welcome to the valor podcast it's a really great pleasure to have jameson lop with us today uh
jameson as many of you know has been in the bitcoin space for for a long long time over a
decade i believe we'll talk a little bit about his history there um he's a bitcoin pioneer self-proclaimed
cypherpunk co-founder of casa which will no doubt speak quite a lot about where he's also the chief
security officer um one of the reasons i was very excited about getting jameson on the podcast is that
he's really a one of the most prominent figures in the crypto space in the bitcoin space about
security privacy self-custody uh all very very important topics which i i would love our 1.4
million customers around the world jameson to really gain from your knowledge and your best practices
obviously we're a centralized exchange but we often talk to people about the need to think
about your own security setup and we all obviously advocate doing self self-custody when you know what
you're doing but we'll talk about that a bit more uh jameson's a computer science he has a computer
science degree uh he's worked at bitco also a one of the i would say og companies in the in the bitcoin
space i created statoshi a fork of the bitcoin core node to or the fork of bitcoin core for node analytics
um and also he's got a great uh resources at lop.net i really encourage everybody to go to
l o double p dot net there's a lot of information that's great over there but the one place i'd like to
start off jameson is 2017 where obviously you had a swatting incident which i'd like you to just tell
us a little bit about but that really kind of i think was a turning point for you in many ways so
let's just start off with what exactly happened in 2017 and then the question i'll ask after that is kind
of how did that change things for you yeah so essentially 2017 was the height of the bitcoin
block size wars the scaling debates and tensions were high a lot of people were getting very upset
as arguments were occurring on different forums and social media and i ended up saying something at
some point that upset the wrong person and they basically reached out to someone that they knew
who had expertise with swatting people and said hey we should screw with this guy you know he's
an og bitcoiner you can probably extort him it'll be worth your while so on so forth and uh i ended up
having you know several dozen heavily armed law enforcement officers shut down my entire suburban
neighborhood of 400 homes because they had received a call that was claiming it was me at my house
claiming that i had killed people and had people hostage and had bombs and basically using all of
the trigger words that are necessary to get a massive lethal response from law enforcement to come
out because they're you know pretty much obligated to investigate these types of claims and uh thankfully
the incident itself ended without anybody being hurt um there have been swattings where people have
been shot and killed by law enforcement and it was kind of a close call for me because i had actually
been to the shooting range the day before and i had a bunch of firearms laying out in my living room
waiting to be cleaned um but i had i had a few things going for me um one of which was that i was already
somewhat practicing decent operational security and um the tweet that i had made that morning which
i believe led the the swatter to believe that i was at home and would be a good target i actually made
that when i was not at home i was at the gym already going about my usual business and so i ended up
coming back home from the gym and running into the law enforcement blockade there so so thankfully you know it
wasn't an incident of me just minding my own business sitting at home and having law enforcement bust in
and potentially something terrible happening we were able to you figure out what was going on fairly
quickly and the situation got resolved but that kicked off a well a multi-year journey of me trying to
understand what i would need to do to prevent that from ever happening again and then once i had
sufficiently hardened my privacy my operational security that kicked off a multi-year investigation
of me hunting down the guy who attacked me i think that took you know four years uh basically uh but i
i did end up getting some justice there it was a kind of bittersweet thing because it was just some
naive young kid living in his mother's basement he you know fell in with the wrong crowd he didn't really
understand the ramifications of what he was doing but i think he learned his lesson and i learned a lot and now i
i speak a lot about the you know the ramifications of being a public person in this space where i mean
people are kind of doing calculations in the back of their head of like okay this person's been
into bitcoin for this many years and you know they are probably a soft target and we could try to extort
them we could try to hack them we could try to wrench attack them and um you know what as a result do
people in this space who have essentially outed themselves as uh investors need to do if they want to
be sufficiently safe from all of these types of attacks so you know security is a uh never-ending
cat and mouse game so it's a good business to be in for sure absolutely absolutely thank you for sharing
um we met recently in new york um and one of the things i came up to you and i was just actually
asking you about some of your security views etc one of the things that you said struck me which is
you said i sleep well at night um so i really wanted to kind of put ourselves in the kind of the shoes
of our viewers so these are people that are very sophisticated when it comes to crypto and uh and
the security and all the way down to people that are just beginners and just understanding what bitcoin
is not even necessarily even understanding what a bitcoin private key is etc so one of my goals of this
podcast is that for our user base to listen to it and to gain some insights about their own personal
security so i think what when you said i sleep well at night i think i'd like you just to kind of put your
views your shoes in yourself in the shoes of kind of this beginners and the the most you know sophisticated
people how do you make that happen given the wide range of experience that people have and what is
like the main mistake that people are making when it comes to the custody of their bitcoin so really just
a foray into kind of what are your what's your advice into how to get this personal setup right yeah i
mean there's a few components to that uh one is the actual architecture of how your keys and your assets
are secured so i sleep well at night because i don't keep my assets with trusted third parties so i don't
have to worry about getting rug pulled or uh having my accounts get arbitrarily shut down for some unknown
reason that won't be disclosed due to bank secrecy act uh regulations um or or really just you know
internal issues that can happen um you know some some companies well really any company can have bad
actors inside of them and you you can't necessarily know what the internal policies and practices are of
any given company so third party custody is always going to be a black box from the outsider's perspective
so if you want to actually understand what the security model for your crypto assets is you have
to be doing it yourself like you have to set it up yourself you have to manage it yourself um you don't
have to do everything yourself obviously this is why casa exists we essentially help people help themselves
um but you know i sleep well at night because i don't have single points of failure in my actual
asset custody so a that's because i'm not keeping them with a trusted third party b it's because i'm not
just keeping them you know one key in one location i have multiple redundancies a geographic distribution
of keys um you know if my house burns down um it's not going to be a catastrophic loss for my assets i'm
confident that i've you know thought through basically every possible scenario of of attack and loss for
my assets and that they can withstand pretty much anything that wouldn't be a sort of world apocalyptic event in which case we got bigger issues to deal with
um now the other side of this which is a separate problem is like the actual physical security of
myself my body uh and and so forth right so um you know even even if your assets are sufficiently distributed
and uh robust against any type of attack or loss if it's really easy for people to find you uh you can
still end up having problems um and this is where some of the wrench attack situations come into play we
we can learn a lot from them because we are aware of like 240 at this point though there have definitely been
way more than that i would say anywhere between four and ten times as many wrench attacks out there
um as the ones that we're actually aware of and that's a whole that's a whole other problem like i said
when you say wrench attack why don't you just explain to our viewers what what does that term mean
uh essentially it means physical robbery it means you know someone uh coming to you and placing you
under duress and coercing you into handing over your money and we're we're kind of in the discovery phase
right now where wrench attacks are relatively rare compared to the many other forms of theft and attack
and loss that can happen in this space but they are going up and they are roughly correlated with the
exchange rate this makes sense because if you think about it the vast majority of people are are
generally quote unquote good people right they don't want to hurt other people for their own personal
gain but there's always going to be some like single digit percentage of the population that's you know
psychopath or sociopath and and they're just trying to figure out you know what's the best return on my
investment and and so right now we're in this discovery phase where people who are willing to hurt others
for their own gain are finding out that well you know why would i go try to rob a bank or an armored truck
or you know some retail business where either like the risk is really high or the reward is really low
even if the risk is lower and unfortunately with these digital bearer assets that are generally being held
and accessed by one single person there's one you know single uh authorization that's a fairly low
risk and fairly high reward outcome and so you know the criminals are basically probing
this sector right now and unfortunately they're pretty successful like the majority of these wrench attacks
that we're aware of that are happening are successful and the um the perpetrators when they're successful
they tend to get away with quite a bit like usually at least in the six figures sometimes seven sometimes
even eight figures um from their targets so this is just another reason why casa exists why i'm constantly
preaching having better security because this is actually this is a problem for all of us you know
even if you think oh i'm not going to get wrench attacked um every time someone in the space is
successfully wrench attacked and an attacker is um essentially rewarded for that attack then this is
information this is signal that we are sending out to the entire world that says hey this is a profitable
endeavor uh and it's incentivizing more and more of them to happen so until we get to the point where
you know the the average holder is sufficiently safe and guarded against this because they're following
best practices and we get the uh success rate of these attacks to drop then i think that it's only
logical that we should assume that the number of attacks is going to continue to increase as long as
the the attackers themselves are being enriched do you have any stats on actually what percentage have
been successful of those 240 odd ones that you just mentioned uh yeah i have a i actually just gave a
presentation in vegas um but it's it was around like 60 of the attacks that were successful and then i also
have stats around you know number of attacks per year which roughly follows like the price charts and um
the amount of money that is being taken by these attackers though the like the further you drill down
into these data sets the more or the less accurate uh the data is because for example first of all we
probably only have like 10 to 30 percent of the attacks that get reported and then only a subset of
those will reveal other attributes like the amount uh that was stolen so um it could vary i think in recent
years we've been i was seeing over 30 million dollars a year um that was being taken by wrench attacks and
so and that's just the tiny subset that we can uh calculate um so it's you know it's probably well over
100 million dollars a year and for those that don't know in the last few weeks we've seen some that
have been reported in new york uh in france uh in canada so this is something that has happened uh in
france for some reason multiple times that we're seeing uh yeah that was actually they believe it was
one mastermind this like moroccan french guy uh who they did arrest i think last week so hopefully that'll
stop the slew of french kidnappings for a little while and you know despite that slew um that happened
this year from a per capita risk standpoint france is actually not in even like the top 10 countries
it's still relatively safe in terms of wrench attacks um actually the country that is the riskiest
per capita is uh uae and that's because there have been nine known attacks and i think all of them were
basically otc trades so you know somebody saying hey i want to buy or sell physical trades yeah that's
one of the riskiest things you can do is is face to face otc trades basically someone they and they'll
even start off with tiny buys and then ramp it up and be and get to the like i want to do 500 000 or i
want to do a million dollar trade and they'll basically say you know meet me in this hotel room you go to
the hotel they jump you they take everything that you have um to dubai's credit they also have the highest
justice rate in the sense that uh 100 of those attackers were very quickly apprehended and did not
get to you know take advantage of their success um you know i think that that's because my
understanding is you know dubai is very heavily surveilled and it's very easy for them to track people down
yeah yeah okay so obviously very serious issue um what is your response to you know what i say to
customers is i said you know it really depends on people's knowledge of their setup so you know where
people you know a lot of people are just going are used to going and resetting their password
right if they have lost access to something and obviously with bitcoin if you lose your your private
key or seed phrase you cannot go and reset it it's lost for good so my personal advice to people is to
say we very much encourage people to self-custody if they know what they're doing but what i also always
say is that there are risks with every single thing that you do right so there is no such thing as a
particular security approach that is risk less or risk-free everything comes with this risk so i say hey
if you know what you're doing by all means go and do it if you don't know what you're doing then try to
find a trusted custodian where you believe your assets will be safe obviously valor is a centralized
exchange we custody our our customers assets we have a whole bunch of uh security measures that we take
as you said there isn't any individual that can go and uh you know take the assets uh unilaterally to
your point geographically distributed multi-signature etc so but that's very different where we're an
institution where we invest in this we have a dedicated cyber security team so are you would
you advocate to some like maybe your your response is no just go get casa regardless of whatever level
you are come to casa which is a perfectly valid response but for someone that's new what would you
say to them no i mean i think there's a number of different tiers of security right so security should
always be commensurate with the amount of value of whatever it is that you're protecting and that's
just like a very broad generalization um you know you don't need to have a fort knox to secure uh amount
of money that you would carry around cash in your wallet it's these are very different paradigms of what you
need to like the threats that you need to be worried about and so i generally classify it as okay um if
you only have like spending money like the amount you would carry around cash in your wallet and it
it's inconsequential if that gets lost or stolen then fine leave that with a trusted third party or if
you want uh you can use just a hot wallet on your phone you don't need a super high level of security
because the ramifications are not terrible if something goes wrong but if you get to the point
where you have more than that you know a non-trivial amount invested you know say a thousand dollars or
more it starts to make sense to invest in a hardware device you know you can get these hardware devices for
like 50 to 100 there are a few that are more premium than that but you think of it as you're basically
buying insurance you know whatever security you're setting up you're you're basically paying for
insurance ahead of time because you generally in this space there is no insurance to cover you
uh after something goes terrible there are a few products that are starting to come out around that
but it's still very early days and so uh you know investing 50 or 100 dollars in a hardware device
protects you from 90 to 95 percent of the attack vectors uh that are all you know internet based
basically you're taking your keys off the internet you're now you no longer have this
door open where 8 billion people can be knocking on it and trying to get through it and try to get to
your key material and you're compromising whatever device it is that you have your money on so that's
that's really like one of the most effective low-cost ways to protect yourself but you know that
doesn't protect you from everything there's you keep going further and further down the security rabbit
hole and you're you end up having to spend more and more time guarding against more and more edge case
risks but once again what you're guarding against is catastrophic failure so if you move beyond that
if you move to having a significant portion of your portfolio your net worth in digital assets that's when
you need to start thinking about eliminating single points of failure and so that's when you want to
have multiple redundant geographically distributed backups of your seed phrases um you may want to
think about using multi-sig itself uh because you know even for example if you're using like a treasure
ledger cold card whatever um that's still a single point of failure there's a single seed phrase
that you have backed up most likely in clear text and if an attacker got a hold of that backup they
would be able to reconstitute your wallet and spend everything so in order to protect against stuff like
that you want to have multi-sig which basically means you're constructing this digital lock box that
requires multiple keys to cryptographically sign a transaction before the network will accept it and
that's what casa helps people do there's a number of you know free open source software solutions out
there where you can do this yourself but once again this is all about like how much time are you putting
into understanding all of the threats and being able to guard against them and i would say like for most
people especially people who have a lot of wealth in the system it's more effective for you to pay casa as a
a security consulting service because this is what we live and eat and breathe and we will keep you
apprised of any changes in the the best practices this dynamic security environment and so really what we
do is we do is we help get people to a level where we assume that any part of your setup can and will fail over a long
enough period of time people are human people make mistakes um natural disasters happen and we have a
really long list of threats that we have incorporated into our own security model and explain like how our architecture guards against them but the short version of the
but the short version is that anything can go wrong and you can still recover your money and that includes casa like our company is not a single point of failure
um we only hold one out of three or one out of five keys so even if we disappeared we can't prevent anyone from moving their funds we can't spend funds uh without authorization from the user uh we're really facilitating you know a more robust
you know a more robust setup but um it also gets even further down the rabbit hole into stuff like inheritance and you know multi-generational family
planning uh that's a really weird tightrope to walk if you you want to be in a setup where only you control your keys but then magically a button kind of gets pressed if you die and of course the blockchain doesn't know if you're alive or dead so like we
we have to construct other game theory and uh distribute keys in such a way that will allow your uh beneficiaries to be able to recover your funds
um but if they try to do that while you're still alive you can kick them out
sure sure so a couple of questions on what you said so you talked about hardware um wallets are there any particular ones that you've looked into that you think are worth people looking at that you can kind of vouch not vouch for but
kind of recommend more than others um yeah so there's many different attributes going on here the short version is there is no perfect hardware wallet they all have pros cons strengths weaknesses um if you're buying one hardware wallet for a single signature wallet then you definitely want one with a screen this is like one of the major
major important points of hardware devices it's basically a self-contained offline computer that allows you to verify
the details of the transaction that you're signing so that you're not having to you know trust that
some other wallet software running you know maybe on a phone or a desktop or whatever hasn't been compromised
and is basically lying to you um you know that's that's kind of that's kind of what happened like with
the bybit hack uh last year for example is uh they basically the wallet software got compromised and they
were not able to actually validate the transaction details and they signed a transaction and it went somewhere
that they didn't think it was going to be going which was to the attackers rather than to their own uh wallet
uh wallet so um you know we support treasure ledger cold card uh foundation passport um uh the bitbox is
also good and i'm sure there's more out there i mean there's a ton out there uh but one of the other things
one of the other things that people should generally keep in mind is there's a saying in the space of
virus in numerous which is strength in numbers and a lot of people only ascribe that to like the
cryptography uh that secures these networks and that is true that's like one aspect of strength in numbers
but this also applies to just security in general that whenever you're doing something that kind of
strays outside of the like popular modus operandi of other people in the space uh you you're basically
you're you're you're becoming an explorer and you know explorers exploration always has risks
because there's just a lot more unknowns whenever you're exploring a space it doesn't have to be a
physical space it can be this uh you know logical space some new construction of some security
architecture that just nobody else has ever used hasn't been sufficiently vetted and may have points
of failure foot guns so on so forth so um yeah you you you need to be careful and not try to get cute
not try to get uh too smart like i've seen a lot of people try to be smart and do things like split
up their seed phrases and uh and keep different uh like manually split up parts of their seed phrase
in different places and it actually that creates a weakness because in many cases you can actually
make it very easy to brute force the seed phrase um depending on you know how much entropy it has
but you know it like i said it's it's a very complex environment and so you you can easily spend weeks
or months just learning all of the ins and outs and the best practices and i have plenty of
educational material that you know people are welcome to read and and this is this is what i do a lot of
times is i'm exploring things and then i'm writing up my learning so that hopefully other people
can save themselves some of the efforts um you know is that the best place to go yeah and i have my blog
that's also linked on there but you know i've done all types of random things like i've i've stress tested
like 80 different metal backup devices for seed phrases for example because as another motto we
have in this space you know don't trust verify um i i didn't trust the claims that the manufacturers made
and i put them through the paces of heating them up to like 2000 degrees um storing them in acid
putting them in a 20 ton hydraulic press to see how they would deform so yeah it's it's a complicated
space to try to navigate and you can certainly do so yourself if you're willing to put in the effort
let's talk about the numbers again um so you talked about kind of geographic um dispersion of keys etc
to what extent do you suggest so this is again also comes to towards like when you're when you pass away
and you want your in to bequeath your assets to somebody else how do you think about getting other
people involved where you actually have to trust other people you know there is like let's say you
have you know three or five keys or five or seven keys or whatever it is seven of ten or whatever it
may be um there's always a risk that if they're your assets that whoever has other keys could collude
against you and to take those assets as an example because as you said by definition if you're only the
one key and they're let's say let's just make it simple say three or five then um you know you
three of three of the other four could do something so to what extent do you say well actually there is
a certain amount of trust that you need to have in setups we're not in a society where you can be
completely solo or are you advocating completely solo and then leaving leaving information in the
world somewhere but even there that's a single point of failure so what are your thoughts about the
trusting of other people versus not and then bequeathing your assets um it's not necessary
uh but in order to guard against collusion you have to think very deeply about game theory and
you basically have to construct a game and i'll give you one simple naive way like that so casa has
done several iterations of our inheritance protocol the first one was very kyc heavy and worked within the
the legal framework and so you know what we would have our clients do you know this was like you know
four years ago is we would have them put one key in a safety deposit box that had beneficiaries
listed on it right so that's that key won't even be accessible unless the beneficiaries come to
the safety deposit box with the death certificate so on and so forth uh so that's like one way of
guarding against it we would also have um their attorney hold one key so once again you're you're
you're operating under the assumption that you know the attorney uh is going to abide by their legal
duties uh not to collude against you um and then of course casa holds one key and we would also require
a death certificate so it's you know nothing is perfect but that was it's all about dispersing trust as much as
possible amongst uh a wide variety of disinterested parties so that it's not just that you're dispersing
keys amongst your own family that might collude against you if you don't fully trust them um and
we ended up getting rid of that because there was just so much friction around the sort of the kyc
death certificate attorney um aspects of it and so what we've done is we re-architected that to instead
use a couple of interesting aspects of casa's system essentially uh for example if you're in a two of
three setup with us and you use our new inheritance feature that we rolled out a year ago you end up
sharing an encrypted qr code which is your mobile key on your phone uh with your beneficiary and so
because that's encrypted they can't actually do anything with it then um the process for someone
requesting to kick off the inheritance protocol is you've essentially onboarded them as a beneficiary in our
app they all they can't see any of your wallet data the only thing they can do is push a button that
says i want to claim that the owner of the wallet is dead when they do that we start contacting you
and saying hey uh your beneficiaries claiming you've passed away if you're still alive please let us know
and we'll kick them out for being malicious and we basically continue doing that and blasting you for six
months and after the six month time period goes uncontested they can then decrypt that encrypted key
they can sign a transaction with one signature and then they have to ask us to co-sign with another
signature and then you know the actual funds transfer process can happen but uh there are
essentially an infinite number of ways that you can construct the game theory around this stuff right
and so especially if you start doing more keys like you have five different keys you have a lot more
flexibility with how you can distribute them and thus create different game theory and this is one reason
why we have uh higher level tiers at casa the the more expensive tiers at casa they're not really expensive
because you get more keys they're more expensive because you're paying for more hands-on consultation
where you know we're helping people create more customized architectures that essentially suit their
setup because you know nobody has the same life right everybody has different sets of friends family
semi-trusted individuals that they may be willing to you know pull in to an inheritance setup
one question that you may or may not want to answer on air but um it's about uh
we obviously are a centralized crypto exchange we have to kyc our customers for regulatory reasons
do you do you ever kyc yourself on a centralized exchange uh because we talked about not doing
otc and like if you do do that i would imagine you're very worried obviously about having your
your data there so what are your what are your responses to that yeah no i have to kyc myself for
a number of things uh a you know i'm uh i'm an officer of a company and that comes with a number of legal
of legal responsibilities um b i have all types of different investments in private equity that that
has you know similar types of uh aml kyc um and yeah i i have accounts at a number of centralized
exchanges now the this is one of the most difficult aspects of extreme privacy and a lot of it really
ties down to what i tell people is the most difficult thing of trying to be fully private uh in my
experience is the dmv it's like your driver's license and they they require a very high level
of documentation and proof of like this is your residence and so this is the most expensive ongoing
thing that i have to do is like i have to actually rent a real you know separate residence that can
meet all of those requirements and i just don't spend time there so like that's that's the kind of
like misdirection target that if my kyc data got leaked i this is why i'm still able to sleep at night
is because i'm not giving people the address of where i actually sleep at night absolutely and you
have to make sure that you never give that particular address of where you actually are right so
yeah so that's one little slip up if you do give it away then that kind of compromises the whole setup
so um okay wonderful um side question i see all behind you bitcoin and uh you know there's obviously
tons of altcoins are you a bitcoin only type of a person do you think there's space for others i know
casa does more than just bitcoin what are your thoughts on that yeah no i mean uh i've been cancelled
more times than i can count because i dare to be interested in non-bitcoin things now first of all
i never tell anyone what they should invest in i i i generally don't even tell people that they should
invest in bitcoin um my favorite quip about that actually is like when people say you know should i buy
bitcoin um my answer is like if you have to ask then the answer is no you clearly have not researched it
enough like you need to keep researching it until you're convinced yourself and you don't have to
ask me or anyone else to make you feel better about whether or not you should jump in um but you know
i'm a technologist and so i was dabbling in altcoins back in like 2012 uh 2013. um i i thought ethereum was
interesting in the early days um i didn't spend a ton of time doing stuff with it because i was mostly busy
building bitcoin infrastructure i did end up building some ethereum and ripple and litecoin and bitcoin gold
infrastructure and there was like 2016 2017 years when the the altcoin boom was happening
um but i also think that bitcoin can't do everything for everyone and this is a free market i think it's pretty obvious that you know even even though bitcoin is king
um i'm a cypherpunk and i'm the first to admit that bitcoin has terrible privacy
so i've always been interested in uh privacy projects from monero to zcash to grin and um you know there
are plenty of uh what i call the bitcoin puritans who get very upset about me daring to mention any of
those other things i think that they're uh generally just afraid like the other things are competing with
bitcoin and it's it's not good to to look at competitors but um it's my innate curiosity that
brought me to bitcoin in the first place so i have no intention of ceasing to be curious and dabbling
around with other stuff but i'm not a trader um i'm not like trying to get in early on the next altcoin
and and ride it up and then dump it and so on and so forth and there are people who do that and good
luck to them i'm i'm not really into uh you know speculative gambling and stuff like i i was in vegas for the
first time two weeks ago and i didn't bet a single dime on anything um it just it does not it doesn't
capture my attention um i prefer i prefer to play games that are more novel um and i prefer if i'm gonna
gamble i prefer to do so by investing in like seed stage startups that i feel are trying to solve a problem
that no one has tried to do before absolutely i'm gonna go and we've got a few minutes left but i
want to talk to you a little bit more about the broader bitcoin ecosystem but before we leave kind
of privacy and security is there anything that i haven't asked you that you'd like to get the message
out to the listeners about any last tips or advice about bitcoin about security and privacy uh well i mean
one of the things that i'm kind of disillusioned about lately is that um it just seems like the
narrative has shifted over the past few years and it's all like number go up everybody is going to
get rich uh don't worry about your security or your sovereignty because you know your your your coins
will increase in value even if you're leaving them with a trusted third party or just buy the etf
yada yada yada um and as a result of that it's actually bad for bitcoin for a number of reasons uh a we're seeing
like more and more coins essentially getting hoovered up by a small number of institutions
and other entities and that creates systemic risk within the ecosystem you could you could call it 6102
type attack risk but basically whenever the there's a small number of entities that could be targeted by
whatever and they have a massive stash amongst them you know bad things can happen uh it's also bad for
bitcoin from a long-term sustainability standpoint because there's basically no fees the miners are
are not earning much revenue right now uh outside of the uh block subsidy which of course gets cut in
half every four years so that's a sort of an open-ended long-term question uh you know thankfully
the bitcoin price tends to more than double every four years but if we get to the point where it stops
doing that then we're really going to have a lot of hard questions that we need to answer uh if the
fees are not supplanting that subsidy so the short version of all of that is that this is another reason why
you should do self-custody it's uh it it decreases the systemic systemic risk it's good for you personally
it gives you a stronger security model and it's good for the the thermodynamic security of the system
because you're actually creating demand for block space yeah i think that's an important point for
listeners to understand is that like if you're buying an etf and you you know it's the safer way to
buy the etf um you've got to understand that the whoever the etf uh provider is they're holding or
they should be holding the underlying crypto uh in some safe custody somewhere they're going to be using
a custodian either they have their own in-house custodian or they're using an external custodian
and those custodians also have risks associated with them so don't for a moment think that by holding
the etf alone that you've kind of abdicated responsibility and it's okay because it's
there's zero risk there is certainly risk and in fact um there is potentially increased risk because
as the pot gets bigger and bigger it's a bigger uh kind of reward for an attacker to to get so
please always almost all of the etfs are using coinbase as their custodian that's right that's right
so coinbase is actually a big point of failure if something were to happen with coinbase obviously
i think they take that very seriously and they do a lot in that space but there is again i'm
going to reiterate this there is no situation of zero risk right that just doesn't exist with coinbase
it doesn't exist with valor it doesn't exist with yourself it doesn't exist we can always try to get
as close as we can to 100 security but 100 security doesn't exist anywhere so just keep that in mind
yeah actually i can tell you how to make your bitcoin 100 secure you send it to a burn address
there that's how no one will be able to access that bitcoin is perfectly secure
of course not very useful not even yourself exactly um all right i was going to ask you
actually about exit existential risks to bitcoin so let's let's uh fast forward to a world where
bitcoin has failed right um and you know i've spent a big chunk of my career now also in this space
particularly because of bitcoin you've done the same in what scenario does bitcoin fail
where do you see the existential risk actually coming from oh uh well i mean so there's a number
of potential failure scenarios and like one that's becoming more popular that we're talking about
lately is quantum computing this is a very vague and hand wavy problem because it's
almost impossible to pinpoint and quantify what the current level of risk is and to uh put a measurable
time frame on how long we have uh you know the the the estimates of how long we have before a quantum
attacker can uh actually reverse engineer bitcoin private keys is anywhere from today to never it's a very
wide range of opinions around uh the risk there but um there are various government agencies and standard
institutes that are basically saying we all need to move to post-quantum cryptography in the next you
know five six seven years so that's one data point um we can also see that there are massive advancements
that's happening by a variety of different companies that are working on improving the hardware and the
software for quantum computing and so while i don't i can't stand here and say we only have x number of
years what i can say and what i've been talking about is that we can work backwards uh from
whatever this queue day might be and say how long do we need as an ecosystem in order to upgrade and
mitigate this attack and i think like minimum five years uh you need generally several years to actually
debate a proposal before it can go in and then it can still take several years after that to activate
and then it will take several years for the rest of the ecosystem to adopt and write the software and
get it into all of the wallets and then it will take years for people to actually migrate all of their
bitcoin to new uh unspent transaction outputs that would have whatever the quantum safe uh cryptography
securing them is and so i worry about that and not so much because i know when quantum is going to break
bitcoin but because i know how slow and how hard it is to upgrade bitcoin and kind of along a similar
vein and something i've been talking about for many years is just ossification in general and basically
what that means is that this is a well understood aspect of network protocols that uh as the size of
the network grows this is uh an anarchic system right we're we're deploying rules but there are no rulers that
are authorities that dictate what the rules are so changing the rules actually becomes harder and
harder as the size of the network grows because you can't coordinate amongst the larger and larger more
diverse set of participants and eventually like the ability to change a protocol to change the rules
kind of collapses under the weight of the size of the network it can no longer uh move in any direction
that's what like ossification is is really means like the calcification like turning into bone
you can no longer move and so i worry about that uh you know specifically related to quantum computing but
even more generally just related to upgrading and evolving bitcoin as a system and so i have a number of talks
talks that i've given where i actually talk about other internet-based protocols and ways where their
ossification actually many years down the line created problems and weaknesses and and the general reason for
that is that you can you know you can freeze or ossify a protocol but you cannot freeze or ossify the rest of the world
and so eventually what happens is new threats new types of attacks come into existence and if the
protocol cannot evolve to meet and and mitigate those attacks then you end up with really hacky solutions
one of my favorite examples is actually smtp which is the email protocol i was an email engineer for 10 years
before i got into bitcoin stuff and so i saw this happening firsthand uh essentially smtp ossify like
in the 1990s but uh then as millions of people started coming online uh as um a bunch of people started
abusing the protocol to send spam because it was so much cheaper than snail mail we ended up with massive
problems where smtp as a protocol was developed in the 1970s under the assumption that every user would
want to receive all the messages so it was basically designed to nearly guarantee delivery of messages
so now what happens you know 20 25 years later is this gets flipped on its head where we actually have
this protocol that's great for guaranteeing message delivery but now we want to not guarantee message delivery
and so we then spent several decades um slapping all of these hacky solutions for spam mitigation
onto the email protocol and they were they all ended up being highly centralized um and basically ended up
being like reputation based and created a bunch of gatekeepers and so now where we are is that you ask
somebody is email popular and they'll say oh yeah billions of people use email but i would argue to
you that actually almost nobody uses smtp almost nobody runs their own email server anymore because it's
simply not economically feasible to do so it's a really really high cost in order to uh maintain all of these
meta protocols and maintain your reputation uh amongst all of the gatekeepers uh that's essentially what
we were doing when i was at this email marketing company as we were hiring dozens of people to manage our
reputation with the isps and the blacklist providers and so on and so while you can technically download the
software and run an email server today it's almost guaranteed that you know within a few weeks or months
you're going to get blacklisted and your your your ability to use email as a sovereign email user is
dead it's just uh it's not feasible and so point being um it is not hard at all for me to envision a
a similar type of situation happening with bitcoin you know we're already seeing more centrally more
centralization happening amongst a variety of different vectors whether it's the custodians or the
miners or what have you and so all of those things are concerning and i i figure like if bitcoin cannot
evolve to be able to react to new stresses then we may not like the the ultimate end situation for what
bitcoin ends up being so given that you said quantum quantum basically attacks or uh concerns and then
also um this ossification that you've just talked about i assume you're still long bitcoin and you think
that those the reality of that actually emerging isn't isn't too close so that's another funny thing is
that uh you know much like how uh email became super popular uh even as i argue the like the sovereignty
inherent to email as a system was crushed over the decades um i also believe that it's entirely possible
that bitcoin's exchange rate continues to rise exponentially even as some of the fundamental
properties of bitcoin continue to get degraded that's one of the scariest things to me is that um the
incentives might not be aligned there like if this is a very common thing that we hear from the pro
ossification camp is oh bitcoin's doing great we're all getting rich don't don't you know don't mess with
something that's something that ain't broke right don't try to fix it um and and i i think that that
is a very naive way of going about looking at this is like the price of bitcoin should not be our like
main metric or indicator of the health of bitcoin as a network i think that's very wise we are nearly on
the hour do you have a couple more minutes after that or are you have you got a hard stop yeah just a
few okay so one just larger question and then i'll just start wrapping up um if you look at the analog
let's say analog version of bitcoin if you want to think about gold okay and you see that in the 1930s
the u.s government basically forbade the public from owning any gold all right um do you see similar
threats in the future when it comes to kind of nation states and their relationship with bitcoin
what are your concerns particularly from security and a privacy perspective when you think about
such a scenario do you think don't worry about that or is that something that also concerns you
yeah i mean hopefully we're in a uh a decent scenario um at least for the next few years but uh
actually one thing i've said is like it's actually it's somewhat concerning to see nation states getting
more interested in bitcoin um because you know one of the scariest things out there is uh the lion you
know i'm i'm from the government and i'm here to help uh a lot of terrible things have resulted from that
line of thinking uh and that could also play into this ossification stuff right it's like if if the united
states decides that is like strategic bitcoin reserve is incredibly important to them they might start
doing and taking actions around uh you know people trying to improve bitcoin if they disagree with
some of those proposed changes um it's also tough because you know pretty much all of us have kyc'd i think
and so we're all on lists somewhere um you know to put a different point on it my my grandfather
actually showed me photos from his childhood where they had gold bars uh they had actually like
prospected and found gold you know in creeks uh near where they lived and when the 6102 executive order happened
and they didn't follow it they just held on to it they didn't tell anybody about it and and you know
eventually that uh it got dropped but you know they were safe because there was no database with their
name on it saying that they owned gold so they were able to just you know hide it under the mattress uh
type of thing it's a lot trickier i think for most of us in this space today absolutely
well uh jameson where can people find you and we talked about lop.net uh where else can they find
you or what's a good way to get in touch with you if people can get in touch with you yeah i have a
contact page on my website there and uh you know i'm pretty active on x my handle is just l-o-p-p
awesome and any last comments before we close of questions i should have asked that i didn't or
anything that you want to share with our listeners uh well i mean security can be very very overwhelming
um similar thing with privacy right and i'm i'm on the extreme uh end of both but i've also been doing
it for over a decade um but you don't have to go from zero to 100 right you you can do incremental
steps you can you can greatly improve your privacy in one weekend just by installing various ad blockers
and vpns and privacy software you know on your computer and you can keep building upon that same thing
with security um you can take your time you know don't rush into anything and as as long as you keep
moving forward and keep educating yourself then you know eventually all of those gains will compound
upon each other awesome jameson fascinating discussion thank you so much for your time
and uh stay well thanks for having me