We are here at 11FS headquarters in London we work for episode 32 of Blockchain Insider.
Today we bring you the crypto market to be down, crypto comes to Puerto Rico and we bring
you a fantastic interview from Jameson Lopp.
All this and more on today's Blockchain Insider.
Today this week joining me as always is Colin G Platt who's in the room made it through
customs again welcome back.
Yay I'm so excited about this Jameson Lopp interview I'm like the biggest groupie.
You are a groupie you got away from your field and into this country again how's that?
Sadly I'm no longer living next to a field I have a garden though.
You gave up on the field and now you're all about the garden?
I live in town now man.
I'm so disappointed in you I'm feeling let down.
We have a great guest as well joining us other than Colin G Platt.
We have Sarah Feenan from ClearMatic.
Sarah how are you?
I'm very well Simon thank you for having me.
Sarah thanks for being back you were with us once before I think on Blockchain Insider
in the early days.
Good to have you with us.
Before we get started I just wanted to let listeners know that today's episode of Blockchain
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to transact directly in strict privacy using smart contracts.
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Alright Colin let's let's get to some news.
The market be down and it's not the only markets is down I mean the crypto markets specifically
when CoinDesk did a story on this they said the crypto market is down 50% from all time
highs.
It looks like it's down a bit more than that now.
Yeah I know Gary's gonna be super happy that we're talking about prices isn't he?
Gary Fagan.
Yeah that's the man.
So yeah prices have been up and down and I've honestly stopped looking and stopped kind
of caring about what the prices are anymore because every time I look at them they're
worth a little bit less.
Is that because you can't look anymore?
What about you Sarah?
Well it's been like soap opera isn't it but I don't actually watch soap operas so.
I want it to be like a telenovela where somebody turns out to be the uncle's mother's brother's
dog Walker and everybody's like but the crypto markets have been a bit like that recently.
There's been so much drama on them but it's what goes up must come down.
It seems as much I mean did you see somebody put out a tweet the other day with a picture
of the ripple price chart going up and straight back down and it looked like the Burj Khalifa
in Dubai.
It was just like to the moon back to the floor.
It was it was a perfect rocket trajectory because it came back down and didn't quite
make orbit.
It's more like Apollo 13.
Next story after this one though because I think we kind of knew the prices were down
were maybe some of the reasons why that's happening.
The first one's a bit UK centric so the bank in the UK Lloyds has banned customers buying
Bitcoin on credit cards which is some bad music so Lloyds has credit cards like a lot
of banks and their APRs are in the sort of 19 percent 20 percent 28 percent.
People were taking debt out to buy crypto and I think it did make a whole lot of sense
at one point with the prices were going up and up in theory but could it ever really
make sense.
Anyway the really interesting thing is if you look at their offerings they have a 36
month 0 percent balance transfer so if you were to go take out a lot of debt somewhere
else and you've now got a lot of losses you can transfer it to Lloyds.
You can spread your loss around to the next credit card company that will charge you 30
percent a year.
I know there was a few US banks JP Morgan Bank of America and Citi as well that have
done similar things in the US.
I know some people are kind of upset saying yeah banks are coming back to try to kill
Bitcoin because they realize it's their end.
It is really fucking irresponsible to go out and think you're going to make millions of
dollars by buying Bitcoin on credit with 30 percent interest rates.
Look what happens when these things drop by 50 percent you're in the hole.
What are you going to do and people are going to lose a lot of money.
As we always say this is Vegas boys don't spend money you don't have don't spend money
you don't have.
Yeah absolutely I couldn't agree more it's one thing buying it on debit but taking out
credit we've just seen what's happened to the prices you know it's a.
It's scary times right now and I think this ban I think comes to really benefit Lloyds
they say they're doing it in this release to quote unquote protect customers but actually
they're more concerned about the risk of losses here and are they concerned about what the
rights are if a customer comes to them and says hey I spent all this money from you and
I bought a Bitcoin but that good is damaged because the regulated position of cryptocurrencies
isn't very well known so I guess these banks are just kind of protecting themselves from
that.
But the question on this kind of comes back to is it really the bank's roles and who picked
it for to be the bank's roles to decide what we can and can't buy.
I mean taking out credit irresponsibly is arguably part of the bank's deal when you
take out a credit card but telling you what you can and can't buy might go over and stretch
that line.
Yeah I mean that's how they make their money isn't it by us not being able to pay it back
or you know not all of us but but I agree with you on not being able to buy certain
things by decree of a bank but equally it comes back to the protection the consumer
protection that credit cards offer which say debit cards don't and I can't speak for all
of them because I don't know all of the rules so feel free to tweet me if I'm wrong later
but that a lot of purchases are protected by certain credit card schemes and not debit
card schemes.
And a bank will not like uncertainty so if it's if it's uncertain as to whether or not
they are on the hook for refunding you for the losses that you've had in Bitcoin well
they're going to kill that risk whereas with gambling it's fairly clear as to whether or
not they're on the hook so they don't mind you gambling they don't mind you spending
all of your money on anything as long as it's profitable for them.
I get the sense that this was not profitable for them so they're trying to exit the business
I don't think it's really about protecting customers or gardens.
All right so next story is one from CoinDesk.
As we speak right now the CFTC and the SEC commissioners are giving testimony in front
of various committees of the US government and I think part of this is really in response
to the massive buildup of price around cryptocurrencies and a lot of people I suspect are thinking
this is really at the end of a wave of regulatory mood music and CFTC and the SEC especially
have been towards the front of that.
So any thoughts as to what's going on here?
So we've talked a lot about outside the US some of the different regulatory points of
view and I mean you get everything from Chinese regulators local and at a national level straight
up banning most everything that comes into contact with cryptocurrencies and ICOs very
specifically and then you get the much more liberal ends of things with certainly some
of the smaller countries.
The UK has kind of been in the middle we've talked about this a lot with the prime minister
deciding that only criminals need them for you know booze and hookers but then you get
the US just kind of hasn't acted much and the things they have come out with have been
very much of what we've been talking about they want to protect consumers and investments
ICOs have been in the limelight at the same time they're still very open to innovation
and this is something we're definitely seeing from the administration from Donald Trump
and those around him pushing they want the United States to be on the forefront of innovation
and this happens to be one of those areas.
Now you can agree with that or not but that's kind of become the mandate so it's a very
difficult road for them to walk down of on the one hand saying we want to protect people
who could suffer massive losses from a 50% 60% 70% price crash in these things or buy
into a fraudulent ICO but at the same time recognizing that there is in fact innovation
and this could change things for the better we just don't know what they are quite yet
so let's let them roll.
Yeah yeah I agree there was a somebody leaked or purposefully leaked one of the speech basically
that was that's being spoken now and it did highlight exactly that they're very very
positive on innovation and I think that there's there is probably first mover advantage in
setting the regulation especially if you want to be seen at the forefront of that regulation
and as we know these cryptocurrencies and blockchain in itself is is cross-jurisdictional
so being able to set that is actually quite important and I see no reason why if it's
sensible other countries won't follow.
That opportunity to set an agenda about how you regulate this global new emerging asset
class I think is something that the US has grasped the mantle on quite successfully.
Yeah and it ties into their kind of control well control but the US dollar being seen
as the kind of global reserve currency and so it it makes sense that they want to set
that as well.
US dollar US rules denominate crypto in US dollar and if it does become massive then
you have an option on that future which not for future the product but an option on that
possible set of outcomes.
So the the interesting thing about that is the US as I think since 2013 under FINRA said
that they expect KYC AML so since 2013 they've done what South Korea just did a few weeks
ago and what the PBOC have now really started to enforce that that information sharing at
the exchange level has been there for some time.
The US has often been lobbied and pilloried as being not that progressive I actually think
it's a remarkably progressive regime in the kind of stuff coming out of Clayton and Giancarlo's
testimony was actually released I don't think it was leaked and some of the key bits in
there they're exploring as to whether or not you need specific regulation in terms of the
trading platforms but they're looking to bring clarity and fairness to the space so the big
challenge in the US is a lot of securities regulations are actually implemented on a
state level so if I want to buy cryptocurrencies there are some exchanges where I can't buy
them in my state now how do you enforce that how do you manage that so I know there are
a number of organizations pushing for that to be at the federal level but there's always
that state versus federal kind of set of questions that comes back into it.
Yeah and I think also on the topic of regulation there is this is the first foray into trading
on the internet that some sort of Main Street or retail investors might have had so it's
quite new to them to see what an exchange looks like on in front of their screens and
it's all very exciting as well and if we've seen over the last say six months you could
make a lot of money from it so you can see why people have stuck but also there's on
the flip side there are regulations that surround exchange exchanges in the US and outside and
in Europe as well and the trading cryptocurrency aren't they aren't afforded the same protections
that other exchanges are like ATFs and on that point there was there's actually a really
interesting sentence I think in the released testimony which they state unfortunately it
is clear that some have taken advantage of lack of understanding to prey on investors
excitement about the quick rise in cryptocurrencies and ICOs and they actually quoted something
that we've talked about a lot that it was an SEC enforcement against what was quote
so easy that it is grandma approved.
It's dangerous at the end of the day I think there is definitely a silver lining to the
cloud Simon and I had a conversation last week with someone who said they're getting
a lot of interest initially from very young investors who are putting money into cryptocurrencies
and then they're saying well actually we can do this why don't I put money into into mutual
funds why don't I put money into other things so we've heard a lot of economists come out
and say Millennials aren't saving Millennials aren't investing and maybe cryptocurrency
is the quote unquote gateway drug.
I love that I absolutely love that and I was on fintech inside our news our sister show
I was kind of mocked a little bit for talking about Robin Hood and I think I maybe mentioned
this on the last blockchain insider but that kind of can we get people to pay attention
to investing and maybe volatility and drama and the novella thing is what markets needed
because markets were so boring and dull and crypto made them interesting and if you're
sitting there in your 20s now you've started to think about money in a way that you haven't
this is your moment where you go oh crap because in 2008 I remember I was in my early 20s and
the markets crash and I was like oh crap I need to think about money because it might
not always go up and savings aren't easy and what if my pensions not for sure we've had
a whole new generation of people discover that and maybe discover what it's like to
lose for the first time and so I think that's that's going to be the start of something
yeah I mean that is very interesting but if you sort of rewind 20 years further back than
that we were in a world where banking wasn't particularly sexy it was a very normal job
it was very sort of I know a lot of generational jobs were like that one job for life and things
but and then fast forward to 2008 and there's a big financial crisis and our generation
or the people of our age aren't afforded that same security of the generation before us
and do we think we're going to get even less security from the generation ahead of us what
if they don't get in early is it still another structure of the same kind of pyramid scheme
I didn't say pyramid scheme there I'm not saying anything is a pyramid scheme but if
you get in earlier you tend to public pensions may be a pyramid scheme maybe well here first
guys and I think on the back of this look we're going to see an EU directive coming
in June around virtual currencies specifically and so there's a silver lining aside from
making investors pay attention who hadn't paid attention before and maybe the social
benefits of that there's also the fact that the cryptocurrency space was struggling for
legitimacy as they these activities from regulators happen they become more and more legitimate
and the excuses for banks not to support people who want to transact with this world become
less and less and then becomes the really scary question okay so what's the actual value
of a cryptocurrency what's the actual real world value of these things is it is it just
was it right all along was it just tulips or is there some real world value here that
represents digitally native tokens digitally native asset classes and can these digitally
native asset classes like film and digital arts and so on can those non-fungible assets
find a home in financial markets in a way that other things can there's a story from
trust nodes saying that some US senators have introduced a bill I was just going to leave
it there because that was quite fun but no they're exempting tokens from security laws
now this bill has not been passed but it's interesting that some senators have gotten
as far as introducing that bill so what do you think about this one Colin I think there's
lots of caveats around this and of course we'd love to have that idea of exempting tokens
from securities law but I think it's much more nuanced around it I'm definitely not
a lawyer I barely understand any of it and I understood that it's only in the state of
Wyoming so fantastic but let's not take this as a the United States Senate is looking at
doing this this is literally the least populous state in the US it is very big for business
because of tax reasons so much like the Channel Islands in the United Kingdom punch well above
their weight as far as business Wyoming does in the US for very different reasons but they
are looking at some of these things potentially being ring-fenced outside of securities laws
but it's mostly things like tradable gift cards and prepaid phone things on a blockchain
yeah and they do specify that it's not marketed as a security in their actual bill so that
makes sense and and you know maybe we'll start to see a lot more differently governed models
of tokens emerging that aren't just you know to to reference one of your later articles
the ICO swindle the great fool somebody will buy it for more than me but that really kind
of speak to usage and like a work-to-earn kind of model for example I've seen a lot
of good work lately on helping people understand the different types of token out there because
it gets really confusing like I'm okay so you're buying this token in this pre-sale
the value might go up or go down but what is the token like what is this thing I'm actually
buying what does it do what does it get me because sometimes like it allows me to use
a product that hasn't been built yet well would I want to use that product and is this
team going to build this thing versus sometimes it's buying me a share of their future income
in which case all right so that's functioning a bit more like a security it's a bit more
like shares or dividends and that sort of thing so there's there's really kind of a
gap in the market for and I think an industry level of coalescence around how do you how
do you actually define these things and how do you help different regulators understand
them because I think some people do have a point that not everything in there is a security
but a lot of it is I think at the end of the day where everybody's really trying to go
is like Elon Musk and his flamethrowers or not flamethrowers and basically trying to
bring in a load of cash to finance what they're trying to do and they're doing that with tokens
and they'd like them all to be looked at like flamethrowers when what they're really trying
to do is dig a hole in the ground that won't pay off for another 30 years but a lot of
those things are securities in most if not all regulations around the world and there
are clearly things and this is time after time the SEC has said we're looking beyond
function we're looking and into what's actually happening inside of this thing I love that
that idea that the boring company is like basically selling tokens but as a but they're
doing it a different way they're selling you hats and flamethrowers and that's a way to
generate revenue for like do drilling holes in the ground that's going to take a couple
decades why you need a flamethrower for that I don't know but hey maybe everybody that
bought them gets to like burn the first car that comes they're buying Elon Musk the brand
really only true already I'm speaking of more regulation in Canada some regulators are apparently
set to approve the country's first blockchain ETF but it's it's not all as it seems Colin
it is it is not first of all it's from Canada so nothing says it seems we do love the Canadians
so this is an ETF that has been provisionally approved by the Canadian regulator it holds
equities from companies that are directly or indirectly linked to blockchain or cryptocurrency
a lot of these have been companies who saw their their stock soar because they put blockchain
in the name in place of things like iced tea or companies we talked about last week or
the week before companies that were doing oil mining that decided hey why don't we get
me some of this blockchain and threw that in we'll see but it's definitely not a Bitcoin
ETF which is what a lot of people wanted to sell it as definitely not what as all as it
seems it's definitely not a garden but next story on wired the big ICO swindles Sarah
you referenced this one a moment ago this is actually from Joy Ito who's the I think
was the head of the MIT Media Lab because MIT Media Lab and MIT famous for having come
up with just about every invention in technology some amazing things and they're always way
ahead of their time they also have the MIT sort of digital currency project that they've
had funded Joy had for some time had been quite supportive but this this arguably this
tech purist has said ICOs are a bit of a swindle bit of a scam you should avoid them did you
have a chance to read the story I did yes and to summarize he's basically saying that
ICOs are kind of not how he envisaged the what the world would look like when him and
his friends set up DigiCash in the 90s and I can kind of see his point that there's this
immediate rush in as soon as people have realized what the potential of something like blockchain
and the potential to issue your own currency or token or whatever you want to call it on
top of that and raise money that can be transferred into real money which seemingly is only going
up that's instantly what people did and they haven't actually enacted any of the good things
they wanted to do for blockchain to make the world a better place you know referencing
Vitalik's tweet storm from a while ago saying how many of the unbanked are banked and this
to me ties in with the same theme of what is this really for and what are people using
it for because if it's just going to raise more money to go into the pockets of the same
people then well okay great but otherwise if it's really a transformational underlying
technology then let's focus more on that let's see more investment in that so I find this
interesting as well because whilst all of those points you make summarize his individual
position to me it almost when I look at we covered last week the telegram ICO and some
venture capitalists trying to get into telegram doing the coin offering a lot of the early
VC firms like Andreessen Horowitz who were involved in funding organizations or fun mini
funds that then got into ICOs have almost stopped and backed out of the ICO space entirely
it's almost like those those poster children for the Silicon Valley tech elite have kind
of gone you know ICOs were the thing but maybe maybe they've turned their back on it now
it's too mainstream not cool anymore maybe I see those are dead come on like what what's
what's left in 2018 and ICOs I mean telegram clearly jumped the shark they they want to
raise I heard they did actually raise two billion dollars so by far the biggest ice
you by far what are they actually delivering like who has gone done an ICO and delivered
anything other than a theorem I haven't seen anything yet but please you know tweet at
me if I'm wrong and you have delivered something I think Elon did better with the flame throwers
at least they work right that would be great to have a token ICO on flamethrowers why not
I wouldn't be surprised if somebody's done it can I take a slightly different take quickly
on this I think ICOs and cryptocurrencies is a broader take here is Bitcoin cryptocurrencies
ICOs all of this is one single package is nine years old right and think of this as
like a growing child into an adult we're still a very rambunctious preteen times we saw this
thing when it was much younger going up down and everywhere nobody knew what it was doing
it was discovering itself it's still just about going through puberty here like blockchain
is going through puberty it's still trying to figure itself out and it's breaking things
and burning down the house or whatever the hell it's going to do but it doesn't really
know what it wants to be when it grows up and we're all trying to figure this out and
I think that's very much this sense that people are saying you're throwing money into a black
hole and you're throwing it on to greater fools at the end of the day it might come
to you know be a live at home until it's 30 in the basement or it might turn out to be
the next CEO of a tech company we don't know that yet we're hoping it's the tech company
and not living in their their parents basement until they're 40 well it could grow up to
be Brock Pierce thank you for those that don't know Brock Pierce was a child actor in the
mighty ducks indeed and a story in the New York Times where Brock Pierce and several
others are moving to Puerto Rico and they are making a crypto utopia so what they call
per utopia they're going to basically try and get together and sell their homes and
cars in California establish residency on the Caribbean island in the hope of avoiding
what they see as owners state and federal taxes and these men almost exclusively men
have a plan for what they're going to do with their wealth they're going to build a new
city where the money is virtual and the contracts are public to just show the rest of the world
what a crypto future could look like oh my god say your line come on so it looks like
some bros are brewing this is not a good look guys come on you go right after Hurricane
Maria's decimated the island you brought in your millions you don't want to pay taxes
you're going to buy up and build your own cities to live your own lives and whatever
you want to do even the hedge fund managers that are down there escaping taxes are calling
you out this is audacious like get a fucking life pay your goddamn taxes and live in a
place rather than trying to take it over live in a place actually bring something back to
the community don't just take over some old children's museum because you got it on the
cheap and don't pretend that moving there to dodge taxes is creating a utopia like no
they call it the monastery I mean fuck them yeah it's just a sign of how silly things
have become really and actually how a rebalancing might not be such a bad thing yeah so crypto
being down might not be a bad thing indeed on the back of this Colin you discovered a
story in the Washington Post where somebody said bitcoin is my potential pension what's
driving people in Kentucky to join the craze and this was published on February 3rd but
I guess they probably did quite a lot of research because this is a long old article from the
Washington Post here yeah I think anybody that's interested in kind of the story of
the people the real people on the street investing in this should definitely have a look at this
great article a bit lengthy but it talks about a lot of normal humans that invested in crypto
currencies because they saw the prices going up people that say you know I'm doing software
sales I don't ever see myself paying off my own debt not even talking about my children
who are just going into college now they're talking about you know I see this stuff go
up I saw this 13 year old kid that invested in it four years ago and now he's a millionaire
how can I do the same thing and it speaks to the thing that we've been talking about
of people putting money they can't afford to lose into this because they think it's
a sure bet and that needs to be protected it also talks about you know there are some
of those bright stars that got in early and got lucky in Kentucky we all need to be very
careful and if you are thinking about investing in crypto currencies for the first time definitely
read this think about the risks you've seen it happen in real life if you haven't seen
it before some of us that have been in this for a bit longer have seen big crashes before
they're pretty usual here.
Yeah and use common sense like the not leaked but released statement from the SEC who are
speaking as we speak use common sense if it looks like security if it smells like security
it probably is a security and what goes up must come down is that these kind of mantras
are no different from normal investing or sorry mainstream traditional investing.
Well indeed I mean you just need to look at the Dow Jones or the FTSE or the DAX in the
last couple of days they come down too and I saw a story about how some wealth managers
are getting angry phone calls from their clients because the Dow Jones is down 4% and it's
like yeah these things happen in markets and they've happened a lot faster in crypto currencies
but things going down as normal and I think living with the consequences and planning
accordingly is a great lesson for everybody but I think I guess the one thing with mainstream
gaming all of this is that there's a story in Reuters Colin where compliance officers
are sweating as crypto currency trades have gone quote unquote mainstream.
Yes and I particularly like this one because Anna Herrera who is fantastic quoted me.
So one of these things that a lot of people have been kind of looking at in the background
is there's been a lot of announcements about partnerships from big companies with crypto
currency companies.
It started out with things like R3 and the notion that a bank joined R3 was big news
amongst banks but it wasn't really big news that people could buy into and then you saw
companies tripling their share price because they said the word blockchain or there was
rumors they partnered with Ripple and then it became banks actually going out and partnering
with things like Zcash or Zcash and that goes through the roof and there's been a lot of
speculation that there are questions about whether people are doing insider trading on
this.
We saw things about Coinbase and Litecoin and Bitcoin Cash being listed potential things
on there.
A lot of compliance officers have to watch normal investments like bonds and equities
and how their own banking staff might need to be careful around this so they're not trading
on insider information or at least not giving the appearance of it even when they're not
at all able to do it.
It's something that's starting to come to the forefront but it's still so nascent that
people haven't quite figured it out.
I think that there are a lot of people in there in banks that are very close to it and
they generally use their best judgment.
I would question this in non-banks that have partnered because they're not necessarily
used to it.
Not because they're malicious.
Just if you worked at IBM do you know that you shouldn't be investing in this company
and then six months later you put out a PR that says oh yes by the way we partnered with
this company.
That sort of knowledge is a gap and it's not always malice I think is an interesting point
and then also if you're a compliance officer you've already got the day job, you've already
got the stuff you look after and this new thing comes along so the amount of thinking
time you have to take in this new world is limited.
The amount of knowledge you have about it is limited.
The amount of kind of the optics of cryptocurrencies look horrible if you're a compliance officer.
People say they're all anonymous and governments are saying we should look at them more and
there's more regulation coming.
You can see why they're just like well I need to keep it out and I need to think about how
I limit it and now people have started to buy it.
I don't know that that's an option anymore.
I think you have to start to engage with how do I put sensible limits in for people internally
but also for customers and then once you do that you actually come up the knowledge curve
and what I find kind of exciting and frustrating at the same time is that the technologies
like cryptocurrencies give compliance officers something that they never really had before
in terms of audit trail of transactions.
The way in which you can follow the money from a transaction monitoring and an AML perspective
for example throughout Bitcoin and then the way therefore they were able to capture the
guys behind Silk Road and many other things is phenomenal.
You would kill for that inside the existing banking system.
This idea that it's all bad I don't necessarily agree with but I can see why it looks all
bad.
Yeah and I think that definitely people looking in this that need to understand as part of
their job have to play with it.
So there need to be sensible rules around it as you say to understand these benefits
and if you're just reading about it you're not going to fully experience it until you
actually play with it.
If you want to learn more do reach out to us because both Colin and I have and I know
Sarah has as well but spent a lot of time helping people understand this inside large
organizations.
All right next story though speaking of large organizations headline from CoinDesk which
really caught my attention 2018 enterprise blockchain might be finally ready to break
out.
Colin I think this was one of your predictions for 2018.
It was enterprise blockchain to the moon in 2018.
Where do I buy that coin?
I think probably at your normal stockbroker here.
There are a lot of things that have kind of gone quiet on the enterprise side and a lot
of people have said oh they're not doing anything.
I mean we were we were talking about this earlier we were at R3 meetup last week and
I think the amount of excitement from texts that work at a bank was palpable in the room.
It was about really geeky stuff which generally excites me when geeks get excited about geeky
things and a lot of it felt like the early days of going to the Ethereum meetups and
somebody goes oh look at this cool tool that I built for other devs inside of my organization
that's now open source at a bank and that's a big change.
These things are starting to come.
They're not going to be replacing systems in the next couple of years but it's going
to be those little things around the edges that go oh well that makes my life a little
bit easier.
These legit developer communities are popping up.
Like it's actual developers engineering real things and I think that's the big question
about enterprise was was it all going to be talk and it doesn't appear to be that way
Sarah.
No for sure.
I think 2018 is definitely the year where we'll see a lot of these things coming out
of POCs.
We've all seen POCs.
It's about getting that kind of final investment and pushing things over the line and I think
the tooling is a very important point you make there Colin because that's always been
one of the sort of the challenges the hurdles to overcome in the blockchain space.
A lot of the tooling surrounding it is pretty horrible but now I think that it's definitely
maturing and there's you know people are starting to eat their own dog food so to speak and
being able to use the tools for their own purpose and inside their organizations which
helps a great deal.
So the story itself comes up with a couple of main themes or several main themes.
Firstly apparently the software is ready.
I often describe the space as having three main actors in it.
You've kind of got the R3 and Corda based code bases and people using that and its strengths
and relative weaknesses and how you use it.
You talk about the Hyperledger kind of foundation and project and where and there's probably
two code bases within there obviously you've got Fabric but now Sawtooth has also hit 1.0
and number of people using those projects and starting to move out of pilot towards
production rollouts in 2018 and then of course you've got JP Morgan and Quorum and of course
the criticisms of those are out there but those are probably your big big three beasts.
Well I think that through the digital assets got their own code base in there and obviously
they're moving forward with the Australia Stock Exchange.
I think that's the fourth one to be watching if you're interested in this.
It's still very behind closed doors.
That would be the thing right so that's why I've called these the three but yeah.
And watch out for Cleomatics in 2018 we've just recently open sourced a privacy solution
a privacy EF and we've got another program of forthcoming open sourcing as well as you
know.
Check it out.
It's an Ethereum based technology probably yeah that there is a lot of interesting things
going on being built on top of or next to Ethereum extending what Ethereum does in a
public network specifically for private networks and I think you guys at Cleomatics were leading
this very early so definitely to be commended.
To be fair I should say that the JP Morgan Quorum stuff is heavily Enterprise Ethereum
Alliance and Zcash sort of sort of based and so actually if I was to restate it it would
be the ETH based forks for Enterprise the Hyperledger based projects for Enterprise
and then probably all three encoder and you can group most things into those three apart
from some specific bespoke closed door solutions but those are becoming less and less so your
chain.coms your Cobalt DLs your symbionts they've sort of made some conversations about
pilots and POCs and traction but it's gotten a lot quieter lately whereas those other names
seem to have more momentum but that could just be the optics.
So just to recap then the story says the software is ready interoperability is moving forward
apparently Ripple and Swift will change the game that one I think I completely disagree
with because I don't know if Swift are going to change the game and Ripple we've talked
about plenty on this show bank POCs will evolve so looking for people to kind of move from
the POC further and then lastly cryptocurrencies really enter the mix this one this one I can
I can sort of see but now the price has dropped out maybe it's going to take a little bit
longer but the gradual sort of normalization of the use of cryptocurrency.
I agree with this and I don't I mean I don't think cryptocurrencies are necessarily going
to spur on enterprise blockchain I think there are the gray areas like Ripple of is this
enterprise is this cryptocurrency most of the things that move forward don't need a cryptocurrency
in enterprise land and if they do and there's a few things that people have talked about
like Stellar with IBM's announcement it's not really the same ilk.
Yeah no I flip it because what blockchains are solving for an enterprise versus what
cryptocurrency does is two different things cryptocurrency enters enterprise and banking
in a way of like well okay my clients want to buy this stuff and or I want to be a customer
of this stuff or I want to help trade this stuff and so it becomes like another product
the financial services world sells which I think it actually naturally understands that
more than its own tech change.
And I think the interesting thing to kind of lead on to that is that there are a lot
of new tools that need to be built to handle things like Bitcoin futures even without using
a blockchain that may actually help foster some of the blockchain thing so it's we've
talked about this it's not how Bitcoin will necessarily impact banking it's what are the
impacts that will occur in banking because of Bitcoin.
Yeah I'm gonna gloss over the next set of stories but I had a group of them around identity
so Evername and R3 paired something called sovereign ID with Corda.
Identity is one of those subjects people have talked about with blockchain and DLT being
really key for some time interesting that they've gotten together Evername being one
of the kind of leaders in that space obviously blockstack have their own solution as well
that's used in this trade alone many others.
Will any of these gain traction I think the jury's out but it remains to be seen let's
see if something happens.
And then a couple of other bits linked to that different approaches to Ethereum identity
standards a story on medium comes from YouPort obviously YouPort is the consensus project
looking at identity really long read here by Pele Bradegrad I don't know if I've said
his last name right who's the engineering lead for YouPort but sort of looking at launching
ERC 725 a proposed identity standard which could be interesting because as we were saying
the Ethereum based forks and code bases are becoming kind of more and more known so we'll
see if anything happens there.
And then the last story was on New Scientist a dark web users are easy to unmask through
their Bitcoin use which links back to that piece we were saying earlier about kind of
if you work in a compliance department turns out maybe crypto isn't so bad maybe it's
a useful thing.
Alright so moving past those story in Cointelegraph UNICEF have asked PC gamers to mine Ethereum
and donate to Syrian children so PC gamers turns out they're the ultimate altruists.
Well they've been asked to do that I'm not sure if any of them have them please get in
contact.
Now I want to see if any PC gamer has actually donated to Syrian children whilst mining Ethereum
or linked those two together.
I think you know spare I mean I get it right you've got spare GPU space that you could
utilize and why not why not donate some of that if you're also profiting from it.
I think it makes sense.
I think it's great they call it donor coin.
Yeah good on UNICEF right I mean I don't know if we've had enough of these these stories
where there's they're trying to link some unused capacity to doing something interesting
it's all been about like how does somebody profit quickly.
Well there was folding coin that happened years ago the project was at MIT does it's
folding at home where basically you can donate part of your computer to do really complex
calculations to calculate genomes or I have no idea what it's actually for but you could
get a crypto currency that you could then go and sell was one of the ideas put on top
of it.
This is similar I guess to use your spare capacity I guess it's not too far away from
a story we talked about a few months ago where instead of getting ads on your computer you
go oh yeah run this little thing and you can mine Bitcoin for two minutes on your PC and
then you can actually watch a video or whatever and it'll happen in the background.
Similar idea only this is I guess going for a good cause and I will point out that it
is UNICEF France so way to go France.
Moving on to stories we didn't have time to cover bitsonline.com BTC is a fork of Bitcoin
cash says a US government standards agency which okay good on them for being the authority
on all things happening in Bitcoin but I think I think Reddit would argue that would just
be let's just send this standards agency into Reddit and see what happens next and ask me
anything on Reddit that would be fun.
Bitcoin Telegraph and blockchain called Qtum has launched the first ever quote blockchain
node into space because why not but hold on hold on didn't Blockstream do this with a
Bitcoin node like six months ago I think this is the second ever blockchain node into space.
Do your research before you go for the hyperbolic headlines people and in royalmint.com royalmint
gold on a blockchain Colin is this is that like live live or is it just they've talked
about this what six months a year ago everything six months ago now they talked about this
a while ago that CME was partnering with them to do this I don't think it's live quite yet
but I think there were still a lot of things to be worked out.
So we don't know what's real here or what's not but they've got a very nice website that's
for sure.
I certainly don't know what's in the blocks.
No I don't think anybody does I'm I'm really hoping there's some gold there somewhere all
right don't forget listeners you can let us know what you think about any of the stories
we've covered all the ones we've not covered and that we should have by tweeting at B chain
insider to share your thoughts or you can give us stick directly at S Y Taylor or Colin
G Platt if you want to pick up with the GSAS personally and Sarah what's your Twitter handle?
It's saronomos that's S A R O N I M O.
So you mentioned a few times to for people to tweet you if we're factually incorrect
I don't get a lot of tweets about factual incorrectness I'm guessing it's because when
people are listening to this.
I mostly get hate mail.
Yeah although Gary Fagan does get in touch quite a bit so who knows don't forget as well
you can head to fintechinsidernews.com if you want to comment on any of these stories
all of them go up there all right so we're going to head to an interview with Jameson
Lopp from BitGo and Colin's so excited.
Great so we have the pleasure today of being joined by Mr Jameson Lopp Jameson how are
you sir?
Doing well.
And for our listeners who may live under a rock and haven't heard of you could you tell
us who you are and what you do?
Sure so I've been in the Bitcoin and crypto asset space for a number of years now basically
got interested in 2012 and started falling down the rabbit hole and trying to understand
it better so I really just started looking at the code making my own fork and offering
this sort of statistic dashboard that was geared towards Bitcoin developers so that
we could better understand internal operations of Bitcoin nodes and as I kind of went down
this journey of mostly self teaching I wrote a lot about what I was learning and after
doing that for a few years realized that I wanted to just go ahead and do it full time
so I've been working at BitGo for three years and mainly focusing on operational infrastructure
for our Bitcoin and other like blockchain network wallets so it's just a continual learning
process for me and I guess the final state that I've come to is that you know this is
a system that is still constantly evolving and changing and it's really become a full
time job just trying to keep up with everything that's going on so I try to do all the grunt
work and distill that into little sound bites so that regular people who aren't you know
as deep into it as I am can try to keep up with all of the innovation that's happening.
That's incredible isn't it yeah trying to keep up is a full time job that's a great
statement and it's so true and of course to help with that as well your website you have
I think is it lop.net l-o-p-p dot net that's right forward slash Bitcoin you have a list
of kind of educational materials that is one of the links I send out most most often on
to the kind of people just looking to deluge themselves into this space so as you've kind
of done the education piece what are your favorite sound bites and what are your favorite
common misconceptions?
Well one of the things that I end up saying to a lot of people is that you know Bitcoin
is not necessarily one specific thing or you know that it doesn't have any specific end
goal because there is no authority to dictate you know what the final purpose of Bitcoin
is.
It is this sort of organic community project and as a result I would say you know it has
actually changed over the years as to what it is targeting as we learn more about it
as we learn what we can do with it and how to extend the technology so it can be very
confusing because most people are used to having some sort of authority over any given
system that can then say well this is what the system's goals are and this is the roadmap
for how we're going to try to achieve our goals but there is there's no you know even
an official roadmap in the Bitcoin system it it's just people make proposals for changes
a lot of them get shot down some of them make it through the gauntlet and we end up with
new functionality and and other people just go off and start building without asking permission
from anyone and some some of those projects fail some of them succeed it's a it's a very
you know startup like atmosphere.
There was an interesting point you made in there about there's no official guidance a
lot of people point to the white paper obviously I think when I first heard about Bitcoin I
read the white paper I imagine it was similar similar for you what do you say to people
that say that is the vision or that is kind of the guidance bearing in mind that yes we've
learned more about it and things pivot.
Yeah so we've even got you know a certain group of people who are very keen on trying
to follow what they believe is Satoshi Nakamoto's vision who was the anonymous creator of the
system and you can read into the white paper and try to interpret different things but
it it becomes just like any other sort of historical text and so I'm seeing people really
create dogma around their interpretations of different quotes from Satoshi whether that's
in the white paper or on forums or whatever in the several year period that he was active
before he disappeared.
And my my main response to that is that first of all Satoshi left so as soon as he stopped
contributing to the system he no longer has a voice his vision is basically irrelevant.
The only thing that matters is the sort of collective vision of the people who are currently
participating in the system and trying to improve it so you know you can sort of take
a historical view and say well I'm going to try to do what Satoshi wanted but my belief
is that if you're going to do that you should at least say well this is my perspective and
I like what Satoshi liked and these are the reasons why I think we should try to do this
not just you know make appeals to authority to a figure that is no longer really a part
of the active community.
It's an interesting perspective because it starts to resemble a religion and this is
something Collins said for some time is the Bitcoin space does have a lot of similarities
to a religion in so far as it starts out with a text and then it becomes lots of warring
factions for the true true Bitcoin the true belief what is the right coin what is the
right one true God and there seems to be more and more of them.
How would you sort of summarize some of the challenges that have been created in the recent
years around scaling and would you say that's Bitcoin's biggest issue or would you say there
are other things that face it as well?
I mean it's definitely been interesting to see how this has all played out so you know
we had about three years of very vigorous debates and while there are certainly a lot
of similarities to you know religious or propaganda type wars the interesting thing about forking
in general and forking in open source software has been a thing for decades now but the entire
point of being able to fork a software or fork a blockchain fork in an open system is
that this provides you for an avenue a you know non-confrontational non-violent avenue
to change your perspective of the system.
So where as like in political systems we generally see like a democracy or representative democracy
where you know whoever can get 51% of the votes basically gets to impose their perspective
on the other 49% in Bitcoin that's not how it works.
If you get 51% of the votes and there's 49% who are against whatever change you're trying
to make then instead of you being able to force them to accept your new rules you have
to go create a new network and now the networks split and each perspective gets to basically
compete in the marketplace to see you know who can offer the best properties of money
or whatever other functionality the system is offering to users.
What really I think hits on a point I've been talking about a little while about Bitcoin
is the kind of social groups that Bitcoin has initially appealed to.
So the libertarian faction in the United States and in other places were very early adopters.
We can talk about criminals for economic reasons, Silk Road being kind of the front foot of
that but I think libertarians were even earlier than that.
Would you say it's a fair characteristic that relatively speaking that is a small group
that saw some commonalities in their own economic views but more importantly kind of this very
fact you just mentioned.
We have the freedom to do something and it can't be forced or am I missing the point
completely?
Yeah and whether you want to say you know it's libertarianism or voluntarism or anarcho-capitalism
I consider myself like a cypherpunk and a crypto-anarchist and so I originally got interested
in the system both from a technical standpoint because I'm a computer science major but also
from a philosophical standpoint of money is this you know abstract concept that I believe
belongs to all of humanity.
I don't believe that any person or any group has a special claim to being able to dictate
what money is so you know over most of history you've had some sort of authority and power
whether they're you know political in nature or central banks or whatnot that has basically
dictated the specific properties of the monetary system and I thought that it was amazing that
we now have the ability to basically have a collaborative project where anyone who is
interested can give their input and say you know these are the properties that I believe
that a monetary system should have.
So from that standpoint I think that it will always be rooted in some of that philosophy
and ideology but of course as we've seen different waves of adoption happen over the years you
see people coming into the system for different reasons.
A lot of those more recently due to mainstream media is just people coming in because they
see dollar signs and they you know they want to ride the wave and get rich quick and that
can be detrimental of course.
Not only detrimental I mean I think you posted on this and we've talked a lot about this.
Bitcoin is an experiment and we like to say you know if you're new to it never put money
that you wouldn't be happy taking to a weekend in Vegas.
I know a lot of people that have been in it for a long time are very heavily invested not
only from a monetary point of view but also their time.
People like you know a lot about this and I think you know the risks you're taking and
the experimental nature of it but anybody else getting into it you may get rich but
you you very likely will lose a lot of money on on at least a short term.
Yeah and I mean I've lost money in a number of different incidents.
In fact I just had an incident this week where I realized that a wallet that I had been working
on for BitGo last year that I had put a decent amount of money into is actually corrupted
and so I'm currently working to see if I can possibly recover that but it's not looking
good and it was a you know non-trivial amount of money in there but that's kind of especially
when you're a developer in this space it's one of the risks that you take but early adopters
of anything in general are taking an ordinate amount of risk compared to what the mainstream
people will end up taking because by the time it's ready for mainstream most of those bugs
and kinks will be worked out and so you know that's one of the reasons why it's high risk
but also potentially high reward from an investment standpoint.
Interesting perspective I guess you say when it's ready for mainstream implied in that
statement is that it's not ready for mainstream yet and yet Colin and I sort of talked late
last year when we were looking at all-time highs for Bitcoin of you know $19,000 that
I felt like the mainstream had moved in and perhaps the mainstream had moved in too early
because there was a risk of getting burned.
You may have seen that in some reddit forums the suicide prevention hotlines are kind of
becoming the main thing because you know this ready for mainstream thing could be a while
away do you think we are some time away from that or do you think it's actually no that
it's just a case of building the right user experience the tech is ready.
The tech is definitely not ready so I would say that you might believe that Bitcoin and
crypto assets are mainstream and that's because of the mainstream media coverage so I think
I saw some stats recently where more than 50% of Americans have heard of the word Bitcoin
but less than 1% of them actually own any much less you know really understand the value
and the utility of the system but even from a technical scaling standpoint there's no
way that any of these blockchain systems can currently handle mainstream like transaction
volumes they would all basically fall over and everybody would be very upset if you know
an entire country tried to start using any of these on chain transaction systems and
that's why we have a lot of developers are very excited about building the second layer
payment technologies that are going to give us the scalability that we really need to
go mainstream but I think the best way that I've heard it described Andreas Antonopoulos
had a great talk where he was talking about how the internet evolved and how it failed
to scale over and over and over again and you know in the early days like 56k dial up
internet there were a lot of things that you could not do because you simply did not have
the bandwidth and the user interfaces were just not ready but over the years we continue
to build additional layers on top of the technology the hardware continues to get better and we're
able to realize really the dreams of what a lot of people are thinking of today but
just reality is not there yet so from a lot of technical standpoints I think it's not
ready but also there is an issue of almost like a cultural or perspective change that
I think is required and that's because we're moving from a type of system that has been
in place for pretty much all of recorded history of having trusted authorities that you can
go to if you have a problem and they'll fix the problem for you to going to a system that
requires you to take ultimate responsibility for any screw ups that you might have and
so the result of that is that a lot of people who get into these systems right now who don't
have the right mindset can very easily make a mistake be negligent there's a million ways
to lose your bitcoin and pretty much everybody has lost bitcoin in one way or another if
they've been in the system long enough that's one of the the sort of constants that I've
seen from talking to anyone who has been using it for a number of years and whether it's
just you know out of malice from someone hacking you but more likely just due to negligence
and forgetfulness and you know losing your keys somehow you know even if it's just like
oh I accidentally put my USB driver my ledger wallet through the wash or something like
that and I didn't have any backups like I've lost count of how many different ways I've
heard of people losing their money and of course because there's no authority you can't
get it back.
That would make a great YouTube series a million ways to lose your bitcoin and I think that
could be pretty fun so there's three things you touched on there I think before we get
into the scaling stuff I want to talk about the idea that because there's a million ways
to lose your bitcoin we live in a world where consumer tech is playing to laziness it's
playing to the dopamine receptors in the human brain being as easy to attack as possible
and just to just to get people coming back and staring at stuff and not know why they're
staring at it but the second part of that is we're also in a phrase of there is a cognitive
load at which an amount of money for people becomes too much so I come from the financial
services background and I was talking to somebody who works in wealth management a couple weeks
ago for a different podcast we do and they were saying everybody has that number everybody
has that number where it's like okay I can't do this anymore somebody please help me and
make me feel that it's okay like do you feel that there's still a role for that with bitcoin
does bitcoin obviate the need for the individual to do key management or is that just a perspective
of what bitcoin could mean?
Yeah key management is definitely one of the fundamental issues at play here especially
for you know the really early adopters who now are you know richer beyond their wildest
dreams and the result of that of course is you hear more and more horror stories of people
losing millions and millions of dollars in an instant so I think we're going to see two
different things happen and we're already seeing them start to happen and one of those
is going to be the rise of reputable custodial services and you know I think they're going
to start by catering to the institutions and eventually that'll probably also be catering
to like family offices and just high net worth individuals and then you're going to see some
other folks who take a more like cypherpunk perspective and say you know we're going to
work on building non-custodial software that is also user friendly so that we can realize
the dream of you being your own bank without you having the nightmare of being your own
bank where you have to you know basically have armed guards you know surrounding your
house or your castle or whatever.
There are technical ways to allow people to be their own bank in my opinion that actually
make it more secure than what you can get from a traditional bank but at the moment
it's very difficult to set up a system like that.
And I think that's interesting there may be technical ways to do it but can we create
the behavior change and that's a user experience question that's an interesting one and I wonder
if there's a dissonance between the kind of the origin story of Bitcoin being adversarial
to the concept of central banks and adversarial to the concept of banking as a system and
actually this messy reality that we find ourselves with in which institutions and custodians
are working within Bitcoin and there's almost a let many flowers bloom both in the technical
level in terms of many different projects forking and many different ideas being recommended
but at the business level and the user experience level you've got the large institutions kind
of reverting to type trying to buy Bitcoin through custody and so on and then you've
got kind of this alternative narrative of you can still be your own bank we're just
working on it.
Do you think that Bitcoin has to be the adversary of sovereigns and central banks and do you
think it's helpful or unhelpful to continue down the adversarial route?
Yeah I mean I think that developers building Bitcoin both at the protocol level and the
application level with an adversarial perspective is what makes it stronger that's why it is
the honey badger of money and I think going back to like Andreas Antonopoulos again he
had a great presentation a few years ago which I believe was called a bubble boy and sewer
rat and he was essentially making the argument that a system that is constantly under attack
is going to end up being stronger because you're building up immunity to every possible
attack vector and you know from a protocol standpoint Bitcoin has been extremely solid
we haven't had any incidents since I think like 2014 there was a short chain fork that
happened but it is a little bit concerning you're seeing the centralization that is happening
in a lot of custodial providers and I do worry that that is introducing more systemic risk
but I'm optimistic because I'm seeing these technologies especially lightning network
and related stuff that is going to I believe increase the competition in the exchange space
so that in a year or two I expect we're going to have a lot of decentralized exchange software
that people will just be able to download run locally and be able to exchange crypto
assets truly peer-to-peer in a trustless fashion that does not require them to deposit them
into a custodial exchange that then has all of these systemic risks where they might get
hacked they might freeze your account due to AML KYC or they might just fall over under
the load of trying to serve all of the requests of other customers and so building decentralized
permissionless exchange software then results in us having this big wide network that is
the quote-unquote exchange and once you get that distributed out amongst many many different
computers then you've gotten rid of a number of different attack vectors including denial
of service issues it's an interesting tension that we find ourselves with between kind of
the need for faster better infrastructure that reverted to centralization and if you
think you used the metaphor of the internet earlier the early cypherpunk movement around
the internet was trying to rebuild the individual's relationship with how it's how we're governed
and I think there was a lot of ideology that's not dissimilar from what we see in the Bitcoin
movement there's definitely though I think as there was some choice of design choices
made as the internet evolved that did give it some elements of centralization and some
elements of government control and indeed the business models that evolved after it
appear to have been more centralized than ever the layer above the internet now you
see the tech giants of these winner-take-all platforms is it just that we're fighting human
nature by trying to decentralize it to a certain degree anyway and before we get into that
as well we've we've kind of floated around the idea of scaling you've mentioned lightning
network you've mentioned segway give us a tour of what they are and kind of where they're
at in their in their development sure so you have a couple of different perspectives of
how to quote-unquote scale these blockchain networks and one of them is a more naive straightforward
way that just says oh let's increase the size of the blocks and allow more data to go into
them and that from a computer science standpoint is known as vertical scaling whereas we have
a bunch of people who want to take a different approach which is to try to minimize the amount
of data on the blockchain and instead scale use it using multiple layers of technology
and scale in a way that would be considered horizontal scaling so in very high level terms
vertical scaling doesn't work very well in the long term because you end up having to
buy more and more expensive computers to process all of the data that you're throwing at them
whereas horizontal scaling means that you're basically dispersing the load across many
many computers and thus you're able to use you know cheaper low-cost computers to to
run whatever application you want and this was actually something that I was very involved
in in my previous job I was working basically as a a cloud data engineer of doing large
scale analytics for a marketing company that would send out hundreds of millions of emails
every day and we would then have to crunch through all of that data you know terabytes
and petabytes of data as quickly as possible and so we had you know thousands of machines
that were running and crunching all of these numbers so I've definitely seen the the cost
difference between vertical and horizontal scaling and what we're trying to do with Bitcoin
is scale in a similar way that the internet itself scaled and that is by basically building
multiple layers on top of each other so if you look at the way the internet is architected
it's a seven layer software and hardware stack the very very lowest layer it's the ethernet
layer and basically what that is is a broadcast global type of data transmission where you
put data out there and it goes to everybody else on your local network and that is really
how the Bitcoin blockchain works you make a transaction you broadcast it on the network
and literally everybody on the network gets that transaction validates it relays it and
stores it forever on their hard drive this is terrible for scaling this is like the least
efficient type of database that I believe has ever been architected but it was required
in order to solve a double spending problem the Byzantine generals problem which was
you know pretty innovative on its own of course the trade-off is it's very inefficient so
if the internet only had the ethernet layer we would not be able to do what we're doing
right now we would not be able to transmit audio and video across the world because everybody
else on the internet would have to get that data stream and relay it and of course your
bandwidth would very quickly fill up just from having a few thousand people trying to
use the internet there's no way it would scale to millions and billions of users so instead
what they did with the internet is they created these routing layers on top of it so that
your data is actually only hopping through the minimum number of other nodes on the internet
in order to get to its final destination and this allows us to scale much better because
we end up using a lot less of the sort of global available bandwidth and you can make
an argument that that is more centralized but it is much more efficient it's still
however permissionless because if one of those nodes along the route that that you're using
to send data back and forth if that node starts to become a bad actor or they get knocked
offline or anything goes wrong that's okay you just route around them use some other
nodes and you know now you have a new path to use for your data transmission and so that
really is how the lightning network works is that we we anchor into the bitcoin blockchain
to create something called a payment channel and then we have a bunch of nodes that have
payment channels connected to each other and they are routing data back and forth but in
this specific case the data represents monetary value so now you can have this network mesh
of nodes that you can find a number of different paths to route your money through very quickly
it's basically you know instantaneous at the sort of speed of of the internet itself and
so it'll end up being a lot cheaper and a lot faster than trying to do on chain stuff
and as for segwit very high level overview of that is that it's just fixing a tiny flaw
in the bitcoin protocol called transaction malleability and and that allows us to create
these payment channels which then allow us to transmit these bitcoin transactions between
each other off chain you know without broadcasting to the entire network it basically gives us
some additional cryptographic and game theory guarantees that enable the lightning network
to work and the lightning network is really complicated to put it in perspective the bitcoin
white paper was about nine pages and the lightning network white paper is about 60 pages so it's
more complicated it involves a lot of game theory and it does provide a slightly different
security model but it also provides a lot of amazing benefits on the scaling aspect
and moving away from lightning which i think is fascinating and people are interested definitely
check out the 60 odd pages of white paper there was a really big effort to look not
only at implementing segwit the middle last year but something called segwit 2x and we
talked about that a lot on the show so so listeners have an idea about what's going
on there a lot of people were against that so in short for those people that don't remember
it was implement this segregated witness that you talked about which fixes this malleability
but also do a bit of this horizontal scaling to double the block size effectively without
accounting for the segwit because i know that that skews numbers why was there a pushback
against that and can you talk a bit more about hard forks sure uh there was pushback for
a number of different reasons one of the main reasons being that this was an agreement between
a handful of enterprises it happened at the consensus conference in new york i happened
to be at that conference so i i was not a part of any of the discussions because that
that was only really like ceos that were part of that new york agreement uh so this left
a bad taste in a lot of people's mouths because it was done you know quote unquote behind
closed doors it was not this open process of trying to go out to the community and and
find consensus it was rather just you know a smaller group of enterprises that have their
own specific interests uh trying to create consensus and force it on the rest of the
network by getting a bunch of miners to agree with them and claim that they were going to
go and hard fork and put all the hash rate on the new fork but from a even higher level
like non-governance standpoint one of the reasons that a lot of people are so opposed
to just increasing the block size is because it creates a greater resource demand for those
of us that run fully validating nodes and and fully validating nodes are what you have
to run to have the strongest security model that the protocol offers and when you're doing
that you have to download and validate every transaction that has ever happened in the
entire history of bitcoin so even just you know doubling the amount of data that's going
in can very easily make it grow at a larger and faster rate and would you know price certain
people out of being able to do that from a computational standpoint so you know eventually
i think that we are going to need bigger blocks but we've seen a number of different uh entities
show us over the past year or two that they are using the blockchain very inefficiently
and you know one of the biggest uh entities that is doing that is coinbase for example
where you know every time you want to do a withdrawal from them they will create a new
transaction with a few inputs and one output to you and one change output back to themselves
and they could easily make this you know orders of magnitude more efficient by batching up
those transactions and you know just creating one transaction that pays out to like a hundred
people from a data size standpoint that would be much more efficient for the blockchain
and so if you look at the blockchain as this communal resource then you realize that it's
subject to sort of a problem of the commons and when there are no fees or very low fees
to use this data and you know get your transaction stored on a hundred thousand computers around the
world you don't have a great incentive to be a good steward of this resource and use it efficiently
and that's one of the reasons why even though a fee market can be very frustrating for a lot of
users and it can be somewhat unpredictable that is really the only way that we can think of having
an incentive for users to you know be efficient in how they're using this communal resource
so I think if you see if we see a lot of these big companies start to use the blockchain more
efficiently and then we're still running out of space and there's like no more way to squeeze any
more efficiency out of the system I think it would be a lot easier to convince people that we need a
block size increase it's a bit similar to like a toll road right if the roads are free you'll
you'll drive you know five miles down the road to go pick up groceries 10 times a day if that's what
you want to do but if it cost you 10 bucks to do it every single time you might think about you know
grouping some of those things together the question I'd have on that and I completely take that point
if there are companies that are running this and are still very profitable which is what we've
understood from Coinbase in last week and many of these other companies why not let them do it yeah
and well that's the thing is they're they're free to to use the the protocol and then the network
however they want and I think one of the reasons that we've seen it go so far that you know even
when transactions could be like 10 or 20 transaction fee and they still just keep doing this inefficient
method of using the blockchain I think that a lot of that is because they're passing the fees
directly on to their users and so the company itself might not see a huge incentive to to be
more efficient in their usage and so at that point you need some sort of other feedback mechanism
and I think we've seen that start to happen over the past few months where people like myself
are looking at the network we're doing test transactions with these various entities and
trying to figure out how efficient they're using the network and if they're not doing a very good
job at it we just put it out there we publicize the information and we let the the users know
that the the users of these services know that they could be saving a lot of money if these
companies would just you know adopt a few new methods and and adopt a new technology like SegWit
so we need this like organic feedback mechanism and I think a lot of companies have started to
hear that feedback and some of them have already implemented these methods and others have said
that they're not working on them. Can I take a bit of a transition here into Bitcoin maximalism?
This is something I've heard people call you a Bitcoin maximalist I don't know if you agree
with the title but could you tell us what Bitcoin maximalism is and maybe why Bitcoin maximalists
see Bitcoin as different better than everything else that exists? Yeah I mean I think it basically
comes down to some of the theories around money itself that you know the the best money is going
to basically crowd out all of the other types of money and because money is a network the the
larger the network is the more value it has and so there are a number of reasons why it makes more
sense to have one big monetary network than a thousand little monetary networks. I'm not so
sure that I consider myself a maximalist I mean I do believe that Bitcoin and the developers and
the people behind it have a very conservative approach and that they're going to end up writing
like the the most efficient forms of of adding functionality to these consistent systems that
are safe for everyone and there's a number of different trade-offs that are gonna you know
happen over the short term and long term due to that and I think that has allowed some of these
other systems to pop up and compete with Bitcoin for a number of different things but over the long
run especially if you're looking at like the Bitcoin perspective versus the Ethereum perspective
or versus the Bitcoin Cash perspective I think that over the long run Bitcoin is going to emerge
as the superior technology. What we're seeing happen now is that marketing you know is playing
a really big role in in a lot of these coins and and I think that it marketing works until
you get to the point that you're actually hitting like technical thresholds that require
a high engineering expertise so it's more of a like a long-term versus short-term vision
but due to the the permissionless nature of all of these crypto assets I don't I don't think that
you know all of them except Bitcoin are going to die it's very hard to kill a permissionless
network the only way you can kill the network is basically for everyone who is involved in the
network to become so disillusioned that they all agree to just give up on using it and trying to
improve it but yeah it's going to be interesting to see how the markets play out in the coming
years but I think that a lot of the the folks in the Bitcoin space take a much longer term
viewpoint of or at least I take a like decades if not you know multi-generational approach to the
system so I'm not looking to build something that will just get replaced in a few years or even 10
years I want it to be functional for the very long term so that we can finally meet this vision of
vision of having a global open monetary system that anyone with an internet connection can use
I think that that's a really interesting point I mean a while ago we talked about
the notion that in any normal technology if you're building phone apps or something
you're an entrepreneur you're a developer you build something it's great somebody uses it until
somebody else builds a better thing whereas in blockchain the people working in it not in every
project but a lot of people working in it have built this thing that until everybody becomes
disillusioned it continues to live and becomes according to some circumstances immutable or at
least visible for a very long time in which case you have more of a stewardship relationship and
because it's money you have that incentive to say I'm going to work and earn these things I might
give them to my children or my my family and that that could make it exist for a long time
I think a lot of people still need to work on the mentality of how they treat that because
there are a lot of people out there who are less conservative and the move fast break things is a
great mentality in a lot of different parts of business when we're talking about dealing with
people's money it can be a bit irresponsible from time to time yeah and if anything I would say I've
been kind of surprised by the the lack of of adversarial events over the past year or so you
know there there have been a few things like with ethereum smart contracts going terribly wrong you
know a few hundred million dollars getting lost or frozen but nothing nothing too catastrophic and
so I think it's only going to be a matter of time before we get some more fireworks
it's always going to be interesting to watch those I think we're just running out of time here
Jameson thank you very much for a huge fan you work where can people find out more about you and
and definitely get into read more about what you put out not only on twitter but on your web page
yeah so pretty much all of my content that I do whether it's videos interviews presentations
blog posts whatnot I I make sure that all gets aggregated and put on my website on my website
aggregated and put on my website at lop.net great thank you very much for coming on and we hope to
have you back again soon my pleasure thanks for having me all right a big big thank you to Jameson
and of course my co-host for today sir thank you very much you're welcome thanks for having me
and tell people where they can find out a little bit more about you and clematics yeah so you can
find us online at clematics.com or you can tweet us at clematics or as I mentioned before you can
tweet me too brilliant and your good self at Colin G Platt and you'll miss me next week because I'll
be skiing you'll be skiing but you won't be in a garden you're not putting flowers into your garden
you're not like there'll be trees but like under the snow there's not a lot of plants growing oh
yeah well you're getting okay fair enough do you not have plans for like a water feature or anyway
we'll get to this next week if you want to the week after we'll talk a lot about plants on the
mountains because I know Simon's really in a horticulture nowadays all righty big thank you to
Laura Watkins our producer Michael Bailey our sound editor and we are not with our assistant
producer Petrit this week who's recovering from an operation so get well soon as a reminder 11FS
who bring you this podcast we help you build stuff we help you do stuff if you want to do
something in the blockchain space remember that we're here and you can hit up 11fs.com to find
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