Jameson, welcome back my friend, how you been?
Not bad, just trying to stay corona free.
That's it, you know, you got to stay corona free, keep yourself healthy and sit back and
watch the government and it's in all its glory.
Its wisdom is infinite wisdom, completely screw things up.
Well these are the times that a lot of us wait patiently for those of us who are preparing,
you know, or we're waiting for one of those eventful days where some of our preps actually
come in handy.
The funniest thing though, like there's actually a couple of funny things about this, the first
thing that I notice is the people who are like really against guns, all of a sudden
aren't against guns, you know, they realize wait a second, if I, you know, if shit hits
the fan, how am I going to protect myself, no shit Sherlock.
Things really change when your local government starts sending out notices saying, you know,
we're not going to be responding to certain types of emergencies.
I've been watching videos and this probably, this is actually, this predates even what's
happening with Corona, but I've been watching videos in California when they bypass that
law where it's, I think it was like something like, it was like non-violent, like small
misdemeanor defenses will not be enforced.
All these people are walking into convenience stores or any stores like in broad public,
they don't give a fuck.
Yep.
It's loading.
I'm like, what the flying fuck?
The incentives have been misaligned and you know, people are taking advantage of the new
rules to the game.
And people forget the first rule of a cohesive society is the protection of private property.
If that is not enforced, there is no society whatsoever.
And so when you have something in California, a state that has, I think more population
than all of Canada, not enforcing the very notion of somebody going onto your property
and stealing anything they want, I mean, so beyond just stealing, I've seen people squatting
on private property on their lawns and the cops are like, meh.
Well and then it's compounded when the laws additionally make it so that the property
owners can't enforce their ownership of property.
So you know, the authorities won't enforce it and they won't allow the actual citizens
to enforce it.
What are you going to do?
That's really when things become chaotic.
My question is, why does anyone even stay in California, more and more like Texas and
Florida are looking like the spots to be.
Yeah, well, I guess you got that SoCal weather, but I guess Texas and Florida also have pretty
good weather.
And it's cheap on property, man.
Fuck.
Austin, like I'm from Toronto, Canada, our property is just retarded, just insane.
And I was looking at property in Texas, I'm like, whoa, I can get like this for this like
this is awesome.
There's still the, you know, California has some appeal still left to it, though I think,
you know, anyone who goes to San Francisco, for example, can see the deterioration of
the city there.
There's and then there's still the whole Bay Area culture and, you know, innovation
happens here.
But I think that, you know, they're not going to be able to hold on to that.
It's already waning.
You know, even with my company, we're 100% remote, decentralized, like no central headquarters
that people go into.
And I really think that's the way of the future and, you know, it just it happens to come
in handy with stuff like what's happening right now is, you know, we don't have to
worry about changing people's behavior because the behavior we were already undertaking for
several years just happens to fit well within the new model.
And talking about behavior, it's been interesting sitting back and watching how the Bitcoin
market has been responding to everything.
It never does what you expect, does it?
No.
But yes and no.
I mean, there's a cadence, like people were complaining with the big drop to happen.
I think it was like two weeks ago or a week ago, whenever it was, but that wasn't just
because of the market.
That was also we have poor plumbing within centralized exchanges that cause issues.
And with any liquidity crunch, all assets are sold at the top.
So Bitcoin will be sold.
Gold was sold.
Stocks are sold.
It's a race to get liquidity, which is cash to sit on because you just don't know what's
happening within the market.
There's no trust.
There's no bottom in sight.
You don't know which assets are going to increase.
But I just saw on Twitter, like a minute ago before this, that Bitcoin this week has been
less volatile than the S&P.
Oh, right.
Yeah.
That's crazy, right?
The traditional markets are the shitcoins now.
And for me, I want your take on this.
A lot of people within the Bitcoin community talk about store of value as a value proposition.
Now I understand the narrative.
I understand why that's important to brand it a little bit better.
I get the digital gold aspect.
I understand it.
But more or less, I personally don't see it as a store of value as of yet in its current
form.
What needs to be talked about a bit more and not really within the Bitcoin, we're preaching
to acquire, but what needs to be talked about more to the general public is it's not the
store of value.
I wouldn't suggest my brother, hey, put the last $10,000 you ever have in Bitcoin.
Maybe it goes up, but maybe tomorrow you hit 40% and like 99% of investors, right, are
emotionally driven.
Like even if it drops 10%, it's like, oh, my money's gone.
My value prop is here's an asset that is censorship resistant, that is divisible, that is portable,
that you know for the last 11 years now, every 10 minutes a block has been mined.
This I think has to be more of a, I don't even say selling feature, but the story for
the general public.
Regular people, and I think within the next year or so, people are going to be looking.
People are going to be looking for different assets, like our parents' generation was
real estate.
They could buy real estate for an affordable price.
The dollar was stronger.
I remember here in Toronto, my parents bought their house for $200,000 in the 80s.
The house is worth about 1.7, 1.8.
Right now no one's going to afford that and people think that house is going to go to
$4 million.
Like, come on, come on, come on.
Like let's be reasonable over here.
But I think Bitcoin is the real estate of let's say the millennial generation and under.
And so where do you see it?
What's your thesis within the next year or so within this space or Bitcoin in general?
You know this is tricky because we're basically talking about how do you evangelize the unique
properties of Bitcoin to people who know nothing about the complex inner workings.
You don't want to start going into all of these details of how it operates because people's
eyes glaze over and in most cases you end up having to have long hours or days or weeks
long conversations about how money even works in the first place because not many people
know that.
So if they don't have any frame of reference, then what's the point of trying to extol
the virtues of Bitcoin?
But I spent my first several years trying to do the evangelism thing and talking to
all my friends and family and coworkers and anybody who would listen and a lot of people
who wouldn't listen.
And I ultimately I think that most of that was a waste that 99 point something percent
of the people who I spent time trying to convince, they didn't get interested.
They didn't investigate.
They just thought I was a lunatic and moved on.
And sure, many years later, a number of them come back to me and they're like, why didn't
you try harder to convince me, yada, yada, yada.
And then the 1% who did listen were like, man, I'm really glad that you took the time
to tell me all these things.
But I think at an even more fundamental level, it's not about trying to convince people that
it's secure or it's divisible or whatever.
If I distill all of these properties to kind of the root cause of what I think creates
those properties, it's the nature of it being an open collaborative project.
And that creates just better fundamental incentives and better game theory around whatever the
resulting properties of the system will be.
And so I think it may be a lot easier to explain to someone who they've probably at least heard
of the Federal Reserve or the US Treasury and say, well, would you rather have your
money and the properties of the money dictated by a handful of people who meet behind closed
doors and don't even tell you why they decide to make certain changes?
And they may have their own incentives that you don't even know about that are linking
them to various other entities and government or Wall Street or whatever that can result
in some really screwed up things happening that they decide are good for everyone in
general.
Or do you want money to be a more open, transparent project where if you want to, you can voice
your opinion and argue with people about what you think the properties of the money should
be?
And I think that's just a much simpler way of trying to say, well, fairness in general
is kind of a silly concept, I mean, because everything is subjective.
And so we can never really say that we're going to be able to have that type of money
in existence, but at the very least, we can guarantee that with transparency, with a lot
of people watching what is happening to the system and raising a fuss if there's anything
weird going on that they think is not very well aligned with the incentives of themselves
or other participants in the system, then that ought to at least have a better chance
of not necessarily being better for everyone, but hopefully at least being less harmful
for people.
And that's kind of like the way that we've seen the politics, I guess, of Bitcoin play
out over the years is that it has become harder and harder to make changes that are controversial.
And like the level of controversy that is required to get something blocked from happening
in Bitcoin just keeps going down and down and down.
And we keep ossifying the protocol to the point that eventually, I think it's going
to become like almost any other internet protocol where it's just not even worth trying to change
it anymore because nobody is going to agree to any changes.
What is the heuristics though right now, if people are wondering, what is the process
for changing something within the Bitcoin code?
Yeah.
So because there is no central authority that is even deciding what to change, we have standards.
There is a Bitcoin improvement proposal process, but even that process that has been in place
for I think seven or eight years, there's no requirement that you go through it.
Anybody can propose anything that they want.
It's much more likely that if you go through that process, you are more likely to converge
upon whatever consensus is and you very likely will not find consensus for whatever it is
you're proposing.
I mean, I don't know the stats off the top of my head, but I was looking at just general
like code change requests in the Bitcoin core repository a month or so ago and found like
the vast majority of code that has been proposed ends up not getting accepted and that could
be for a million different reasons.
So the players are, you have somebody who is controlling the GitHub for the Bitcoin
core client, right?
You have miners who decide which client they want to use.
You have developers who are responsible in the open source network to support the network.
And then you have, I guess, exchanges that have a lot of say in it because they're holding
a lot of Bitcoins.
All these different players that have some type of influence within the governance of
the Bitcoin protocol.
Well, yeah, it is.
It is.
I have, you know, an hour long talk that I gave a year or two ago about this governance
process and the synopsis of that is that the governance of Bitcoin is basically the complete
inversion of every other system of governance that we are traditionally used to.
We are both in the public and private sector used to hierarchical top down command and
control.
You know, there's one person at the top and they control another layer of people and those
people direct another layer and eventually at the very lowest level, you've got the plebeians
essentially who have no power.
But in Bitcoin, it's the exact opposite where every individual participant who at least
goes to the trouble to run their own code, to run their own node and basically decide
what rules they want to enforce.
That is at the very lowest level.
Each individual actor making a million different decisions based on a million different variables
in their own perspectives.
And then what the system is, the definition of the system is basically what sort of organically
bubbles up as the, I guess you would say, almost the subset of whatever the agreement
of all those different diverse opinions are.
It's not a system of voting.
It's very actually hard to quantify consensus in the system because it is this organic process.
I have a follow up question.
So SegWit happened what, two years ago, something like that?
How did that take place?
How did that consensus come together to activate SegWit?
Yeah.
So that was a fascinating multi-year long story.
And essentially the code for SegWit got merged into a number of different Bitcoin clients.
And the thing about making consensus changes is they're very difficult.
There's multiple different ways to do it.
You can do it in a backwards compatible way or a non-backwards compatible way.
In general, the ethos of Bitcoin is to do everything backwards, to force people to change
their code if they're not paying attention for any number of reasons.
You don't want to break their money.
And so the code itself got merged without too much contention.
It was at least a year long process, a lot of thorough review.
But then the question is, how do you activate that code?
And there have been at least three or four different styles of activating consensus changes
in Bitcoin over its history.
More recently, it's usually minor activation.
And in particular with SegWit, it was, I think, requiring something like 95% signaling of
miners over the past 2,000 blocks or so in the past couple of weeks to really lock it
in.
And signaling for people who are wondering is downloading the client and pretty much
raising your hand saying, we accept this client.
It's basically that when miners are doing signaling, they are putting a small amount
of data inside of the blocks that they are creating that basically it is a claim that
they are running code that is compatible with whatever that feature is.
But you can't actually prove that you're running that code.
But that's a whole other kind of low level minutia argument.
But due to all of the contention around scaling and what different entities in the ecosystem
wanted, I think almost maybe a year went by and SegWit didn't get activated and the miners
were basically dragging their feet.
We ended up having a series of kind of compromised proposals that happened.
And that was all happening simultaneously with other groups of people who were saying, you
know what, screw you guys.
We're actually going to go create a whole different network, a whole different money.
And we don't need your permission.
So we're just going to hard fork away.
And that ended up becoming Bitcoin Cash.
And then there was also this whole SegWit 2X thing going on that was kind of a compromised
proposal of, okay, we'll do the soft fork, but also do a hard fork.
And suffice to say, I think there was some good political maneuvering that resulted in
a compromised proposal that allowed a lot of people to save face where we ended up activating
SegWit.
And then at the last minute, the hard fork part, just the support for that just kind
of collapsed.
And it was a good thing that it did because there was actually a bug in that code where
if people had been running that, then the whole network would have ground to a halt.
But it was a fun couple of years of history there.
Yeah, it was.
It was interesting to watch.
I always view these blockchain networks almost like organic organisms that turn into like
these like nation kind of states online or like even like family members, right?
So you have like Bitcoin, then you have Bitcoin Cash and like Bitcoin S-Feed and like all
these like derivatives like Bitcoin Goal.
I can't keep counting.
There is at least 50 different Bitcoin forks last night, and of course, most of them are
worth nothing.
Nothing.
Yeah, yeah.
You know, Zipf's law, power law.
I'm interested for the question though is, the question for myself is, there will come
a point in the future, I forget what it was, was it like 21, I forget the date, but where
miners will not mine, they will not get a reward no more for the block, right?
Then what?
Yeah, that is one of the major questions around the long term sustainability of the system.
And it is one of the reasons why the developers who are generally against just making block
sizes larger and larger and larger to keep fees low because at some point we do need
a sufficient level of fees to sustain the hash power.
Now this is where it gets tricky because like there is no level of hash power at which the
network is secure against computational attacks.
It's all relative.
The network would function fine if the difficulty was a difficulty of one like it was when Satoshi
first started mining blocks.
However, that would mean that basically anybody with a CPU could create their own blocks and
the network would become really chaotic.
So what is the desired level of hash power?
It's quite honestly as high as possible.
Like we want it to be so high that it is not feasible even for like a first world nation
state to be able to gather sufficient level of hash power.
Based on that thinking though, like since this is pure open market, free market, capitalistic
systems in place, it's very simple.
I'm putting resource in, which is my capital, to find the cheapest electricity, whatever
source of electricity I can get.
I then have to have a housing unit, meaning a warehouse or whatever containers.
I have to then buy equipment, some ASICs.
They have a half-life, so whatever the half-life is, I must then hire engineers and people
to maintain this stuff.
I must then have hydro, all this stuff, or there's a massive overhead and I must crunch
the numbers and it must be worth it for me, at least of a 20-30% per dollar to earn my
return on that.
My question is, what is their proposition?
Is there a base minimum fee that has to be in place for the miners to be incentivized
to increase hashing power?
The question basically comes down to, what is the cost of mining?
There is no easy answer to that because there are so many variables, some of which you just
mentioned, and ultimately this is why mining is so competitive and ultimately mining results
in people being incentivized to seek out the cheapest forms of energy.
We're even seeing people go to the extremes of setting up little boxes basically in the
Arctic where there's oil drilling going on, but lots of excess natural gas that is just
getting burned off into the air because there's no way to transport that.
The energy is just getting destroyed.
I think the less interesting question is, how much do we need to pay the miners?
The more interesting question is, how easy can we make it for miners to contribute to
the network?
Like you were saying right now, miners are very industrialized.
They're going to extreme lengths to find little bits of better efficiency so that they can
increase their profit margin and eventually put the other miners out of business if they
can't keep competing.
Now that's one way that mining has evolved over the past five or six years, but it's
not necessarily the only way.
I would really like to see the tide of mining swing back into a decentralized nature.
By that, I mean my optimal scenario for Bitcoin mining is basically a miner in every house.
Of course, these would not be miners like we know it right now.
Nobody is going to want to have really loud fans going that are heating up their houses
and making things uncomfortable for day-to-day living, but rather there might be other places
where we could find energy efficiency gains.
One of those ideas has been, there's actually been a few prototypes and some limited production,
but along the lines of creating miners that are actually just space heaters for people
who live in really cold climates or for more regular use is miners that are actually submerged
inside of your water tank at your house that heat up your water for you.
That type of stuff is like you're already going to be spending electricity to create
heat for various things.
If you can spend that electricity and create the heat, but also be mining some Bitcoin,
then maybe you can basically subsidize your regular day-to-day operations.
I think the only question that would then come down from that is, well, how do we then
make the actual IT administration of these devices easy enough that the average household
owner doesn't have... Yeah, they don't need to deal with any complexities of...
Plug and play, that's it, man.
Yeah, it basically needs to be plug and play, but from a theoretical standpoint that seems
to be feasible, it also seems to have pretty well aligned incentives.
It's just a question of, can somebody figure out how to pull off that ease of use?
Yeah, it's the transforming of one energy source that's being wasted into another one.
But also this brings up the question then, or the point is it comes to a point where
industrial mining is not profitable.
Hence, why it would go back into a decentralized matter, because if I can plug in a device,
and let's say I'm in a cold climate, I'm in Canada, so we have seasons and winter's
cold here.
We have long winters.
If I can plug something in, and a lot of houses are already here, they're still in the old
school way, like electric, they already use electricity to heat.
If I can plug something in, and for regular miners, peanuts, I don't give a shit for
making 200 bucks.
Because I need to make millions.
But if I can earn, let's say even 150 bucks a month off of this thing, that covers my
hydro bill.
Yeah.
So I actually theorized on this, I want to say in an article back in 2015 or so, where
I was saying we could potentially get to the point where if we can undercut industrial
highly scaled up mining, because there might actually be a way where you can have regular
homeowners that are actually mining quote unquote at a loss or at a slight loss, then
that effectively prices out all industrialized miners and forces decentralization in the
system.
It's just a question of, can you figure out a way to get these devices deployed and basically
help subsidize people's ongoing energy costs?
Last question, since it's not impossible to change root code in Bitcoin.
So it's been done in the past.
And there's always this question of 21 million has been baked.
It's a psychological number.
It's not a definite number.
It's not, this is fine.
This is it.
There's only 21 million.
There's an accepted consensus since the beginning of Bitcoin, there's only 21 million Bitcoin.
Do you ever foresee the possibilities of something similar to segue at least in a conversational
manner in the future?
Obviously this is way, way in the future where there is even like a 10% chance of possibly
that gets extended beyond 21 million.
Well, it's certainly possible and I believe that we are going to have multiple contentious
changes over the long term that are proposed.
I think segue was not the first contentious proposed change by any means.
It was just one of the longest drawn out and it resulted in a ton of drama that there were
plenty of dramatic proposed changes in earlier years, but they were generally contained within
the developer mailing list.
So I think that in the short term, we're probably going to see contentious proposals around
privacy improvements.
I think there are going to be various actors that are anti privacy improvements for various
reasons.
Then the question becomes, you know, and it's, we're not even really talking about a hundred
years from now.
It's really more like maybe 15, 20 years from now that the block reward is going to be really,
really low, you know, after a few more halvings.
And depending on a variety of factors like the exchange rate at the time and the transaction
volume at the time and the transaction fees at the time, then we very well might find
ourselves on the precipice again, where we have a lot of doom and gloom and naysayers
that warn of, you know, mining death spirals and all of this other stuff that has come
up before.
But they may have a stronger argument around it if there isn't a sufficient level of predictable
transaction fees.
But that is far enough away that I'm not worried about it because we have had some points in
time where transaction fees, I think have reached almost 50% of the block reward.
And of course, that was during some extreme usage and congestion.
But you know, we've seen that we've already gotten fairly close there.
It's certainly possible.
And I think that if Bitcoin doesn't completely die and collapse, then most likely we will
continue to see more usage and more contention to get block space, which means more active
markets that are bidding for block space in the form of transaction fees.
And that's going to create good tension that essentially it forces people to be more judicious
in their use of the block space.
So it incentivizes innovation for people to use less block space in a variety of ways,
whether it's through, you know, sharing transaction data with like coin join type operations and
aggregating signatures together.
And that's going to become a thing in the next year or two.
Or of course, going to second layer networks, be it something like lightning network, be
it side chains like liquid or drive chains or rootstock, et cetera, et cetera, is I do
believe we're going to continue to see evolution, the economic incentives for people to become
more creative in how they're using Bitcoin.
Like a living organism.
Pretty much.
Cool.
Jameson, I just want to thank you so much for sharing your thoughts.
If people want to know more about you and what you do, what's the best resource?
You can find everything I've ever done in the Bitcoin space at lop.net.
Or if you want a direct shortcut to my educational resources on there, just go to bitcoin.page.
Thank you, brother.
Always a pleasure.
Thanks for having me.