What's up, guys?
Welcome back to another episode.
Today I have a very special guest, Jameson Lopp, which is a team lead at BitGo, creator
of satoshi.info and founder of bitcoincig.com.
Jameson, welcome to the show.
How are you doing?
Not bad.
This space is always keeping us on our toes, so there's never a dull moment.
So what would you say is the most interesting thing in the space currently today?
So I've been doing this for a number of years and been going down the rabbit hole in terms
of the technology and trying to understand how the actual protocols work and everything.
But really, over the past year, I've kind of popped up out of that technical rabbit
hole and have been really looking more at the human side of things, the sociological
aspects of these consensus systems.
And so I think most people are well aware that we've had a lot of drama and forking
and people going off and doing their own thing.
So it's really interesting, I think, to see how the quote unquote governance of these
ungoverned systems really operates.
And what's your take on all these forks lately?
We had, you know, Bcash, Bitcoin Cash, you have Bitcoin Gold, and I heard now there's
like Bitcoin Silver and Diamond, all these different forks coming out.
Yeah, it's really it's reminding me of the like 2012-2013 altcoin boom.
So I think that, you know, this is just another cycle repeating itself, where we saw it around
2013 with proliferation of altcoins.
People figured out it was easy to make them and they could raise a lot of money.
Then, you know, earlier this year, we saw a similar type of cycle with ICOs.
And now I think we're starting to see the beginning of a cycle with the new type of
altcoin, the altcoin airdrop to the Bitcoin holders.
And it's going to continue until the market cannot bear it anymore.
And I think we might be getting pretty close to that point because we're having customers
come to us at Bitco and ask us if we're going to support X, Y or Z.
And we're like, I don't I don't even know what you're talking about.
Like, how are we going to support something we've never even heard of?
So it's definitely we're getting to that like long tail distribution of like, it's not really
going to be worth the effort for the engineers to try to support all of these things because
they're going to have less and less value.
That's a huge issue in the space, too, and just not enough smart people that can develop
these very complicated technologies.
Talking about governance, what's your philosophical take or what's your opinion on like, is there
a governance model within Bitcoin?
I think we're trying to figure that out, right?
Like there is no official written rules or constitution, though, you know, there's a
lot of blog post of people who try to draw parallels between like the American tricameral
system and Bitcoin or or other, you know, governance systems and Bitcoin.
But I think that those are just sort of loose approximations and they're always going to
be missing something here or there.
So we're still trying to figure it out.
Now, we know, you know, you've got two main options in these permissionless systems and
you've got your voice and exit as usual.
It just so happens that exit is a lot easier in these systems than it is in most other,
you know, hierarchical governance.
So people are exiting and we're going to see how well they do and, you know, what the market
thinks of their exits.
And so earlier this year, we had Segwit that activated, I don't know what the percentage
is there.
I think it's above 15 percent activation.
It's been bouncing around 10 to 15 percent like by transaction volume.
And do you think that had like a drastic change within like quote unquote out this so-called
governance model that we have?
It definitely showed some issues where the BIP9 like miner activation for soft forks
was shown to have an issue where it's basically giving this like voting power or veto power
to the miners.
So the miners use that as kind of a bargaining chip over the course of a year or two.
And you know, frustrated a lot of other participants of the community.
So I think that like you're probably not going to see that type of activation get used in
the future for other soft forks.
We may see more, you know, user activated soft forks so that the miners don't really
have that option.
You know, it's going to be the community as a system in general that is going to be telling
the miners like this is what we want and we're going to pay you for it.
And talking about mining, you know, it's very expensive to set up mining, especially in
Bitcoin.
So there's a large overhead cause.
Do you see the actual mining ecosystem within Bitcoin changing in the next couple of years?
Definitely.
I've been approached by a number of different entities that are, you know, working on their
own new initiatives.
And a lot of this was just born out of the frustration of what I was just talking about
of the miners getting into a position where they're blocking upgrades to the network.
And so there are a lot of people out there, a lot of early adopters, a lot of very well
capitalized people who see the centralization of mining as one of the bigger problems that
Bitcoin is facing right now.
And they're willing to put in the time, the effort, the resources to make mining more
competitive and therefore more decentralized.
So we heard about Dragon Mint, which is supposed to get up and running early next year.
And I've also been speaking with a fellow locally who is doing some interesting stuff
with Waste Energy.
And I've also heard from some other groups who are working on their own initiatives that
are going to use new fabrication plants, new type of ASIC designs.
And the system is going to kind of get out of this deadlock phase, you know, break the
monopoly, if you will, and get more competition injected into the system.
I heard about that.
So there's new designs for the new ASICs coming out?
Yeah.
I think there are multiple different companies working on their own ASICs.
So you know, the basically Bitmain near monopoly that has been in place for the past year or
so is definitely going to be challenged.
And my funniest, I'm not going to say my issue, but one of my funniest remarks I give people,
people always complain about energy consumption when it comes to Bitcoin.
Sure.
I'm like, do you realize how much energy consumption is in your Visa card?
How much energy consumption there is on the banks and everything?
So it's like it's a drop in the fucking ocean compared to everybody else.
But it's easy to get upset about because it's easier to approximate to figure out how much
energy it is.
It's just that people don't have any idea how much energy get used for all these other
systems because it's hidden behind various veils.
There's no single number that you can just pull out and look at.
And still talking about mining, I have no idea for this answer.
Maybe you do know.
Is this even probable?
Is there reasons why we can't use solar energy to start powering our mining rigs?
No.
And in fact, so like one of the things about mining is Bitcoin uses exactly as much energy
as the users of the ecosystem are willing to pay for, and that basically gets reflected
by the price.
So everybody knows what the subsidy is, what miners are getting paid, then the actual dollar
amount is just based on the price of Bitcoin itself.
So as a result, you have people who can get into competitive situations of finding cheaper
and cheaper energy.
So renewable energy is definitely on the horizon.
I think what we see in China a lot is actually hydroelectric energy.
And really what you see is it's not that miners are just going out, setting up shop and sucking
up a lot of electricity.
What they're doing is they're going and they're finding the excess electricity that is already
available and making use of it, because otherwise it would just get wasted, thrown away, not
used.
So they're just using, in many cases, electricity that is already being generated.
You're right.
Over here in Ontario, we create so much excess electricity that we have to sell it to New
York State.
So fuck, we should just divert that to Bitcoin mining farms.
Yeah.
So that's what I mentioned, the guy that I met with recently, who is actually here in
North Carolina, a while ago, they bought this tire remanufacturing waste processing plant
where they take old tires and they basically burn them up.
And then they get all of the waste byproducts separated and sell those out.
And they realized, we're generating a lot of heat and a lot of electricity from this.
And they were selling it back to the grid at like one or two cents per kilowatt hour.
And they realized, we can take that, throw a bunch of older mining hash power at it,
and be much more profitable by using that electricity ourselves rather than reselling
it back to the grid.
So we talked about earlier with all these forks.
So we had different evolution.
Like in 2013, you had these altcoins and then we had the ICOs in the last year or so.
Now we have all these forks.
And then as you mentioned, we have these airdrops coming out to Bitcoin users.
Is there anything that is really concerning for you currently and moving forward?
Oh, well, I mean, there's always the scalability issues, but I'm not as concerned about that
because there's a lot of people working on them.
What is really more concerning to me now is that even though we've had these contentious
hard forks, there has not been a clean sociological split.
So there's still a lot of fighting and really the war for Bitcoin, if you will, has moved
from a technical scaling argument to a social branding argument.
So now you have the Bitcoin cash is Bitcoin or the Bitcoin cash is Satoshi's vision.
All of the rhetoric has basically pivoted a little bit.
So instead of it being this is our vision for Bitcoin, it is now this is our vision
and we've implemented it, but you have to go use this fork.
And now we're going to do a big marketing drive.
So the game has changed a little bit, but it's still this massive argument and really
battle for, I guess, mind share and general like user acceptance.
What do you say?
Do you believe in like a free market?
Like let's say you have Bitcoin, what we do have Bitcoin cash and we have Bitcoin.
At the end of the day, the best product wins or the best system wins.
I believe so.
Yeah.
And I think that the market is speaking right now.
Every moment it's telling us which system that it thinks is more valuable.
I have various reasons why I believe that the various statistics for Bitcoin cash might
be a bit overinflated.
But that's like one of the reasons why we're seeing all of these airdropped altcoins is
because they can then use the very easily manipulated market cap metric to make it look
like they're a lot bigger than they really are.
Because in reality, the vast majority of Bitcoin holders are not keeping track of all of this
drama and they're not going to go try to find the right software to be able to claim their
coins on a fork to sell them or convert them to something else.
And so really, I think the vast majority of coins on these airdropped forks are just locked
up and probably never going to be touched.
So the market caps for them are even more inflated than the market cap for Bitcoin,
which you could argue is inflated because there's probably several million bitcoins
that have been lost forever and they're never going to get used.
Once you're taking on these whole futures markets, I think they're going live like mid
December.
Yeah, that's exciting.
Some people seem to think that they're going to open up opportunities for institutions
to short Bitcoin into the ground, but I'm expecting probably the opposite.
I mean, shorting Bitcoin has almost never been a very good proposition.
I don't think that like increasing the volume of the shorts is going to really change that.
It's such a scarce digital asset and the demand just continues to increase.
So we'll see.
I think most people agree that it will be like providing better liquidity, better price
discovery in general.
I'm actually curious to witness once scaling is implemented, like let's say we have Lightning
Network whenever that goes live and that gives more accessibility, cheaper transactions,
micro payments can actually be utilized.
I'm more curious then what the price would actually reflect the value of.
Yeah, and this is something that I've been thinking about and talking to people a lot
recently is really like, what is the value of a new global payment system versus the
value of a global sovereign store of value?
And it's kind of hard to find like good metrics on that of like, what is the level of value
that could be captured by a payment system versus a store of value?
You know, obviously you need to be able to send money in order for the money itself to
have value, but does the ability to do cheap, fast, small payments really add that much
value to the system?
It's hard to say and it's one of those things, you know, we're just going to have to see
what happens as we roll out the system.
But like the whole Lightning Network thing is complicated and we're doing, we're building
something that's never been built before.
And you know, technically it is working now.
Like you can use Lightning Network protocols on the main network.
It's just very, very early stage.
You really shouldn't do it unless you're highly technical.
But we're going to have to go through a growth cycle here of experimenting and failing and
fixing the problems and moving forward.
So there's going to be a lot of issues with Lightning Network, both at the micro scale,
the single payment channel scale and at the macro scale.
And I wrote an article on CoinDesk like two years ago, just talking about all the potential
complications that might come up.
And of course, there's probably plenty of unknown unknowns as well.
But the reason that I'm bullish on it is that there are so many people that are dedicated
and are devoting their skills and their resources to continuing to improve it.
So it's the same that we see with any of these technologies.
You see a lot of skeptics who say, oh, it's not good.
It's not working.
What's the debate they give against Lightning Network if they're saying it's more centralized
or makes Bitcoin more centralized?
Oh, yeah.
And that's, you know, any of these arguments of saying it makes it more centralized.
It's hard really to have quantitative arguments about centralization unless you're setting
up a lot of metrics beforehand of saying like, this is how we're measuring decentralization.
I think that the more important thing rather than saying like centralized versus decentralized
is like, does it retain its permissionless aspects or are we moving to a custodial trusted
model?
And so I think that what you see happen a lot with the rhetoric in this space, especially
against Lightning Network, is people make arguments for why it is more centralized.
And then they kind of slippery slope you from more centralized into like a custodial trusted
solution.
So like you could have a fairly centralized Lightning Network that's still permissionless
non-custodial.
Those two things don't have to go together.
But in general, I think the best way that I can describe this network is just by looking
at the Internet itself.
And so we're just building routing layers on top of Bitcoin, exactly like TCP IP routing
layers were built on top of the Ethernet layer.
And that's how we have a scalable Internet right now.
Like if the entire Internet worked at the level zero Ethernet layer, which is a broadcast
to everyone communication protocol, we wouldn't be able to do what we're doing right now.
We wouldn't be able to stream video and do high bandwidth stuff because everybody else
on the Internet would have to receive and relay this stream and everybody else's streams.
So I mean, this is a like tried and true method for scaling decentralized global protocols.
So I think at that macro level, it's going to work out fine.
We're just going to have to deal with a lot of edge cases and minutiae that we find along
the way.
What do wallet providers or service providers need to do once a Lightning Network is implemented?
Well they're going to have to start running Lightning nodes that can speak that protocol.
They'll have to start storing a little bit of extra stateful data.
So like each time you update the payment channels, you have a little bit of data that you need
to keep track of.
It is more complicated than Bitcoin because it's Bitcoin plus a new protocol.
They're in many cases, though, going to be able to use libraries, which is basically
what a lot of the developers are working on right now is the low level libraries that
are going to abstract away a lot of those complexities.
But they will need, I'm sure, to make a number of changes from the user experience side.
That's one of the things that I'm really interested to see is how well we can abstract away these
complexities because I think that in an optimal future where Lightning Network is used by
a lot of people, the average Bitcoin user should not necessarily even need to know whether
or not they're making a transaction that is just a simple on-chain transaction or an off-chain
transaction.
The software should just handle that all under the hood and it should just work when they
click the button.
Do you guys have a rough timeline?
Well at BitGo we are working on payment channel stuff, though we have kind of like a multi-phase
rollout where we're going to start off and only be doing payment channels internally between
our own customers because we can do that basically now as soon as we get it up and running without
needing anybody else in the ecosystem to have Lightning Network compatibility.
So we can already save our own customers a lot of money by doing off-chain transactions
whenever possible.
And then we're going to continue to monitor and see how the rest of the ecosystem starts
to catch up and once we've implemented our stuff internally to be compatible, it should
be easy to then hook it up with the rest of the Lightning Network as it comes online.
Now in terms of how the engineering process and progress at other companies and the ecosystem
has been going, it's actually been kind of disappointing, right?
So BitGo was one of the first companies to implement segregated witness and we actually
were a few weeks late.
We anticipated having it ready on the activation date.
The only reason that we didn't was that Bcash came out of nowhere and we had to scramble
all of our resources to prepare for it.
But it's really weird how a lot of these bigger companies in the ecosystem have actually been
a lot slower to implement changes.
So that's fine for us.
I guess we'll just stay small and nimble and stay ahead of everybody else.
We're just waiting for the rest of the ecosystem to catch up at this point.
Yeah.
We have a long way to go.
I think the money and the greed and all this fascination of getting rich quick is outpacing
the realities of the technology and the capabilities.
We need to have a good crash.
Yes.
That's right.
Unfortunately.
You know, the two-year trough of disillusionment, it was kind of disheartening, you know, looking
at the price and not moving for a long time.
But we got a lot of work done because we weren't looking at the price.
So any final thoughts, like any advice for anybody who's interested in getting the space,
whether it's the developer or anybody, like what would you suggest to them?
Yeah, so I maintain a list of educational resources on my website at lop.net, L-O-P-P.net.
That's got pretty much everything you need, starting from high level, going all the way
deep down into the protocols.
If you want to get into actual software development, there are a number of good resources, especially
like Chaincode Labs and Jimmy Song, who are doing developer education there.
And they have a lot of good resources, both online and doing like physical in-person classes.
But really, if you already know software development, the best thing to do is just find an open
source software repository, check out the code, and start contributing.
You can contribute documentation.
You can contribute tests.
You don't have to jump in immediately and start making like major functional changes
to just get your foot in the door.
Cool.
Well, Janison, thank you so much for coming on the show, and talk to you soon, brother.
Thanks.
Cheers.