another big issue that the question raises is whether or not to conduct a hard fork in order to scale the network, since that is what would be required in order to change that cap. The core developers say that doing so runs the risk of splitting the chain, which could result in two versions of Bitcoin, and that would have a deleterious effect on Bitcoin's reputation as digital gold. A couple years ago, they began working on another scaling solution called segregated witness that would essentially enable more data to be processed in blocks without requiring a hard fork.

It also included a fix for a problem called transaction malleability. Segwit, as it became known, was also greatly anticipated because pushing it through would enable something called the Lightning Network, and that would bring many more transactions to Bitcoin, not necessarily all of the Bitcoin blockchain, but to be settled on it. At some point, the devs and the miners had a meeting in Hong Kong where the attendees signed a document agreeing to implement both Sequit and Hard Fork to two megabytes. But what actually happened in this meeting is in dispute because the attendees had different conceptions about how much authority this agreement had. Regardless, once the work was done to begin implementing Segwit, only about 30 to 40% of

miners actually gave it support, but the threshold necessary to implement it was 95%. One minor in particular, who owned the largest mining pool as well, is a company called Bitmain headed up by a man named Jehan Wu, and Bitmain is also the largest mining ship manufacturer, and they opposed Sequit unless a block size increase came along with it. So a steelmate occurred. Seguet was sort of held hostage by Bitmain's desire to see this one megabyte block size increased. And as the divide deepened, each side began essentially threatening to cut the other side out of Bitcoin. And I did write a few articles on this, which I can link to in the show notes. However, in May, Barry Silbert, who's the head of Digital Currency Group, which is the biggest blockchain VC firm,

brokered an agreement among the biggest economic actors in Bitcoin to push through something that they're calling Segwit 2X, or it's often called the New York Agreement as well, which basically says that Segwit will be implemented with 80% of mining power, and then after that, the network will upgrade to a 2-Mabyte block size limit through a hard fork. It's essentially the Hong Kong agreement from a year and a half ago, just with some details that are different. And the companies that signed this agreement include some of the biggest economic actors in this space, such as Coinbase, blockchain, Zappo, ShapeShift, and of course Bitmain, which is this company that is most reviled and blamed for holding Segwit hostage. So in response, there was more support began to build for something called a user-activated software.

or UASF. And that actually also risks causing a chain split. So the deadlines for both Segwit 2X and for the UASF are nearing. At the moment of recording, it's actually Thursday afternoon. It looks, we're very close for Segwit 2X to be locked in. So BIP 91. Okay. It's called BIP 91 for those of you who maybe don't follow all the technical details.

and if it does go through, then that should prevent the chain split that could have been caused by the UASF, but it doesn't resolve the question of whether or not we will see a chain split in November, which is when the hard fork to move to the two megabyte block size will actually take place. So that's everything. It's a very long summary, but we needed to get through that backstory in order to have a media discussion. So I actually want to start our talk with Brian. Brian, Obi-1 signed the New York Agreement. Why?

So, you know, I think that was a pretty good summary of what's happened at a pretty high level. I mean, it's been several years now. And obviously, there's a lot of details left out between this. But, you know, I mean, from our perspective, I mean, I'm not a core dev as Eric is or even work with the Bitcoin Core Code. directly. But, you know, we built a business and an open source project on top of the protocol and, you know, our success as well as a lot of other groups that are building, you know, on top of the Bitcoin's network effect, understand that, you know, the project has to scale in order to be able to support what these groups want to do. And I think that there's this disagreement about

how that happens. But, you know, ultimately, the most important thing for us is that we try to move forward in some way that all parties that are pertinent to the discussion are not fighting with each other. And so, you know, so, but I'm wondering, like, when you were saying, you know, it's necessary to scale, as we mentioned earlier, Segwit actually would enable more transactions to occur on the network at any given moment. So why sign the agreement that would not only bring Segwit 2x, but also increase the block size limit? Well, I mean, I think, first of all, it's important to understand that, like, there was a time before Segwit existed, and there were many discussions around how Bitcoin could scale before Segwit was even a thing.

And I think a lot of the people that feel this way about scaling, that Segwit is not the optimal option, are the ones that have been pushing back for the last few years. And I think, you know, fair or not, they feel that Segwit, giving Segwit, now is a compromise that moves the market forward without, you know, ruining too many things, but yet a hard fork later on would be the part that they would be most interested in. And I think, you know, I think the conversation has been reframed where, you know, oh, well, everybody agrees that Segwit is awesome and the hard fork is not great, is not great. But that's not how these people feel.

Oh, interesting. So what is their objection to Segwit? Why do they feel it's not the optimal solution? I mean, this conversation will probably get in the weeds, and Eric could probably talk circles around me in terms of whether it's technically accurate. But my understanding is that, you know, Segwit could be enabled through a hard fork method, and it could do, there are several other defects in the protocol that we could also kind of package as part of that hard fork and clean up the code. And instead, many of them feel that Segwit in its current.

implementation as a soft work is a little bit hacky and maybe not as clean as it could be. And I think that choice was made in order to sacrifice not having this or to have backwards compatibility with other apps instead of breaking the network maybe with a chain split. Oh, interesting. And then for them, or for them and I'm assuming you, why is it that increasing the block size is the better way to go? I mean, obviously, increasing. the block size is only a temporary fix. I think everybody pretty much agrees that that's true. And I think there's a lot of potential outcomes here. We could raise the block size and it could immediately be filled up with spam and be a problem once again, which is what some people speculate.

And maybe it's a it holds us off for another year. But I think the for me, the most important aspect of this is that I don't feel that this change is something that is going to long-term harm Bitcoin and the goodwill and positivity that comes out of actually moving all of the players in Bitcoin forward together is going to allow us to not have to go through these Mexican standoffs every time there's a critical change to be made to the network. Well, but wait, but do you think it is moving everyone forward together? because I see that the core devs are not moving forward. I mean, you know, they're sort of being forced along.

They wrote BIP-91. I mean, you know. Segwit 2-X. But, I mean, BIP-91 and the whole, everything that's going on with, like, making sure that the transition is going smooth. I mean, there's a lot of core developers actually working on making sure that that Seguid actually activates and smooth, and there aren't any market disruptions. So there are, there are, you know, core developers that are actually actively working on trying to make this transition as smooth as possible.

Oh, okay. Yeah, I agree. And I think that this, I mean, that does not mean that everybody agrees with what's happening, but I think we're all trying to work together to make sure that this isn't a disaster or any some way. Because ultimately, the market is deciding that Segwit is going to happen, right? We're obviously seeing BIP 91 is probably going to be activated soon. Yeah, but not just Segwit 2X, which is a different thing.

Well, we don't know about that. That's like several months, you know, further on. I think right now, like, we're just concerning ourselves with, like, the current activation and then, like, seeing what's going to happen. Because a lot of things can happen between now and three months. Okay. But so I want to go back to at this point about whether or not the core devs are coming along because they wanted to or sort of because they realized that it's happening anyway. And so they need to jump aboard. Which is it?

Well, let me just clear up a few things. You know, when you talk about core devs, you're really talking about a whole bunch of volunteers that, you know, work from all over the world. It's not just like this one homogenous group that like agrees on everything. There's there's a lot of internal, you know, disagreements and minor tips of, you know, different approaches of doing certain things. But for the most part, I think there's a general agreement as to the general roadmap as far as like, you know, the best way to to move things forward. But let me just comment a few things if I can.

Just to give a little bit of context of my current situation in this. When I first started working on Bitcoin, I saw it as a proof of concept. I did not see it as a completed product. It was only worth like, you know, there were barely any markets and it was worth just like a couple dollars or something like that. And when was that? This was like 2011. Okay. And I expected it to become obsolete, you know, for someone else to come up with a better cryptocurrency that would replace it eventually.

That was kind of my expectation. And then I saw the rise of Ripple and Ethereum and several other projects, which I participated in in the early stages, hoping that we would be able to fix some of the issues with Bitcoin. and create a better cryptocurrency. So it's not like I was a Bitcoin maximalist that thought that, you know, it's got to be Bitcoin and everyone's got to, you know, do it this way. I always thought that if someone came up with a better idea

and wanted to have a better cryptocurrency, that was fine. It would probably be called something other than Bitcoin, so like you have Ethereum or a ripple or whatever, right? And eventually maybe users would migrate over to that because it would be a better platform at some point. But then I quickly saw that other projects made even worse mistakes than I think Bitcoin made. And there was a huge breakthrough, which was the discovery of how to be able to change consensus rules in a backwards compatible way. And this was like the really big

breakthrough that made me believe in the future. Which is called a soft fork. Well, yeah, soft fork plus a whole bunch of other things that go into it. It's not being a soft fork alone doesn't make it backwards compatible, but it's an important tool in the whole arsenal of making things backwards compatible. So for instance, like the, you know, the way that's like, but just for people who don't know what all this means, the reason that that's significant is because then you can prevent a chain split and therefore prevent two versions of Bitcoin being created. Is that, is that it?

That's one of the big points. And the other one is disenfranchising people. For instance, if you change compatibility, then maybe people's preferred programs are no longer going to work on the network anymore. Or maybe coins or contracts that they had before are no longer going to be honored by the rules or stuff like that. So that's also an important factor that figures into the backwards compatibility. And a software alone is not enough to ensure that, for instance, the software could be used to blacklist addresses. And that's something that's a big no-no. That's something that I don't

think anyone, any of the developers would support, for instance, even if it could be done as a software. So it's really the combination of no chain split plus making it an optional feature in the sense that people that don't want to use the feature are not adversely affected by other people using the feature. So it was discovered that it was possible to extend Bitcoin in a lot of different ways by committing to extra data, to hash of an extra data in a block. And I think, you know, some people have made a big deal of whether it be easier to implement something like Segwood is a hard fork or not. And the truth is no, actually, it's really no different. It's just where the commitment actually is placed.

Obviously, with a hard fork, if we have the full ability to change anything we want and we don't care about compatibility, You know, we could start from scratch, and with the lessons of the past, we could fix a lot of other things if we wanted to. But one of the big challenges, and I think this is the biggest engineering challenge in Bitcoin. It's like when I design a lot of other systems, I usually, especially if I get to start from the early stages, try to design it from the start the way that I want it to be. But Bitcoin is how it is right now, and we're bootstrapping this network that already has a lot of value. And the real engineering challenge isn't, you know, how would I build it from scratch better?

but how can I take what exists right now and modify it in a way that isn't going to break it that's going to add the functionality that we want. So for you, it sounds like you feel like the number one priority at any point when you are making decisions about how to develop the protocol is whether or not you can make that change in a backwards compatible manner, which would therefore prevent a change split. Is that what you're saying? That's a huge component, yes. And if it's not possible to do that, then I would probably consider doing something like

Ethereum or Ripple, which is a separate block. So, I mean, if I wanted to really change Bitcoin drastically and do something that was very different, that it was very hard to do in a backwards compatible way, I would probably just start a new blockchain. So I want to actually just take these thoughts and shift them over to Segwit 2X. Here we are at this moment where it looks really likely that BIP 91, Segment 2x is going to go through, which means that Segment will lock in. And then in November, there's likely to be this hard fork to a two megabyte limit. So what is your position on that? Do you think that it's a good thing or a bad thing that this is probably going to happen? Well, first, let me clear something up.

The whole minor signaling thing is actually an arbitrary mechanism that was added to the software to help coordination and to make the transition smoother. Wait, and by minor signaling, you mean this is how we come up with these percentages, like 80% threshold and stuff? That was actually, you know, something that was invented way after Bitcoin actually started. the first few soft forks did not use that mechanism at all. How did those go through? They just had a flag date or a block height.

And basically, you know, users would run the updated software. And at some point, blocks that did not conform to the new rules would just basically be rejected by those nodes. So it was a form of user-activated software, even if it wasn't called that. The minor signaling was added later with a mechanism that's called is supermajority. And I believe it was BIP 30 something or other. That was the first one that was deployed this way. And what this allowed was for miners to signal intent to start enforcing the rule, which made it so that it was easier to transition the network more smoothly and give people time to make sure that they don't end up mining orphan blocks

or that they don't end up accepting invalid confirmations and stuff like that. So do you think that it's a good thing that this is the way we do it now? Well, it was a coordination mechanism that expected cooperation. and as long as there was cooperation between developers, industry, miners, users, etc., it was fine. But the problem is when you get this kind of adversarial scenario, and in this kind of a situation, it just does not work at all. I believe that it has been abused and has been given way more importance than it really has. For instance, this whole 95% thing, that was an arbitrary choice that was made in the subway deployment. It could have been made as low as probably 60 or even lower, and probably still.

still would have been relatively safe, but there probably would have been a few miners that would have mined a few bad blocks, and there might have been, you know, a couple, you know, small chain splits, just a few blocks deep and then other issues like that. 95 just makes it so it's like almost guaranteed that there's going to be almost no, you know, no, no, uh, chain split at all. But it's mostly just a safety measure. But Eric, I mean, like you were saying like, oh, we could have made it 60% and stuff, but I mean, it, it only ever got 30 to 40% anyway.

So it wouldn't have gone through even if the threshold had been lowered. No, but at this point, it was all just political posturing. I mean, really, if you think about what happened with the signaling, was people were just starting to stick random data into blocks and using it as a signaling mechanism that didn't actually trigger anything in the software that people were actually using. So if I'm running a node and someone decides to stick something

in their Coinbase transaction that says, I support the New York agreement or whatever, yeah, okay, that's a way to kind of demonstrate support from miners for something like that. But it's not going to change anything of my software. where it's not going to make some blocks suddenly become valid that weren't valid before. 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.

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They put that shit on everything. Breakfast available until 11 a.m. At participating Canadian restaurants for a limited time. Frank's Red Hot is a registered trademark of the French's food company LLC. Okay, so what you're saying is like, but I guess what I'm trying to get it is I don't know exactly why this point is important to you. Is it because you feel like this is a bad way to go about doing things? Because I actually did want to ask you that later, like what is the best way, you know, to make decisions like this?

But is that why you're telling me all this? The reason I bring this up is because I think there's been a huge misconception by some of the community that there's this kind of political process that's established in Bitcoin that works by minor voting. And that's actually not the case at all. I know that the Satoshi White Paper talks about, you know, one CP, one vote. But I think that it's very confusing in a lot of ways. and people have tended to misinterpret that. Back when the white paper was written, it was still something that was being prototyped.

It wasn't even released yet. But if you look at the original implementation of Bitcoin, the software checks to make sure that blocks are valid. So really, what miners are choosing is which blockchain to extend and which transactions to include in their blocks. They're not actually getting to choose which rules the blockchain that they're choosing to follow will enforce. And you see that in all these markets

where you have a bunch of different blockchain Like, for instance, look at Poloniacs or something. You have all these different blockchains and all these mining pools that actually shift their hashing power depending on what's more profitable to mine at any given one point in time. So really, miners are following whatever chain is the most profitable for them to be mining at that particular moment. And they're providing a service to users, which is to secure their transactions by making it expensive for someone to reverse it. That's what proof of work actually does. But it's not actually a voting mechanism.

it's not actually a political decision-making process at all. And it was never designed that way. And I think that this signaling mechanism that was used for soft forks kind of played into that whole misunderstanding. So now we have this kind of like theater for all these different, you know, signaling of different proposals and this and that. But that actually doesn't change what the software does unless people choose to run software that actually enforces those new rules. So even if... So, Eric, I just... I just want to stop things for a second because, like, I feel like, you know, we're getting into the weeds here.

I actually probably just really want to talk about this later. Like, what is the best way to do this? Because, like, I just need to give listeners a framework to also talk about, like, for the rest of this podcast. I actually just want to hear from both of you. What deadlines and events are you most worried about over the next few months? Like, what, what are some of the deadlines that are coming up? What is going to happen at those moments? What should users be aware of?

and what are the risks that happen at each of those points? Okay, so right now we're waiting for BIP91 to activate. What Bip 91 does is it requires signaling of the currently deployed version of Segwit, which is running on over 80% of nodes right now, has a particular trigger for it to activate. And once it triggers, then at that point all blocks are going to have to enforce, or blocks that use Segwit are going to have to enforce the Segwit rules. So does that mean that immediately the chain,

has the segregated witness feature, which means that lightning can be implemented after that? Not immediately. Not immediately. That's just, this is just a trigger for the next trigger. It's kind of like a Rube Goldberg device. It just triggers the next trigger, which is going to be, you know, a two-week lock-in period and then a two-week activation period. So we're probably looking at activation, of actual segue would activation sometime, probably mid to late August. Okay. So basically, if we reach that 80% threshold, which it looks like it'll be today, I think, that means that it kicks off like a two-week period of what? Because it doesn't it have to do with, you know, when that difficulty actually? Okay, so can you explain that?

Yes. So the way that Segwood is currently deployed is using what's called BIP 9, which is a signaling mechanism that operates on every retargeting interval, which is every 2016 blocks. Every 2016 blocks, if 90% of those blocks signal for Segwit, then at that point, it locks in. And then, you know, people are given two weeks to upgrade. And then after two weeks, the next retargeting interval, after another 2016 blocks, at that point, people can start using Segwit transactions. Okay.

And this retargeting interval that has to do with the difficulty, the hashing difficulty on the network? Yes. And it was just chosen because it was a convenient interval that already existed. it as part of the protocol. So it was decided that that interval was going to also be used for the BIP mine activation mechanism. Okay, but then you were saying, so then after that first two weeks, then what happens to, what has to happen after that in the next two weeks? So after it's locked in, then two weeks after that, all the nodes out there are going to start enforcing Segwit. So if miners mine blocks that do not enforce it, that include the transactions that are invalid according to the

segment rules, they're going to get rejected by these notes. So that means that minors have to, you know, if they include segue with transactions, they have to enforce the Segwit rules at that point. So that's when you can consider the activation to actually have been completed. Oh, okay. So if I'm a minor and I don't enforce that rule and I mine a block, then I don't get the block reward? Exactly. Oh, okay. So there's an economic incentive for them to do this. Mm-hmm, exactly. Okay. So, and then at which point can, um, can the different actors in in Bitcoin use the feature of segregated witness? As soon as it's activated, which is going to be one retargeting interval after it's locked in.

So it's basically going to, it's probably going to be somewhere in late August, like a month from now or something like that, where people can actually start to use it. But that sounds like two. Oh, okay. So it's like two intervals away. Yeah. Yes. Okay. And if that happens, then that means that the user activated software will not go through, which then means that the risk of a chain split from that will also not happen. Is that correct? Yeah. Yeah. Basically what happens is if BIP 91 activates and miners are actually starting enforcing it, then that kind of makes BIP 148 moot, assuming that they do follow through with it. However, a lot of users still are running BIP 148 just to make sure that minors follow through on that because most users are actually not running BIP-91. B-91.

is for minors to enforce among each other. BIP 148 is for users to check the miners, and it's kind of like checks and balances, to make sure that the miners are actually following the rules. Okay. So then it sounds like the next big deadline for people to focus on, and in particular to worry about whether or not the value of their bitcoins will drop or whether or not they'll suddenly have two different versions of Bitcoin or even more.

will take place in November. So can you describe what's going to happen then? And actually, Brian, do you want to do you want to do you want to do that since Eric's been talking a lot? I mean, the principle behind Segwit 2X is that it's roughly three months or 90 days past the activation of Segwit, you know, then would be the attempted hard fork. I think it's important to realize that that's, it's not necessarily like a sure thing, right? Like this is clearly going to be a massive, contentious time period, I think. I don't know if Eric agrees with that. But, you know, I think there is speculation that a lot of these people that just want to get Segwit out are going to go along with this.

And then, you know, once Segwit activates, the landscape could change in terms of support for a hard fork or any other perceived outcome. And so I don't know. I mean, I'm holding my tongue for what, well, happen, but certainly that's the most important date, I think, in the near future is what happens within that 90-day period. Okay. So I actually, earlier in this conversation, I kind of had you both argue your own side, but one question that I got from Twitter, which I think is a great one, is I want to hear

you guys describe for me what you think is the best argument for the other side. Hmm. Well, I don't really think that there are sides of the way that. that people are painting it. I think that it's kind of like people have kind of created these, you know, straw men and tried to kind of pitch one side against the other. From the very beginning, I've been a very strong supporter of increasing block size

if it's found, if there's a way to do it safely and a way to do it that, you know, that doesn't cause a lot of other problems. And a lot of other core developers have also been very supportive of this, including Peter Willey, who's one of the main authors of Segwit. And actually it was one of the big motivations to actually try to merge this into Bitcoin core was the fact that we could get a block size increase without all of the other issues, including, you know, chain split risks and compatibility issues, et cetera. Peter Willey is a supporter of Segment 2X? No, no, no, he's a supporter of bigger blocks also, if done in a

safe way. And it's done in a way that's actually, you know, that has peer review and that is not going to split the network where it's not going to coerce people. And I think that a lot of, you know, at least several of the major core developers, core contributors, since this whole issue was brought up in 2015, at least in the discussion forms that we generally use for our communications, such as the mailing lists and the IRC chat channels and other places like that on GitHub, the general idea was, okay, let's see if we can find a way to increase block size that's safe that's not going to cause a chain split,

that avoids a lot of the political contentious issues, etc. and Segwa was kind of the solution to all these things that we found for the moment. And so I want to just make it clear, first of all, that I'm fully in favor of being able to increase block size, if it's possible to do it in a safe way. I don't think that we currently have a way to do it that's safe, given the current political circumstances and given the current technology. So I asked you to argue what you think is the best argument for the other side, but it seems like you're going back to saying, like, a hard fork, no matter when or how you do it, is a bad idea. No, I'm not saying that at all. No.

I think a hard fork would be fine under different circumstances if we had better research for it and if we actually were able to get market support for it. And right now it just doesn't look like the market service. And you don't feel like there's market support for this when we have a... Every single time that any hard fork threat has been pushed hard, the markets have dropped significantly. Every single time that Segwood has been pushed hard with signaling, the market. have gone up. So the market signal almost unambiguously shows that hard forks are not popular in the market and Segwit is. Yeah, but Eric, but Eric, would you argue that, I mean,

we're getting Segwit activated right now because of both the combination of the UASF threat and the Segwit 2X threat. They're both coming together and creating a scenario where people would rather not have to deal with whatever's worse and they're going to do it. And we're seeing the market get pushed up. And that were New York agreement, I mean, is is Segwit plus a two megabyte hard fork. Now, I don't know if people are just bluffing and saying, oh, we want the Segwit and we don't want the two megabyte. We'll just take this for now or not.

But it certainly seems like the market is saying we want both of those things and we want to move forward and the price is going up. I mean, we're getting close to $2,800 now from last week when we're under 2000. So because we're about to activate BIP 91. So I don't, I don't necessarily buy that like the market is rejecting. the hard fork. I think hard fork has certainly gotten the connotation that it's this horrible, awful thing that could possibly ever happen. I mean, at some point in time, Bitcoin is going to have to hard fork. Like you said, we'd like to do it in the most safe and responsible way

and have, give everybody enough time to prepare for it. But we've been discussing this stuff for three years now. And we keep saying that, but like, and there's a hard fork research website you can go to and see about spoon net and all these other options. But like at some point, there has to be some progress made. And I think, you know, you're seeing frustration within core devs as well. I mean, you see Luke Jr. and Greg Maxwell arguing around whether B.148 is responsible or not, whether it's too fast or this or that. So I don't think everybody agrees. It's hard to get people to agree, period. And that's a political problem. That's something that Bitcoin does not solve. And I think that, you know, more people, I wish more people understood that. Bitcoin is not a political

system. It's just a protocol, which defines a set of rules that if everyone follows, it's predictable, that, you know, it's going to behave a certain way, assuming that it works correctly. Changing the rules now gets into the realm of politics. And Satoshi, unfortunately, did not give us a system for really being able to do that in a way that is, you know, that's like spelled out for us. So we're kind of trying to create a way of doing that. But, you know, just as someone that's had a lot of experience working with the protocol and trying to make changes, I can tell you that it's extremely difficult. Like, once there's a certain momentum and a certain amount of market value and stakeholders and all this involved,

It's very hard to realign people and to steer the ship and to get people to accept changes to it. So those issues are way beyond just programming and coding or engineering. I mean, we're talking politics here. And I think that, you know, people can write up all this code for hard forks and, you know, all these different scaling approaches. But in the end, it's like people need to run the actual software. You need to convince people to run it. and people need to and you need to make sure

that you don't get any kind of divergent interest that you know want to see any kind of situations where they can kind of exploit weaknesses I mean because there's a lot of things that can go wrong if there is a divergence of interest and you don't get the right checks and balances. There could be a lot of potential hacks and attacks.

And this is the whole issue that I have with the UASF movement is that, you know, we're trying to get people to run the software. Like you're saying people have to use it, people have to put it out there into production, right? Like a couple thousand users running UASF is not going to do it necessarily either. Like we need the miners as well. And this whole like demonization of what they're doing is like the wrong way to go about. That's why like we're so supportive of trying to do something with Segwit 2X. Now we didn't know at the time we signed the agreement how whether it would be accepted by core devs or not or any of these other people.

We just thought that this is the most pragmatic approach to get everybody on board. the problem is now we have the situation where the miners kind of work out it works out for them whether we get Segwit or not I mean it's to be blunt I mean if if Segwit doesn't go through and they in the blocks stay small and the fees go up they make money off the fees and if the blocks get bigger and everything works out and it scales up and they get more fees that way so you know it's like they can play games with both sides and then that's actually what's really kind of like it upsets me a little bit that I feel that you know um maybe um interests between a lot of of people, especially in the DCG portfolio and say, like, Bitcoin core developers are more aligned than a lot of minor interests and DCG companies. And, and I, you know, I kind of feel like, I mean, I'm not saying all miners. I think there's a lot of great miners out there that are doing a great service for the network, and then they're definitely, you know, doing their job of of making sure that the network is hard to attack. But there's also interest there that, as you

point out, conflict with other companies. You know, obviously, miners want to collect as much in fees as possible. businesses that use Bitcoin want to pay as little in fees as possible, right? And so there's a negotiation that occurs here. I think that definitely none of those fees are going to the developers. I mean, we're not getting paid any. Minors are getting all this money. So it just feels to me like, like, you know, industry may be like pick the wrong

allies when it comes to like actually figuring out like where their interests lie. And, you know, I understand. I mean, I know that, I mean, I don't, I'm not trying to like demonize anyone in particular is I think that everyone has their own interests and whatever. It's like obviously you have to expect people to be selfish. And if you expect people to not be selfish and for this to work, then obviously it's not going to work. So yeah, let's, so let's hold that thought right there. We're going to break now for an important word from our sponsor, OnRamp. And then we'll go back to this really interesting topic. So with so many companies buying for people's attention now, it's important to

stand out from the pack. If you're looking to become a go-to brand that lingers in consumers' minds, check out OnRamp, a full-service creative agency that helps its clients maximize brand awareness, gain market momentum, and accelerate growth. OnRamp has helped numerous companies do everything from create their branding and identity to redesign their existing website to draw more traffic. Plus, they've helped blockchain startups and projects. Whether you're launching your brand or repositioning an existing organization or just want to freshen your company's look, onRamp can come up with a tailored design project or a strategic marketing plan that ensures your firm's lead in the market. Learn more and see examples of its work at Think OnRamp. com. I'm talking with Bitcoin core developer Eric Lombroso and CEO of Obi-1 Brian Hoffman.

So we were talking about the politics of this whole thing and about governance in general. And I wanted to ask you guys what you think is the best way for Bitcoin to make big decisions like this going forward. Well, I mean, there isn't a process right now. I think a lot of people might not be very familiar with all the intricacies of it. I think that there's a big kind of clash of cultures maybe between like, you know, free open source software development and more corporate software development. But there is a process for submitting proposals, for getting them reviewed. There's a, you know, big open community out there for, you know, doing this stuff. But what's the process then for deciding between those different proposals?

Well, I mean, right now, yeah, that's a good question. Right now, basically, people can run whatever software they want. I believe, you know, I believe this is a fundamental right. And this is one of the things that I actually believe was one of my biggest bones of contention with the Hong Kong agreement. And also, you know, a problem with a New York agreement is that I do not believe in telling people that they need to run specific code. I believe that people should be able to run whatever code they want. If it happens to be code that's buggy or that has problems or that splits them off the network or they end up losing money, well, I mean, caveat emptier, I think that, you know, that's just part of crypto. So if you want to really have control over your own funds, then, you know, you're also responsible for making sure that you're running stuff that, you know, that works.

So you support more like a laissez-faire style where it's like not really making decisions as sort of like let anybody do what they want? I believe that miners should be able to mine whatever blockchain they want to mine, you know, and users should be able to use whatever blockchain they want to use. And merchants should be able to support whatever blockchings they want to support. and exchanges to be able to list whatever blockchains they want to list. But then in this case where there's, you know, this issue with a network where there's more demand for transactions than the network is able to process, how do we, you know, like, I totally get your philosophy here maybe for other things in life, but when it comes to this kind of network where kind of everybody needs to be on board in order for the whole thing to stay together,

what is the best way to make these decisions? But do they? I mean, for instance, Ethereum has been going on without the need for, you know, Bitcoin. I mean, obviously Bitcoin is used as a reserve currency for all of crypto. But, you know, besides that, I mean, you have other blockchings that are chugging along. If people want to create a cryptocurrency that has very different features. Wait, I don't know what you mean by that. I don't know what you mean by that.

Are you talking about the fact that Ethereum had a fork and so the people who disagree are not. No, no. I'm just saying that if you want to create a blockchain that has features that are, you know, above and beyond Bitcoin, nobody. nobody's stopping you. You can create a blockchain. It won't be called Bitcoin, but you can, you know, brand it and make it something big.

And if you do a better job than Bitcoin, you should be able to win on the markets. I believe that's fair. But people that have already invested in Bitcoin, they want to retain that investment. They want, or the value of it, you know. But that works both ways, though, because people that invested in Bitcoin also subscribe to a particular set of rules,

a lot of users. And, you know, if you break compatibility with that, then it becomes a question of whether or not it can, really still call that Bitcoin because as soon as you start to break rules that some people accepted as part of the rules of Bitcoin. So Eric, I feel like you still haven't answered this question. What is the best way to make decisions about how to change the network? Well, first of all, anything that's technical, requires technical review, requires a lot of peer review and making sure that, I mean, this is a lot of cutting edge stuff that, you know,

hasn't been really fully field tested yet. And we're talking about a bounty of, you know, tens of billions of dollars. So there's very, very little margin of error here. It needs to be really, really carefully reviewed and tested and made sure that it actually makes sense, you know, scientifically and technically. But then once we have a proposal that actually makes sense on all that, getting everyone to actually agree to use it really is a matter of aligning incentives. There really is no – that's one of the things about Bitcoin is that there's no formal governance structure.

And I think a lot of people want to keep it that way, there's incentive structures. And if you can get the incentives to align correctly with a particular idea that you have, then the network might, you know, take you up on that. And I think that certain things make it much more likely for the incentives to align. For instance, not disenfranchising people or making features optional or, you know, supporting back. So from what you're saying, though, then it sounds like what Bitmain and Jehan did was rational. Because if they, you know, their incentive is for, for the long term, to have more fees come to them and to have more transactions processed on chain rather than off chain. And so by, you know, and Giann, you know, fully told me like he's not opposed to Segwit.

When he's opposed to is Segwit without also a block size increase. And so then it sounds like what you're saying here is if incentives are the way that this should be run, then what he did was completely rational because therefore now he's getting, well, hopefully if this goes through, he's going to get what he wants, which is the block size to be bigger and for more transactions to be processed on chain. And so then it worked. But I think that there's like a little bit more, there's a little bit more to it here that I think Eric alluded to in the beginning of this podcast, which was that there's some control issues here that are getting glossed over. I think, you know, for Jehan to say I support Segwit, but I want a hard fork. I mean, this is a temporary fix.

Let's not like fool ourselves. Like even if we move to 12 megabyte blocks at some point that's going to get surpassed and we're going to be back to the same issue, right? So, you know, unless Lightning Network or something solves everybody's problems, but once again, it still requires on-chain transactions. And so this is still a problem. And, you know, I think, you know, it wouldn't be developing the UAHF and these other BU and Bitcoin ABC and all these other things that change the governance model of Bitcoin if there wasn't like more of a power grab also here at play. And that's something that we shouldn't ignore. So you think that G-Hun or Bitmain was basically doing this as a power grab against the core developers to be like, hey, I know you guys want this thing, but you can't have it unless you kind of like go along with what I want.

Is that what you're saying? My hunch is that I think they felt like they had a lot of control when like Bitcoin Classic and Bitcoin Unlimited came out. They thought they had enough power as miners to kind of force some of this governance stuff through and they realized that wasn't going to happen. So now this is somewhat of a little bit of, I think, a gracious capitulation to the market because users were rejecting them as well and not adopting unlimited or these others. And they're going to maybe make another run at it. I don't know. This is my speculation. So, Brian, I also want to ask you, though, the same question about what? So what do you think is the best way for the Bitcoin community to decide on big decisions like this?

Well, I mean, I certainly think that we need to reevaluate how much weight we put on minor signaling and influence. I mean, I think it's clear that they have too much control. We have to always fly to Hong Kong and talk with them every time there's like a problem where we want something done. And I think that that kind of is not a tenable long-term solution. I don't necessarily know what the problem is, but, or I mean, what the solution is. But, I mean, I think we're in this weird transition period where we had this like very like, like Eric said, a proof of concept blockchain with a consensus model and a process for like trying to figure out how we get new rules into the protocol. The bit process was created after the fact. You know, all this stuff was kind of added on.

And we're getting to the point where maybe it's almost better that like the protocol is this like it's like TCP IP. Like it's not changing all the time. It's not dramatically. Like we're not adding new rules to TCP IP. every six months, right? Like, everything has done another level up. So then making it a settlement layer as, you know, which would happen if we kept the limit, the block size low?

I don't know if that's certainly the best solution, but I think at least if that was the plan, and then everybody understood that, that we could kind of use that as a foundation to build off of, and then maybe more people would put effort into the next level up. I think right now... Well, that's interesting that you're saying that because since you signed the New York agreement, which was something that was kind of against that philosophy of keeping Bitcoin more like a settlement later,

but it's weird that now it feels like you're sort of arguing against yourself. I'm not arguing against myself because I don't personally consider myself on his side. I think... I mean, I don't think you guys that don't necessarily disagree as much as it seems like, right? I think we're all very pragmatic about what we should do. And I think most of the disagreements are around petty political arguments. I think what we agree that we need to be safe about our scaling enhancements. And, you know, the reason I told, like I said before, the reason that we support the New York agreement is because we feel like this is the best chance that we can get Segwit, which I think most people agree is better than what we have right now.

and at least solve some of the problems for now and sets up Lightning Network and helps us So for you, it's just like a pragmatic choice. It's like this isn't the best thing, but it's like the highest chance of ending this debate and just moving things forward. I think so. And a lot of people would argue that that's not a great reason

to support something because you should always do what's technically the best thing. But you know what? That's not the way the world works, you know, often. You have to kind of just, sometimes you just have to like accept it and move on and we build off of it because ultimately I think Bitcoin is stronger if we have miners, big businesses, small businesses, users, core devs, everybody moving in the right direction like together.

I mean, I don't think that we're ever going to really like do much. What we're going to do is we're going to encourage people to go off and do altcoin development and start these other projects. I mean, we're already seeing that. And it's said that a lot of other garbage comes along with that. And the people that are true Bitcoin believers have been here for like a many years before all that stuff kind of existed, they understand that like the cordos that work on Bitcoin are probably some of the most devoted and most dedicated people in the space. They're some of the brightest. And they don't give up on their principles.

And that's why we're seeing this battle. Because these guys are the guys you want behind that. So I want to ask about something that Eric brought up earlier, which is such an interesting question to me. one of the users, because, so I tweeted something like, hey, I'm going to have a big blocker and a small blocker on my podcast. Which I asked them. And all these people took issue with the way I framed it. And one that I loved was like, you know, it's more like corporations versus cipher punks. So what do you think? Because I feel like there is this tension where, you know, Bitcoin started the early community largely consisted of libertarians. And then the people who more brought it to the masses were these corporate entities like Coinbase, Zopper. blog, BTCC.

So what do you think about that idea that this is, you know, what's really going on here, that that is what really the battle is right now? I mean, personally, I think it's kind of a sad argument because, you know, first of all, I think the core devs and developers in general and a lot of the supporters, I mean, Eric, I mean, call me out, please, if I'm getting too incendiary here. But, like, I think they're very vocal and they, like, try to explain their positions. And I think a lot of the companies don't say anything. Like I've talked to many of the people that are leading these companies and they just kind of like, oh, we don't ignore that noise.

And they don't defend themselves or their positions. But, you know. Well, I think some of them tried. I mean, they, they, for them, it's like too risky, you know. Like Coinbase tried to do that Bitcoin classic thing. It failed miserably for them. And, you know, I have personally asked some of the other CEOs in the space about this issue and they just will not touch it. They won't say anything publicly.

They definitely have opinions, but they know that if they say anything publicly, that will be the death of them. They'll get embroiled in these debates on Twitter and blah, blah, blah. But, you know, I do feel like that is kind of what we're seeing happening. Like if I look at... They kind of burn themselves, I think, or some of these CEOs, I think, kind of burn themselves in the whole, you know, block size debate because I think that they took very vocal positions when the environment might not have been very conducive towards that being successful. And that's not to say that CEOs should. never go out on a limb. I mean, I'm also, you know, I also have a company and I also am interested in, you know, making a successful business. And I also want to see Bitcoin scale. And, you know, definitely,

I'm trying to be as pragmatic as possible. It's not just about being ideological. I definitely did not come into the space. Just, you know, thinking in terms of like, you know, libertarianism or like, you know, anarchy or anything like that. For me, it was really, you know, a practical way to kind of, like, you know, build a career and do something that I like. And over time, it kind of grew on me. And I'm like, wow, like this whole concept of self-sovereignty is actually very, very powerful. And by that, like, do you feel like what's important to make that happen is a decentralized network? Well, what's important to make that happen is to make sure that people are able to continue to validate

things and to make sure that people don't change rules from under them and, you know, to make sure that people don't, like, can not easily counterfeit stuff and, or, you know, create money out of thin air that is not part of the rules and stuff like that. Wait, but Eric, what I really wanted to ask when I asked that was, you know, one of the concerns that I've heard about increasing the block size is that it will make it more difficult for small miners to support the network, which will then increase minor centralization. And so, you know, I feel like there's this tension where a lot of the people that advocate keeping the block size small, it's because they want to keep Bitcoin as decentralized as possible. And then you've got these startups and other companies. he's running on the Bitcoin network who are like, oh my God, these transactions aren't going through. It's like causing us all these problems. You've got these users who are really annoyed at us.

And so for them, it's kind of like this headache. And then for you guys, it's this philosophical thing of like, hey, we need to keep the network to centralize because already it's so centralized. Am I wrong? I'm thinking that that's... That's why it's not black and white. Yeah, it's not black and white. But there's three points I want to address here. I think there's like three issues that you're kind of combining there. One is this backlog, part of it just has to do with wallet software and fee calculation software that was just not prepared for full blocks. I mean, obviously, if blocks are full, I mean, it's just an economics thing. If supply is low and demand is high, obviously fees are going to get higher.

But better fee calculation heuristics in wallet software will make it so that you don't have to wait as long. And I think a lot of the earlier situations were that were just wallets that were not calculating fees correctly. Right, but that's only going to take us so far. like five or ten years from now when hopefully there's a lot more activity on the network, then what? Well, I mean, well, still, I mean, even if you have correct or better pricing, some applications are going to get priced out given a certain level of supply, no doubt. But the issue, so the second issue is regarding validation costs. How expensive is it to make sure for you to check on your computer that the transactions that you received are actually valid?

And that's where we get into issues of bigger blocks requiring more download, you know, bigger download and more computational effort, more CPU to actually validate the transactions and blocks, et cetera. Right now, the blockchain is, you know, growing pretty quickly, and it takes longer and longer to synchronize a node and to be able to actually fully validate for yourself. Now, with better crypto, it's possible that we might be able to reduce this significantly. It's possible that with better technology, we'd be actually able to support much larger blocks without requiring as much computational effort in verification of the blocks.

And with things like the Lightning Network or off-chain protocols, most people do not need to actually be validating most of other people's transactions. So you only validate a very small percentage of the total transactions that occur on the network. So those are really good ways to avoid increasing validation costs, which makes it easier for you to actually make sure that, you know, Bitcoin hasn't been co-opted or, you know, someone isn't just suddenly creating counterfeit Bitcoins out of nowhere or some state isn't deciding to just suddenly blacklist transactions or stuff like that, right?

So, and then, but the third issue, which I think is the most critical issue, which I think also kind of receive the least amount of attention at first, is really how do you actually guide the markets to adopt a particular incompatible change? And if you're going to introduce any kind of incompatible change to a blockchain, you have to get all the markets to agree that now, you know, what we used to call Bitcoin is now no longer Bitcoin. This is the new Bitcoin, which is basically a protocol replacement. And isn't that sort of what Segwit 2x is? I mean, like, all these companies that signed are like the big companies. Yeah, that's what any hard fork would eventually entail. And I'm not saying it's impossible. I'm just saying it's very difficult to do.

And it's more than just writing code. I mean, I've been writing code forever. And I can tell you that writing code is definitely not enough to make that happen. I mean, you need to get people to agree to run that code. And that's, that's really. But it looks like that's what this agreement did, right? Yes. I mean, the thing is, it's forcing the issue, right?

It's forcing the issue. Like, we all agree that, like, the hard fork is probably possible. Whether it's smooth or not, that's debatable. But it needs all this preparation. But the Segwa 2X is saying, look, this is not like a super crazy leap to go from one megabyte block size to a two megabyte block size. Let's do this.

We can do this. So since this is actually such a small increase, really, that we're getting, I am wondering, kind of like long term, what do you guys think is the best plan for scaling? Yes. See, so that's the thing. It's interesting what Brian just mentioned, like, just going from one to two. I mean, even if we were going from one to 1.1, the same exact issues with chain splits and incompatibility issues would arise.

So it's not a matter of how much bigger we make it, right? And if we make it bigger, then, you know, are we really, what are we buying? What are we getting for that? Is it really worth the disruptions and all the potential havoc that can be wreaked on the network just to get 2x? So should we hard for it to like four megabytes or eight or do Bitcoin unlimited? I think we should be working on better technologies, better crypto, better ways to compress proofs to make it, you know, compact proofs.

There's a lot of really interesting research that's being done in cryptography right now. Right, but how long is all that going to take? Like the congestion on the network has... But going to 2X isn't going to take us anywhere either, really, other than just maybe like kicking the can down the road and getting a lot of people upset. So I just, you know, it seems like... So it'll take the can down the road and maybe during that time we can do all this research on the better cryptography and stuff?

Is that kind of what you think? Like, again, going back to my... question. What's your idea of the best way to scale long term? Well, first of all, if we're going to do a block size increase, I don't believe we should just bump it up twice and then just leave it at that because then that sets a precedent that every single time blocks fill up. We're going to do another hard fork for that. That just seems totally silly. So first of all, you know, if we're going to do a hard fork, you know, in the worst of cases, I would like to see at least like, you know, an X percent increase per year or something of the block size. So we don't need to hard fork every single time.

first of all. And second of all, I would love to see a more dynamic or more adaptive kind of system that responds to actual market dynamics and to have more protocol that can support other functions besides just paying minors like, you know, paying relay nodes and paying validation, paying for proofs. You know, there's ways for cryptographically generating like, you know, snarks or stuff like that may be and paying people using payment channels to be able to do that kind of stuff. Once you start to get those kinds of incentives, now you're talking, being able to, you're able to, you you know, increase the capacity to much higher levels without significantly degrading security. So, but it sounds like, so those are things I don't, I haven't heard much about them and I don't really know much about them, but it does sound to me like they're probably further off. And here we have this network that's been congested for a while. And so maybe it is not a bad idea to, as you put it, kick the can down the road and maybe let some of the other technology catch up so it can be implemented later. Is that?

But at what price, though? I mean, if it splits the network and if it causes it. is a lot of discord in the community and if the market, if it affects the markets, if the price, you know, is very adversely affected, is it really worth it just for like a, you know, a small, tiny factor increase? Yeah, I mean, I guess, you know, like what we were saying before already so much, well, I don't know about so much, but a lot of economic activity is moving off Bitcoin. Like, you know, how many startups have I talked to where they're moving from Bitcoin to

Ethereum or like coin or whatever it is? But like already, the fact that there's this much congestion, which maybe isn't, you know, critical from your perspective. Like it's enough where businesses are making other choices and they're not using the Bitcoin blockchain. So I think that's why. But the other team has the exact same problems. That's where the pragmatism comes in, though.

That's where the pragmatism comes in here. And when we're talking about going from a one megabyte to a two megabyte block, I mean, let's be honest, this is really effective eight megabyte block. Right? I mean, with Segwit. So that's a considerable amount. It's not negligible. But it's certainly not going to last forever.

And I think the thing is, it's kind of what you were alluring to. Laura is that, you know, if this does at least get everybody kind of like, okay, well, now we're not like just like dwelling on I mean, how much time did we waste on the block size debate? Just this silly block size debate right now. I mean, really, I know it's more than that, but still,

we can't get past it. And people are leaving. Some people were actually working on code though and working on solutions and working on optimizing a whole bunch of other crap that makes it possible to have bigger blocks. I mean, you can't discount the effect. You know, like for instance, Peter Willey worked on the SEC P-256 library. This is a library.

This is a library that increases validation, you know, reduces validation time considerably. It's like a factor of six or something just from the cost of validating signatures for a block. So this kind of stuff. And then like the headers first sync, which he did like way before that, also Peter Willie, all these things. And then, you know, Matt Corallo with like the fiber networks so that the miners are more able to easily relay blocks to each other. And then there was, you know, the compact blocks. Those are brilliant technical solutions that the perception is not feeding out. into the mainstream, right?

All these things are necessary, though. And expanding the ecosystem for Bitcoin that are making it more valuable, they're not catching that. So I don't know, maybe there is some kind of communication issue gap here. Definitely the communication gap. I mean, all these things are necessary. They're not just amazing innovations. They're necessary.

They're prerequisites. Without this, what will happen is that you'll run a node and you'll not be able to keep up with the blockchain. It just will not sync. The blockchain will be advancing more quickly than your computer can keep up with it without these advances. If we were to use Bitcoin Core from just a couple of years ago, it would not be able to keep up with today's blockchain. So all these advances are going on. And all these are necessary in order to be able to do a block size increase.

So we're running out of time. So I'm just going to ask you guys one last question, which is that as we go forward, you know, every single design decision that we make in Bitcoin is going to require some tradeoffs. So when you think about the different kinds of tradeoffs that you're willing to make, what would you be willing to do, to, you know, keep the network growing? Well, I mean, I think that it's, you know, obviously there's risks involved in anything that we're doing right now. It's a huge project with the huge bounty.

It's one of the biggest, like, you know, socioeconomic experiments conducted in history, probably. And I think that, you know, there's a certain risk tolerance that different people are willing to take. And what's yours? Well, I personally would like to see good solutions to scaling. I think there's some really great ideas, but I would like to see more constructive dialogue. log first without people just jumping to

specific solutions that they think are because this is the problem, Laura. But Eric, what tradeoff are you willing to make? What tradeoff is, I mean, there's millions of different tradeoffs depending on the situation, right? Yeah. But definitely, for sure, I think the self-sovereignty aspect and the ability to validate transactions for myself

is a huge part of what I value in Bitcoin more than anything else. Which is more like the decentralized, a decentralization philosophy? Yes, but I would definitely like to grow the network and make it, you know, support way more. I would just like to see better crypto implemented. So I just want to draw that out. So if that's your priority, then the downside to that,

the trade-off that you're willing to make is maybe for, because like essentially if we keep it that way, then one of the ways to do that would be to keep the block size low, which then is something I think that will cause a lot of problem for some of the bigger economic actors and potentially also long-term for the miners. Is that? Not necessarily.

I mean, there could be ways to grow the block sides that are actually smart that makes sense that we can get a lot of support for and like, boom, we do it. It's just that the ways that have been, you know, called for so far are just like really brute force, like blunt, you know, things that a lot of people think, well, you know, is it really worth the risk? A lot of people are not going to get behind it. It's probably going to cause a lot of contention and potential market disruptions. And is it really worth it for, you know, just like getting a 2x increase, for instance. If it was 1,000 X, I'd be like, oh, yeah, maybe it is worth it. But, you know, if my business is just going to increase... But if it's a thousand X, then you lose your decentralization priority.

No, no, no, no, no. You could still do a thousand times a number of transactions without sacrificing decentralization with better crypto and a better protocol. Okay. And Brian, what about you? What tradeoffs are you willing to make? I think, you know, I have tremendous respect for the fact that changing a protocol is very, it's very difficult, and it's not something you should take lightly.

And I certainly think that's the case with the hard fork that's looming over us. But I also think that there is some value with trying to get all of the most important actors in the ecosystem together to go at this and be contributing. Because right now what you're seeing is a lot of people that are trying to push against each other. And it just we've seen several years of this back and forth. So it sounds like for you, like you know, you want to move forward at the risk of perhaps having a hard fork. Sorry, a chain split? I think decentralization is this weird term that people throw out there, but it's a gradient. It's not black or white.

There's different degrees of decentralization. And whether or not this hard fork to a two megabytes is going to dramatically impact true decentralization of Bitcoin, I certainly personally don't think that that's going to impact it that much. There are others that do. They feel like they will kill Bitcoin. But I think the most important thing is that we just kind of push through this, we get it. and we do what the market is asking for. And right now we're seeing that people are asking for Segwit,

and they're asking for another, you know, an increase in the block size. And so we don't know about the second part. We definitely know about Segwit, but the second part, I'm still not sure. I have one last question for Eric, which is that, you know, this change that's happening was implemented essentially without, even though many core developers opposed it. So after this, where does that leave the core developers in terms of their power over the protocol?

Well, I mean, let me just clear up a little bit what happened there. I mean, I feel that there's a lot of communication problems that have been. Communication has been pretty bad for a long time. I mean, like, for instance, most of the DCG portfolio companies, I don't think even really realized who most of the core developers were or even like met most of us like until fairly recently. You know, back in 2015, basically like, you know, they thought that they had like, you know, the Bitcoin Corps had spokespeople and like a couple developers and that they kind of represented Bitcoin Core to the industry. and industry didn't really come to talk to us about any of these concerns at all. We kind of had to pick this up indirectly because other people were complaining, right?

And so, first of all, it'd be really nice if, like, people in the industry that actually have concerns about this, like would actually come and approach us and, like, talk to us about these things before, like, making decisions and, like, doing full-on, you know, campaigns trying to push particular agendas. Because if we can kind of work on these things and get more consensus beforehand, it'll go a lot smoother. So I'm just wondering, like I think, and correct me if I'm wrong, the main developers behind Segbit 2X are Jeff Garzik and Mike Belchie. Is that correct? Well, Mike Belchie, I don't think is a developer. It's mostly Jeff and some other contributors on the team. So, and Jeff is with Block, BLOQ, and his co-founder, Matt Rozeck was on the podcast earlier. And then Mike Belchie is with Bitco. So, you know, they're kind of like shepherding this massive change through.

So after that, like, where does that leave the core developers? Well, I mean, to be completely honest with you, it was a very small number of core developers that actually were like the ones that were, they got advisory roles in companies a couple of years ago and like we're kind of like lobbying for this kind of push. For the, you know, the vast majority of the protocol development community in Bitcoin, and I'm not just talking about core developers. I'm talking about all the people that work on a whole bunch of different, you know, other parts of Bitcoin or layers on top of Bitcoin. I think for the most part were in agreement that we need to find better, smarter ways to scale but unfortunately this particular point of view

did not really get represented very well to industry a couple years ago and so I think you know and it's kind of weird to see like what happened with Jeff because I think Jeff Garzik at the beginning of 2015 was actually very much aligned I think with what most of the development to the protocol development community was looking for

but then like towards the middle there was this very drastic change that occurred. And, you know, unfortunately, I think that he kind of burnt a lot of bridges with a lot of the rest of the core development team. Yeah, so since he's kind of behind this Segwit 2X and yet he's burnt bridges and you guys kind of opposed Segwit 2X, I just wonder where that leaves things afterward. Like, do you guys still have as much control over the protocol as you? Well, it depends on what people are going to use. I mean, it's really up to the users in the end what they decide Bitcoin is, right? All we can do is release code and see if people want to use it or not.

And that's what we're going to continue to do. And if people want to use, you know, if people want to do a two megabyte hard fork and it seems like that's what the markets want and there's a huge demand for that. I don't think it'll be that hard to make that happen. But it doesn't seem like the market wants that they want it. It's hard to forget that like when Blockstream was announced as a company and it had so many of the core devs on their important people in Bitcoin that the market, everybody was so excited about side chains. They thought that was the future. They thought blockchain was like this big company was going to come and help us save it.

They were like, they embraced that. And for the last three years, we just haven't seen the side chains come to fruition and solve any problems. Yeah, and to be, and I wasn't part of that at all. I mean, I thought the side chain cost was interesting,

but I thought that it had a lot of logistical complications and there needed to be a whole infrastructure in place in order to support that. And I thought that we were still several years away from that. So when I worked on Segwit, you know, first when Segwit was first developed by Peter, when Peter Willie was working on that,

it was working on it as a side chain. But when I really got excited about it, it was when we realized that we could actually incorporate it as a soft fork and without needing to use a side chain. Right. You know, we're really over time. And sidechains is going to take us down a whole other path, side path.

So I actually just want to end it on this note about how excited we are that it looks like Secwit's going to go through. I think it will be great. It will bring a lot of innovation with it. We will see what happens in November. it's going to be really interesting to see what happens between now and then, and also to see how that sentiment is reflected in the price. But thank you both so much for coming on the show.

Where can people learn more about your work and get in touch with you? Well, I'm on Twitter, Eric underscore Lombroso, or you can go to my company's website, cifix.com. And Brian? And I'm at Brian C. Hoffman on Twitter, and you can find out everything that's important about me at openbizor.org It's more about the software. Okay, great. All right. Well, thanks you guys for joining us today.

All right. Thank you so much, Laura. All right. Great. So if you're interested in learning more about Eric and Brian, check out the show notes, which are available on my Forbes page, Forbes.com slash sites slash Laura Shin. Unchained comes out every other Tuesday. Please tune in then and also share the podcast with friends and on social media. And remember to review, rate, or subscribe to it in iTunes, Google Play, Stitcher, tune in, or IHeart. Thanks for listening. Thank you.