Welcome to Opinionated with Ben Schiller. Ben is a Features Editor at Coindesk. He's
a seasoned business journalist and he'll be talking with some of the most fascinating
contributors to Coindesk Daily Opinion section. Ben is joined by two Coindesk reporters, co-host
Anna Batakova and Danny Nelson. This episode is sponsored by Unique One Network and MIMO.
And just a reminder, Coindesk is a news source and does not provide investment advice.
Hi, this is Opinionated. I'm Ben Schiller with co-host Anna Batakova and Danny Nelson.
Hi guys.
Hello everyone.
Hello.
And today we're joined by a very special guest, Jameson Lopp. He's a veteran Bitcoin developer,
professional cypherpunk and CTO of Kaza, which is a security solution for Bitcoin. Lopp is
also known as a fervent Bitcoin maximalist, which is something we're going to get into
today with him. And welcome to the show, Jameson.
Hi, great to be here. The whole maximalist thing is a funny thing to dig into. It certainly
depends on who you're asking.
I know it's a bit of a label and we don't want to sort of label you with that too much.
What do you mean by professional cypherpunk on your website? I just wondered what professional
cypherpunk does.
Well, it's kind of a joke because this is another funny thing that I kind of laugh at
whenever it seems I go on any sort of podcast or publication or whatever. In fact, one that
I did just last week, I noticed that in the byline, it usually describes me as a quote
unquote self-described cypherpunk. I've talked about this a number of times, essentially
that that is a requirement to be a cypherpunk. The very description of a cypherpunk is that
you are an advocate for privacy enhancing technology. So you have to be a self-described
cypherpunk. It's not a title that is bestowed upon you by some authority or even by other
people necessarily. It's something that you have to proactively go out and be doing. And
so professional cypherpunk is kind of my play on that. This is something that I'm doing
full time and I'm being very open about. And that can also rub people the wrong way. There
are some people who would say that, oh, if you really care about privacy, you wouldn't
be on social media or you wouldn't be talking about all these things that you're doing.
But I think that kind of digs into a deeper issue that we will touch on later is that
this is important, I think, knowledge sharing. If we want the world to be able to make use
of these awesome technologies that are being developed, then we have to talk about them.
We have to talk about the failing of our current society and architecture and just the way
that we go about our lives in order for people to understand that these are vulnerabilities
or you may want to consider them vulnerabilities. And therefore you may want to take action
to be proactive about how to better shore up your stance in your everyday life.
I completely agree. So we're just going to start off by talking about an article you
wrote for Forbes recently. It was actually July 4th, Independence Day, and it was called
Bitcoin Redefining F-U Money. And it was interesting, I thought, because it took at the beginning
how F-U money actually has a sort of a preceding life before Bitcoin. I didn't actually know
this. Could you just talk about how that term came about and how you think it sort of evolved
during the Bitcoin years?
Yeah. So this is interesting when I was doing more research into it. The furthest back,
that I was able to find a reference of F-U money was actually to Humphrey Bogart, who
apparently he would keep a $100 bill in his dresser. And this was, I think, back in like
the 1920s or something. So $100 was a lot of money back then. And when he was asked
about this, he basically said that that was his F-U money. It helped him remember and
remind himself that he did not have to stoop to taking roles that he didn't want to do.
He had the optionality to decide what he wanted to spend his time doing. And that became more
of a thing in Hollywood, especially in the 1970s as more and more actors started amassing
huge amounts of wealth and found themselves in the same position. So basically the F-U
money started out, as far as I can tell, in showbiz. And then it seemed to just kind of
migrate to other industries over the decades as those industries started amassing more
wealth. So that's when we saw basically Wall Street and finance, where people became multimillionaires
and billionaires and amassed their wealth and started to think differently about how
they were spending their time and resources.
And then eventually in the 2000s, basically the past couple of decades, that moved to
Silicon Valley as well, where we saw a great deal of wealth concentration as capitalists
and entrepreneurs managed to build highly leveraged businesses via technology where
they were able to amass large amounts of resources by the efficiency gains that they were finding
and creating for other people.
But it's taken on a new meaning in the Bitcoin era. It's not just about like having lots
of money and having the optionality and having the ability to turn down roles. It's something
more about freedom and privacy as well, would you say?
Yeah. So the whole point that I got to after sort of explaining the history of this term
was that the reason that F-U money has been equated to having millions and millions of
dollars is because of the resource requirements for protecting those assets.
Traditionally, if you have a ton of assets and you want to protect them over a long period
of time, then you have a lot of things you have to worry about. You have to worry about
market dynamics. You have to worry about inflation. You even have to worry about just single points
of failure and the fact that pretty much all of these assets are not under your control.
They're actually under control of various specialists, usually other financial advisors
or legal specialists or what have you. And so you don't want to put all of your eggs
in one basket. That creates a high amount of risk for you to have a catastrophe.
And in order to manage all of this variety, diversity, complexity and whatnot, you generally
have to hire a bunch of people and that costs a bunch of money just to oversee the maintenance
on a year to year basis. So some people will say it, you got to spend money to make money,
but you definitely have to spend money to keep money if you have a lot of it.
And the thing that really changes the paradigm shift with these bearer crypto assets is that
my argument is that they greatly reduce the cost of defending them. You no longer have
to hire teams of people and create complex legal structures and worry about all of these
externalities. You can actually essentially build your own bank with technology or with
the help of a few other people that are not going to charge you thousands and millions
of dollars to do so. To the point that you can achieve the same level or I would say
even higher level of defensibility for your assets where really all you have to spend
is time, maybe a few hundred dollars worth of hardware, so on and so forth.
And you can achieve this level of security that I would argue is greater than anything
that a traditional bank or traditional financial institution can offer you because you can
actually completely eliminate these single points of failure. But that gets to the point
of shilling what I've been doing for a living for six years now and you're trying to create
these robust security structures.
Well, talking about the cost reduction thing, I would say that the strategy that you are
talking about comes with its own costs. And if we are talking about really big fortunes
in Bitcoin, to build this kind of autonomous cypherpunk bank that is only controlled by
you and that is secure actually would probably require a certain level of technical proficiency
or hiring some other professionals that would do that for you, which in this case would
be not very different from hiring banksters and financial consultants. And at least it
requires a high level of personal discipline, which you need to remember where your private
keys are, you need to remember how your system is designed and what steps you need to take
when there is a threat and so on and so forth.
And it looks to me that not too many people are willing to do that. And especially even
if we're talking about the wealthy people, they're willing to pay money for other people
to take care of them, to bother about all that security. So do you think that in the
future the number of people and of wealthy people who would want to take the task of
that personal discipline and learning and gaining technical proficiency, learning all
the intricacies of self-custody of their digital assets, do you think that we will see more
people caring about being that financially autonomous or it will be just a small minority
of cypherpunk meverners who would care about that and everybody else would pretty much
go to a crypto custodian and leave all the worries to another intermediary?
This is the billion dollar question. And I've had to answer this question a lot, especially
on VC pitch type calls. They always want to know what's the market size, do people actually
care about this stuff, so on and so forth. So I think there's a lot of different facets
to this issue. I think most obvious and naive one is, well, it's obvious that people care
more about convenience than they care about almost anything else. This is very obvious
when it comes to privacy and a lot of the privacy related stuff that I've done, it seems
that the high level privacy issues in the world just keep getting worse and worse and
worse and almost nobody really cares about them. Nobody wants to put in the effort to
try to improve their privacy unless they've had some sort of direct failure that's had
a huge obvious negative consequence to them. You can make a same type of argument around
sovereignty, financial sovereignty, so on and so forth. People are used to having third
parties that they can go to when they're confused, when something goes wrong, when they want
any kind of help basically. So I think that this system, it's neutral. The system of Bitcoin
as a network, the way private keys are set up and used, it doesn't care about that. As
a result, you're going to have people doing all kinds of different schemes. Now, obviously
we have a lot of people who they just go to an exchange, they buy the asset and then they
never do anything else with it and never leaves the exchange. For them, that may be all that
they're even aware of. They don't even understand that this is different from when they go to
Fidelity or E-Trade or whatever, where they can actually withdraw these assets to self-custody
and so they never even really look into it. Or plenty of people have told me they were
just too afraid to do that and they felt like leaving the assets with a specialist custodian
is probably safer than doing it themselves. And that is certainly going to be the case
for I think a lot of people who they don't go in depth into understanding the system
and the values of the system. But I'm approaching it from the opposite standpoint, which is
that it's not going to happen unless we can make it easier for people to actually achieve
self-sovereignty. So if we understand that convenience is one of the highest priorities
for people, then we need to continue to make it more convenient for them to achieve the
most robust security model that the system has to offer. So once again, that's what I've
been working on for six years now, where there's a ton of people in this space that are doing
really crazy cutting edge stuff that's hard to even explain. And I've spent the past six
years doing boring old private key management, really low base level stuff, because I feel
like that is the foundation of all of these other things. If we can't solve the private
key management convenience issues, then we may end up with a system that looks very similar
to the current system where most of the money is held in a small number of hands with specialized
third party custody providers. So that's important for me, I think, just from a really high level
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So you're building that convenience layer for those who are looking for that to get
into self-custody. But as you said, for personal security, a lot of people, the vast majority
of people seek out convenience and they're not really going to change their password
from it being the same one across all their accounts until they get owned and until the
system fails. And then they realize, okay, I need to fix this. And at that point, then
maybe, at least in my opinion, my experience with personal security for my family, then
they'll start looking for the convenient way to enhance their security. And I think that
Bitcoin and self-custodying might have the same dynamic where it is extremely important
to have that convenience layer because if you don't, then people won't even get through
the front door. But will they even be searching for that front door without some catastrophic
event that signals to them the importance in the first place of having self-custody?
Like do you think that we might not see such a big sea change for Bitcoin if there isn't
some sort of event that shows people the value of self-custody?
Yeah. I mean, I would argue that there have been a lot of those, though I would probably
say I'm somewhat surprised that there haven't been more. This is one of those issues where
people keep repeating the mistakes of the past. And obviously Mount Gox is like the
big one, but that was so many years ago that I think a lot of new people may not even know
what it was or understand just how much of the like wealth of the system just went up
and smoke overnight. Though we still hear about it because the bankruptcy issues are
still ongoing after what, seven years. But there are still plenty of other exchanges
that go up and smoke. I guess there was Quadriga was probably one of the more recent large
ones. We've also had one of the lending providers, I think melted down late last year. That was
Cred. I've been somewhat surprised that we haven't had more of the lending providers
melt down because I'm sure that they are, at least some of them are engaging in risky
practices. They are black boxes to us. It's not really clear what level of risks they're
taking with the funds that are being sent to them. So I'm not too worried about that.
I think that we are going to continue to see more examples of people losing funds because
they trusted them to third parties. But once again, it's hard to quantify. This is a kind
of back and forth cat and mouse game in the system where there will be failures here and
there. Some people will learn from them, other people's won't. And that is, I think going
to be the name of the game for the foreseeable future.
So with all the DeFi craze that we're seeing happening around here in the past year and
so many new projects and coins and exchanges and use cases emerging, as a crypto developer,
have you ever been tempted to join that party to do something else other than Bitcoin, to
work on some new DeFi stuff? Or that's just too far from you. You're all in Bitcoin.
So I do play around with some of them. I guess one of the more public things that I do is
I actually run a bunch of nodes for a lot of these different networks, at least for
short periods of time, just to test them out because I want to better understand what is
the resource requirements, what is the security model if you want to be as sovereign within
one of these other systems as I know that you can be in Bitcoin.
And a lot of these systems really fail in that regard if you want that same type of
security model. And I think it is an inherent problem where some of them are never going
to be able to achieve that simply because of what their other goals and attributes of
the system are being engineered to optimize. It's a matter of time for me. Time is really
the most scarce resource. And if I wanted to spend my time building on some of these
other systems, I could, but that would be, of course, the detriment to all of the projects
that I'm doing on Bitcoin. I feel like Bitcoin has that first mover advantage and I want
to continue pushing it forward. And I understand that in some ways we are competing with a
lot of other people, a lot of other projects. But if I did work on some other projects,
there are certainly attributes that would be like red flags and turnoffs and prevent
me from ever doing that. So like, for example, I seriously doubt I would ever find myself
working on a project that is like venture backed. I would want to work on a project
that is built as an open community. If it's something that has been funded as tokenomics
or whatever, where like a bunch of the pre-mined tokens go to some venture firm or other early
insiders, that's the type of thing that turns me off there. It's about incentives. Each
of these networks, it's interesting to observe them and their attributes because what we're
really talking about is some group of people has created a new game. And by a new game,
I mean they have designed a system of rules and anyone who wants to can now decide whether
or not they want to play that game. Do they agree with those rules? Do they want to operate
inside of that rule set? And at an even more meta level, the quote unquote governance of
how that rule set gets changed over time. In a sense, it is kind of like politics, except
it's much more fluid than your traditional local or nation level politics. So I guess
that might explain a little bit better like how I decide what games do I want to play?
Well, I want to play the games that I believe are the most fairly designed.
And then one of the big topics that you've written about in the past, and you've actually
emphasized that people need to grapple with this is the idea that crypto is not as private
as people might think that it is, at least for Bitcoin specifically. And Bitcoin privacy
is hard to accomplish, although certainly important. As this space develops and as the
media headlines, let's say the mainstream media headlines proliferate, we're hearing
more and more about crypto's use in criminal enterprises. Of course, it's not completely
fair to say, well, Bitcoin is enabling crime. The dollar enables crime, but it is also true
that it is being used in new and different ways of crime, means of crime. And that's
forcing or prompting the government at least to take a closer look. Just yesterday at the
White House, there was the announcement that they're going to continue to work with mayors
in small towns to increase their ability to analyze cryptocurrency transactions. Now this
doesn't mean Bitcoin, but it also doesn't not mean Bitcoin because that's the one that
people know and are thinking about and are using. So how are you thinking about that
dynamic as you're looking at how the space is developing, that question of the government's
ability to and desire to look into individuals' transactions and try to find patterns?
Yeah, I mean, it's not great. Pretty much all of these networks have terrible privacy.
There are of course, a few privacy coins out there that are certainly better from an objective
standpoint, but I think that they haven't really gotten a whole lot of usage, probably
once again, because people don't care about privacy until it's too late. So obviously,
I want to see better privacy on Bitcoin on every crypto network. This is kind of getting
towards the idea of crypto anarchy. What really happens if we have the technical tools available
to us to shield us from surveillance states, from corporate surveillance, so on and so
forth. It just seems like such a small amount of the total resources being put into the
space are being spent on privacy that I'm not particularly bullish that it's going to
increase meaningfully anytime in the near future. There are various improvements on
Bitcoin that will improve in a little bit, but it will by no means be a bulletproof solution.
I think that at least on Bitcoin and most of these other networks, like in order to
actually operate from a somewhat semi-private standpoint, it's a really high bar. You have
to have a really high level of technical sophistication. You have to understand what all of the different
data leaks could be. You have to understand what the different types of surveillance that
are being performed upon these networks actually is. It's a lot more than just the blockchain
analytics side of things. There's entire network surveillance that's happening on these networks,
so you have to worry about even where you're broadcasting your transactions from, for example.
It's sufficiently complicated that I don't see us having any real bulletproof solution
on most of these networks for the foreseeable future. I certainly think more people should
use Monero and Zcash. For whatever reason though, they don't seem to be doing it.
I thought Monero was the number one criminal coin. That's what the FBI used to say, I think.
It's hard to say. All I really know is that over the years, it seems like at least the
price of Monero has been more stagnant than a lot of these other things, which just leads
me to believe that demand for privacy is not as high as demand for other things like aping
into crazy smart contracts that are promising 10,000% APR.
What is your long-term thinking about Bitcoin as a project? You mentioned this interesting
dynamic before about how its unchangeability is one of its... that it makes it more trustworthy
and actually brings people on board to the network, but it maybe is a disincentive to
development. How much do you think we're going to see DeFi, for instance, be a Ethereum-based
system, or do you see some of that migrating to the top of Bitcoin as well?
Well, at least for the short to medium term future, it seems to me like most of the competition
in DeFi is coming from a number of other networks that are essentially seeking to be, in many
cases, EVM compatible. If you're EVM compatible, that means if someone gets upset with Ethereum
because they think the fees are too high or some other aspect of the network is not meeting
their needs, it's basically a copy paste operation for them to go and spool up the same smart
contract on some other network that may have more competitive attributes.
I think that that's going to suck away at least some of Ethereum's dominance. You could
make an argument the other way though that the interoperability of all of these different
smart contracts being on Ethereum, that has its own network effects that would incentivize
people to stay and continue building on Ethereum. There's only a couple of projects that are
doing DeFi on Bitcoin that I'm aware of right now. Obviously, there is the EVM compatible
side chain, rootstock side chain. I'm not aware of a ton of projects that are working
on that yet, but it might just be my own lack of knowledge of not paying too close attention
to it. It's worth keeping an eye on, but it doesn't seem, at least at this point, to have
gotten to an inflection point where you really see a lot of momentum built up. It definitely
feels like it's still very early.
What are the most interesting, most exciting things for you regarding Bitcoin development,
Bitcoin ecosystem, Bitcoin adoption that you want to be watching in the coming months,
years? What excites you most right now?
Well, I've got a number of projects ongoing. One of them is just that I've been getting
a lot more into trying to understand Lightning Network, running a routing node on there,
which I'm putting capital into and trying to better understand what are the challenges
of trying to get yield on the Lightning Network, as it were, compared to, of course, DeFi yield,
which I think is comparatively a lot easier. You just put your money into a contract and
take it out before you get rug pulled.
On the Bitcoin protocol side of things, there are a number of things coming down the line
later this year and early next year that are going to be good for us as a multi-sig self-custody
provider. I'm interested in features that are going to improve the privacy of our users
so that you won't even be able to tell from on-chain or network analysis that our users
are, in fact, CASA users or even multi-sig users. There's going to be more functionality
coming down with Taproot and the scripting capabilities there that I'm interested in
trying to build more complex type of Bitcoin locking scripts around.
That basically means instead of only having a Bitcoin address that is encoding a script
that says to spend from this, you have to assign so many keys, you can start to put
other conditions in there. Think of it as kind of escape hatches of ways to have alternative
spending conditions. Perhaps if several years go by and you have lost too many of the keys,
it would be really great if you could have other spending conditions that say, okay,
we have an emergency backup way of spending these funds if a certain amount of time has
passed and you no longer have access to these keys.
Much like with, I would say, Ethereum and more complex smart contracts in general, complexity
is a double-edged sword. It's very exciting to think of the things that you could do,
but it's scary because there's also a big possibility for shooting yourself in the foot
if you do something wrong. It's going to be a long, slow road to try to do this the right
way, but I am intrigued by the possibilities.
Okay. Thanks very, very much, Jameson. That was excellent. I think we've got to wrap this
up. Danny Nelson, thanks very much. Anna Betikova, thanks very much. Thanks, Michelle Musso,
for producing this, and thanks to our guest, Jameson Lopp. Do you have a handle or something
people can go to, Jameson?
You bet. It's easy to get to my website. It's lopp.net, and my Twitter handle is also just
lopp.
Great. Thanks, everybody. We'll see you next time. Cheers.
Thank you, guys.
You've been listening to Opinionated with Ben Schiller, Anna Betikova, and Danny Nelson
with guest Jameson Lopp. Today's show is produced, edited, and announced by Michelle Musso with
music by Ender. Have any questions or comments? Send us an email at podcast at coindesk.com
or leave us a review on your favorite podcast player.