Welcome to The Defiant.
I'm your host, Tegan Klein.
Today, I'm joined by nothing short of a legend,
perhaps the Bitcoin greatest of all time,
Jameson Lopp himself.
Jameson is currently the CTO of Casa,
a company specializing in Bitcoin security solutions,
where he has played a pivotal role
in developing products and services
that empower individuals to safeguard their digital assets.
Jameson is a globally recognized voice
from his written work on cybersecurity, privacy,
and the social implementations of Bitcoin.
Trigger warning for those in the Ethereum community
and beyond, as this is a spicy episode
that gets gritty with the importance of individual privacy
and protecting personal info in the digital age.
And with that, Jameson talks to us briefly
about what he's currently focused on at Casa.
- Well, Casa's mission has always been
to help people empower themselves.
And that, of course, is helping people
being their own bank at the moment.
You know, we believe that cryptography
and the technology that is being developed in this space
is really all about empowering individuals.
So it starts with Bitcoin, moves on to other assets,
and we think that over the longterm,
it will turn into more than just a financial security service.
- Absolutely, and helping people empower themselves
is not the easiest feat.
So I'm excited to circle back around to that
a bit later in the episode.
But first, I wanna start off with your Bitcoin journey.
So you were very early to the Bitcoin community.
Can you talk to us a little bit about your origin story?
How did you find Bitcoin,
and what was that early Bitcoin career like?
- Well, people came into Bitcoin
from a variety of different avenues.
Mine was the nerd/libertarian route.
I'm pretty sure that the thing that initially got me
to read the white paper was seeing slash-dot articles
continue to come up over a period of several years.
And I had ignored it for several years
'cause I figured it was gonna collapse
and everybody was gonna lose their money.
But eventually, I was like,
"Okay, this thing's not going away.
"I should probably look into it."
And once I read that white paper,
the computer science and libertarian perspectives
kind of coalesced and realized that,
"Hey, this is a really interesting new project,
"and it actually makes me think of money
"in a way that I've never really looked at it before."
So I got hooked after that,
and pretty quickly started coming up
with my own side projects.
And within a year or two,
I was working full-time in the space.
- Amazing.
And have you always been more on that libertarian side?
Was there an aha moment for you
that made you go more in that direction?
- Over the course of my life, I've been everything.
I was raised in a very conservative,
traditional Republican WASP-y household.
Ended up going to an extremely liberal university
and kind of flipped around the other way.
Then I felt a bit disenfranchised
after watching Obama continue a lot of the same policies,
especially related to war and stuff.
So I ended up becoming much more libertarian,
probably right around the time
when I was also getting into Bitcoin.
And if anything, since then,
that caused me to go even more extreme
as I learned more about cypherpunks, their history,
ideas around crypto-anarchy,
and now being in these systems
and seeing voluntary networks
that are really crypto-anarchic networks
and sort of governance arising out of nothing
has been fascinating to see.
And I do believe
that there's a lot of interesting lessons to be learned
and experimentation that's happening at the governance level
and just how do we organize people
to collectively work together towards achieving new goals.
- Absolutely, and I think many people follow
that similar trajectory over time.
I think Ethereum is going through that today.
I want to get into that a little bit later,
but first I want to talk about your time at BitGo.
What was it like inside a Bitcoin startup
in those early days?
- Well, it was a lot like pretty much any other tech startup.
You're not really sure how things are gonna pan out.
I think describing it as some long stretches of boredom
spotted by sheer abject terror,
especially during the bear markets,
it got pretty quiet and easy to get disillusioned
and then things come roaring back
or terrible things happen on the security side.
And then of course, as I'm sure we'll get into,
there were also governance and philosophical debates
going on within the entire community.
- Yeah, let's jump into that.
So at BitGo, at least the CEO, Mike Belshi,
was famously on the other side of the big blockers
during the block size war in 2017.
And that always seemed strange to me
given so many from the inside, yourself included,
were on the other side.
What was that like and how did that all go down internally?
- Well, so I was actually a big blocker
for a couple of years.
It wasn't until after I had been working at BitGo
for a while and was responsible for running
a lot of the node infrastructure
that I started seeing a lot of the small blocker,
layered scaling type of arguments as being much stronger.
So I understood it.
I had come from a big data distributed computing background
so my view of how you scaled systems
was not particularly focused on individual ability
to run systems at scale.
So I saw both sides of it
because I transitioned from one to the other.
Really, I think the bigger point of contention
was not so much that Mike was interested
in on-chain scaling.
It was more around the SegWit2x sort of corporate movement
to try to break the stalemate
by kind of forcing a fork through.
- Got it, okay, interesting.
And honestly, if you read the Bitcoin white paper,
Satoshi also may have been on the other side
of the argument.
I think so, Satoshi at times alluded to this payment system,
sometimes Bitcoin as a speculative store of value,
and then even a registry system with Namecoin.
What do you think Satoshi thought they were developing?
- Well, Satoshi wasn't entirely sure.
You can actually follow some of the changes
that they made over that two-year period or so
that they were active.
And they made mistakes.
They learned things along the way and made changes.
And I think it's very dangerous for people to focus on
like what Satoshi would have wanted
or what Satoshi would think today
because we've all been learning
as this system has been evolving.
And my own perspective has changed a lot.
I think anyone who's been in for more than a cycle or two
has probably changed their perspective.
And so I think it's asking a lot to believe
that Satoshi was omniscient.
And in the first two years of Bitcoin
that they had a great idea of what it would become.
But I think that they were just trying to build a system
that was robust against every possible type of attack.
And however you were using that system,
whether it was for transfer of value, store of value,
even like domain registries or whatnot,
they wanted all types of functionality to be possible.
This was obvious from the fact
that they put a scripting language into the system.
Though fairly early on,
they disabled a lot of those opcodes for security reasons.
But I think that at a very high level,
Satoshi just wanted to build a system
that could be a sort of public commons
for us to agree upon who owns what
and who is able to manipulate this distributed ledger.
- Absolutely.
And I know you extensively studied
the early days of Bitcoin,
including the early mining patterns
when only a few people were on the network.
And then you also studied Satoshi's early writings
on the forums.
What has most surprised you kind of early on
that most people don't talk about?
- Well, one thing is that Satoshi actually disappeared
for a few lengthy stretches of time.
They were not working round the clock all year long.
Who knows if they went on vacation
or they maybe got disillusioned for a bit and took a break.
But there were several like month long,
if not longer periods of time
where there was absolutely no communications
or activity from Satoshi.
I think there was a book
that chronicled some of that early history
that basically gave a lot of credit to Marty Malamy,
aka Sirius, as being one crucial early contributor
who basically kept Bitcoin alive
for certain parts of that first year,
where they were still contributing,
running those, running the website and so on.
And if not for a handful of those very early contributors,
I think the project very well
could have died in its infancy.
- Amazing.
And that's one of the great things about these ecosystems,
these decentralized ecosystems.
And you recently said that Bitcoin is (beep) you money.
Can you tell us what you meant by that?
And do you think Satoshi would agree
if they were alive today or around today, I should say?
- Yeah, it was funny.
I actually asked Grok that same question this morning
to see what the ex-AI thought about it.
And it got a pretty good answer.
But basically, traditionally (beep) you money
has been considered to mean that you have a level of wealth
that you are no longer constrained
by what other people think of you
or what they want to try to do to stop you.
Basically, you can do what you want
because you have the means to do what you want.
I think there's a slightly different spin
you can take with Bitcoin
where it's not about the amount of wealth that you have.
It's not about the amount of Bitcoin that you have.
If you have any amount of Bitcoin,
at least in self-custody,
that you yourself are controlling with your own keys
and you're following the rules of the protocol,
then there is no third party,
there is no authority who can tell you
what to do or not to do.
So if someone wants to confiscate your funds
or if they want to inflate the money supply
or otherwise screw with you
as a Bitcoin user, they can't.
And you don't even have to say, "(beep) you."
All you have to do
is keep following the rules of the protocol.
- Absolutely.
And what would you say
is Bitcoin's major accomplishment today from your view?
- I think we've, at the very least,
we've gotten the idea into the public conversation
that money doesn't need to be
what a few people tell us it is.
I think the best way to describe this is
before 2010 or so,
if you went around talking about fiat money,
people would just look at you weird.
But now that we have Bitcoin, we have crypto,
and now it makes more sense to be talking about fiat money
because fiat money is no longer the only option.
People, of course, would talk about gold and silver
and precious metals or whatever,
but their utility was extremely limited.
In comparison to what we can now do
with these new digital assets.
- Absolutely.
And why do you think Bitcoin survived
when so many projects before it failed?
- Well, Satoshi actually said it themselves.
I think there was a quote where Satoshi said,
"I hope it's clear that the reason
"that a lot of these early projects died
"was due to their centralized nature."
If you have a single company that is running a project,
if you have a single point of failure,
really in any regard,
whether that's the entity that's running the network
or the database or really any crucial aspect
of the project, of the system,
if there are any single points of failure in that system,
over a long enough period of time,
one of them is probably gonna get triggered
and the whole thing is gonna collapse.
- Yeah, and why do you think Satoshi never touched
the Bitcoin?
Do you think they destroyed their keys
out of fear of the government?
- My thesis is that the million or so Bitcoin
that are believed to have been mined by Satoshi
were mined not because they had any intention
of spending them,
but rather because they had a dedicated custom mining
machine, I mean, it was probably just a regular PC,
but it definitely had custom mining software on it.
And they were using this machine
for the first couple of years
of the Bitcoin network's existence,
essentially as a heartbeat.
It was basically to ensure that the blocks
would keep getting mined at regular intervals,
regardless of how many other people were mining.
So this was essentially a bootstrapping mechanism
that they used.
And you can actually, you can look at the hash rate
of the supposed Satoshi miner,
and you can see that as other miners joined the network
over that first couple year period,
the Satoshi miner would actually intentionally
in step functions, decrease their own hash rate.
So if Satoshi was trying to maximize the amount of coins
that they were mining, which wouldn't really make sense
because they had no value at the time,
nobody knew what was gonna happen.
But if they were trying to maximize
their total number of coins,
then they would have kept going full steam ahead
at 100% of their hash power.
There's also a pretty conclusive evidence
that this machine was powered off half of the time,
that they would actually,
the machine would stop mining for about five minutes
after it found a block.
And I think part of the reason for that
is Satoshi didn't want to overwhelm the network.
They wanted to give plenty of possibilities,
opportunities for other miners to come in and join
and get some rewards
and start being able to play around with Bitcoin.
- So you think it was fully altruistic,
but then don't you think there would still be a temptation
to want to spend that at some point?
- Oh, absolutely.
I mean, it's difficult to imagine anyone sitting
on billions and billions of dollars
and not doing anything with it.
On the flip side, though,
if I try to put myself in Satoshi's shoes,
I probably wouldn't touch it either
because it's basically impossible to do in a private sense.
Like if you believe that all of the powerful nation states
of the world are looking at this
and gonna be trying to track it
and trace any movements back to you and your identity,
it would be a really weird situation to be in.
On one hand,
you're theoretically one of the richest people in the world.
On the other hand, if you try to spend your money,
you put your life in intense danger.
- That's a great thesis and that makes a lot of sense.
Okay, amazing.
Okay, and then more controversially,
what do you think Bitcoin, or sorry,
Satoshi got wrong in the early design?
One thing that keeps me up at night is,
as we get closer to all of the Bitcoins being mined,
I'm worried that there's not enough incentive
to the miners.
And then what happens?
Do we all collectively agree on a 1% inflation?
And then once you cross that barrier,
what stops you from becoming the monster
that you're trying to fight against?
- Sure.
This is always theoretically possible,
though it's one of those things that's many years away,
I think, from becoming a crisis.
But I'm pretty optimistic about the incentives.
First of all,
first of all,
I think it's pretty amazing that Bitcoin has survived
for 14 years.
That basically shows that the incentives
in the game theory that Satoshi constructed
were quite robust.
And I think that there is good reason to believe
that those incentives will continue working as expected.
And I mean,
you only really have to look at what's been going on
in the past few weeks and months.
We've actually had periods of time
in which the transaction fees have been greater
than the block reward.
And of course,
since the block reward is getting cut in half
in a few months,
it's gonna be even easier for transaction fees
to more than offset that.
So I think we already have at least some proof of concept
that this is possible.
Of course,
there's so many different factors at play
of really what will create demand for block space
and therefore drive the transaction fees
and help to pay for the miners
and basically the thermodynamic security.
It's also a tricky question
'cause no one really knows what the quote unquote
right amount of hash power or right amount of energy is
that is needed to keep Bitcoin relatively secure.
So Satoshi did get some things wrong though,
and they fixed them.
They actually,
in the very first releases of the Bitcoin client,
they were incorrectly using the length of the blockchain
to decide which fork of a valid blockchain was correct.
And pretty quickly,
they realized that that wasn't great
'cause anybody can just create a bunch of blocks
without much proof of work.
So they fixed that pretty quickly to instead be
whichever fork of the blockchain has the most proof of work
is considered the best.
And there were a number of other changes over the years
of removing some opcodes that could have been used
to essentially destroy the consensus of the network
if they had been exploited.
And beyond that,
I think it's pretty clear that for the past 10 years or so,
Bitcoin has functioned quite well,
but where we're at now,
it's more of a theoretical issue of what changes
if any should be made to Bitcoin
that will make it more valuable and more functional
without accidentally introducing some exploit
that could cause the whole system to fall apart.
It's good that Bitcoin development is conservative
and that people are thinking very adversarially
about these things.
But on the flip side,
one thing that I think a lot of people
don't keep in the back of their mind
or they don't put enough weight in
is the fact that this system is anti-fragile,
not because of the software,
not because of the hardware,
it's anti-fragile because of you and me and everyone else
who is interested enough in watching what's happening,
in contributing in whatever way we can
with whatever skills and resources we can.
And that it's really hard for me to envision a catastrophe
that would actually cause Bitcoin to fail permanently.
We've seen plenty of examples
where Bitcoin has failed temporarily
due to technical issues.
And what happens is if machine consensus stops,
then you fall back to human consensus
and then you fix the problem and you move forward.
This is why Bitcoin is resilient to almost anything.
It's because it's comprised of now
probably millions of people scattered all around the world
who are incentivized in seeing it continue to succeed.
- Absolutely.
And I wanna get into syncing a node
and all of that in a moment.
But first, I wanna double-click
on why you're passionate about this industry.
You mentioned empowerment, you alluded to freedom.
Can you kind of double-click there?
- Yeah, so technology is a double-edged sword.
Technology can both be a tool for freedom,
but you can also assume that technology
will be used by authoritarians
to control and manipulate the masses.
So I think anyone who pays attention
to anything that's going on in the world
is well aware of a lot of the surveillance
and things that governments are doing
to take advantage of technology
to really more greatly empower themselves,
make themselves more aware of what people are doing
and therefore able to manipulate them and guide them
kind of in the ways that are most suitable
to the government.
So we need people on the other side of that
where we can't just be creating theoretical technology.
Bitcoin has always theoretically allowed people
to be their own bank, but if it's not practical,
then the real-world impact of the technology
is gonna be greatly minimized.
So much like, for example, PGP,
which is one of the strongest communications,
privacy technologies in existence
that has been around for several decades,
it's an amazing technology from a privacy perspective,
but nobody uses it because it's just not practical to do so.
So I don't want Bitcoin or any of these other
theoretically empowering technologies
to go the way of PGP.
- Absolutely, and that's why the work you're doing
is so important, and I'm excited to chat about it
in a moment, but you're one of the leading authorities
on syncing a node, and I'm sure you spent countless hours
testing Bitcoin software.
Why do you consider the ability to sync a node
to be so important for Bitcoin?
- Yeah, I actually have a syncing test running right now
as we're speaking, my annual syncing tests.
So it comes down to the governance issue
of what rules do you agree to?
Do you want to be sufficiently empowered
that you know exactly what the rules are
of whatever network you're using,
of whatever project you have decided to put money into?
How do you ensure that you don't get rugged
by someone changing the rules?
You know, this happens in traditional systems all the time
because there's some central authority somewhere
who dictates those rules, and you have no say.
You know, even in America, which is supposedly
one of the world's greatest democratic republics,
we get rugged by authorities at every level,
be it local, state, or federal,
because the rules are changing all the time.
And unfortunately, we employ a lot of people
whose job is to change those rules.
So it can be hard to even stay apprised
of all of the rule changes once a government
becomes sufficiently large.
So if you want to,
if you want to prevent yourself
from having the rules changed right out from under you
in a way that may harm you,
then you need the ability to enforce those rules
and validate that the rules are not being broken and changed.
And that's where running a node comes in.
You basically, you have to think of a node
as sort of your own personal attorney/accountant,
where it's an automated sentry,
where every bit of activity that's going on
passes through that node,
and it checks everything that's happening.
And if anything is wrong, the node rejects that transaction,
that block, that data, that whatever,
that attempted manipulation of the global ledger is.
It just says, no thank you, and it keeps chugging along.
And so if it's possible for people
to run this type of automated sentry
to ensure that the rules aren't being changed,
then the question becomes, okay,
how much does it cost to do that?
And I don't think you'll ever get a exact answer,
but at least within Bitcoin,
the answer is we want it to be as affordable as possible
for people to be able to audit the system
and ensure that the rules aren't being changed.
Of course, that creates a number of conflicts
and trade-offs with other things.
- Absolutely, and if only you could vote people in
to shrink the government instead of enlarge it,
but maybe someday.
And then more recently,
how well has Bitcoin Core itself been improving,
and what's your prognosis for maintaining the ability
for home users to be able to sync with minimal cost?
- So the one thing that we know for sure
is that the size of the blockchain
is just gonna get bigger and bigger and bigger.
This is essentially an append-only ledger.
It is possible, if you're running a node,
it is possible for you to prune old data,
but you still have to download it
and verify it before you can throw it away,
though there's some other projects
that are actually working to make even that more efficient.
So how much is it going to cost?
Also is related to the fact that technology
at the hardware level continues to get better.
So this is one of the reasons why I do this annual test,
is if we know the blockchain's getting bigger,
that means we have to process more and more data.
And so that should take more and more time
or more resources to be able to do,
especially if you're starting from scratch.
On the flip side, we know that computers
and hardware are getting faster,
so that should help mitigate the fact
that the blockchain is getting bigger.
And then the other variable is the software itself.
And are there more improvements that can be made
to improve the performance of the software?
And that, in general, that seems to be quite true
at many different layers of the software.
And really, one of the interesting things about Bitcoin
is that it seems to have incentivized
the development and continued efficiency
and performance of really, really low level
cryptographic signature verification.
There's an entire project with several people dedicated
just to the secp256k1 elliptic signing curve
that is used for a number of different Bitcoin operations.
And it seems like every year,
they keep making it like 10 or 20% more performant.
And that has a huge impact on a node syncing operation
when you're validating all of these transactions.
- Absolutely, and is that how you would define
decentralization, is the ability to kind of validate
the state of the network yourself at low cost,
or how do you think about it?
- Yeah, I mean, decentralization is a bit of a trigger word
because there are so many different aspects
of these systems that you can try to quantify.
And decentralization is also a spectrum.
I get triggered when someone says
something is decentralized.
Sometimes if you say something is centralized,
then it's very obvious because there's a single point
of failure you can point to.
But calling something simply decentralized
is usually glossing over a lot of nuance.
But certainly one big aspect of how decentralized
these systems are, are how many nodes are running out there.
The more nodes there are, the more difficult it would be
for any authority to try to shut them down or coerce them
or force them to change things against the will
of the node operator.
And so of course, the cost of running a node
is gonna have a sort of direct correlation
to how many people decide to run one.
- Absolutely, and I think decentralization oftentimes
should be a means to censorship resistance,
which is also a spectrum.
Are you satisfied with Bitcoin's level
of censorship resistance today?
- I could be better.
And there are some aspects that I'm not optimistic about.
Bitcoin has pretty poor privacy on chain,
and that is related to censorship resistance.
Unfortunately, I don't foresee really strong privacy
happening at the base protocol level,
because most of the really strong privacy potential changes
would be in direct conflict with the desire
to be able to easily audit the entire money supply,
for example.
So you get into a lot of weird minutia and trade-offs
for these things.
There's also issues kind of at the mining level
of the fact that the industrialization of mining
has made it more centralized than I'm comfortable with.
And I'm hopeful that we'll eventually get to the point
where it will make sense for people
from more of the quote-unquote average people,
or at least nerdy Bitcoiners,
to be doing small-scale mining at home
because they're able to reuse the waste heat
for other purposes.
- Absolutely.
And we talked about why someone would set up a home node.
What's your recommendation for setting one up?
- I would generally recommend someone go use
some of the more user-friendly software
or even plug-and-play hardware out there.
So if you check out my website at lop.net,
I've got a whole section for running a node,
and there's plug-and-play hardware from companies
like Umbral and Start9 and Samurai.
And basically, these are projects
that they've built a lot of other software around the node
that makes it a lot easier for you to run it
and manage it and see what's going on,
as opposed to just downloading Bitcoin Core directly
and running it yourself.
- Amazing.
And your website has so many great resources,
so I recommend the listeners check it out.
And then speaking of recommendations,
you were subject to a swatting in 2017.
Can you tell us a little bit about that story
and how it led you to become more of a privacy maximalist,
if you will?
- Yeah, basically, I grew to a level of prominence
on social media that, you know,
it's a law of large numbers type of thing.
If you have enough people whose attention is focused on you,
then eventually somebody out there is gonna be malicious
or willing to do naughty things.
So, you know, I basically got extorted.
You know, these people thought that they could screw around
with me and scare me and get me to pay them off.
And it actually turned into a multi-year,
life-changing event and eventually a hunt
for me to track them down.
And I did eventually get them
and got a little bit of justice.
It didn't feel quite as good as it could have
because it ended up being some punk teenager
who just, he didn't really know any better.
But, you know, this resulted in me understanding
that there was actually a vulnerability
at the law enforcement level, at least in America,
where we have created protocols
at our law enforcement level,
such that if you make a phone call
and you say the right words,
it will trigger a lethal force response by law enforcement.
Even in my case where law enforcement
was already very suspicious
because the call came from a different state
and it was claiming to be me in my house
with hostages and weapons and stuff,
they were still obligated by their own internal policies
to go check out the potential threat
and do so with a level of extreme force.
So the problem here is that
the only way you can prevent law enforcement
from being pointed at you as a weapon by a bad guy
who knows how to manipulate them and say the right words,
the only way to prevent that is to ensure
that nobody can find your physical location
to be able to call up your local law enforcement
and pretend that something terrible is going on
at your physical address.
So swatting was not a particularly new thing.
It had been around for over a decade,
but as is the case with a number of other
types of criminal activity on the internet,
Bitcoin has changed the incentives.
So just kind of like the fact that ransomware was a law,
it was a thing long before Bitcoin existed,
ransomware is very small
because it was very difficult to get the payments.
So once it was possible for you to write your ransomware
in a way that said,
oh, you have to send Bitcoin to this address,
the return on investment
for being a ransomware author increased greatly.
So the same thing really happening with folks
who are trying to extort other people,
whether that's through swatting
or other types of cyber crime.
- Well, I'm sorry that happened to you.
And what's your recommendation to prevent that?
I assume using a VPN,
maybe setting up your home under an LLC
and not your real name,
anything else that you can share around best practices?
- On the bright side,
very few people will ever have to worry about this
because you have to make enemies
or you have to rise to a level of prominence
that someone believes that they can screw with you
and get a payoff.
So if you're the average person
who is not like a controversial figure on social media,
you'll probably be okay.
But the flip side is that you don't necessarily know.
Due to the way that social media works,
it's now possible for you to go from being a nobody
to being someone who has the ire
of millions of people directed at them.
It's possible to be someone
who only has like 100 followers on social media,
but if you post the right series of words
that are sufficiently controversial and it goes viral,
you can have millions or tens of millions of people
really pissed off at you.
And once again,
and then you get into that same situation
where you have millions or tens of millions of people
whose attention are focused at you.
There may be one or two people in there
who decide to do something about it
and basically attack you in a way
that you never anticipated.
So I consider as a result strong privacy.
You should really think of this as a shield
or a type of insurance against these unknown type of attacks.
It's the best way to prevent yourself from getting attacked
is to make it so that nobody knows
where you are or what you're doing.
Just don't give people a target in the first place.
Of course, you could go,
you could take that a step further and say like,
if you really don't wanna get attacked,
just don't use social media.
But for a lot of us,
I think that's not quite a tenable proposition.
- Absolutely.
And I think that privacy should be a human right,
but I find that most people don't understand privacy
and oftentimes will think you're a criminal
or even accuse you of being a criminal for wanting privacy.
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- How has being kind of this privacy maximalist
impacted your personal and professional life?
- Well, it makes small talk very difficult.
Most small talk is actually the sharing
of personal information.
So a lot of times when I am conversing with people,
I have to have, you know, alternative options.
If they knew who I really am,
like I'm at a conference or something,
then I generally just have to deflect.
But the thing is with my setup,
like my actual neighbors and friends
where I spend my time don't know who I am.
I have this entirely separate persona and pseudonym.
And so, you know, I have to have my backstory for that.
And that, for the first year or two,
it can be pretty tough to be able to maintain that.
And eventually you get used to it,
it just sort of becomes second nature.
But, you know, this is extreme privacy.
Very, very few people go to these links
because it causes a lot of friction.
I have to maintain like dozens of different email addresses
and phone numbers and throw away credit cards.
And, you know, my life is a lot more complicated
as a result.
- Has anyone ever found out your real identity
and felt, I don't know, maybe betrayed?
- No, so far so good.
- Okay, amazing.
Wow, that is impressive.
- It's probably only a matter of time.
Yeah, I mean, this is one of the trade-offs
or potential problems of being a prominent figure
in the space.
I don't want to become more prominent
in the sense of I don't want to become
a sort of mainstream level prominence
because then I would have actual issues, you know,
walking around in real life
and having people potentially recognize me and follow me.
- And any good resources that you can recommend
for maybe someone listening
who wants to improve their privacy?
- Well, once again, I have an entire privacy section
on my website.
And in general, if anyone wants extreme privacy,
I actually recommend buying the book "Extreme Privacy"
by Michael Bizzell.
That's the book that I wish had existed
when I had embarked upon my journey.
- Thank you.
All right, let's shift gears
and talk about the work you're doing at CASA.
Tell us a little bit about the products and services
that you all provide.
- Yeah, I think the best way to think of CASA
is that we help people be their own bank.
We help people really empower themselves using technology.
We're trying to make it easier for them to do so.
It kind of goes back to what I was saying.
You know, the difference between the sort of theoretical
and the practical functionality
is that these protocols are enabling.
We take the best practices that I've learned
from working in the space over the past decade
and seeing a lot of catastrophes.
We combine that with some of the best hardware
and software technologies.
And then finally package it up with a level of service
that's basically unheard of in the space,
but you're paying for it.
So, you know, unlike a lot of wallets out there
that are quote unquote free,
and of course free basically means
that they're finding some other way to monetize it,
with CASA, you're actually paying us a subscription fee.
And in return for that, you get a level of service
that you can't really get from other wallets
or even custodians.
You know, we really exist to provide people
with a concierge level of service
so that whenever you run into a problem,
whenever you have decisions that need to be made
and you want to best understand the trade-offs,
because when it comes to managing keys
and doing self-custody, there are many, many decisions.
And each of these decisions is almost always a trade-off
between security and convenience.
And so we're really, we're helping people navigate
a lot of these decision trees
and put them into a setup that is more robust
than really anything else out there.
And then, you know, once you're happy with your setup,
we can talk about other things such as inheritance planning,
which gets even more complicated.
- Absolutely.
And yeah, one thing that I found interesting
was just that CASA, you do have to attach it
to an email or a phone number.
So it's not private, but to your point earlier,
you have to make this accessible,
otherwise people won't use it.
So do you find that people generally will start with CASA
and then maybe go to a more private option in the future?
- So this is tough.
If you want extreme privacy with your self-custody,
the trade-off there is that you can't ask for help.
You literally have to do everything yourself.
And for the privacy maximalist,
if you're willing to put in the time and the effort,
of course, you know, this is the freedom of the protocols.
Like you can set up whatever you want.
The problem with going the lone wolf route
is that it's a lot more likely for you
to accidentally introduce a single point of failure
or for you to overlook a potential foot gun
that may not bite you, maybe even for several years.
You know, you may be going along for quite a while very well
and then some problem arises and you discover
that you may be locked out of your own funds.
I've seen a lot of things go wrong.
So there's a reason why CASA puts people
into a architecture in which we have
a diverse setup of your keys.
You'll have one key that's on software on your phone,
several keys that are on hardware devices
that are distributed around different locations.
And then very importantly, CASA will hold a key too.
And the reason for that is that this diversity is strength
in that when you start to analyze
all of the potential attack and loss of vectors,
any single attacker loss that might happen to any given key
is then going to be limited to that one key
and will not affect enough keys of your setup
that will cause you to actually lose access to your money.
And this includes like you doing stupid things
like running your keys through the washing machine
or something, I don't know.
And the fact that CASA holds one of those keys,
we don't have the ability to actually move your money,
but we can work with you to co-sign a transaction
in the event that some of your other keys
have been lost or compromised.
- And you all advocate a multi-signature solution.
And from what I've read, you consider multi-sigs
to be superior to other schemes
such as like Shamir secret sharing,
which I'm terrified to do
because I think I would screw it up.
Talk to us a little bit about the trade-offs.
- Right, well, Shamir secret sharing has several problems.
One of which is that it's difficult
to actually do Shamir secret sharing correctly.
There have been a few incidents over the years
where various Shamir secret sharing schemes
were developed and found actually to be vulnerable
in the sense that people could reconstitute the keys
with fewer shares than were supposedly possible
or required to do so.
There's also some auditability issues there
where you actually have no idea which shares were used
to reconstruct the key and sign a transaction.
Also, it requires you to actually reconstitute the key
in one single place.
So what happens is you have a key
and it essentially gets split out into many shares,
but then in order to use the key,
you have to get the shares all back together
and reconstitute the key.
So that is a single point of failure.
There are things that can go wrong at that point.
There's also multi-party computation,
which is a slightly newer thing.
And one of the problems there is that
multi-party computation is, as far as I'm aware,
it's not supported by any dedicated
air-gapped hardware devices.
You basically end up having to have
all of your different keys on internet-connected devices.
So that in and of itself I think is a big red flag.
You don't want key material,
or at least you don't want a sufficient quorum
of key material to be on an internet-connected device
because everything that's connected to the internet,
you've essentially, you have a door there
that billions of people could be knocking on
and trying to get through.
The nice thing about multisig is that it is extremely simple.
Like I said, Shamir secret sharing and MPC
are both much more complicated protocols.
Whereas, at least in Bitcoin,
the multisig is built into the protocol.
And it is literally like seven,
it's basically like seven words
when you're creating a Bitcoin script.
And you wanna say, I wanna do like a three or five multisig.
It's like one line of code, essentially.
It's a bit more complicated when you get into Ethereum
and EVMs 'cause you have to write your own smart contract
or use a multisig smart contract.
So we've built on top of Gnosis Safe,
which is a multisig technology
that's been around for five or six years
and has tens of billions of dollars secured in it
without incident for many years.
So like I said, we try to take the best of what's out there
and apply it and make it easier for people to use.
- Absolutely, and red pilling people
on self-custody is not easy.
Can you talk to us a little bit
about how that's been for you?
- Even just getting people to understand
like why they should care about Bitcoin
and alternative assets is hard enough.
These days, I try to mostly focus
on the many, many real world, historical,
catastrophes that have happened.
You rarely have to go back in time more than a few months
to find some catastrophe that wouldn't have happened
if people had been holding their own keys.
And so of course, there were quite a few catastrophes
last year with, I guess, tens of billions of dollars lost
because people were trusting others
to hold onto their keys for them.
And it's not gonna stop.
This is human nature that humans tend to take the path
of least resistance and they tend to prefer convenience
over security and privacy and other attributes.
And as a result, that's going to continue to result
in a lot of hard lessons being learned,
especially every new wave,
every new cycle of people that come in,
they're gonna have to relearn the same hard lessons
that the rest of us have.
- Absolutely.
And hopefully no one has to learn that lesson twice.
And let's talk a little bit about Ethereum
because recently CASA got in a bit of hot water
in the Bitcoin circles for supporting Ethereum.
Can you talk a little bit about what drove that decision?
- Well, I think a lot of people who are angry about that
don't really understand CASA or what our market is.
We've generally, well, from inception,
we've targeted the people who have the most to lose,
AKA the whales, the early adopters,
or even more recently, especially post-pandemic,
we saw a lot more traditionally wealthy people
start to diversify in their assets into the space.
So we listened to our customers
and we had more and more of not just our current customers,
but our sales team telling us
we were losing potential customers
because if someone was coming in,
they were evaluating all the different options out there.
And when they would get to the list of,
okay, well, which assets do you support?
And we were like, Bitcoin only.
And they were like, okay,
I need you to be able to support multiple assets.
And it was usually Bitcoin plus Ethereum
and plus probably Ethereum-based tokens
or stable coins or whatnot.
So that was what drove the decision there
is that we didn't think it made sense
to continue limiting our market
and that we knew that when we were adding support
for Ethereum, it was not going to affect
the security of our Bitcoin product.
These are completely separate ways
of storing and manipulating the keys.
So people who don't like Ethereum
don't have to use it in our product.
They can certainly use Bitcoin only.
But then over the past year or so,
this past bear market,
we really saw the rise of stable coins.
And so we believe that there's a lot of demand
for stable coins.
And of course, most of that volume is happening
with Ethereum-based stable coins.
So that's why we actually just launched
stable coin support a week or so ago.
- Oh, congratulations.
Yeah, now we just need a more decentralized stable coin.
And it reminds me of when Jesse of Kraken,
who's also more of a Bitcoin maximalist,
supported Ethereum before Coinbase,
and that was a crucible moment for them.
- Well, yeah, I mean, especially if you're operating
an exchange, you want your market to be
as large as possible.
And that means exchanges are actually incentivized
to go out and support the long tail
of a lot of these assets,
'cause every new trading pair is gonna be in more volume,
which is gonna be in more fees for them.
- So putting aside the business needs,
how do you feel about Ethereum
from kind of a cypherpunk security standpoint?
- You know, it's interesting.
I don't know the stats off the top of my head,
but it feels like, you know, on the privacy front,
like with Tornado Cash, Ethereum has had more coverage
and controversy than, I guess,
with some of the Bitcoin mixers.
I've generally been kind of bearish on Bitcoin mixing,
and that's mainly from an economics standpoint,
but also from a standpoint of managing the UTXOs
with Bitcoin mixing, there's still,
there's just a lot of possible ways to screw it up.
It's not just a magic thing of,
oh, you put your Bitcoin through the mixer
and now you have great privacy.
So you might be able to make an argument
that like Ethereum's account-based model
is actually more user-friendly
for more practical mixing privacy there.
But other than that, you know,
these are very different networks, right?
Ethereum's trying to be more of a general purpose network,
which is interesting because I think it allows
for the narratives to shift a bit faster.
You only really need, you know,
a handful of people to build a new dApp
that becomes explosively popular
for it to potentially significantly impact
the driving force behind demand for ETH.
Of course, or at least the original point of ETH
was just to pay gas for whatever, you know,
your smart contract and dApp interactions are.
So it seems like that is really what Ethereum
should be going for from a value perspective
is just letting as many people do
as many things as possible on the network,
which should drive more demand for gas.
You know, Bitcoin's a bit trickier
because it's less flexible, it's harder to change,
and you have to take more of a layered approach,
I think, if you want to do more complex stuff
and not have to deal with the morass
of trying to navigate the consensus change
governance process.
So I don't know, I don't even really consider them
to be in direct competition with each other.
I think a lot of people are,
you could call them maximalists or whatever,
but I think a lot of people are perfectly happy
for Bitcoin to be the more conservative,
stable protocol that doesn't change very much,
that, you know, that stability also helps
to drive the value of the fact that people
are less concerned that they're gonna be,
you know, rug pulled by rule changes.
Whereas Ethereum has, for quite a while,
felt to be more like, you know,
Silicon Valley tech startup type of ethos
of we're just gonna like try a whole bunch of things
and see what sticks.
- Yeah, absolutely.
And I guess with that, you don't buy
the ETH is money narrative?
- No, not so much.
I mean, I'm sure people have their own arguments for it,
but at least I've always viewed it as, you know,
ETH is for powering smart contracts.
Now, what is money?
You know, that turns into a whole other argument.
I mean, it seems like you can use almost anything
as money if it has sufficiently good properties
that people can agree to use it as such.
- Absolutely.
Okay, and now, you know, Ethereum kind of started out
with this progressive and maybe even kind of statist bent.
And they've come around, I've found that many
in the community have come around
to Bitcoin's more libertarian and adversarial thinking.
Do you see that as well?
Kind of, you know, we trust the government,
but now they're kind of learning
that maybe that's not the most wise approach.
- Hmm, well, it's tough for me to comment too much
on the community 'cause I'm not as attuned
to what's going on in Ethereum land.
You know, I think some people would point
to some of the centralization and staking
as being problematic.
I'm not sure if there are like projects
or much progress being made to try to fix
some of those incentives that have caused
so much centralization and staking.
As I said, though, you know, there's more centralization
in Bitcoin mining than I would like.
It can get really tricky to try to compare these things
because I think it's kind of like apples and oranges.
But I do believe that Ethereum is not going away.
You know, I think that it has achieved escape velocity,
if you will, on at least some of the parameters
of decentralization such that it's, you know,
it's sufficiently dispersed that there are enough people
working on it that it would be very difficult
to kill the system, even if there was a critical problem.
- Agreed.
And what I've found is many developers
in the Ethereum community, they maybe started
with Bitcoin, the Bitcoin community,
and they found the developers to be a little bit harsh,
and then they came to Ethereum,
and it's more rainbows and butterflies.
Can you speak to that harshness of the Bitcoin developers
and actually maybe it's an important component
to this whole puzzle?
- Yeah, I mean, that's part of the reason
of why I kind of used the Silicon Valley
tech startup mindset.
It's more of a like experimentation
versus just don't break it type of mindset.
And I don't know, I would say that, you know,
Ethereum is probably starting to move
more towards that as well.
And why is this the case?
At the very least, I think it's fair to say
that when you have less to lose,
you're more likely to be a risk taker.
You know, when the value of your crypto network
is only a few million dollars
or even a few hundred million dollars,
and you've got these behemoths that are, you know,
hundreds of billions of dollars,
then it probably feels like, you know,
you need to try different things
and differentiate yourself.
And all of these networks, you know,
even Bitcoin to an extent,
they're still trying to find the best product market fit.
And they're all trying to maximize, you know,
their total addressable market.
So if you think about these networks
from more of a product standpoint,
then it's still the early days.
None of these networks have even probably
a hundred million users regularly.
And so they've got scaling challenges.
They've got, you know, usability challenges
and overall functionality issues
of what can and can't be done.
So I think it makes sense
that they're not all taking the same direction.
You know, you can look at it from like a perspective
of trying to compete in different markets.
It would make less sense for all of these projects
to try to compete over the exact same market
because, you know, they're gonna be all fighting
over one pie.
It's a lot better for them
to be trying to get, you know, different pies
so that whatever slice of the pie of the market
you're getting, you're not competing as hard over it
with, you know, other networks and protocols.
- Absolutely.
And I think it's more positive some in crypto
or at least it should be.
And the real enemies are outside of crypto
or at least they should be.
And, you know, I do agree that balance sheet growth
made a lot of people have to kind of grow up quickly
and in the space.
And kind of looking forward from the early days,
what surprised you most in terms of how Bitcoin
or even maybe crypto has evolved over time?
- Well, it's progressed a lot faster than I expected.
I was thinking of this as being more of a generational
type of project.
So, you know, when I originally bought Bitcoin
many years ago, I kind of looked at it like a gold hedge
of like, you know, I don't know necessarily
what the value of Bitcoin is gonna be
or that it's gonna go up insanely,
but I'm confident that the value of fiat
is going to continue to go down
because they're gonna keep printing more and more of it.
And I know exactly how much Bitcoin
is gonna get quote unquote printed.
Then when you start looking at these other networks,
especially the smaller, newer projects, you know,
they have a lot more maneuverability to try new things
and they may crash and burn.
And really we should expect that the vast majority
of projects in the space crash and burn.
And it's just like the majority of small businesses
don't last more than a couple of years.
But, you know, that's sort of the nature of capitalism
and advancing technology and civilization in general
is we have to experiment.
We have to be willing to fail and keep moving forward.
But, you know, as we said, if you do succeed to a level
where you're now somewhat responsible for the stewardship
of a hundred billion dollar or even trillion dollar network,
then yes, the pressures change a bit more.
And so it turns less into a,
oh, we need to innovate and move fast
and more into we need to be very careful
not to break this amazingly valuable thing.
- Absolutely, yeah.
And I think, you know, the kids these days,
they don't want gold.
They would prefer digital assets like Bitcoin.
And at the NFT boom surprised me tremendously,
but kind of in hindsight,
I should have seen that coming as well
because the kids don't want physical art.
They would prefer digital art to show all of their friends
all over the world online.
So interesting.
- Yeah, I mean, that was, it was like,
NFTs is like everything that you don't know about art
plus everything that you don't know about crypto.
I can't really claim that I've ever understood
the NFT stuff myself.
And I even have a Bitcoin wizard PFP, so.
- And did you ever expect Bitcoin over 40K?
- No, not in the first, you know,
dozen or so years of its existence.
When I got in, it was a single digit dollars
and, you know, imagining that many thousands
of percent growth, never even really crossed my mind.
So the, I think the bright side of this is that,
you know, I didn't get into this for like speculative
or trading purposes.
And the result of that is that I think,
unlike a lot of people, I've been less prone
to, you know, dump my coins because the price doubled
or whatever.
It's never been about the fiat exchange rate.
It's been about sticking it to the man and saying,
no, you cannot inflate away my wealth.
- And how do you see the next few years
of Bitcoin's evolution?
Can you talk to us a little bit about the roadmap
as you see it?
- Yeah, it's gonna be tough.
I've actually spent a decent amount of my presentations
at conferences and stuff this past year,
talking about my worries with regard to what I would call
the like the ossification movement.
And this really ties in to the fact of what we've been
saying, you know, you have a trillion dollar asset.
A lot of people are gonna get really afraid
that you can't touch it because you might break it
and everybody loses their money.
But I've been going back in history, you know,
looking at other protocols and how they've evolved
and been trying to make some points that, you know,
both software and protocols,
they need to continually be maintained and improved.
Otherwise, they're likely to become worse.
And I like to use SMTP, which is the email protocol
as an example for that.
Though you could pick any number of popular
internet protocols that have effectively ossified.
And what does that mean?
It basically means the protocol,
it doesn't change anymore.
And the reason it doesn't change is because
it's just too difficult to coordinate a change
'cause there's so many people that are running software
on machines, they can't all, you know,
update in concert with each other.
And if you make a change, it's kind of like,
it's kind of like changing language.
You know, it's like if we were in America right now
and the government told us, okay,
starting on January 1st,
the official language of America is Esperanto.
You know, that's like the level of conflict
and disruption that could be caused
when you have a protocol that's being used
by billions of people suddenly changing.
I'm going to continue pushing for improvements,
but, you know, that gets contentious as well.
What I really wanna see is I want improvements
that will improve the security of what we can do
for people in self-custody.
And I think there's stuff around covenants
and vaults that could help improve that.
I am most interested in anything that I think
will act as a boost for permissionless innovation.
So there are a few potential low-level protocol changes
that could make it easier for people to build other layers
and complete other networks and side chains
that are Bitcoin adjacent,
but in a way such that you don't have to go
through the gauntlet of, you know,
Bitcoin consensus change if you wanted to do something
really novel and out there.
And, you know, there's always more room
for improved efficiency and there's things that we can do
to make Bitcoin act as a cryptographic accumulator better.
And what do I mean by that?
Basically, anything that can act as a multiplier effect
for an on-chain transaction.
So the best example of that right now
is Lightning Network, where you make an on-chain transaction
and then you can basically make theoretically unlimited
off-chain transactions that are really fast and cheap.
And then they essentially all get consolidated
and settled back down with one other on-chain transaction
at some point in the future.
And there are things that we can do
to make that process even more efficient, for example,
so that many, many people could share
one of those on-chain transactions
for opening and closing Lightning channels.
Because, you know, the Bitcoin block space is very scarce
and it is becoming more expensive.
And that's some of the drama that we're seeing right now
is, you know, people complaining
about how other people are using Bitcoin
because they're driving demand for block space
and that prices out low value transactions.
And it's kind of like the Scaling Wars 2.0,
just a slightly different twist.
- Absolutely, okay, amazing.
Thanks for diving into that.
I'm gonna ask you one question
that I wasn't gonna ask you
because I don't know if I fully formulated the thought,
but maybe you'll help me finish it
and then I'll ask you the final question and let you go.
But, you know, one thing that I think about often
is one of the flaws around Bitcoin
is that those that were early
or those that are early to Bitcoin
that actually held
have such kind of a disproportionate level of wealth
compared to those that get in over time.
Do you have any thoughts on that?
Do you think about that at all?
- Not in as much as that
I think it's no different than anything else.
The people who got into Apple stock early and held
did really well.
The people who got into Amazon early did really well.
But just because you got in early
doesn't mean that you held.
I would say probably the vast majority of people
who got in early on any of these things
that became extremely valuable,
it's human nature if you're,
if you like double or triple your money,
it's kind of human nature
to like take some off the table, right?
You wanna realize those profits.
So, you know, I think this is just capitalism.
It's how markets work that the money will distribute itself
but I'd have no reason to believe
that the wealth will be distributed any differently
than it has throughout human history through other systems.
Yeah, Bitcoin does not fix wealth distribution.
I mean, I think that's just the nature of capitalism.
- Absolutely, and that's an optimistic take.
Okay, amazing.
And yes, the hardest part is holding.
So lastly, how are you defiant?
- Well, a few years ago,
I actually gave a talk entitled "DeFi for Defiance"
in which I was kind of ragging on
a lot of the DeFi systems out there
for having single points of failure.
So especially in the Bitcoin circles,
there's a lot of poking fun at DeFi
because it's not as defiant as it probably should be.
But I'm optimistic that we will continue to improve DeFi.
And now of course, there's the whole Bitcoin DeFi movement
happening with various Bitcoin related technologies.
So it'll be interesting to see how like Bitcoin DeFi
compares to like Ethereum and Solana
and all of these other DeFi ecosystems
to see if the Bitcoiners
do take a slightly different take on it.
But I am defiant in as many ways as is practical to be.
And I mean, one of those most fundamental ways
is the fact that I've built my company
in such a way that even if the government decides
to come in and shut us down,
they can't take our clients' money.
They can stop me, they can stop Casa,
but our clients' funds are outside of everyone's control
except for our clients.
- It's very important, yeah,
the censorship resistant nature of it.
And I do think DeFi should probably rebrand
to TransparencyFi.
And I tweeted that at one point,
but then deleted it because I didn't want it
to be misconstrued and then I get canceled.
But that really is what DeFi is about today.
It's more about the transparent nature of it.
- Amazing.
Well, thank you so much for coming on.
I appreciate you staying extra time.
Thank you so much, Jameson.
- Thanks for having me.