What Bitcoin Did - SHOULD BITCOIN OSSIFY? W/ Jameson Lopp

Episode Date: February 4, 2025

Jameson Lopp is the co-founder of Casa, and a long-time Bitcoin security expert. In this episode, we discuss the state of Bitcoin self-custody, the growing threat of physical attacks on Bitcoiners, and why UX remains a major barrier to adoption. We also get into the ossification debate, whether Bitcoin development is stalling, and how institutional adoption could impact Bitcoin’s ability to upgrade. Finally, we explore inheritance planning, decoy wallets, on-chain privacy, and whether Bitcoin could face the same centralisation risks as email. MASSIVE THANKS TO OUR SPONSORS: IREN: https://www.iren.com/ RIVER: https://river.com/wbd CASA: https://casa.io/ LEDGER: https://www.ledger.com/

I see ossification as an inevitability, and we're not going to know if Bitcoin has ossified until we have a lot of hindsight. I kind of see it as a race against time, where we should want to continue improving Bitcoin as much as we can while we still can, and hopefully we still can. For all I know, we'll never be able to make any consensus changes to Bitcoin again, and everything that we're doing right now is for naught. But like I said, we'll never know. No, if we don't try. James and Lop, how you doing? Not bad. I'm in Bitcoin country at the moment. Nice. I've still not got out to El Salvador. I'm very jealous. How has it been?

There's a lot of people here, a lot of excitement. And, you know, this is my first time back in the country for about three years now, and I'm seeing massive improvements and changes. And, you know, a lot of optimism, a lot of infrastructure building. And it's, I think, a good place to be hanging out and talking about continuing to fix the world with Bitcoin. I love it. Are you in Elzonte? We're in San Salvador, basically, the downtown capital city. I need to get out there. I'll make it happen this year at some point, I think. But there was a couple of reasons that I wanted to have you on the show. But the place I think we should start, I recently did a show with Alex Leishman, who kind of posited this idea that most Bitcoiners shouldn't be

self-custodying. And it seems like a very obvious place to start with someone who's built a company specifically to address that need. So just like a very high-level overview, broad question, but what do you think about the current state of self-custody in Bitcoin and what most Bitcoin should be doing? It's confusing. And I think that's one of the big problems. There's so many options to choose from. And the vast majority of the basically free wallet software, that's out there or even, you know, the hardware wallets, pretty much any option that you go with, it's not going to have a lot of guardrails.

And by that, I mean, you know, you get the software, you get the hardware, maybe there's some very high-level instructions of how to set it up. But there's always going to be this iceberg of knowledge of how to actually follow all of the best practices, how to avoid all of the footguns that the vast majority of people are not going to see because they're not going to do deep dives

into self-custody best practices. And so basically the result of that is that if you jump into self-custody and you don't spend much time learning about it, you're probably going to have weaknesses in your setup. And over a long enough time frame, one of those weaknesses is going to get hit and you're either going to have your Bitcoin stolen

or you're just going to lock yourself out of it. And effectively, same thing. You're going to lose your access to your coins one way or another. Yeah, I think it's, I'm sympathetic to what Alex is saying because I do understand that a lot of people are probably self-custing that haven't done the work to fully understand what they're doing. And it's like Matt O'Dell says.

It's like the idea of watching an hour-long Bitcoin sessions video to secure your Bitcoin just doesn't scale to everyone. So how much of this do you think is a UX issue rather than a Bitcoin issue? I think that a lot of it can be solved with UX. And that's really one of our primary theses at CASA, which is we have to understand that nobody but maybe the nerdiest of nerds are ever going to read the manual, AK, which is just another way of saying,

you know, do a lot of deep research to fully understand the problem space. And so the question is, how do you build your software such that it basically forces the user to follow best practices and to read the manual in a sort of way so that they are doing the fundamental things that will protect them

in the long term. And so that's really our goal at CASA is you should be able to install the app, get your hardware, and you know, follow the instructions in the app. And once you get through all those steps, you're in a really good position where you're, you know, top 1% of Bitcoin security models for people self-custody out there. Yeah, it's in that show, I actually brought up the fact that I had a terrible inheritance plan. So previous to, well, yesterday I fixed this, but before that, my inheritance plan was literally documents in folders in different places with like a treasure map for my wife to go through. And then once you'd collected these things, it was like, speak to these people and we'll figure out how to get your Bitcoin. But after the show

I did with Alex, Nick texts me being like, why aren't you using CASA? So I actually went through and set that up yesterday, and it was incredibly easy. So fingers crossed, I'm in a much better state right now. Yeah, and I mean, we've heard plenty of horror stories of treasure map style plans gone wrong, and I think the major reason for that is that if you're setting up your own inheritance plan with, you know, keys and instructions and, you know, perhaps even people who can help guide, you need to actually run through it. You need to actually run through it. You need to actually test it, you need to have your beneficiaries go through the whole plan while you're still alive so that you can find out whether or not they can actually follow the instructions.

And, you know, this, I think a lot of people don't really think about that because they're like, oh, it's not that difficult. You know, I wrote my instructions very clearly. And I think the best way to demonstrate why that's a naive approach is, have you ever heard of the game of writing instructions for creating a peanut butter and jelly sandwich? No. Okay, so I would recommend that people go on YouTube and basically Google like peanut butter jelly sandwich instructions and look at some of the videos.

And you can basically see from that. It's very hilarious to watch, but it becomes very apparent that even trying to give someone the precise instructions that cannot be screwed up or misinterpreted for how to correctly construct a peanut butter and jelly sandwich is incredibly difficult. Yeah, that's scary. But so previously, we had run through it before, and I had some amount of confidence that she would have been able to do it. But I think realistically, if this, like, if I died in five years time and we'd not

run through it again, I would put the odds of her recovering that Bitcoin at like 70%, maybe. So I feel like that number's gone up now, which is very cool. But the other reason I want to speak to you is another number. that's going up, which is terrifying, which is physical attacks on Bitcoiners. And again, this actually did come up in the show I did with Alex. I heard a terrifying story recently, which I know you're also aware of, which was a guy in the UK who had got off the train, was kidnapped, basically beat into a pulp and forced to send a large amount of Bitcoin. Again, like his security practice was terrible. It was like first thing in the book that you don't do. But it still is.

is just another thing that highlights how real this threat is. It was pretty close to home, I guess. And also, I was looking through your list of physical attacks on Bitcoiners. There's been a lot this year. There's already eight to nine, I think. So how closely you're tracking this and how big an issue do you think this is going to be going forward? Yeah, I mean, I have a number of different projects, but, you know, this is one where I'm updating it on a weekly basis. My prediction in my annual Bitcoin metrics posts at the end of last year. My prediction was we're going to have an all-time high in wrench attacks and there's going to be at least an average of one per week. And here we are,

we're at the end of month one. So you know, five weeks in and we have eight publicly reported attacks. And I'm aware of two or three unreported attacks. And I'm sure there's plenty more than that, that haven't even made it in my sort of sphere of understanding. So this is an unfortunate metric, but it is expected because what we've seen in prior market cycles is that the physical attacks tend to be roughly correlated with the exchange rate. It's very easy to explain why this is the case. It's because when the exchange rate goes to the moon, general public interest

increases and of course while the vast majority of people are good upstanding citizens who don't want to hurt others there's always some tiny minority of sociopathic criminally minded people who are also going to suddenly be paying attention to it and they're going to be trying to figure out you know how do I use my skills and my ability to hurt other people without caring about them in order to maximize the return and so that's why we're seeing. seeing a variety of different attacks, especially more of them that seem to be happening in an organized fashion with groups of perpetrators that are coming together to pull off the heist.

Yeah, why do you think like a decent chunk of these go unreported? It's just simply fear. You know, once someone has been attacked, they're afraid that, A, if they go to law enforcement, you know, that will start creating records, the media might pick up on it. it might become a highly publicized thing where that basically just invites more scrutiny and creates a target for them yet again. I'm only aware of one case in this whole space where someone has been targeted multiple times or like there was one case actually in a place that I lived for a long time in North

Carolina where a couple I think had been hacked and ended up in some sort of data a leak, and that actually resulted in them getting on the target list for this gang of criminals that went all up and down the East Coast of the United States hitting numerous people, and they happened to be one of those targets. It's pretty terrifying. One of the interesting things when I was looking through your repo on these attacks is where these are happening. So I was looking back historically, and the U.S. was kind of.

of like pretty high up on the list. But this year, it seems to have been sort of France and Southeast Asia where most of these attacks have been happening. Do you have any idea why that is? So I think you have to take my archive with a very big grain of salt because we, you know, we don't know what we don't know. And I'm not sure, you know, how many attacks are happening in non-English speaking countries where perhaps a local media picks up. on it, but it never gets syndicated. It never gets translated. And for whatever reason, it just never gets on my radar. So it may simply be that, you know, Europe and Thailand and Philippines just happen to have, you know, more English translations of their media. And so they get picked up.

but I think at least in Southeast Asia, especially Thailand, we've been seeing a lot more of these attacks. And a decent amount of the ones in Southeast Asia appear to be occurring by organized crime that's coming in from a different country. And specifically some patterns that I've seen are Russian expats getting hit by Russian organized crime, you know, in Southeast Asian countries, and then also Chinese expats getting hit by Chinese criminals in these countries. And I think one of the explanations there is that these organized crime elements are learning about those wealthy crypto owners. However that may be,

you know, maybe they have inroads to various financial or other intelligence agencies in those countries that, you know, leak data to them. And then they figure, hey, if we go commit this crime in a different country and then immediately come back, then that will be safer for us. And, you know, in several of those cases, they have gotten away with it. And in other, in some of the cases, like some of the criminals were basically caught at the airport trying to get back to their home country. Interesting. So I think we should probably talk about the ledger co-founder, the story that came out a week or so ago. Can you give a background of what happened there, just so the audience is aware.

Yeah, so one of the co-founders, David Balland, he is pretty low-key. He and his wife were kidnapped, taken hostage, and as far as we're aware, the attackers were not trying to extract Bitcoin from him. Rather, what they did was they used him as a hostage to demand, I think, a $10 million ransom from one of the other co-founders, Eric. And as a part of that, to kind of prove how serious they were, they actually cut off David's pinky finger from one of his hands. So this was definitely a pretty horrific attack. I think the whole ordeal lasted nearly two days. But thankfully, due to quick thinking by people at ledger and by local law enforcement,

they were able to rescue both of them. And they were able to seize, I think, the vast majority of the ransom payment and get it back. So the ransom payment was sent? Yeah, I'm not sure exactly how much they sent. And I think they may have sent some in Bitcoin and some in Tether. But however that ended up, a lot of the funds apparently ended up in Tether. And with basically the work of, I think it was the SEAL 911 team that does a lot of tracking of crypto thefts. And of course, with tether's help, they were able to freeze the vast majority of those funds.

I see. So they froze the tether, but I assume they managed to keep the Bitcoin. Yeah, I don't know the specifics of like the breakdown of like how much was paid in each style. but I think one figure I heard was that they got at least 90% of the funds back. Okay, well, that's a positive. One of the really interesting things on this is, like you said a little earlier, is the status of the people being targeted. Because it doesn't, like when I look through the list, it's not a list of names that I know.

It's generally people who are flying a little more under the radar. And I've spoken to Peter a lot about this because he's been very concerned, just as someone who's high profile in the space. So why do you think it is that we're not seeing these kind of attacks on really well-known bitcoins? Well, some very well-known bitcoins have been attacked, but they have not disclosed it. So it's not zero, though, you know, I'm also somewhat surprised by how low it is. And I think part of the reason for that is that perhaps the criminals figure out that

these super high profile people may have better security and better precautions. Now, I can tell you from my own experience that at least in America, a lot of the fairly well-known Bitcoiners don't have great privacy. You can find where a lot of them are, because I've looked into it. What Bitcoin did is brought to you by our lead sponsor and Massive Legends, Iron, the largest Nasdaq listed Bitcoin miner using 100% renewable energy. Iron are not just powering the Bitcoin network, they're also providing cutting-edge computing resources for AI, all backed by renewable energy. We've been working with their founders, Dan and Will, for quite some time now, and have been really impressed with their values, especially their commitment to local communities and sustainable computing power. So whether you're interested in mining Bitcoin or harnessing AI compute, Iron is setting the standard.

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yourself or your business at river.com forward slash wbd, which is rivir.com forward slash wbd. It would be good to go through the kind of things that you can actually do to protect yourself from this, because like I say, it's not just high profile people. I think anyone who is known as like the Bitcoin are in their group has to probably consider this at least to some degree. So if we try and go sort of from the start, what do you think is like the easiest lift that all Bitcoin should do. And part of that is to do with like how you're custodying your Bitcoin, but in a way, that almost doesn't matter because you can have the best Bitcoin custody set up possible. It doesn't mean you're not going to get kidnapped. So can we go through kind of from

the start what you think people should be doing? Yeah, well, I mean, privacy, I think is the top thing. Don't make yourself a target. So you should consider privacy to be the outermost layer of your security. And any security, whether it's physical, digital, whatever, should be a multi-layered system. You know, only having a single layer of security is a single point of failure. It means if someone breaches that, then it's game over. So you always want to, you think of it as ring fencing. You want as many borders and perimeters and fences and basically defensive mechanisms that an attacker will have to somehow bypass, get through, breakthrough in order to finally get to whatever it is that you're trying to protect. And that's true, like, whether it's your physical

body or your actual assets and, you know, keys that are protecting them. So, shut up about your actual wealth. You know, don't talk. I think one of the quips that I've had for many years is the first rule of Bitcoin is always talk about Bitcoin, but the second rule of Bitcoin is never talk about your Bitcoin. So, you know, people can assume whatever they want, but you shouldn't give any specifics about your actual assets. And related to that, you shouldn't be flaunting your wealth really in any way, especially on social media. That is a great way to get yourself targeted if you're like showing off your Lambos or your, uh, six-figure watch collection or whatever it is.

There's also high-risk activities that show up as a pattern in these wrench attacks. And one of them is trading. Just don't do high value face-to-face trades in the real world. If you are going to do that, then you need to take a much higher level of precautions. You know, a lot of these attacks, especially in Southeast Asia, are the M.O of the criminals is that they might reel you in by doing a few small trades with you to kind of build up a reputation. And then they'll say, okay, we want to do several hundred thousand dollars. You know, we want to trade several Bitcoin with you. And that's when they'll just have you show up at a hotel room. And once you come in, you know, that's when the rich attack happens. So obviously if you're going to be doing high value transfers like that, you should only be doing them in highly physically secure spaces, you know, where there's lots of surveillance, preferably armed guards, you know, people, a lot of people should be watching that can intervene if anything goes south. You should not be doing these privately in a hotel room or a parking garage or whatever. And beyond that, you start to go down the whole rabbit hole of operational security and key management

and really a lot of the things that we help people think through at CASA. So the primary thing is just don't make yourself a target. Let's get into the key management side of it then. What do you think the kind of perfect key management solution is for most people? Do you think most people should be looking at having collaborative custody style services? Or do you think like hardware wallet with good protocol around your backups is acceptable? Well, I think it really comes down to how much value we're talking about, really. you know if it's only a small investment like if it's not a huge amount of your portfolio and it wouldn't ruin your life by by losing it then you're having a single signature hardware wallet and then you know a good backup preferably multiple backups you know distributed um i think is going to work fine for most people but if a significant portion of

of your net worth is in Bitcoin. If it would be catastrophic for you to lose all of it, then I think the goal should be to eliminate single points of failure. And the only way to really do that is to have multiple keys, multiple geographic locations with different physical and digital security mechanisms around them, basically building up a level of robustness and redundancy and resilience.

And the idea here is to protect you not only against hackers or wrench attack folks, but just loss in general. You know, keys can get destroyed or lost in any number of different ways. Okay. One of the things that I would like to talk to you about, because I don't know enough about it, is the kind of technical things that you can do in terms of like decoy wallets or duress pins. Can we go through these one by one?

and just explain what they are, what they do, and if there's something people should be considering. So maybe we'll start with, like, decoy wallets. Sure. So there's an easy way to do a decoy wallet. I mean, you can have really any wallet that you set aside that's just a different wallet with only a tiny amount of money in it. But I think the general way when people are thinking of decoy wallet

is usually with a passphrase. Some people call it the 26th, you know, essentially you create your Bitcoin wallet and then you add some sort of passphrase on top of it, which effectively generates a totally distinct wallet. So, you know, you can have the same piece of hardware or the same seed phrase and have essentially an unlimited number of wallets, you know, each one with its own distinct passphrase. So the idea here is, you know, attacker comes in, says, give me your Bitcoin and you open up instead of your main wallet, you're a decoy wallet.

Now, there's a number of things, I think, that can go wrong here and people make assumptions about or don't think about. The first thing I'll say is we're not aware of any real-world instance where someone successfully used a decoy wallet against a wrench attacker. I think there simply haven't been enough wrench attacks that have taken place, or if there have been one where they successfully just gave a decoy wallet, then they haven't admitted to it, so we don't know. but there's other things that I think could become problematic,

like if that situation actually arises. The first one is that, look, this is like potential life or death scenario. You're going to be all hopped up on adrenaline. You don't know how you're going to be thinking. If you don't regularly use your decoy wallet, what happens if you forget your decoy wallet passphrase because you only ever open your main wallet passphrase? Even if you are calm, collective,

and remember your decoy wallet passphrase, and you open it up. The next thing is that you're really speculating about the knowledge and motivation and sophistication of the person who is attacking you. You have no idea about this ahead of time, and so you're hoping that they have sufficient, like, lack of knowledge and sophistication

that a decoy wallet will be good enough for them. So, you know, first of all, perhaps the amount in the wallet is way too small and that attacker has some level of knowledge and is expecting far more. And they say, you know, this isn't your real wallet and they just keep beating you with a wrench. Now, I will say that there has been at least one scenario that's in my logs, my archive, where a guy got attacked and he handed over his real Bicklech. coin wallet immediately and the attacker thought it was a decoy wallet and just kept beating him kept beating him for quite a while, even though it was his real wallet. So you never know how the attacker is going to react. Another issue is that, you know, how well are you maintaining this decoy wallet, right? If you're just setting it up and putting a tiny amount of Bitcoin in there and then

never doing anything with it, an attacker opens it up and sees, okay, you had one small deposit three years ago or five years ago and then there's no other activity that's kind of suspicious uh because you know i think most bitcoins are fairly regularly stacking sats or having some sort of activity um and and then you know like i said um the attacker may or may not be uh happy with the amount and it it could go well for you it could go poorly like it could just piss them off more. And so my general take on these things is that it's better for the attacker to get nothing. Okay, that's interesting. And so in terms of like everything you just described, how important then is on-chain privacy? Because if it's harder to kind of track you at the history on-chain,

then I guess the better a decoy wallet is going to work. Yeah. So I actually met with a guy, here in El Salvador a couple days ago, who is on the rich attack list. And he told me that in his case, what had happened was he had been engaging in, you know, the OTC face-to-face transactions with people. And they had essentially been surveilling him and doing trades, small trades with him for months, and that he screwed up because he was sending them the Bitcoin directly from his primary wallet. So they had a really good idea of how much he had. So, you know, when the attack went down and they demanded a certain amount and he said,

oh, I don't have anywhere near that amount. They said, look, you know, don't screw with us. We know how much you have. So on-chain privacy is important, you know, depending on who you're dealing with. If you're dealing with anyone that you don't fully trust, then, you know, you can potentially be exposing. a lot of information to them that can be used against you in the future. So one of the projects I think is very cool that's kind of recently is Anchor Watch.

And this seems like one of the better defenses for physical attacks. Because obviously you can just give them everything and you know that within 30 days of lodging a claim you get paid out in the dollar denominated amount. How big a step do you think that is? you know, we're basically talking about a new variation of, you know, hybrid or collaborative multi-sig setup. You know, the main difference is now that it's also paired with an insurance product. So I think it is something that there is going to be demand for on the market.

And I hate to say it, but I'm going to be, you know, waiting to see. what happens when some people actually get their claims, they get attacked and then they file claims? I don't want to be the first adopter of anything because you want to see whether or not systems work or can potentially fail or whatever. But as far as I can tell, this is a very well-thought-out system,

so I don't have any expectation of failure. But it's one of those things where you know, until someone actually gets attacked or has the loss and they go through the whole process and we see it play out. You know, there's, it's a theoretical thing until it actually becomes a practical thing. Yeah, that makes sense. The other thing I can't quite figure out is the kind of game theory of it, whether it increases your chance of getting wrenched because they know you're just going to send it.

I don't know. You know, that's something that I had not considered, you know, maybe. you don't want to broadcast to the world that you have insured self-custody. But this is like so far down the rabbit hole that I don't think any criminals are even thinking about it yet. Yeah, fair enough. Okay, so we should talk about CASA's private client option because I remember being a dinner that you guys put on in Nashville and you kind of presented the whole service of CASA

as Lop as a service, which I thought was really. really good. So how much of all of everything we've spoken about here is kind of baked into the private client option? Yeah, that and more. So, you know, we have a number of different tiers of memberships at CASA and you can think of our standard tier as being the generally do-it-yourself route. You know, it's effectively, you know, $20 a month, though annualized. And, and, and you get your basic email support and your two of three setup. And then you have your premium tier

where you're bumping it up to a three of five key set that you can still do two of three if you want. And you're getting a higher level of support. You know, you're getting client advisors that will actually get on the phone or video call with you and you walk you through any questions or issues that you have related to your setup and the various decisions around

key management of that setup. But then the primary difference between those levels and the private client is think of our lower levels as security for your Bitcoin, and the private client level is security for Bitcoiners. And so that means it's not only helping you think through and manage your actual keys and and vault setup, but thinking through really every other aspect of your life that is going to be related to the privacy and operational security of you yourself, because ultimately that all does impact the security model for your Bitcoin.

So, you know, this is where it gets really bespoke. And there's no specific, you know, standard path that we have people follow. down because each person's priorities are going to be different than their situation is going to be different. So the things that they're worried about are not going to be the same as what a different client is worried about. So you really is best to think of this as a bespoke security consultation service where whatever it is that is the most worrying for you at the time, we will help you think

through and you know research solutions that may be specific to your situation, your jurisdiction, you know, help you potentially connect with other, you know, specialized parties to help you do other things that, you know, may or may not be directly related to the actual keys themselves. Okay. So I want to change gears a little bit. The, but before we do, is there anything there that you think I've missed that people should seriously be considering. Well, you mentioned LOP as a service, and I think that's really the ultimate goal here is that, you know, I've done a lot of crazy extreme stuff and experimented with a variety

of different privacy and security protocols for myself. But of course, everything that I have done is not directly applicable to everyone else, especially if you don't live in the United States. the goal is to get you as close as possible to the setup that, you know, I consider sufficient for myself, which is fairly extreme. And you can also think of it as implementing a number of recommendations that are sort of in the Michael Basel playbook, who is, he's another, you know, very well-known privacy and operational security guy. So like I said, this is more than just about your keys. It even has to do with improving your own security and privacy with other devices,

whether it's your phone, your laptop, so on, so forth. I also, just before we do move on, I did watch the presentation that you've got at the link on your GitHub repo, but I can't remember his name, a guy from New Zealand. That's brilliant. I think it's Rajal Walsh. That's right. I thought that was really good, so people should watch that as well. This episode is brought to you by Kasa. For those of you out there who want to protect your Bitcoin, I want to tell you about CASA, the leading Bitcoin self-custody solution. If you're serious about protecting your Bitcoin, then you need a rock-solid security plan,

and CASA gives you just that. With their multi-signiture security and key management services, CASA makes it easier than ever to take control of your Bitcoin without the risk of a single point of failure. CASA also now has a private client option, which gives you a purpose-built security program, with ongoing advisory, advanced verification inheritance, a 24-7 security emergency line, and lots more.

To find out more about CASA's private client solution, go to casa.io, which is c-a-sa-d-i-o. This episode is brought to you by Ledger. If you're serious about protecting your Bitcoin, Ledger has the solution you need. Their hardware wallets give you complete control over your private keys, ensuring that your Bitcoin stays safe from hacks, fishing, and malware. With Ledger's easy-to-use devices and the Ledger Live app, managing your Bitcoin has never been more convenient. Whether you're a long-time holder or new to the world of Bitcoin, Ledger makes it simple to keep your assets protected. If you want to find out more, visit ledger.com and secure your Bitcoin today. That is L-E-D-G-R.com.

But the thing that I want to talk to you about next is ossification. So you, at the end of last year, wrote a piece about this. It's something that I find really interesting because personally, sort of from my perspective, I've been kind of surprised how prevalent the ossification narrative has become. Like, for me, I would love to see Covenants. I'd love to see Op Vol coming to Bitcoin. But I'm just curious. Should we just start maybe by you giving a high level overview of what you think this current state of upgrading Bitcoin is right now?

Yeah, so I believe that Bitcoin is currently facing the innovator's dilemma. And this is a fairly well-known issue that a lot of companies, organizations, and even network protocols run into. And essentially, you think of like the S curve of adoption. This applies to the innovator's dilemma, where in the very early beginning, you have no adoption. And so you're innovating, you're innovating, you're innovating. And then if you successfully innovate and you find some product market fit, you start getting adoption, you know, you start going up that S curve.

And then you reach at some point a peak. And you've got a lot of adoption. and now you're faced with this dilemma. The dilemma is, do I continue innovating, try to get even more adoption, or do I stop innovating because any change that I make is a risk in and of itself that may somehow, you know, break the system or cause me to lose market share

and go backwards and, you know, lose a lot of the momentum that we've made so far. And so the dilemma is, of course, that if you don't innovate, then you're essentially opening up the door, to competition to come and out-innovate you and basically bring a better product or service to market, and you may then lose market share anyway. So I think that we're definitely at a place now where Bitcoin has been so successful. A lot of people have the vast majority of their net worth

in Bitcoin because they've been holding for so long. And so now, rather than being optimistic and interested in taking risks and innovating to continue pushing the protocol forward to do new things, we're saying, oh, we have to stop making any changes because it's just too risky and then there's too much money at stake. So this is something I've been talking about for a year or two now. You know, it feels like we're kind of stalling out, progress at the base protocol layer. And I think that's concerning for a multiple different reasons. My main issue being that, you know, a lot of pushback we get these days is,

oh, you don't need to change anything at the base layer because you can do everything at second layers. However, we simply do not have all of the functionality at the base layer that we would like in order to be able to innovate on second layers. And so, you know, there's a number of different projects out there that are working on cool second layer technology. And a number of them are in fairly rough consensus of saying, like, if we had a few new op codes that would massively improve our ability to do permissionless innovation and to offer, you know, stronger security for people who you might want to move their Bitcoin from the main chain into a second layer and be able to

take advantage of different functionality there, whether it's stronger privacy or more financial like defy type of stuff. Really, you know, the ability to do crazy new stuff on second layers where you don't have to worry about layer one consensus is only really restricted by people's imaginations. However, where it stands right now, we have very few, well, you could even argue that like the only truly permissionless second layer is Lightning Network and that all of the other ones are making, you know, massive tradeoffs with the security mechanisms for getting the bitcoins transferred between the different layers. Yeah, I kind of think of ossification as almost being selfish. Like, I think this narrative really seemed to pop up last

bull market, sort of 2020 onwards. Ostification before them, and this is, again, just from my perspective, seemed like it was something everyone always thought was inevitable eventually, but we weren't ready for yet. And then 2020 onwards, I feel like probably partly because Michael Saylor kind of pushed this narrative, it's become really prevalent. And how much of it do you think comes down to what you actually think Bitcoin is? Like whether you think it's purely this store of value asset that never needs to change or you think it's money that can be innovated on.

Yeah. You know, the narratives of what Bitcoin is has changed multiple times over the past 15, 16 years. And it wasn't really until the fork wars and after the fork wars that I would say the store of value narrative became the dominant narrative. And, you know, I think Bitcoin is many things. And the really dangerous thing I find about the store of value narrative being the dominant thing is that people can follow that narrative while not even taking advantage of most of Bitcoin's other properties, like especially censorship resistance. I felt like that was always one of the most prominent ones.

But if someone is, for example, buying a Bitcoin ETF, and they're just buying into the store of value narrative, they're throwing all of the other properties of Bitcoin out the window and saying, you know, I only care about having financial exposure to this store of value narrative. Yeah, they've got no interest on what happens on chain because they're not on chain. Exactly. So, you know, if we're pushing a lot of people to really only have exposure

to the financial aspect of Bitcoin through trusted third parties, that is potentially changing the game theory. Like the short version of incentives around improving Bitcoin at a protocol level is like the only reason you would ever want to improve Bitcoin at a protocol level is if you're actually using like self-custody Bitcoin where you're actually holding your own keys and you're directly interacting with the protocol on the network. if you're never directly interacting with the network and you're just playing with Bitcoin IOUs

through a trusted third party, you don't have any incentive for anyone to make changes to the Bitcoin protocol. So I think it would make sense that you would be more fearful than optimistic about people proposing changes to the protocol. So this is why I find the number go up narrative to not only be a distraction, but potentially a dangerous thing in the long run for the overall health and continued evolution of this protocol. I do see Bitcoin as money, but I see it as much more than money. It's programmable money. It's a programmable database. It's a very crappy database from a variety of different performance metrics. But it has a database with a very interesting property. you know, mostly around availability and reliability that the data is not going to get overwritten.

And so from that perspective, you know, building other systems that anchor into the Bitcoin blockchain, I think are also very interesting. There are a number of different projects that have done so and have, you know, improved their own security and auditability as a result. So, you know, I'm all in favor of continuing to innovate on Bitcoin. I think that the really tricky thing here is that it's completely possible for a number to continue going up, even while a variety of the different fundamental properties of Bitcoin go down and get degraded if the network continues to centralize in a number of different vectors. Yeah.

And I mean, I totally agree with that. One of the things that, like, one of the arguments that the ossifiers often use is you never want to have unintended consequences from any of these changes. And obviously with Taproot, I know Taproot didn't necessarily allow all the stuff that's happened on chain, but it made it easier and cheaper. Do you think that Bitcoin is still have some kind of PTSD from that? Yeah, well, I mean, there's still PTSD from the actual Fork Wars in 2017. a number of people got triggered by the usage of Bitcoin to store large amounts of non-financial data,

though, to be honest, that has been going on since almost the very beginning of Bitcoin, just in different ways, and that it will always happen in Bitcoin. There's really no fundamental way to prevent people from storing arbitrary data on Bitcoin without vastly hobbling the protocol and destroying a lot of other use cases. I think the unintended consequences thing is a non-argument, and the reason for that is that there are always unintended and unforeseen and unknown consequences. And what I mean is there are unknown unknowns for making changes. changes, and there are unknown unknowns for not making changes. And so, you know, you can look at a number of

other examples in history, but, you know, this also, this comes down once again to the innovators dilemma that I talked about. The unknown unknown of essentially ceasing innovation, stopping work to improve a project is that someone else could come along with something better. Or take, for example, SMTP, the email protocol. It essentially stopped being changed in the 90s. And however, a lot of new problems arose as the internet became more mainstream, as email became mass adopted. And the main problem that arose was spam. And because it wasn't really feasible to implement spam protection at the protocol level because it had effectively ossified. What happened is solutions got bolted on. Essentially, these meta-protocals, they were created by

various parties, essentially the major email infrastructure operators at the time, coming together and saying, you know, we need to fix this. They tried a number of different things. Eventually, they settled on a variety of different reputation mechanism systems, and those reputation systems were highly centralized, and so resulted in a system with just a handful of gatekeepers who were keeping blacklists and white lists and essentially reputation scores for all of the email traffic, and that over a period of several decades increased and increased and increased the cost of operating your own email node, your own email server, your own email infrastructure. So we went over the course of like 30 or 40 years from anyone being able to run their own

email server just by running the software and following the protocol to the point today where, oh, you can certainly download email server software and run it. And you might even be able to get a number of emails out and third. through to their delivery recipients, but over a long enough period of time, you're most likely going to end up on blacklists. You're most likely going to get a reputation hit and you're going to get excluded,

unless you are a very large organization that can dedicate teams of people to managing these reputation issues. And I know this problem very closely, because I spent the first decade of my career running email infrastructure for a company that was sending out 100 million emails a day. So I saw all of the dirty stuff that was happening outside of the protocol, all of these sort of meta protocols that have gotten us to where we are today, which is that like 90% of email users are captured by 10 companies. So you kind of take that metaphor, figure how does that happen to Bitcoin?

Well, it's not that hard to imagine if we keep going down this path where basically everybody is just using Bitcoin through ETFs or through exchanges or basically trust in third parties. Once again, you know, those folks are all going to be doing their AML, their KYC, their financial regulatory compliance,

and we can very easily end up in a system where 90% of Bitcoin users are captured by a handful of companies that are gatekeepers. Now, it's entirely possible that it would still be feasible for an individual to be, you know, a sovereign Bitcoin user, but I expect it would become, you know, an incredibly rare and potentially very expensive thing to do. One of the other arguments that I'd like to hear your kind of response to is this idea that if it's not broken, then why are you trying to fix it? And obviously right now, memples are relatively empty.

Like, I've just had a look to get a high priority transactions two sets of bike. So if you're trying to implement sort of scaling changes to Bitcoin and ossifiers would probably, trying to steal them on their argument, would be like, why now when we don't need it? Yeah, well, A, because it takes a really, really long time to make consensus changes to Bitcoin. So if you wait until it is needed, then a lot of people are going to be freaking out and emotions are going to be high. and it's going to be like the block size wars all over again that people still have PTSD about. So I'm actually interested in talking about scalability

when it's not an imminent and critical danger because hopefully it's more likely that we can have calm, rational discussions with each other rather than people who are really upset because they have to deal with a thousand support tickets from customers whose transactions aren't getting confirmed for example. So I think it's always a good time to talk about scaling because also you have to ask yourself

if we wait until Bitcoin is totally overloaded, what's going to happen? Obviously people are still going to have problems that need to be solved. And if they can't be solved with Bitcoin, they will go use some other solution. So I think that that is also, once again, that's kind of a part of the innovator's dilemma. If it's too hard for people to use Bitcoin or Lightning or any Bitcoin layer two, if it's too difficult, too expensive, whatever, and they find that they can go use Tron and it's faster, cheaper, and easier, than I suspect most people are going to do that. And this is just because it's human nature to do whatever the path of least

resistances, whatever the most convenient thing is. And so I think we should desire for us to be able to offer the best user experience so that we can gain the most users, retain the most users, and not lose as many users due to friction or other problems. Totally. One thing that I would really like your opinion on is, so I've spoken to Rusty Russell a few times. I think he's brilliant.

but he has a pretty extreme approach to this. He wants to essentially just turn everything on and let the market decide what is useful and what isn't. While I'm definitely not an ossifier, there's some very clear changes that I would like to see come to Bitcoin. That seems scary. And I'd just like to know where you kind of fall on that. No, I'm a big fan of the great script restoration project.

Essentially the idea is we want to impact. our developers and give them as much of the, you know, primitive tools, you know, the op codes as we can safely. The reason why a lot of these op codes were disabled were because, you know, various edge cases were found where they could potentially be used to, you know, perform denial of service attacks on the network and use too much resources and, you know, crash nodes or cause other issues. So the thing about Great Script Restoration was Russie Russell. He doesn't just want to turn them back on.

He wants to implement a safety framework to go along with it. That's kind of analogous to like gas counting on Ethereum, except it's more that, you know, we're roughly counting up the resource costs of executing and validating the Bitcoin transactions based upon exactly what each op code does, like, at a hardware level on a node. So I'm a big fan of that. And I think that actually that type of resource accounting system is going to be pretty important if we want to continue talking about scaling throughput on Bitcoin safely.

So do you, but in terms of... of the actual likelihood of any of these changes happening, Covenants or Up Vault seem like one step. Turning everything back on seems like a huge step. We'll never know if we don't try, right? So I think that's kind of the mindset that you have to take if you're going down the path of doing a Bitcoin improvement proposal, is that all you can really do when it comes to changing Bitcoin

is offer the improvement to the world, make your case for it, you know, try to provide as much data, as much use cases to build support, you know, go around and you really actually drum up support from people, you know, talk to different stakeholders in the industry to understand their perspective on this issue and whether or not they care about it and to try to convince them they should care about it. Building rough consensus is a very difficult thing. There's no manual for it. There's no playbook.

Like even if you look at like the technical activation parameters for different soft forks over the past decade, almost every soft fork has been activated in a different way. And that's only from the technical perspective. Like the actual meat space. consensus of things is far more complicated and definitely not written down. It's hard to replicate. And the major players who have been responsible for a lot of the previous soft forks are out of the game. Like they don't want anything to do with it anymore because it's a thankless job. You know, it is very difficult. It will get a lot of anger and hate.

sent your way. You know, making any sort of proposal to change Bitcoin, even with the greatest of intentions, is almost guaranteed to result in backlash and people being very mean to you. So you have to have a very thick skin and you have to really be invested in trying to see it through to the end with the understanding that you could potentially spend years advocating for and trying to build support for something only to have it just not go anywhere. Yeah, that's a really funny thing in Bitcoin, isn't it? So obviously Jeremy Rubin proposed his covenant update. And he's gone out and he's tried to draw up support.

And the reaction you get is like, dude, why are you pushing this so hard? You need to chill. But like that's the only thing he can really go out and do. And so there's a real, like that sort of social backlash is really hard. And that seems like one of the most challenging things to overcome on the ossification narrative. Pretty much. But, you know, then there was actually, there was a paper, I think. think that was put out recently that was trying to go through the governance process of Bitcoin

and like all the major stakeholders. And it was it was interesting looking at the game theory. They were they were essentially trying to like draw it out kind of like chess moves of like if player X does this and player Y can do this. And it's a it's a very difficult thing to reason to reason about, and I don't think any of us can really say that we fully understand it, but, you know, no one can stop you from making proposals. I would say it's probably Paul Stork is like the most long-lived, dedicated advocate of a proposal that looks unlikely to ever go through, but he's still going for it. Yeah.

It's almost as if the person that proposes the improvement can't be the same person trying to push it to actually be implemented. It seems like they almost need to be bifurcated. Yeah, that's something that I've brought up with several people. You know, it does look kind of bad, I guess, from an incentive perspective. But, you know, this is why really what you want to do is you want to build a coalition. You want to build interested parties that are stated. stakeholders in Bitcoin in a number of different ways. And I think that's the best way of trying to convince people that you have rough consensus because rough consensus can't really be

quantified, right? It is kind of like a gut feeling. Then there's also just the issue of, I would say a lot of people on social media who are happy to weigh in on things about Bitcoin. You know, they're not really participating in the consensus process. Like they might not even be running nodes. They might not be running businesses or have any sort of economic weight within the Bitcoin network. They're literally just, you know, yelling on social media. And, you know, that can't have an effect, especially if enough people listen to you,

then, you know, you have reputation. You might be able to change people's minds or get them to accept or reject things. but that's just the name of the game. You have to be willing to put up with all sorts of vitriol. You basically have to care about Bitcoin so much that you're willing to go through this gauntlet. And like I said, it seems like most people who even have successfully gone through the gauntlet don't want to do it again. Yeah. The funny thing with Paul, he's, and drag chain.

So drag chains aren't something that I personally necessarily am desperate to see in Bitcoin. I think I would be on the sort of against side of that argument, although I don't know enough about it. So I don't have that opinion very, very strongly. But what I don't understand is why, and people are going to hate me saying this, but why doesn't he just go and do it on like coin and see what happens there? Yeah, I mean, I can't speak for him. So I'm not sure whether or not he's tried to do that. but that's another, I guess, issue when it comes to kind of like proving out any major change

to Bitcoin is that once again there's no playbook. And it seems like the goalposts are constantly moving of like, do you need to prove it out on a CigNet? Do you need to prove it out, you know, on TestNet? Do you need to prove it? But then even that's not good enough for some people. And they're like, well, no, you need to prove it out on a network that has actual economic value. So you need to go do it on light coin or something.

But the thing is, like, there's no authoritative rulebook to say, like, you have to do these things. And if you actually look at the Bitcoin improvement proposal process, it's intentionally vague. and that's like by design. Because even, even, this is the kind of the crazy thing is like, even the Bitcoin improvement proposal process is not enforceable in any way. Like,

you know, Bitcoin itself doesn't have any idea like what a BIP is. BIPs are just for humans. So it's entirely feasible to make changes to Bitcoin without going through the Bitcoin Improof. improvement process. And it, it, that, you know, that was done several times back in the day, basically when Satoshi was unilaterally doing stuff.

And it's theoretically possible that it could happen again. But as it stands, the, that process seems to be the best thing that we have since there's not really anything else. Yeah. All right. So one sort of last big question to close out. there's obviously a chance we get something like a strategic Bitcoin reserve, whether that's Bitcoin or Bitcoin and others, we'll find out maybe it'll never happen. But with something

like that happening, do you think that again increases the chance of justification? I know Lola Leitz has written about this a little bit, talking about if we have a strategic Bitcoin reserve, any changes to the Bitcoin protocol becomes like a national security issue. So what would your take on that be? Yeah, well, look, anyone who is involved in Bitcoin has the right to voice their opinion. And so this is something that I've been monitoring, like as institutional adoption has been happening over the past year, as far as I can tell, at least so far, you know, none of the major institutional players have even bothered or tried to get involved in the actual Bitcoin development process. but no one can stop them from doing that if they decide that it's in their vested interest.

And the same thing applies to nation states. And I mean, I think that Bitcoin is for everyone, and that includes, you know, companies, states, nation states, central banks. You know, anyone who wants to own Bitcoin can do so. and if they want to get involved in the development and improvement of Bitcoin, then they should also be allowed to participate. So, you know, if there's a lot of people out there who will, because a lot of us, of course, are sort of libertarians and anarchists, and we don't want the state involved in things. I think that if the government designated certain people to essentially dedicate themselves to working on Bitcoin and contributing to it, that should be allowed. If the government wants to create grants to fund Bitcoin developers, preferably those grants are like no strings attached grants, but no one can force that. But as it is, when it comes to developing Bitcoin, we should not care who is proposing stuff.

We should care about the actual merit of the idea and how that will affect everyone else who is using Bitcoin. I think that's a good place to close out. Is there anything that we've not spoken about on the ossification side that you'd like to touch on? I mean, I mostly, I see ossification as an inevitability. I think almost everyone agrees upon that, and we're not going to know if Bitcoin has ossified until we have a lot of hindsight. And so I kind of see it as a race against time

where I think for network protocols, whether it's a financial protocol or just any sort of communication protocol, ossification is almost like a law of physics. The network continues to grow to the point that it essentially gets crushed under its own weight, that it becomes too difficult to coordinate changes in the protocol amongst the wider and wider diversity of actors who all have their own incentives and timelines and interests.

And so from that perspective, you know, we should want to continue improving Bitcoin as much as we can while we still can, and hopefully we still can. For all I know, we'll never be able to make any consensus changes to Bitcoin again. and everything that we're doing right now is for not. But like I said, we'll never know if we don't try. Love it. Thank you, Jameson. I really appreciate that.

That was great. Is there any way you want to send anyone before we close out? Well, if you're interested in improving the security of your self-custody, check out CASA.com. If you want to go down the Bitcoin rabbit hole, you can check out my educational resources at Bitcoin. Perfect. All right. Thank you, Jameson. I hope you have fun in El Salvador. Thanks for having me.