I believe the solution proposed by Notts is a non-solution because it's just not effective.
The argument is that, you know, we want Bitcoin to be the strongest and purest monetary network rather than a data storage mechanism.
People can put data on that you don't have control over.
You are not liable for the content of that network.
That presents a surface area for attack by the government to then target node runners.
Until we get to the point where we have a global one world government, it is simply not feasible.
Bitcoin is a permissionless and censorship resistant network.
We can't force anybody to do anything.
All we can try to do is move the incentives in a certain direction to try to incentivize people to play nice.
If we start going down this path, that would potentially inject more centralized points of pressure.
Governments might step in and say, we're going to put our finger or our boot on your neck.
Are we going to then start trying to censor people who are using Bitcoin in financial transactions that are illegal or immoral?
It's just such a slippery slope.
Either you are bothered by what other people do on Bitcoin, or you take the crypto anarchist approach.
You've been in Bitcoin since when, Jonathan?
Well, I've been interested in Bitcoin since 2012.
And my first ever Bitcoin tweet was actually the first halving, where I was noting that, you know, this was a momentous event.
And this really kicked off the beginning of the grand experiment of having a deflationary currency.
At the first halving, was there, like right now, the halving is almost kind of Bitcoin ritual.
You know, we look forward to it as if there's going to be some huge major event happening or a major consequence as a result of the halving.
Nothing ever happens after the halving.
And then we're all sort of like ritualistically saying, well, don't worry, it's just building up and it'll be within six months or something, anticipating some kind of bull market.
But was there any kind of expectation or anticipation about the effect of a halving back then?
I would say the biggest thing was a lot of FUDing about mining death spirals.
And that happened for the first few halvings.
I didn't really see much of the death spiral FUD happening this past time, though.
I think we've matured beyond that, where most people have realized that predicting the death of Bitcoin due to a halving is not going to end well.
So do you think that was the first real test for Bitcoin, about it being able to survive from an economic perspective?
That, and it was proof that miners don't control Bitcoin, because there were some miners who decided that they would try to skirt around the halving rules and continue to try to collect 50 Bitcoin per block.
That didn't end well for them.
How did they try to do that?
They just, you know, changed the rules of their nodes.
And of course, they did not get paid.
Was that the, would that be considered the first hard fork then?
Was it a hard fork?
Yeah, that would have put them on a hard forked chain.
And so what happened?
What happened after that?
How did it transpire?
What were the events?
I mean, I don't know if they ended up actually mining blocks.
They may have mined one or two blocks and then realized that they were not ever going to be able to spend those coins.
Okay.
Well, economic incentives do work.
And so that's a, of a, it's particularly germane right now to the discussion that we're having.
Well, everybody seems to be intent and compelled to have an opinion on the whole filtering thing.
And you've, you've, you've participated in that, um, and you have some very strong views and you want to share with us whether or not you're a proponent of the solution proposed by knots versus what?
What is it core 30 upgrade and what your views are on that?
Uh, effectively, I believe the solution proposed by knots is a non solution because it's just not effective.
The, the, the game theory of the, the game theory of the network does not support trying to, uh, stop people from transacting on Bitcoin by trying to block their unconfirmed transactions.
And if anything we've seen a fair amount of evidence of that, um, I would say the biggest evidence was what we called a sub one sat summer, which was completely organic and did not have any support from, uh, node operators or implementations.
Uh, effectively for a very, very long time, for many years, the node implementations that have had standardness rules or call them policies.
Some people are calling them filters, though.
I don't think that's a, a great description because they don't actually work as filters, but, um, it was effectively the fact that there were so few people transacting on Bitcoin this past year that the block started not being full again.
And some people decided, Hey, why am I spending one satoshi per virtual bite when the consensus rules allow me to spend less?
And so they started, uh, crafting their transactions with even less fees than that.
And noticed, Oh, our transactions are getting propagated and they are getting to the miners, even though a lot of the nodes on the network are not relaying them and they were economically incentivized to try to save money.
So they did that and now we're at the point where, uh, you know, core saw that happening and said, well, this is like the new economic reality.
So, um, um, trying to stop it is not worth it.
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I've been trying to understand this in a very lazy way because, you know, I'm not a technical person and I don't want to do all the work to understand all the technical arguments because that's not who I am.
But my understanding is sometime during the bear market when they launched, was it runes or what do they call those?
They launched JPEGs on Bitcoin basically by somehow putting data in an area of the Bitcoin protocol that was unintended.
And so as a result of that, people are putting in non-financial transactions, otherwise known as JPEGs, NFTs, minting them.
And that seems to have riled up a lot of people because they believe Bitcoin should be a monetary network, not for what is now called arbitrary data.
And so what does Bitcoin core 30 update do that is so controversial for the people who are advocates for nots in dealing with those JPEGs on the Bitcoin protocol?
Oh, basically what it does is it relaxes one of the standardness policies where originally if you created a Bitcoin transaction with an op return output, if you put more than 80 bytes of data into that op return output, then the node would see the unconfirmed transaction and would say, yes, this is valid.
However, however, I am not going to relay it to the rest of my peers, we're going to consider it non-standard.
And, you know, as we already saw with these, it was the same thing with the one Satoshi per virtual byte policy rule.
It has become extremely easy for people to route around these.
And most of that has to do with the dynamics of how data propagates over this flood fill peer to peer network.
Essentially, what we have learned over the past year or so is that it's almost the it's the tolerant minority is one way you could look at it is that you don't have to have a high percentage of node operators accepting and relaying your transactions in order them to get through most of the network or at least to get to the miners themselves.
And there's a few reasons for that one of them is that we have extremely permissive node implementations like Libra relay and that's a Peter Todd project, I believe, and Libra relay intentionally tries to connect to as many similar nodes as possible in order to create a more dense mesh.
Effectively, if your transaction gets to one of those Libra relay nodes, then you can expect a very high likelihood that it will also get to the miners because they go out of their way to make sure they connect to miners as well.
So, you know, one way to look at this is that information wants to be free Bitcoin is a highly censorship resistant network and attempting to implement effective censorship within relay policies is not very effective.
It's you put your you're at a very asymmetric disadvantage if that's how you're trying to shape what is allowed to happen on the Bitcoin network.
Now, even beyond that, you know, that's dynamics of the peer to peer network beyond that.
One thing that has changed over the past few years is we've seen more and more mining pools and large miners craft their own direct APIs so that you don't even have to use the peer to peer network in order to get your transactions to the miners.
You can go directly to the miners in some cases, it's literally a website where you can submit these things.
And that I think even further diminishes the ability to censor certain types of transactions from being included in blocks.
So it's kind of like the house is locked, but the window is open.
So the air is going to come in right whether you like it or not, but the cold air is coming in pretty much.
And so then we have a bunch of miners, perhaps many of them, because of their economic incentives to say, hey, we can actually make it easier for you.
We can open the back door for you and you can come straight in regardless of all the other windows being locked, all the other doors being locked.
You can still come in and then the air will propagate into the system, just like the transaction will propagate through the blockchain as a result of the minority allowing a transaction that's considered what's the terminology again?
Non-standard.
OK, and so now we've got we've got data on the blockchain that some people are against.
Right.
And the argument has been used in a kind of very emotive way.
Was it CSAM?
Is that?
Yeah, that's the extreme example, right?
OK, but whatever it is that you don't like.
And so we see, you know, governments use the same arguments for censorship, terrorism and protecting the children.
Yeah, fine.
OK, noble causes.
Right.
So to start with, I don't want to use the word but, but Bitcoin is primarily for what?
It's censorship resistant monetary network with its own native token.
Right.
And censorship resistant is its primary property, which is manifest because of all its other properties.
Right.
And so if we then start, I'm just laying at the argument, this is not my argument.
If we then start implementing changes that facilitate some level of censorship, what is wrong with that?
Well, I mean, there's there's nothing wrong with it if everyone agrees to it.
But that's when we start talking about consensus and unfortunately all of the proposals so far around this have not been at the consensus level, which is why I would say they are ineffective.
Now, if we want to talk about how would we go a step further and try to do this from an effective perspective and do it at the consensus level, it turns into a really gnarly problem due to what is called information theory.
And that is basically the fact that there's a practically unlimited number of ways that you can encode data.
And, you know, if you're trying to filter data, you're probably going to be looking for various heuristics.
You know, the way that Bitcoin works is that it is a system of rules.
And so if you want to stop something with certain attributes, you can't you can't just say, oh, I looked at this and I can tell that, you know, it's a JPEG or that it's something that I don't like.
Because then if you try to codify that, you're probably going to codify one very specific fingerprint, if you will, of that data, add that to the rules and say, OK, we've blocked that.
But then you get into this asymmetric game theory where changing the rules is difficult to do in Bitcoin, also by design, and it's slow.
So, you know, Bitcoin Core, for example, does releases every six months or so.
If you're talking about going through the whole Bitcoin improvement proposal process, which is generally required if you want to change consensus rules, that can take years.
The flip side of this is if you are, let's call them spammers, you know, it's a very arbitrary and subjective thing.
But if you are trying to put your own arbitrary data into Bitcoin, you are not limited by those timescales.
If you're building a meta protocol, you can come up with a new way to encode data in a matter of hours or days and deploy your software and you don't have to get consensus for it.
So that's why you hear this term like whack-a-mole game.
It effectively turns into a whack-a-mole game where you're at a disadvantage because the people who are trying to build into the protocol just can move so much faster.
And while, you know, a lot of protocol developers don't like this arbitrary data and how it's being used, they realize that it would just be such a time suck for them to be constantly fighting this battle.
They feel like there's better things that they can do.
And in general, the belief is that the way that you actually solve the problem of people doing stupid stuff with Bitcoin block space is that you get more people to use Bitcoin block space and basically bid up the price of block space to price out the low value stupid use cases.
Having been loosely following these arguments, there's something that I've heard about an increase in some type of data being allowed in a different part of the block.
Chain.
And some people have interpreted that as encouragement for more non-standard transactions, just in a different way.
Can you tell us a little, what is that increase in block space and how is it any, like, why is that being increased?
And doesn't that in fact become more permissive for non-standard transactions?
So the first argument would be that it's not really more permissive because of what we already talked about, that there's so many ways to route around it.
But even beyond that, the fact that the standardness limit on op return, which is arguably a cleaner and less resource-intensive use of block space for nodes themselves with regard to storing UTXOs.
And actually for the total amount of block space because op return does not receive the 4x discount on space like witness data does, which is what most of those inscriptions are using, that this is not actually increasing the allowed amount of block space that's being used.
So if we ended up seeing more people put more data into op return, to give you an extreme example, if you were to fill a block with the maximum amount of allowed data and did that all in op return, the maximum block size actually is reduced to 1 megabyte.
Whereas if you're stuffing it all into witness data, the maximum block size is 4 megabytes.
And so the op return data is actually three times more expensive to use.
So I don't think, I would actually like to see more people put it in op return because blocks are going to get smaller, but I don't think that's going to happen because the economic incentives are not there to do this.
There's an inflection point, like you can actually plot this out on a curve and if you're just putting arbitrary data into Bitcoin, I think that if you're doing more than around 143 bytes of data, it flips to being cheaper to do that in witness as opposed to op return.
But there's multiple reasons why you would want to use op return.
The specific example that really triggered all of this was a use case that Citria, which is a bit VM layer two, that's probably going to be launching in the next month or two.
They had a specific part of their protocol, which is essentially like a fraud proof attestation edge case, which will probably never even be hit due to the other game theory and incentives of Citria's protocol.
But in that case, they needed to get this data to propagate across the network in an unconfirmed fashion as quickly as possible and they would have preferred to put it all in op return but their data is something called a, I think it's a growth 16 proof and I think that's about 160 bytes, which is twice the size of what is the standardness.
So they ended up putting half of that into op return and the other half into these basically fake pub keys, which is unfortunate because that goes into the UTXO set and creates these dust outputs that will probably stick around forever.
And for various reasons, you can argue that the size of the UTXO set is a bigger problem in terms of operating a node than just like the size of the blockchain itself.
So we've got an increased allowance in the op return, what do you call it, what do you call the actual part that you actually put the data in just op return?
Yeah.
Okay.
So we've got an increase in data allowance there.
Segregated witness, data stays the same.
What if the spammer is price agnostic given how low prices are at the moment to put data in there?
Does that not result in an increase in spam if they're saying, well, like, you know, the price, it's not that much as it is.
Is there any further damage inflicted by putting your data in one part of the blockchain versus the other?
Or why is it better for it to go into op return and not segregated witness?
What's the difference?
Because op return is something that was added to the protocol, I think over a decade ago, because of this very same issue of people wanting to inject arbitrary data in the blockchain.
And so, you know, this debate has been going on for a decade.
Yeah.
It's just had slight morphing over the years as new entrants have come in to the network and used it in new ways.
And so the entire point of op return is to allow for people to put some data in there in such a way that it does not create a UTXO.
So the size of the UTXO set and the database that nodes have to keep track of for the UTXOs because they, you need to keep track of all the UTXOs in order to know like what Bitcoin is actually spendable, right?
But if you're putting data in there and you have no intention of like needing to spend those outputs, then why create an output in the first place?
Okay.
So it's, you could argue it's like a harm reduction mechanism, but because Bitcoin is a permissionless and censorship resistant network, we can't force anybody to do anything.
All we can try to do is move the incentives in a certain direction to try to incentivize people to like play nice.
To price sensitive spammers.
That's an essential component, right?
That assuming that they are price sensitive at current levels.
Yeah.
But that would then be something that's effective.
And so we've got these, I guess, you know, the digital equivalent of NIMBYs, not in my backyard, not on my node.
Right.
So why don't they just run software that senses their node or filters their node and just be done with the whole argument?
Why do I, why do I care about anything else?
Well, so in order to remain in consensus at the very least, your node still has to download and verify and validate blocks.
What you do with unconfirmed transactions is pretty much irrelevant as long as you're running the same consensus rules.
You know, there are reasons why it's preferable for your node to have as many of the unconfirmed transactions as possible.
Uh, but that's probably more for enterprise uses.
So a, if you're a minor, you want to have all of the unconfirmed transactions so that you can select what, whichever ones you think are going to be the most beneficial from an economic perspective for you.
Uh, B, if you're running a wallet or an enterprise, uh, that is regularly transacting, you want to have the best view of all of the unconfirmed transactions out there in order to have the most accurate fee estimation.
Hmm.
So if you are one of these node operators who wants to filter out non-standard transactions, my understanding, please correct me if I'm wrong, is that regardless, if it gets propagated into the network and on the blockchain, it's going to end up on your node anyway, somehow?
At least temporarily.
Yeah.
You have to download and validate it at some point.
Now, then you could prune that out.
Uh, well, if it's operaturn data, you could prune it out.
Uh, it's kind of, well, like I said, it automatically gets pruned in the sense that it's not put into the UTXO set.
You could, I don't see why you could not also add additional pruning to literally delete it from your disk.
But I think that's a level of complexity that's kind of overkill because if you really care about that, you can just use the default pruning, uh, mechanism within the node that prunes literally everything.
You basically say store this many gigabytes of most recent blocks and delete everything after that.
So the way you've just described it, I'm thinking, what's the bloody problem here?
I don't understand what the problem is yet.
And, and I don't want to be, um, straw manning the, the not argument.
I genuinely, if that's, you know, as you've presented it and with my limited understanding, I can't challenge that.
But like, as I understand what your explanation, I don't see what the problem is, is if you can't effectively stop it,
but, but you have a way to prune it out of your node.
So just do that.
Uh, well, the problem is the, the nimbyism, as you mentioned, um, it's more a philosophical question of, should we keep people out of Bitcoin if they're using it for non-monetary things?
I think the, the argument is that, you know, we want Bitcoin to be the strongest and purest monetary network.
Uh, rather than, uh, you know, a data storage mechanism or anchoring mechanism.
But especially when you get into anchoring, that's when things get even trickier because layer twos need to put data into Bitcoin.
It obviously really depends on how the layer two is implemented, but that's kind of what kicked off this whole recent drama is that a layer two, a BitVM style layer two was developed and they needed, uh, some sort of arbitrary data storage mechanism.
And an operaturn would suffice for that.
Yeah, but where did that value come from?
I mean, we just discussed earlier on Bitcoin is censorship resistant monetary network with its native token Bitcoin.
Bitcoin.
That's what Bitcoin is, right?
That's what Bitcoin is, right?
Where did this purity come from?
Uh, the quest for purity.
Well, that is also a very, very long, uh, historical debate, right?
So, especially if you go back to the very beginning of the operaturn debate 10 years ago and, uh, Luke Dasher's, um, creation of knots, he was, he was railing against uses of Bitcoin in a variety of different ways that he thought were not good, not beneficial.
Um, but that's injecting your own ethics and morality to, uh, uh, uh, an objectively neutral protocol.
And so there's no place for injecting your own morality onto Bitcoin.
Cause we're, well, well, here's the, here's the reason why I say that.
Max is a famous for, um, telling everybody else, Bitcoin doesn't care about, you know, Bitcoin doesn't care.
And then yet we see some of them try to inject their own morality onto Bitcoin.
And so there's a, there's a deep level of hypocrisy that, that, um, I find quite difficult to ignore actually.
Yeah.
Uh, I think one, one of my favorite examples though, is that, um, in the very early days of knots, one of the things that knots filtered out was any transaction that was going to and from a service called Satoshi dice.
Satoshi dice.
And, uh, it was feasible for Luke to codify policy rules that filtered out Satoshi dice transactions because Satoshi dice only had like a dozen or so static Bitcoin addresses.
So you could literally just put those addresses into the rules of knots and say, if we see any transaction that's using these addresses, we just, uh, don't relay them on.
But I don't think that knots filtering out those transactions was actually effective or stopped Satoshi dice.
I mean, Satoshi dice ended up hitting issues mainly due to the block size limits, uh, at the time.
And then eventually I think they got, uh, shut down due to government action or something.
Yeah.
And just want to make clear, like with respect to, we, we, we use morality or injecting the morality into the argument as something that I would object to.
It's got nothing to do with the two areas of content that we just discussed as being very, quite obviously every decent person would be, would be against.
It's got nothing to do with that.
It's literally you either allow or don't allow.
And as soon as you start censoring, this is just my understanding.
If you do start censoring, then where does it stop?
And so if we can compel, if the community can be compelled to start filtering and censoring, why can't the government then do that as well?
Yes.
Now on the other side of the argument is if that content does get onto the blockchain, which it probably already is, right?
There is a fair amount of illegal content that's been in the Bitcoin blockchain for many years.
That presents a surface area for attack by the government to then target node runners as distributors of such content, which is clearly illegal in any other format, right?
So how do we address that argument?
How do we immunize ourselves from prosecution in that regard?
So there's a few things here.
First of all, any government can ban Bitcoin for any reason that they want, right?
I mean, and we've seen governments do that.
Sure.
Bitcoin is censorship resistant for many reasons, including the fact that it is so highly distributed.
So you have this jurisdictional arbitrage.
So until we get to the point where we have a global one world government, it is simply not feasible for the government to completely ban and shut down Bitcoin.
But of course, anyone who is running a Bitcoin node is always at risk that their local jurisdiction may declare it illegal for any reason whatsoever.
Now, I think that a lot of the people who are promoting this stuff are thinking more from a perspective of like Western governments in the United States.
Let's just see the United States as an example, because it's, you know, it's probably the most likely most powerful nation with the capacity to.
And with a lot of hash rate.
Yeah.
A lot of hash rate, a lot of businesses in the industry that are running nodes that, of course, you know, any any business, this centralized entity can, of course, be under pressure from the state.
Within the US jurisdiction, there is no legal precedent.
And I believe there's actually some precedent to the contrary that, you know, if you're operating on a network that is permissionless and that people can put data on that you don't have control over, you are not liable for the content of that network.
Where you become liable is if you are actually writing tools that then extract the data, decode it and make it viewable in a human readable format for other people.
So if you demonstrate some agency in the willingness to enable its propagation.
Not just propagation, because obviously transactions and blocks get propagated, but they only get propagated at the like, you know, the raw bite level.
It becomes an issue when you start decoding it and then it re encoding it like as an image or a video or whatever that becomes human viewable.
Action that's specific to that data.
Yeah.
In this instance, probably images or files.
Yeah.
So, so to give you a more precise example, the, the entities that could run into legal issues, if this illegal content starts getting regularly propagated over the network and put into the blockchain.
So if you are running a block explorer that is decoding and then making that content visualizable, you're probably going to run into issues and you would probably need to like self censor whatever you're doing there.
Well, there are some NFT platforms that do that.
So that's, that's prime target for that.
Right.
Yep.
Sure.
And be their responsibility.
That's their problem.
Yeah.
Yeah.
Yeah.
Okay.
And what are the knots crew say about this?
Well, I mean, they would just rather the data not exist in the first place.
Sure.
We would, we would all rather that, right?
Yes.
Um, so I'm seeing a lot of emotive arguments and accusations.
Also you're a distributor of such and such material.
Is that what you're, you're an advocate of that.
I see that entirely as a straw man.
Clearly it's not, that's not the case.
Yeah.
I think everyone.
It's fear.
Everyone making the argument that I've seen against knots is not defending the availability
of that material rather defending the censorship resistant property of Bitcoin.
Have I got that right?
Yes.
And also as you've kind of alluded to, if we start going down this path, and as I've said,
I think it would need to be at the consensus level to actually be effective.
But if we started going down that path, and of course it really depends on how these new
rules and filters get implemented, but, um, that would potentially inject more, uh, centralized
points of pressure.
Like if, if it becomes such that like, there's one obvious, uh, central point that is deciding
what these filters are, that's when you should expect that then governments might step in
and say, we're gonna put our finger or our boot on your neck and, uh, and start, you know,
forcing you to implement even further censorship and who knows what they would want to say.
So I see two groups of people essentially defending different attack vectors from, I mean, they're
both mindful of government attack vectors.
One saying if the content is there, that's an attack vector for government.
You're saying, well, they could do that anyway.
I, I would on their, on, uh, in their defense, in addition to their argument, I would say, yes,
but that would give them so much public support, you know, they would, they would zero in on
that in a mass media campaign to say, this blockchain is propagating and distributing these kinds of images,
and we just have to solve it to save the children, right?
And we've seen these arguments in, in relation to internet censorship as well.
And we saw the, you know,
Cat control.
Yeah.
All that sort of stuff.
And so we need to see your private messages to save the kids or for terrorism.
And it's always the same two things.
Um, on the other side, I see the argument saying, we want to defend against an attack vector, um,
for, I guess, protocol change that's makes it more permissible to censor.
I'm not attributing this to any people, but in those arguments, I see good intentions in
those arguments.
I'm not, I'm not saying that I see only good intentions in the people involved.
I don't get involved in the personality politics of that, but if I've got their arguments correct,
that's how I see them.
And so like, how do we reconcile those differences or are they irreconcilable?
I'll give you a different example, just stepping back.
So, you know, earlier I talked about, uh, Luke trying to filter out Satoshi dice transactions,
which had nothing to do with arbitrary data.
This was pure financial data.
And he deemed this to be undesirable because it was gambling and, you know, in many jurisdictions,
gambling is illegal.
So I would step back and say, well, even outside of the arbitrary data debate, if we're just purely
focusing on Bitcoin as money, there are plenty of people who are using Bitcoin as money illegally.
So are, are we going to then start trying to censor people who are using Bitcoin in, uh, financial
transactions that are illegal or immoral or what have you that's, it's just such a slippery slope.
And also due to the, the asymmetry that I mentioned earlier of the, um, like pro filter versus breaking
filter aspects of this, I believe in order to be effective, you would have to have some sort of
like filter rule set that got updated very quickly and in an automated fashion.
And so then the question becomes, you know, who is maintaining that and does that become
a single point of failure?
And I could very easily see that move beyond just rules for arbitrary data and literally rules
for blacklisting other actors on the Bitcoin network that are only doing purely financial
transactions, but now, you know, they're not approved.
Well, are we already seeing that regulated and list publicly listed entities who are, who are
being given, is it, is it FATCA factor?
We saw for a short period of time, there were some miners that were, uh, filtering
out OFAC sanctioned addresses.
Yes.
Okay.
And so we, you know, that's already there and we've already seen the sort of behavior by governments
exerting pressure onto TradFi to do much worse things.
So, you know, if, if this is where it starts, I guess it's, it's becoming quite obvious that
you're convincing me of your arguments.
I can see the angles, um, and without having engaged with someone on the other side, I guess,
you know, like I should, I should continue somewhat playing, uh, the devil's advocate as
well.
Um, I think the short version is that either you are bothered by what other people do on
Bitcoin or you take the, you know, crypto anarchist approach that there are going to be people
doing naughty things that you don't approve of, but in order for the integrity of the system
to remain the same, you just need to not be bothered by that.
I guess, uh, there's one more thing I want to highlight in addition to that is to just
broaden the scope of this discussion because most of the, the offensive material in the
world regarding those two topics, like 99.5 nines, 10 nines, right?
Yeah.
It is not on the Bitcoin blockchain.
So your ability to impact its effect and impact on the world in the dissemination of those sorts
of offensive materials is zero virtually, right?
In the similar vein that people accuse, uh, Bitcoin's primary use case of being, you know,
buying drugs, money laundering, all that sort of thing, and you go, hang on, most of that
happens in fiat.
So before we start taking actions to undermine the, um, integrity of the protocol with respect
to censorship, if your concern is really to make an impact on humanity, then shouldn't
our focus be elsewhere?
Isn't that, aren't they the arguments that we make against TradFi's attacks and government
attacks on Bitcoin's legitimacy in its use, again, or in defense against its use for things
like, which, you know, criminals do use Bitcoin, but like most criminals use the dollar almost,
almost exclusively, and they prefer the dollar.
So I think that argument holds water and I'll be interested to see what sort of blowback I
get on this, because, you know, like I have a rudimentary understanding of it, but you have
obviously quite an in-depth understanding of it.
And the arguments you make, I find quite compelling and I'm trying my best to see the angles, at
least philosophically from the opposing angle, but I don't find them compelling.
So I, I think, you know, we could talk about different use cases all day long, but I think
another interesting point and use case to bring up is that Bitcoin is used by quite a few political
dissidents.
These are people who have been debanked, like their governments have put their boots on the necks of
all of the traditional financial institutions that these dissidents are trying to use.
And so the dissidents end up being driven to use Bitcoin because of its censorship resistance.
And so it's not difficult to imagine a world in which, you know, people are using Bitcoin
in a non-government approved way, where the governments would love to be able to step in and find, you
know, where the filters are being injected and enforced to once again, do the same thing that
they've already been doing with traditional finance.
Nick Szabo has, uh, returned to the scene recently.
And I'm not sure if he's primarily motivated by, by this debate, but it seems to be something that
he's been, uh, he, he feels quite strongly about.
And he's, uh, it appears to me, maybe I don't want to mischaracterize, but it appears to me that
he's firmly on the side of knots.
And, you know, he's one of those figures in Bitcoin folklore is, he's an OG, right?
And he's one of the earliest cypherpunks and, uh, and Adam Back is on the other side.
He's, he's pretty much in agreement with your, uh, your stand as well.
And so we're seeing, you know, Nick's got some very colorful takes and I, I like that sort of
personality.
I don't agree with probably most of the things he says, but he's, he's a high caliber person.
He's a very smart guy.
You don't have to agree.
That's my, that's my impression of him.
He's a very smart guy steeped in the tradition of not only Bitcoin, but cy, uh, cypherpunk
law as well.
So he takes a firm stance on the opposite side to you.
What is your understanding of his arguments?
Are they any different from what we've discussed already?
I don't think I've seen any novel points from him.
Uh, you know, he only really entered in, I think in the past few weeks or months.
Yeah.
And it seemed to me like he was basically learning in public.
And so he went through over the past few weeks, he's basically gone through the entire past six
months of the evolution of this debate.
Uh, and I mean, I think he makes the same legal claims and especially, you know, we'll stick to
the U S jurisdiction because that's where it seems like a lot of this is happening.
But, you know, even within, within lawyers who practice, uh, within U S jurisdiction,
the consensus seems to be that this is not an issue that, that it's basically what I described
before, uh, at the very least, there's no precedent that, uh, node operators
would get in trouble for like facilitating distribution of this content.
If they aren't actually extracting the data, decoding it and making it available.
And, you know, this is not all theoretical.
There are a number of institutions in this space who had the exact same questions and concerns many
years ago, a big one being fidelity.
And, um, you know, we have engineers who worked at fidelity and worked on their custody system
a decade ago, who told us a decade ago, fidelity consulted their legal counsel about this issue.
And we're, we're effectively told what I just described to you, which is that it's, it only
becomes an issue if you are making that content available in a human readable format to people.
- Otherwise it's just, it's just data. - Yeah.
- Okay.
Privacy.
I think from the earliest time that you came to my attention, you know, I've only been in the space
middle, middle of 2020, I started watching Bitcoin, observing the community in 2021, January 2nd,
I started this account and you've always impressed upon me that you are a massive privacy advocate.
Um, how did that come about what happened?
So there's a few things.
First of all, I was on kind of the opposite side of privacy early in my career.
Uh, I worked for an internet marketing company and I was a.
Call it a cloud data engineer in the early days where people didn't even know what the cloud was.
And my job was to facilitate writing large-scale analytics that would run across
petabytes and petabytes of raw tracking and analytics data that our platform was collecting.
And we were doing that in order to help retailers and other online sales mechanisms effectively target
to get people better, right? You know, increase your return on your investment and your marketing spend.
And so I became extremely aware of how little privacy that we have just in our day-to-day lives
as we're clicking around on the internet, um, and, and engaging with a variety of different third parties.
So from that perspective, you know, I was always like running ad blockers and, uh, not giving my email
address out unless absolutely necessary and so on and so forth.
But it wasn't until 2017 when I got swatted and I had a whole bunch of law enforcement shut down my entire
neighborhood as a result of someone calling my local police and claiming to be me and claiming to have
killed people and have hostages and bombs.
Were you a public figure at the time within the Bitcoin community?
So you were not, uh, a non as I was for, for a time, you were a public figure and someone
either maliciously or thought they were, it was a funny prank.
It was extortion.
It was, oh, okay.
Yes. Uh, so basically I became very prominent during the scaling debates, which were
far more heated even than the debates we've been having this year.
Um, scaling debates is the block size.
Yeah. Block size wars, you know, 2015 to 2017.
And, uh, I was quite controversial and I, at some point said something that pissed off the wrong person
and they decided, Hey, let's try to extort this guy by swatting him.
And then they basically asked me for a $50,000 ransom.
Otherwise they were going to keep doing malicious stuff that, you know, could potentially put me in
physical danger. And so when I evaluated my, uh, threat model, like how do I prevent this type of
attack, which is quite insidious.
And it's, it's a really good attack for the attacker because it's asymmetric in the sense that
an attacker who knows what they're doing can for really a few dollars
direct and insanely lethal amount of force at you physically without ever putting themselves in danger.
And so you can effectively get like hundreds of thousands of dollars worth of lethal force
directed at you. Uh, and how do you prevent that? Well, the only way to prevent it is to
not be targeted in the first place. So how do you not be targeted in the first place? Well,
you could just, um, shut up, you know, not, not be, uh, publicly speaking about controversial things
that might get you targeted. Um, or, but in my case, I didn't want to just completely disappear.
Like I had built up a reputation. I still had a career in the space. I wanted to continue
contributing with my real name and face and so on and so forth. So what I ended up having to do was
ensure that no one can find where I actually live in order to be able to find my local law enforcement and
call them up and target me with this type of attack. So I effectively had to burn down my entire life
and walk away from everything, uh, that had connected me to my residence. I had to sell my house and my
car as my publicly registered property and move and set up a new ownership where that ownership was, uh,
protected by things like trusts and, uh, corporations where the, like the, the, the true beneficial owner,
which is me, was not connected to it. And, and therefore my name was not getting associated with my
residence. And of course, that also meant that I need to make sure that I never give any third party
service bank credit agency utility company, whatever, and never give them my real name associated with my
real address and do it all under trust and corporations. So it's a quite a bit of work to do that.
It sounds costly as well.
I would say minimum, minimum like $10,000 to set all of that stuff up. And then depending on how extreme
you go with it, what I found the most difficult thing was a driver's license because a government is very,
very particular about getting a lot of information to associate you to your residential address in order to
give you a driver's license. So in that case, you may have to go to the extreme of actually
you're buying or renting a property that you then associate, uh, with yourself for that purpose,
but then not actually stay there.
What do you think of the digital ID build in the UK, just as a concept?
Any individual or institution or organization will always seek to increase their power.
So I think over long time scales, every government is going to seek to increase their power
over the population. And one way to do that is to know as much about all of your citizens as
possible so that you can, uh, track them, understand what they're doing and put your boot
on their neck. If they start to do anything out of line.
And then you say they already know everything anyway, not everything, but definitely a lot.
Right. Um, so it's the same thing where, you know, we saw this massive push in the nineties
that resulted in the, the crypto wars. And now that all seems to be coming back around again. You know,
they, they, they backed off for a few decades, but you know, one of the problems or one of what I consider
to be the sort of asymmetric advantages of government is that institutions have amazing longevity. You
know, they operate, uh, I don't know if you're familiar with Dune. Um, so, you know, it's like our
plans are measured on the orders of centuries and millennia, you know? So, so these, these institutions
are effectively immortal and while they would love to concentrate and grab as much power as possible
right now, if the population pushes, pushes back enough, then all right, we'll just wait a few
decades. We'll wait another generation and maybe we can have like slow insidious changes to the culture
so that the next generation won't push back as hard and then we'll just try again. And I think that that
is going to be a pattern that continues basically in perpetuity.
But that's such a dehumanizing view to, to take a view of what you're doing on the scale of hundreds,
if not whatever, you know, like thousands of years, because what it does is it diminishes the importance
of your relations with your fellow human beings today. And so that it justifies any behavior. The end
justifies the means and it's incredibly dehumanizing. And, um, I still think they do have all the power that
they need against the people that they want to most, uh, counteract. So if you're a dissident in the
United Kingdom.
Yeah.
They can concentrate their surveillance and intelligence efforts on a small number of people,
but obviously they would prefer to just have global, you know, access and surveillance of everyone.
Um, and you know, it's kind of a similar dynamic with inflation, right? It's an insidious slow burn
where from day to day, week to week, month to month, year to year, like the average human doesn't
really perceive it, but the effects compound over time, compound over lifetimes so that, you know,
governments and central banks end up with this massive grift and, and advantage in their favor that, uh,
the humans generally don't even notice. And so they don't fight back against it.
Yeah. It's a, it's a massive appropriate appropriation in combination with inflation
and monetary debasement. It's a, it's a, it's a double-edged sword that only cuts you one way.
It only cuts the same people from the people to institutions and the wealthy elites, the asset owners.
Um, it's an incredible thing that they've gotten away with for like 40, 40 or 50 years. Um, and it's
finally, we have a way to fight back because anybody else would have needed to like, just to buy a decent
house, you need a 10% deposit. And then that might afford you the ability to buy a house in a really
shitty neighborhood, which doesn't really appreciate by much. Whereas someone who's already wealthy
could buy, could you, could accumulate a greater deposit by a higher value property in a premium
neighborhood, which then accumulates or appreciates at a much faster rate. So you get smashed in every
which way. If you're just an ordinary, regular person, you don't even have to be poor. You can
be up a middle class, which has slowly been sort of wasted away as well to like just the rich. And then
slowly it's just everybody else. And I wonder like, where is this going? Is it just, are we going back to sort of,
sort of neo-feudalism where we just have the lords and the plebs and quite literally,
Bitcoin sort of comes on the scene and gives us an opportunity to actually protect ourselves with
even like a hundred dollars, $50. If you're just a part-time or a college student working part-time,
you can actually protect your savings. You can, and get a little bit more than that,
given how early we are. So I find that incredibly hopeful that we've got this right now.
For now?
For now. Well, for now, you know, there are, there are potential returns that are enriching
beyond just merely as a savings mechanism. Like there are outsized returns still to be had for
perhaps, you know, more than a decade. And that's really encouraging that we are still early. We're not
at the earliest stage, but we are still early. It's not a case of, it's just better than a bank deposit. It's,
it's better than most investment opportunities that are available to us.
But there are things that they could do. So like another kind of insidious thing that a lot of
governments do is a property tax, right? So you effectively don't really own your own real
estate. You have to pay the fee on an annual basis. And it's not outside the realm of possibility.
And I think some have, have actually started to go down this road of they could do the same thing
with Bitcoin or they just call it unrealized capital gains, but it's effectively property tax under
another name.
Yeah. I mean, if they were to do that, I really like Michael Saylor's clip,
which says go fuck yourself. I'm leaving. I know the Americans have a particularly onerous
tax obligation program. Yeah. Which, which by the way, France is about to institute.
If you're in a jurisdiction that taxes you at lower than 40%, you owe the difference.
Yeah. I mean, and that's a natural way for governments to fight against
one of the primary points of the sovereign individual thesis, which is effectively that as long as you can
change jurisdictions, then the game theory should be such that any given government should be
incentivized to give you the best and most favorable taxation scheme in order to, you know,
reap the economic rewards. I know, but I, you know, I just find the prospect of that so deeply offensive
that you should have to give up your homeland, your, your country, your neighborhood, your community,
because of profligate government spending, irresponsible policy. And I'm not even like,
I wouldn't even describe myself as a fiscal conservative. I'm just like a rational,
logical person that we do need to be more effective with government policy. And that goes from
building things that are actually on time that are productive assets, for example. But, you know,
in the UK, we can't, we can't even build a fucking fast train line. We've been trying for 10,
more than 10 years. And we can't do it in America either.
We can't do it. And then meanwhile, like more and more, I'm realizing I look at China and their progress
was just fast rail, which I think is, is a really good indicator of a nation's ability to get something
done because it requires so much coordination with like acquisition of land, strategic planning.
Turns out authoritarians can get some things done much more effectively, massive trade-offs.
So I posit that democracies can also do that, but we've lost our way. And I don't know what it is.
I don't know. I know I was talking to Alan Farrington, everything goes back to the money.
And I'm sure he can make a really strong argument that that is the case, that the money has ruined
the governance. And I think we don't have governance anymore. Proper governance that
inhibits our ability to be effective in building things on time, on budget, functional. And it's just,
it's really concerning to me because I think the world is being built in Asia now and parts of the
middle east. And like, why are we just letting that happen?
You know, it's a, it's a really, really high level problem. And I think is outside of the purview of
most, the vast majority of citizens, right? It's like the vast majority of citizens are just
trying to stay alive and put bread on the table. You know, at least in America, I think we have a huge
amount of the population that is living from paycheck to paycheck. So they're worried about
survival. People like ourselves are incredibly privileged that we are well off enough that we
can think about these meta issues that are, you know, above our pay grades, so to speak.
You know, you're, you're a freedom maxi. That's how you come across to me as well.
Are you, do you have a particular economic ideology as well? Are you an Austrian advocate for Austrian
economics in totality or in perhaps some strands of it? How do you view
the sort of the economic arguments of the whole space?
No, I've definitely become more Austrian, uh, as a result of being in Bitcoin. I didn't really have,
well, I, I, I had some like econ classes in university and it was, of course, your traditional
Keynesian economics, uh, macro and micro stuff. But, um, yeah, I never even really thought about
all of these issues until I got into Bitcoin. And, and of course, you know, there's arguments about,
well, you know, um, you need to have the financial
levers to be able to try to like dampen the market cycles and so on and so forth.
And I, I'm more hardcore and I'm like, well, I think it's healthier to have more volatile Michael
market cycles and let the market figure it out itself. Because as soon as you start meddling
in any incredibly complex system and, and a, a state or a nation level economy is so complicated,
there's so many like millions of individual actors that if you give power to a handful of people and
say, Hey, you need to fix these issues. It's, it's just not possible to understand all of the consequences
of any change that you make. And so, you know, that's why we've seen things like, uh, a hundred years
ago where China tried to have massive control over their like agricultural production and ended up having
mass starvation that killed tens of millions of people. And I think that that's because when you
start meddling with these incredibly complex systems, what you end up doing is you, you end up disrupting
the flow of information. And by information, I mean, price, like price is the ultimate signal
that you can rely upon in any highly complex system. And when you start trying to like inject these other
signals or like you have a, a large central bank or regulator, and they're the ones like putting out
press releases effectively that are trying to send signals to the market that then reacts to it.
Um, it's just gonna result in some of the more effective signals, I think being lost. And then that
can result in individuals and other entities making poor decisions because they don't have all of the,
or at least quality signals to make those decisions off of.
And when we, we stopped seeing a necessity for planning with contingencies, for example,
like if you know, there is going to be a rainy day, then you say for that rainy day, you plan.
Uh, it's kind of like, you know, uh, ancient civilizations and villages. They remember the flood,
right? And so everything that they do, everything that they build is with that memory. And even if it's
been generations before, you know, those stories are passed on, that there will be another flood.
It happens, you know, it might happen once in every hundred years. Whereas now, if I was like going to
buy a house somewhere, it says, oh, it has a one in a hundred year flood chance. I'm like, oh, okay,
don't worry about it. We'll just, it's, it's not going to happen in my lifetime. Whereas ancient,
you know, oldest, older customs and cultures would actually go, well, let's not build there then.
Whereas we're like, oh, it's only a one or 2% chance. Who cares? And I think we've lost the
ability to plan with contingencies in mind like that. And the long tail, um, things that we thought
were only outliers are actually happening quite regularly now. Like we're having crises every
five or six years and like really profound ones, they're becoming more and more volatile.
And the intervention from government is, is bigger and bigger each time. So at what point does the
government become toothless and unable to, to intervene in that? Because we went from an 800
billion bailout in 2008. It was a long time ago now. So what's the next bailout going to be?
Yeah. I think that's what, uh, a lot of people who are looking more at the markets and trying to figure
out, like what's the market cycle or what's, what's the next bubble. It's like, there's always a bubble
forming somewhere, but where in the market is it forming? And in many cases, if you're talking about
an economy where you have central bank and related, uh, entities that are effectively injecting your
free money into different parts of the market, then that can end up creating bubbles that, you know,
they grow potentially for many years before you hit an inflection point where it's just not
sustainable anymore. And something terrible happens. Uh, security is the other thing I wanted to discuss
with you. You know, someone's just getting into Bitcoin. How do you recommend I get started
with security securing the stack? Well, I mean, the, the first thing
is to understand the fundamental value premise of Bitcoin, which is that trusted third parties are the,
the biggest problem in money and financial systems. And so if you're leaving your control of your money
with a trusted third party, just because you're getting financial exposure to Bitcoin's volatility
and exchange rate, if you're not getting exposure to the security properties of it, then you've really
thrown most of the value proposition of Bitcoin out the window. And it gets even worse because if,
if a large portion of Bitcoin holders do that, then it actually creates systemic risk across the entire
Bitcoin system and could be very bad for all of us, even, even all the rest of us who are
securing our own keys and our own coins. So the first thing is withdraw your money from whatever trusted
third party that you bought it at. And beyond that, it starts to get more complicated because there are so
many different ways to do self custody and they all have trade-offs, different levels of complexity and
amount of time and resources that are required to set up and maintain it. So I think that the amount of
efforts and resources that you put into your Bitcoin security should be commensurate with
the value of the value of your holdings and how much it would hurt if you were to lose them for any
reason. So there's, there's different tiers where I say, you know, do you have
sort of a pocket spending money level amount of Bitcoin? If that's the case,
you're probably fine with a really convenient, easy to use hot wallet. That's just on your phone.
Do you have a small savings account level, you know, maybe in the thousands of dollars? Well,
then it probably makes sense for you to invest a hundred or a few hundred dollars into a hardware
key management device so that the keys are not on the internet. And what you've effectively done there
is you've shut off the potential for 8 billion people to, you know, come knocking on your internet
connected device and try to steal those keys. Beyond that, if you have a meaningful investment portfolio,
you know, life-changing amount of wealth, then you should start thinking about how do I protect myself
not only from attack, but from loss and, and from shooting myself in the foot and screwing up and
effectively locking myself out of all of my coins. And that's where you start to get into the
realm of what we do at CASA, which is architecting a self-custody setup that the goal is to eliminate
every possible single point of failure. And because you realize that especially over long timeframes,
bad things happen. People are human, they make mistakes, and you don't want any single
negative event to result in catastrophic loss where you've completely locked yourself out of your money.
So that's when you want more redundancy. You know, you want multiple backups, you want multiple keys,
you want to use multiple different hardware vendors to prevent yourself from being susceptible to things
like supply chain risks. There's so many different things that can go wrong. And then I would say like
the ultimate final level is then thinking about inheritance planning, because that gets even more
complicated of how do you architect a system where you and only you have access to your funds while you're
alive. But then some switch gets flipped if you die. And then only the people that you care about can then access that money.
I think I'll talk to you off. I figured out a way that I've done that actually, like with separate people
who have separate bits of information. But if they come together, one asking the other makes their information,
it illuminates what that means. And then they know what to do with it thereafter as a result.
But neither of them, this person's information and that person's information doesn't make any sense on its own.
So it's like, yeah, it's basically a two of two. And I've done stuff like that in the past.
The only problem there is you have to make sure that that's not too brittle.
And you want to do regular checks to make sure that their data doesn't get lost or corrupted.
You basically want to make sure you don't get into a situation where
you get hit by a truck and one of them gets hit by a truck before the recovery process happens.
Oh, I see. Yeah. Yeah. You don't want, yeah. It shouldn't be someone you take holidays with.
Yeah. Yeah. You don't want your like backup recovery key holders or, you know, call it your executors.
You don't want those to be people that you're like regularly in cars or planes or whatever with.
There are a lot of kidnappings and wrench attacks. How does one protect against that?
Because I see you posting articles all the time. Polish man here, someone in Dubai thrown,
went flying off a balcony. I mean, these things really happen. They're not stories like
very nasty and determined people
make targets of known public entities, and they will not stop at anything
as cruel as you can possibly imagine they're quite willing to do.
How do you protect at least against the prospect of them obtaining your wealth?
Yeah. I just learned about a new attack a few hours ago in Bali that I just posted
right before coming here. The biggest thing is privacy, actually. Don't make yourself a target.
Don't flaunt your wealth on social media. One of the most common wrench attack scenarios that happens in
this space is actually people who are doing face-to-face high value trades. And that is,
if you think about it from a threat perspective, it's actually pretty ridiculous because the people
that are engaging in these trades are often advertising their services. So they're actually
broadcasting to potential attackers. Hey, I'm willing to meet with you while holding a large amount of
money. And so often what happens there is that the attacker, they may even come to you and they may
legitimately do a few small trades and build up, you know, reputation and then ask you to do one for,
you know, a hundred thousand, a million dollars, whatever. And in many cases, these traders are
just like going to random hotel rooms or meeting people in like parking garages, you know, private
areas where someone can very easily just pull a weapon on you, coerce you then into handing over
whatever you have available. So don't make yourself a target. If you are a public figure,
if you're like myself is about as public as you can get, then you have to have an extreme level
of privacy to protect wherever you sleep at night so that you don't suffer from a home invasion so that
you don't get into a situation where people could then surveil you over a long period of time to figure
out what are your habits, your movements, what points are you weak and vulnerable to being kidnapped,
coerced, what have you. Now, I will say that this is still an extreme edge case. Like the total number
of attacks is maybe around 250 to 300 that we're aware of right now. And it's mostly only an issue if
you are a highly visible person or you're engaging in some of these much more riskier activities. You know,
the average Bitcoiner doesn't have to worry about this.
Yeah. But they are particularly vicious attacks though. It's not simply a case of sort of,
hey, give me a Bitcoin. No. I mean, we're talking about, you know, fingers chopped off,
stabbings, mutilations, murders eventually if they don't get what they want. So they are very determined,
very nasty sort of attacks as well. So people do need to take this quite seriously as something that's
possible, even if it's highly unlikely. Most of the articles that you post, no, I wouldn't say most,
but I think the ones that really stand out in my mind are the people who absolutely outwardly flaunt
that not only are they active in the industry, but how much that they have, you know, their P&L and made a
great trade. And I'm like, why, why are they, why are you doing this? Like, isn't having the money enough?
Yeah. Well, and actually the funny thing is there have been some examples of those, uh, call them
trader personalities who have been wrench attacked. And it turned out they actually didn't have very much.
It was all fake. Yeah. Cause you see a lot of those screenshots, they cut out the, the actual position
and some people have been caught out, like taking like $1 positions and, uh, oh, look at this. So it
was a hundred percent call in just three days or whatever it is. And I don't know how, I don't know
how they actually just show, show up the next day and keep posting. Like it was nothing, you know, it's,
it's quite embarrassing actually. Um, do you, do you look at the Bitcoin price? I know you're a very
technical person. You've been in it long enough to not really care about the price. Cause you know,
presumably you've done quite well out of it and you have a very successful business Casa.
Are you still engaged with what the price is doing or is it just totally irrelevant for you at this point?
I don't follow any feeds for the price. I don't, uh, pull it up in my browser.
It's not hard for me to know what the Bitcoin price is because so many other people talk about
it. Like I can tell just from the types of posts that people are posting, I can tell whether or not
the price is going up or down. So, um, I mean, I'm one cycle away from being able to obnoxiously say,
I don't even check the price anymore. Um, I mean, I care about the price in the sense that from, uh,
like the company perspective, from the industry perspective, if the price isn't going up,
it's bad for the industry in general. Like, uh, at Casa, we need the price to go up because that
means people have more to lose. And that's when they start thinking more about security.
So what happens, you know, like we, we had a tremendous bull run last time. It was incredibly
exciting for everybody. Cause like not only, for example, my account was growing, I was only new
and I realized, Hey, I think I might have the beginnings of a business in this, but if you've got
an established business and suddenly you're seeing this tremendous growth, how much of that sort of
that incoming tide recedes once we get into the bear market, you know, are we talking like, I mean,
I'm halfway through my question and I realized I'm almost asking you to tell me some commercial details,
but like how much of that do, do we retain
many of those people and they just become dormant on the timeline and are they still commercially active?
Are they, do they still retain their, uh, their accounts, for example?
Well, so it depends on what your business is, right? So, uh, we have an interesting dynamic at Casa
because we are an annual subscription, like flat fee business. And we target high net worth Bitcoin holders
who want extremely secure, cold storage. They, and they want to be able to sleep well at night
with the understanding that the architecture is such that they're not going to suffer a catastrophic loss
due to a single thing going wrong. That's like the main feedback that we get from our clients is I sleep
so much better at night now, knowing that I will be able to weather whatever happens.
So from that perspective, from CASA's like revenue, um, we, you know, we gain clients and, and increase
our revenue when the price goes up. It's kind of like a derivative, like, uh, price goes up a lot
and we gain some more clients. Uh, price goes down and we tend to retain those clients because generally
the type of clients that we get are long-term holders. So they still need security. Um, of course,
there will be some people who like panic sell and then close their CASA account. But, um,
the, the upside of this is that we have a much more stable and predictable revenue stream than a lot
of companies in the space that are more based on volume and trading. So those companies, they have much
higher upside during the bull market, but they have much larger downside during the bear market. So
CASA kind of like threads the needle between there where our upside is limited during the bull market,
but the downside is greatly limited during the bear market. So it's a nice, uh, sustainable business to be in.
I suppose you'd have a really good insight into like we've seen clearly this cycle, if we can still call it
that we've seen a wave of institutional adoption, but also, you know, there are more nimble, uh,
allocators of capital, like family offices, high net worth individuals. And I imagine you'd have a pretty
good window into that given the nature of your business. Now, have you seen a particularly obvious
inflection point in the last four years? So if we take, you know, from the bear market of the last
cycle through the bottom, and then as we've been climbing gradually over the last three years, have you
seen any, a step change in allocation from the sorts of customers you target? Yeah. I mean, the, um,
customer profile has changed, right? So, uh, 2017 was a real like retail hype and FOMO, um, and you know,
all the ICO stuff, and then a lot of retail got burned from that. Uh, then, you know, we started seeing
retail coming back, um, during the pandemic, I think for several reasons because a lot of governments
were literally giving free money to people and they were locked inside of their homes and they had
nothing else to do other than to, you know, do research and find cool new things to be interested
in. Uh, then of course the, the resulting, uh, contain loan contagion, like that, that, that bull
market was really based on leverage and loans and, and a lot of, uh, uh, highly risky lending that of
course eventually, uh, fell apart and the sort of the whole thing cascaded and collapsed and that burned
a lot of people that got involved in that stuff. Um, and ever since then, it feels like most of retail
just views the entire space as a huge scam, either because they got burned or someone that they know or
care about got burned. And so for the past year or two, it really has been, uh, call it institutional
adoption slash, uh, more sophisticated wealth management adoption where, you know, these
family offices and institutions are able to look past a lot of the terrible mistakes and calamities
and things that burn people in the past and say, Hey, actually this does have an interesting value
proposition. We will start to allocate a little bit into it, even though it is still new and risky.
We have a better understanding of the risks and rewards. So now instead of having a huge number of
normal people putting in small amounts of money, we have a small number of insanely wealthy entities putting in,
uh, what to them is a relatively small amount of money. But, uh, I think it's, it's still
somewhat commensurate with what we've seen in previous runs. It's just the dynamic is very different.
Um, I am hopeful that this new profile of investor is also a much more long-term investor. That's not
just gonna, you know, panic dump if the market starts going down.
So are they coming to Casa after the point at which they've made a decision to allocate or do
they look to you for like, um, for convincing, for example?
It's generally after they've already decided to do an allocation. Yeah. We, we are not really in the
business of orange pilling.
Did you ever do any of that and just gave up on it or it was just never part of your business?
It was never part of the business.
Okay. And, and I personally spent like the first few years of my, uh, hobbyist, enthusiast, uh,
time in Bitcoin, trying to orange pill everybody. And I would say I probably had like a one to 2%
success rate and then decided it wasn't a great use of my time.
Yeah. Business development is a slog. It's like, you know, you talk to a hundred people, you sign
four or five of them and yeah, it's, it's hard. It's hard work. Jamison Lopp, thank you very much.
Can you tell people where they can find you, uh, your website, your, your handle, Twitter handle as well?
Uh, yeah. Find me on X. My handle is just L O P P and my website, which has everything that I've ever produced,
you know, hundreds of presentations and interviews and also several thousand educational links about
every aspect of Bitcoin at lopp.net. Excellent. Sounds like a wonderful resource. Thanks very
much for coming in. It's been a pleasure to finally sit down and have a chat with you. I've been, uh,
reading your feed for, for a number of years now. Geez. It's yeah, it has been five years now. So, uh,
thanks for coming in and you're always welcome. If you're ever in London, I say this to everyone,
please pop by into the studio. We'd love to have you there. Thanks for having me. Cheers.
Thank you.