Before we get going, I just want to say that you can find us on the web at medium.com slash coin talk medium are our partners. They've got a great crypto landing page at me dot dm slash crypto. It's got all kinds of great crypto writing. I follow it all pretty closely.
I will say, Jay, you can chime in here if you disagree, but the times of doom and gloom and panic do produce some good writing and some good stories. Yeah. And amazing means check. Check out medium for all of that good stuff. Let's hear the music real quick before we get going.
This episode of coin talk was taped on February 1st, 2017 at 11 p.m. Eastern Standard Time. The Bitcoin price index was $8,690.
Okay. Hello. Welcome to coin talk coming to you late Thursday night. We'll get this up tomorrow morning. I'm joined in this introduction by my co-host.
Jay, you feel very amped up for the night when Bitcoin seems to be nearing the apocalypse. I am numb to it now, though I am not actually numb to it now. I think I am very tired actually from just watching it descend all day, but it was a welcome distraction to get to tape our episode today.
We did an interview with Jameson Lopp, who's someone we've both been a fan of and followed and is kind of a important figure in the crypto community. Yeah, we had a great talk. I thought. Yeah, it was fun.
We really, you know, I think we learned something in every interview we do, but I mean, except with Doug Kim, but Doug teaches us how to come back. We'll get that guy in the next week or two. Doug has taught us how to grace. When I start feeling bad, I think about Doug.
I certainly learned a lot about the tech side of crypto and a lot of the history of development, which I thought was really actually useful given that, you know, it's good to be reminded on days like this. I think that there is a philosophy and that sort of technology behind Bitcoin, because if you look at the price, it's a little group.
We're going to get to our interview with Jameson Lopp very soon, but before we do so, I thought we could very quickly take a little take a little mail bag. Yeah, let's do it. I think I put this on Twitter about an hour ago.
OK, first response was from three stacks, aka J money. Twenty eight one hundred and fifty billion in five to six days. FUD everywhere is Bitcoin over. Jay, I don't think so, but you know, I will say that it looks like neither of us are professional candle watchers here.
But, man, I mean, it is a little bit of a like I guess the question that I would have for you, Aaron, because, you know, like I don't think either of us know the question to the answer to that question.
I think the fundamental answer is no. You know, Bitcoin will survive. But did you think that we were going to get to this spot at like eighty seven hundred or eighty six hundred?
I mean, I think a lot of people called that eight thousand line and I will be truly shocked if that line is breached. Yeah, I mean, I know I did not think it would ever go this low.
And when you were calling for it to go to eight thousand, I was like, huh, that's an amusing joke that Jay does on the show frequently.
So now I don't know what to think. But generally, I think like narratives like this don't just suddenly end.
I do think that there's a lot more life in it. There's a lot of mixed signals. I don't really know what to think.
I don't think anyone knows to think. Let's let's take let's take another one here.
This is from Tej Parker, a.k.a. at Panic Hodel. Has there ever been a technological advancement that has failed without being replaced by something better?
Interesting question. Well, there's definitely some stuff in the like Betamax like format era, I think that that might apply to.
I think he's referring to something that he might be referring to that post that on Medium that Nassim Taleb wrote,
where he had a very cryptic and weird line where he said that even if Bitcoin fails, it will be replaced by something better.
Do you remember that? And yeah, I actually I thought that that was kind of a cool idea
that in some ways, like there's a system being documented and it is sort of impossible to predict
whether that system will be fully realized with Bitcoin itself or with anything that exists at this juncture.
But it does seem like we're we're this iteration to completely fall apart.
It would not be the last like we heard from like crypto currencies based on blockchains.
Yeah, I mean, it reminds me of what happened in the Great Korean frozen yogurt wars where.
Oh, sure. Sure. We're all familiar with that Wikipedia page.
Well, Red Mango was a company in Korea that made the type of sort of sour frozen yogurt that Pinkberry made.
Pinkberry was like a coffee shop in L.A. that evangelical family, right?
Yes. And I know I know my California Koreans.
Yeah, I'm actually surprised at how much you know about the Korean the Great Korean frozen yogurt war.
Instead of intervening, you know, Red Mango decided to just let Pinkberry sort of go out and blow their load across America,
which they did, you know, and they would use it all as market research.
And they would come in later and take over because they felt like they had better resources and better products.
That didn't really happen. So I don't actually know what the point of this is.
But I would say that like sometimes there are products that are so big like Pinkberry was that go out and saturate the market.
And what you don't know is when they'll fail, when they'll all sort of when the hype will be over
and if the same exact thing or something very similar is just going to come and replace it.
And with cryptocurrencies, that actually sounds like a pretty reasonable way to think about it,
because, you know, like, look, Bitcoin is a sort of contentious, small, brilliant, I think, but ultimately sort of difficult and thorny community.
Right. You know, like, who knows what will come next?
And I just think that as long as it's decentralized and has a lot of the same philosophies that, you know,
there will be in another appealing iteration of it at some point.
Agree. Agree. This is from at Crypto Ninja 21. Have we seen real mass user adoption yet or was Thanksgiving just a prequel?
Oh, man. I mean, I think that there is going to be some real good postmortems
about what happened to cryptocurrency between like November and January of 2016.
You know, like what the Coinbase effect was November 2017.
Yeah, I'm sorry. 2017. The Coinbase a few months ago.
Yeah. The hundreds of thousands of users that were piling in the sort of mania that that sort of, you know, ubiquity in the media.
You know, I think when the people study and this is like this is not to put a postmortem on anything like that.
But when people study manias, even if Bitcoin goes back to 20,000 or 25,000 or 40,000,
I think that that one period of time is going to be fascinating for people to study.
And I would say in equal measure, we might have many of those periods of time in which even greater number of people rush in.
I feel like we like generally think of something when it reaches sort of a mass pop cultural phenomenon.
And we're like, it's everywhere. Everyone knows about it.
And then 100 times more people will hear about it in the next few years.
There's just like these like different radiating lines of like true saturation of technology.
You know, that first time when everyone in America who has a cell phone has like a smartphone and like what that means as opposed to like five years before that.
So I think we're very, very early in the oh, my God, there's been mass adoption.
I look like people talk about and who make apps who try to make top apps that like if you can't be on the front page of someone's phone,
like it's not really worth being in business. That's like where all the real business is.
That's where Instagram is. That's where Facebook is.
And I think that you could you could say I won't see mass user adoption until like a crypto app or an app that allows the trading of cryptos in that spot.
On the other hand, you could say Robin Hood may be that app.
Yeah, I saw Robin Hood on your phone. That's because I've caught a little bit of gold bug fever.
Oh, no. Oh, no. Okay. Let's let's let's get another question.
We let we don't want we don't want to talk more about that.
All right. Well, maybe we should get to it. Did you did you have any you wanted to pull out of your mail back?
Yeah. This is from Spencer Kerber, who wrote into the high at coin talk account.
Hi. That's high at coin talk dot show.
There's no dot com in there. I just want to settle that score.
This is literally the third time I've done this on the show. I don't know our show's email.
But his question is the quote technical analysis unquote charting stuff is all bullshit, right?
I'm not talking about moving averages slash bands.
I'm talking about the triangles, cups and handles, the fib sequences and wave counts.
Tradition, he goes on to basically say, like, look, most people who are involved in traditional markets would look at this stuff and laugh.
What do you think?
Do people do that stuff in traditional markets also?
I don't think in the same sort of with the same sort of lingo and with the same sort of certainty, I would say.
But I mean, I don't think I don't look I don't think it's all bullshit.
I mean, there's definitely ridiculous ends of it.
It looks to me like a lot of that stuff in a extremely bullish market that's flying up.
If you understand some of that, you know, sort of mojo technical analysis stuff, you can probably do better and pick up a little bit of Bitcoin.
But you end up getting wrecked when the whole market falls apart right now.
And no one seems to really know whether the whole market's going to fall apart or it's going to stay intact.
Yeah. And look, I think that there is a little bit of like I think that Spencer is being a little bit hard on people.
Like, you know, when people say that someone is a genius gambler, sports gambler, like that just means that the guy picks like 57 percent of which means 43 percent of the time he's wrong.
But getting that 57 percent edge, it makes you actually a genius gambler and will make you profitable.
And having the discipline to lay lots of bets and to bet in a strategic way and to, you know, try to find a small edge.
I don't think people who are doing T.A. think that they're like can see the future.
They're mostly. I think some to you.
Probably some do. And those are people who are represented by cartoon avatars.
I mean, yeah, like and this is something that we talk to the T.A. people that we know and the people that we speak to are the people that we sort of respect in that space, which is that in the end, you're not when you talk about a resistance line, you're not talking about you're not making a call.
You're not saying this is going to go up or this is going to go down.
You just say like, hey, something is probably going to happen here because something happened here empirically in the past.
And based on these patterns, there's a chance that something happens here.
Like that's about all T.A. can do.
And so I think that part of the reason why I think it's getting a bad rap, first of all, is because everything's crashing and everyone's mad.
It needs to lash out at somebody.
But I think the other part of it is that like I think that people are just sort of misunderstanding what it actually means.
It's just like a probability that something will happen at a point and perhaps it's good to get your money in or get your money out at a point where there seems to be like a high inflection period or high volume and that perhaps something drastic is going to happen with the price.
That's about it. So, I mean, I don't think it's bullshit.
I just think that perhaps people are expecting a little bit too much out of it.
Yeah, I'll buy that. I'll buy that.
One thing I wanted to run by you, I saw today, it's it's a history of the other biggest crashes and Bitcoin.
Yeah. So in June to November 2011, it goes from thirty two to two dollars.
Ninety. Oh, my God, that's wrecked.
That is totally right. I want to say I'm not positive these all these figures are correct or the explanations are correct.
I was like taken off of some total shitpost or telegram channel that I'm on.
So figure the granis on.
But OK, and it says because of Mt.
Gox hacks, then in June 2012, from seven dollars back to four dollars, thirty six percent.
This one's worse than that, at least.
Linode hack. Seventy nine percent in April twenty three from two hundred and sixty six dollars to fifty four dollars at the seventy nine percent drop to sixty six to fifty four.
Then in February 2014, perhaps forty nine percent when Mt.
Gox is gone. And then September twenty seventeen forty percent from five thousand to twenty nine seventy two with the China ban.
That was not that long ago. I think we had already started taping demos from the show for that.
Yeah, I think that was when I said, Aaron, I don't want to do this Bitcoin podcast.
OK, and then we just had a worse crash culminating in right now where I'm not even going to do the calculation.
But Bitcoin is below nine thousand. Like, does does hearing about those crashes make you feel better or worse?
It makes me feel a little bit better, I guess.
I mean, I I think that that, you know, I've been talking to a lot of people and a lot of people at work actually were making fun of me today.
Oh, yeah, I would say it's like, you know, it's a little mean when like if I like if my sports team lost, I would be like, OK, that's funny.
You know, like, you know, like though, haha, you're like the fucking North Carolina Tar Heels lost.
But like when you're like, haha, this thing you invested in, you just lost money.
It's not whatever. I'm sure I asked for it. Yeah. Yeah.
This is the life we chose.
I don't think it makes me feel that much better, though, because I think that all those crashes, there was some sort of big news event, right?
Yeah. There's something that spooked a bunch of people and led to a lot of panic cells.
And for this one, it's kind of hard to point it out.
And I think that that's a little bit scarier for me.
You could argue that it's this bit for next news and the uncertainty around that, but I just don't really see it because that would be like a violent spike down.
And this is just sort of been like a bleeding off for a long time.
What do you think? I don't know. I don't know how to read it.
I do think the bit for next thing like was a pretty convincing and scared a lot of people.
It's not surprising to me. I mean, I think we had said previously like the panic is going to start with exchanges.
This is an exchange issue that could like it's no one really could predict what could happen.
And generally, I think there's always an existential threat to Bitcoin.
There's always something that, oh, God, if this proves true, it could destroy the whole thing, whether it's the fork or whatever.
There's always going to be a like nuclear threat out there.
So it doesn't really give me a particular pause. But the degree to which people are not propping up the market below 10,000 is definitely Frank.
Yeah. Yeah, I have a I have a I have a question for you.
Yeah, not out of the mail bag, but just me.
You know, just you as a person talking to me over the past couple of days, which is that.
Do you think like is it last time?
Look, this was like about a week ago and Bitcoin spiked all the way down, I think below 10,000.
And I made told you that I thought that Tron and other sort of high volume, like kind of very shady shit coins were all dead.
And then Tron immediately spiked up 40 percent.
It had already happened before you said it. You just.
Yeah, I just hadn't checked. Yeah.
Check the price of Tron and Ripple.
Is there is there something that you think is going to sort of shake out after after this one?
Like, do you think anything is dead or do you think anything is is better off?
I. I don't know, but I do think it's going to be hard to those real like low cap.
I mean, a high cap, like low price, like hovering around a dollar or two kind of coins.
That feels like XLM and. Yeah.
Tron, Ripple. I think all of that that market feels maybe the most shaky right now when you look like how far coming.
Those markets crashed a lot further than like Bitcoin crash.
And I just feel like the people who bought into those markets are like those people just get torched.
Like, yeah, because that does seem to be dollars just got torched. So it does seem like that's a lot of new people as well.
So, yes, yes.
You know, our condolences to the Ripple and Tron holders of the world.
We stand with you in solidarity, but Jay did call it.
OK, should we bring on our guest? Yeah.
Jameson Lopp, you got anything more you want to address before we head on over?
No, I'm just, you know, sitting here looking at the charts and praying.
Oh, I got one more from Twitter here.
Tyler Howarth says, will you bring on Francis in the lights for his thoughts on crypto?
I cannot guarantee that, but I will say Francis is a listener to this show.
Does he hold coins? I cannot and will not reveal that.
He is one of the people who has asked me to include some more basics advice in the show.
So maybe we will we will have him on at some point.
Let's bring on our guest, Mr. Jameson Lopp. Glad to be here.
I think the easiest thing to do here is to kind of start at the beginning.
What was your very first experience around crypto?
When did it enter your psychological world?
You know, I don't remember the exact date, but it was mid to late 2012.
And as far as I remember, I believe it was a Slashdot article that finally got my attention.
And I'm sure that I had read about it before and dismissed it.
And I was basically on the verge of dismissing it again.
But as I started looking into the white paper and the system,
I realized that while it was a very unique type of system, it also had some very interesting new properties.
And it was fairly elegantly designed.
So once I realized that it wasn't just some single centralized system that was going to get hacked and destroyed,
I started devoting more and more time to educating myself about it.
And really, as I learned more the hard way, because there weren't very many educational resources,
I just sort of chronicled my journey and decided that I would try to share my experience
and what I was learning with the rest of the world.
And just started talking about it to anybody who would listen and a lot of people who wouldn't listen.
With someone with your background, both technologically, scientifically,
when you first look at Bitcoin in 2012 and you say, well, this is elegant,
what about it seemed elegant to you?
Because I think for noobs like us or for people who just are worried about the price,
they might understand the blockchain, they might understand what Bitcoin is,
but they might not quite grasp why it's such an elegant solution.
Yeah, so I'm a computer science major and I have been in the web application development sphere
for pretty much my entire career, about 10 years now.
And so I was very familiar with web protocols and web applications and that general tech stack,
even though it has evolved over the years,
it's always been fairly similar in the idea that you have some sort of client-server relationship.
And I'd never really come across a decentralized distributed consensus system like this before.
And so just the idea that instead of having centralized managed servers,
instead everybody who wants to is their own server.
And it had some similarities to BitTorrent.
I was just about to ask a BitTorrent question.
I feel like people who grew up with BitTorrent, it's like the easiest metaphor to start with
because BitTorrent is the only time I'm like, it's not really on anyone's server per se,
it's kind of on everyone's server in a way.
Yeah, but BitTorrent is even relatively simple in comparison
because all you're doing is sharing static files with each other.
And so this is like BitTorrent on steroids where now you're not only sharing files,
but you're actually dynamically updating them and coming to a consensus about what the correct updates are.
So I really saw it as a new type of database.
It just happens to be a database where we're all trying to come to a consensus about what the data is that is going into it.
And once I realized that that gave you some very interesting robustness properties
that could potentially make it so powerful of a system that even nation states would have trouble shutting it down,
much like BitTorrent and distributed file sharing with the DMCA and all of that,
I became very excited, especially when I started looking at it from more of an ideological standpoint
of the idea of what is money?
And money is this abstract concept that I believe just belongs to humanity in general
and that anyone who is really interested enough to participate in deciding what the properties of money should be,
they should be able to participate,
as opposed to historical systems where it's just like one person or a small group of people behind closed doors
who are dictating what the properties of our money is.
I think that a lot of people who get into Bitcoin do have these sort of political revelations or even economic revelations.
Were these beliefs that you had before you came into Bitcoin,
like this sort of thoughts about money, what is money, maybe money should not be controlled by the state?
What were your politics like before?
I had never really thought about money. I think most people don't.
You just take it for granted as long as it works pretty well for you.
I live in a first world nation with a great economy,
so I haven't had to deal with a lot of the problems that some people in other countries have with their monetary system.
But I had a fairly long political journey over the years from a very conservative family
to going to a very liberal institution at University of North Carolina, Chapel Hill,
to then getting out in the world and kind of becoming disgusted with both of the main parties
and becoming more libertarian.
And then finally just realizing, well, even the libertarians are doing a lot of stuff I disagree with.
And sort of at the same time that I started getting into Bitcoin,
I started reading more about anarcho-capitalism and voluntarism and really going more to the side of ultimate freedom and anarchy.
Korea is like what you think.
Like most people who are Bitcoin skeptics are like people who think Bitcoin is going to zero dollars.
I'm personally kind of of the belief that Bitcoin is going to be very successful
and in being really successful may totally destabilize nations.
How do you respond to something like that?
Is that just politically aligned with you?
Do you see a potential downside to the success of crypto?
If crypto does really go mainstream, I mean, it's going to change a lot of things.
You will, of course, hear some of the more utopian ideas of,
well, if we can completely remove the power over money from bankers and nation states,
then they won't be able to fund wars by issuing huge amounts of debt and essentially taxing the populace.
I think taxation is going to continue as long as nation states have basically a monopoly over violence
and can threaten to put people in jail or otherwise harm them if they don't pay their taxes.
So I'm not so sure about that, maybe in the very, very long term.
But for the foreseeable future, I think that politics in general is going to continue.
It's been a strange trip over the past decade or so in politics,
and I don't think anybody really knows where it's going to end up.
I mean, one thing that I've been struck with was that around the time when Silk Road was going on,
that's when I first started reading about Bitcoin.
And I will say that I have a friend of Aaron and I, this is the guy who first interviewed DPR,
and part of the reason why he never invested in Bitcoin or didn't like Bitcoin
was because of the politics around it, which he disagreed with.
Do you think that right now the politics and the ideology of it is much less of a factor than it was back then?
And if so, then how does that affect your affinity with it or your feelings towards Bitcoin itself?
If anything, the politics within the Bitcoin and crypto ecosystem have become more complex and more fascinating.
Now, a number of years ago, I believe it was actually Mark Andreessen who said something to the effect of
eventually the libertarians will turn on Bitcoin and move on to something else.
And the idea that as it becomes more mainstream, the politics of mainstream people will then come into Bitcoin.
And I think that that has happened a fair amount.
It's going to be really interesting to see how that plays out in the long term.
So the main point, I think, being that the vast majority of people in the world are used to having
these authoritarian systems where someone or some group of people has the power
and they can make decisions of how the system should work.
There seems to be this messaging disconnect.
The critics of Bitcoin seem to focus a lot on energy.
They seem to focus a lot on things like, well, at the Bitcoin conference, they wouldn't even take Bitcoins.
And I think that in the ways that most people understand money, those are powerful ideas, right?
Like you can't buy a sandwich with it. So how is it possibly money?
Like from your perspective, how do you as somebody who's obviously a Bitcoin supporter,
like how do you push back against that sort?
I mean, there's always going to be things that people can complain about because it is a system
that is fundamentally different from anything else that exists.
And a lot of these things are due to the fact that Bitcoin is not really money right now.
It is this new class of asset that we're still figuring out all of the things that it is capable of doing.
And a lot of us are very excited about the second layer solutions that have been in development for several years.
And we're hopeful that they will allow Bitcoin to become more money-like in terms of being able to do fast transactions for very low cost.
So what are some of those second layer solutions that are being worked on?
Like what does that excite you?
Yeah, the primary one that people we've got like four, three or four different teams
that have been working on for nearly three years is the Lightning Network.
And that has been a long road.
And there are a lot of people who still want to rip it apart and say it's not going to work for one reason or another.
But the fact is that there are already, last I checked, hundreds, if not maybe over a thousand different nodes
that are operating on the test network and several hundred nodes that are operating on the main network.
So this is a proof of concepts that is, I think, going to quickly coalesce into something that is going to be mainstream usage
and available for the average Bitcoiner to start using sometime later this year.
How do you describe Lightning to people when, I don't know, you're talking at Thanksgiving or something to someone?
Yeah, it's tough to go into details because it is a very complicated protocol.
It uses a lot of game theory and sort of cryptographic locking and unlocking to allow you to transfer what are valid Bitcoin transactions.
But you're transferring them between two different parties to update these payment channels.
You're not globally broadcasting them across the entire network.
The comparison that I often use is actually to the Internet itself.
And a lot of people don't even know how the Internet works, and that's fine.
And I think it's going to be the same way with Bitcoin and the same way with Lightning.
But we're at a stage right now where it's so new that most of the people who are getting into it,
they really, really want to understand how it works because they want to be able to trust it.
Eventually, once mainstream adoption happens and most people are just using it without even thinking about it,
there's I don't think going to be a need for this level of explanation.
But with regard to the Internet itself, if you look at the architecture of how the Internet is set up,
it is a seven layer stack of hardware and software.
And the very lowest layer, like layer zero of this stack, is the Ethernet layer.
And on the Ethernet layer, when you broadcast a message out, it gets sent to everybody on your network.
This is a flood fill global broadcast type of protocol.
And that is the same type of protocol that Bitcoin itself uses.
When you create a transaction on Bitcoin, your node broadcast it to all its peers.
They validate it. They then relay it to all of their peers.
And this gossip protocol basically allows you to flood the entire network in a matter of one to two seconds.
Now, if the Internet only had that layer where everybody had to broadcast to everybody
and everybody had to relay everybody else's traffic, then we would not be able to do what we're doing right now.
We would not be able to be transmitting audio, video, other high bandwidth applications
because all of the other peers on the network would not be able to handle our traffic plus everybody else's traffic.
It simply would not scale.
And the way that the Internet engineers fixed this is that they added other layers on top of to that Ethernet layer.
And the next few layers are TCP and IP, which are these routing layers.
And they basically allow you to say, you know, my final destination is this IP address.
Now, figure out an efficient route for between my IP address and the target IP address
so that the data only has to go through a minimum number of nodes to get there.
And that is actually the way that Lightning Network works,
is that you're going to anchor into the Bitcoin blockchain to get your node onto the Lightning Network.
But once you're on the Lightning Network, when you want to send messages,
they are going to get routed through a fairly short path of other nodes on the network.
So instead of you telling the entire network, you know, I want to send half a Bitcoin to Bob.
Instead, you're only going to tell one of your local peers.
They're going to then relay it to one of their local peers and eventually it will get to that destination
in a matter of, you know, probably three or four hops,
because it's kind of like the six degrees of Kevin Bacon issue
where you can get pretty much anywhere in an entire network of billions of people in less than seven hops.
So it ends up being a lot more efficient because you are only routing through a minimum number of participants on the network.
And as a result, you can do much faster and efficient communication.
So whereas the Internet itself is allowing you to send whatever data you want in any type of protocol,
the Lightning Network is going to allow you to send specific types of messages that are updating balances
in these payment channels that are all connected together
and essentially let you route money along multiple hops until it gets to the final destination.
So picking up on your own journey, you got into this in 2012. At what point did it become your job?
Yeah, in 2014, I believe that's when I started Stotoshi, which was a fork of Bitcoin Core.
I basically realized that there was a need to have more insight into what was going on with Bitcoin Nodes.
So I created that project and just put it out there on the dev list and social media.
And that helped me get further down the rabbit hole.
And after doing that, you know, more technical deep dive for about a year in early 2015,
I realized there was a lot of venture capital coming into the space and that I was already spending
most of my waking days working on and talking about Bitcoin related stuff.
So I might as well just get paid to do that full time.
And that was when I reached out to BitGo and started working for BitGo in February of 2015.
So I've been there for three years now and the whole space has really changed.
We had a question actually that came up when we were chatting about the coin check hack,
which was so I believe the hack was for an altcoin, NEM.
But really, this applies to any sort of a hack that is on the blockchain, which is to say,
it should be clear where all of those coins went, what address they went to, et cetera.
What does someone who steals $500 million worth of NEM do with it?
And how can they possibly cover their tracks?
Sort of reminds me of how, like, no one wants to steal actually the most famous artworks
because there's no market for them because anyone could see that they had stolen it
if it ever appeared on the market.
Like, what happens to all these hacked coins?
Yeah, that's a good question because, of course, a lot of the exchanges talk to each other.
And when one of these hacks happens, then one exchange will reach out to as many others
as they're in contact with and say, hey, if you receive any funds that are coming from this address,
freeze them and don't let the person withdraw them.
Call 911 immediately.
Yeah, this has resulted in some funds of some hacks being recovered.
But my understanding is that it seems like a lot of these large hacks,
the attacker is very patient and they just let the funds sit there for a really long time.
Maybe they're waiting for better anonymizing technologies to come out.
Maybe they were never really planning on cashing out in the first place and they just did it for fun.
It's hard to say, but if you steal half a billion dollars of any cryptocurrency,
that's almost the most thrilling possibility that someone just wanted to burn $500 million.
They're just doing it for the lols.
It's entirely possible because if you stole that much money,
it's going to be a lot harder to actually use it and get away with it than to just do the initial hack.
I could see how you could possibly do it with Bitcoin where there's way more places to put it
and there's already a more thriving black and money laundering market or Monero say.
But for something like NEM, it just seems like...
How do you do it with Bitcoin though? Bitcoin is sort of eminently traceable.
Well, didn't the Mt. Gox hack and they just start another exchange to launder the money through?
That was a long story because there were several hacks.
But what we do here often is usually you'll see some test transactions
go to some of the services like ShapeShift and Chain Jelly to try to switch blockchains.
Sometimes they'll be able to get a small amount of volume through
and convert into privacy coins like Monero or whatever.
But my own opinion, if I was someone who did hack hundreds of millions of dollars worth of crypto,
I would sit on it.
And I think that the best option is actually to wait for decentralized exchanges to go mainstream.
And that'll probably happen in a year or the next couple of years.
And once these decentralized exchanges are up and running
and you can exchange your money without a trusted third party who could freeze it,
then maybe all of that stolen money will become a lot more liquid.
Do you think that decentralized exchanges are going to solve or exacerbate these hack problems?
I believe that they're going to decrease the systemic risk in the system.
So just simply by spreading out the value across a larger number of participants and nodes
and centralizing it in these honeypot custodians that become really high value targets,
I think there's still going to be hacks,
but that they're going to be much smaller scale simply because the money is so much more distributed.
What's it like for you as a person who's something of an OG in this space
to see these progressive waves of people coming in who are newer?
Jay and I have been interested in crypto for closer to a year and I already feel extremely old.
Like most of the people I talk to are coming in the last few months.
What's it like to be old in this world and to be talking to people who are at really varying levels of experience?
Well, you get to see a lot of patterns.
A lot of people follow very similar paths over the years.
The tricky thing for me is that I have to be willing to repeat myself over and over and over.
That's one of the reasons why I've created the educational resources on my site
was because I found myself copy and pasting a lot of articles and resources many, many times.
Now I can just say, hey, go to my site, go to this section, and spend the next few months learning about this particular part of the ecosystem.
The educational aspect has become very important because the learning curve is so high
and there's no bottom to the rabbit hole.
It really becomes a question of what angle is a person approaching the system from
and what's the most efficient way for them to learn what they need to know without going too deep into the weeds.
Not everybody needs to be a developer, but we certainly do need a lot more developers in the ecosystem.
I was hoping you were going to say there was a bottom to the rabbit hole
because we've been searching for the bottom of the rabbit hole.
One thing that I was curious about, which is that if you hear the chatter of people who are involved on the development side,
even somebody like Vitalik who will say something like, if all we do is post Lambo means and talk about price, then I'm out of here.
From your perspective on your side, how do you deal with or at least how do you process
this sort of real focus on whether the price is going up and going down and how much of the conversation
is driven by people who do technical chart analysis?
How do you emotionally process these Lambo memes?
It's weird. It's always been like this.
The thing that I reflect on a lot is in the early days when Bitcoin Talk was basically the primary social media forum,
we had threads like the gold collapsing Bitcoin up thread
where people would speculate about when Bitcoin was going to be more valuable than gold
and when it was going to be more valuable than the GDP of a whole country.
Most of the people back then, we were like, oh, this is pie in the sky.
We're all crazy and it's never going to actually happen.
Now, a few years later, people are talking about your $100,000 Bitcoin and all this other stuff.
It's actually within reach. It's amazing that it has progressed so far so quickly.
Of course, the result is that you have a lot of people that are coming into this system
because of nothing other than price charts.
Then they want to start to draw their triangles and their tetrahedrons and their squiggly lines and say,
oh, this is the next wave of Bitcoin price changes.
All I know, I'm not a trader.
I think if you looked at my history of trades over the years, I probably would have ended up better by not trading.
I'm sure I ended up with more dollars but fewer Bitcoins from most of the trades that I'm doing.
Hey, I'm with you.
What keeps you trading in that situation? Just the fun, the entertainment of it all?
These days, I really don't trade based on trying to figure out the psychology of the market.
I trade more from an investor standpoint of, you know what, this project is really cool
and I want to support it and so I'm going to put some money into it.
If it goes to zero, that's okay because I'm not looking for an ROI.
I'm looking to support development.
Along that line, I've also started looking more at just donating for development.
I donated to The Grin Project.
I'm also talking to Christopher Allen about basically doing more bounty donations on Bitcoin
because I really want to see more developers get into Bitcoin.
I don't think I need to spend my time worrying about the price.
There are so many other important things to worry about that may end up having a long-term result on the price
that I would rather focus on fundamentals.
I think that one of the questions that we get a lot as well is when people want to invest in new projects,
or not even just ICOs, but even these more established altcoins,
and I think this is a problem that Erin and I have as well,
which is that it's very hard for us to distinguish what is real and what is a scam.
How do you do that?
If you're going to tell a beginner, hey, everybody wants to have this sort of idea.
I only want to invest in things that have good tech that I feel like will be around in three years.
What would you tell them?
What are two or three things that they should look out for to make sure that this is a real project
and not something that's just like five guys putting their headshots up and being like,
this is our team, we all went to MIT?
I also have a background very lightly in computer science, software design,
and it all looks like vaporware, at least from the vantage point of how far away we are.
Anybody can write a decent looking white paper and say, oh, look at my idea,
but the proof is in the pudding, or more specifically, it's in the code.
A couple things that I look at is what is the actual reputation of the people behind it?
Have they built any projects before that have been successful,
or are they straight out of college or not even skipped college,
and this is the first thing that they've ever done in their whole life?
I think reputation is almost more important than the technical ideas.
I see a lot of these projects, especially ICO type stuff, is more akin to angel investing,
where you're kind of vetting the idea, but really you have to vet the team more than the idea,
because you can have an awesome idea, but if the team can't execute,
then the long-term value of the project is zero because they're not going to deliver on their promises.
As a result, I don't get involved in many of these at all,
because I just don't have time to do the due diligence behind them.
Right now we're sort of in the middle of this tether storm, I would say,
both in the media and I think amongst people who talk about this stuff.
Do you see that as a sort of existential problem to Bitcoin?
How worried are you about that? Because it seems to be the one thing that people are talking about right now.
I'm not too worried. I mean, there's been a lot of interesting speculation going on,
but from what I've read about it, it just seems like a lot of drama.
And until there's actual facts that are being presented that show that maybe tether is built on a house of sand,
then we just have to go with what the market is saying.
And so far, the market seems to like it.
But I find it hard to believe that, is it what, like $1.5 or $2 billion worth of tether?
$2.4 out of like $5.10 or something like that.
Yeah, I find it kind of hard to believe that that level of volume is supposed to explain all of the price movement in Bitcoin,
because I'm pretty sure Bitcoin's daily volume is even higher than that.
Is there something that you do see as a larger looming existential threat?
One of our friends that we speak to quite a bit said that the biggest problem is going to be when somebody who runs an exchange gets hauled off to jail.
And that will lead to huge problems.
What do you see as sort of the greatest existential threat?
What keeps you up at night worried about Bitcoin?
Well, I mean, a lot of these things are external to the Bitcoin network itself.
And so problems at exchanges, for example, can cause market disruption and the price might go up or down a lot.
But in order for Bitcoin itself to not operate as well, you would need to see some sort of major attacks happening on the network or the miners,
like state confiscation of large numbers of miners and then using that to attack the network.
It's been weird where from one standpoint, I actually see the fracturing of Bitcoin itself has become a bigger problem lately
than anything like nation state regulation or other factors.
And it's going to be very interesting to see over the long term how well Bitcoin manages to remain this cohesive system
when you have so many people who are, you know, forking off and creating their own competing networks
and then in some cases claiming to be Bitcoin itself creating brand confusion.
I gave a talk in Atlanta just a few days ago about the multitude of problems that we've had to deal with at BitGo as a result of all of these forks.
And it has been an operational nightmare. It's been a customer support nightmare.
And as a result, it has really slowed down our pace of innovation because we've just been fighting fires
and trying to get people access to the money that has appeared out of thin air that they're demanding access to.
Yeah, it's kind of a story as old as time that people are worried about the politics, the external politics, the government.
But the hardest politics are often the politics within. Do you get sucked into those politics?
Were you like losing friends over the Bitcoin cash fork and that kind of thing?
I'm assuming this is both a part of your work and social life. What's it like to be so deep?
Yeah, I mean, there have been a number of people that I've lost a lot of respect for
because of some of the tactics that they've been perpetrating recently.
There has been a lot of drama. You may or may not recall that I got swatted a few months ago.
You may or may not have been related.
The particular gentleman who decided to do that did not state that it was due to the scalability debate.
He was just trying to extort me. So I've never tried to pin that directly to the scalability debate,
though I think some journalists have tried to make that more dramatic than it probably was.
Just briefly tell us what happened for people listening.
Well, long story short, I had someone call my local police department
and claim that I had shot someone and was holding other people hostage at my house.
So the SWAT team came out and shut down my neighborhood.
Thankfully, they were cautious and they traced the call and realized the call was coming out of state,
which of course did not make sense because I was supposed to be at my house.
So they didn't kick down my door or do anything crazy.
Basically, once they surrounded my house, my dog was going crazy and let me know.
And I just went out and had a nice chat with them.
And the very first thing they asked me was if I had any enemies.
And the answer is yes.
One thing I've been curious about is that if we do have this atmosphere or this sort of ecosystem
where there are competing forks that are a little bit more legitimate than something like, you know,
I don't know, like super Bitcoin or the things that can easily be ignored.
I mean, what happens to Bitcoin then?
Like, let's say that there's five competing forks all with the same name, similar to Bitcoin Cash.
What is this sort of crypto ecosystem look like then?
Yeah, it's anarchy.
And, you know, we have to figure out how to deal with some of these things.
And that was one of the major points of the talk that I gave recently was that this is also new.
You know, we haven't seen stuff like this happen before with money.
I think that over time, you're going to see some sort of unofficial standards form around, you know,
how to decide the value and whether or not it's worth the time for people to support various forks.
But at the moment, it becomes more of a war of words and, you know,
trying to capture attention and market share.
And I see each of these crypto assets and their ecosystems and their communities
as being almost, you know, organic entities.
It's kind of like, you know, watching like cellular division and evolution happen, but in a cypherpunk ecosystem.
How did you explain the swatting to your neighbors after it happened?
Well, I just told them, you know, I'm a somewhat public figure.
It's a Bitcoin scaling wrong person.
The news media stopped by and they wanted to know.
And it was actually weird because none of them even knew what swatting was.
But, you know, swatting is actually becoming more and more common.
And there have been a few incidents recently where the police departments have shot and killed innocent homeowners who got swatted.
So I'm just thankful that my police department was more cautious and more intelligent than some of the other ones in the nation.
You're you're pretty like out there like you you come on podcasts, you do lectures, you're very active on Twitter.
Like, does that worry you at all to be someone who is making it so publicly known that you're deep in the coins?
Yeah, the smart people who I have known, you know, for the entire time I've been in the space
and many of whom were in it earlier than I was, you'll never hear their names.
They don't talk about crypto publicly and they have better operational security as a result.
But this is kind of a paradox within the system itself, where if none of us are willing to be public and talk about it,
then it becomes a lot harder for the system to evolve and for people to come to consensus.
You know, I could have gone another route or I could kill my public persona and come back as a pseudonym and have to start all over again from scratch.
And then, of course, that would make it a lot more difficult for me to do in-person appearances.
So I think that each person has to weigh the risks and determine what they're willing to put in to help grow the ecosystem.
Aaron and I both work in media.
And so I think that part of our interest in Bitcoin or some of the things that we fixate on, perhaps too long and maybe too deeply, are messaging issues.
So you as a person who's public, who has his actual name attached to it,
if there is one message that you wanted to get out about crypto that you feel like has either been mangled or misconstrued or ignored, what would you want that to be?
What idea about Bitcoin do you think has either been lost or has just been ignored?
I think the main culture shock that happens for a lot of people is that they want answers.
You know, they want to know what is going to happen to Bitcoin.
You know, what is the roadmap?
You know, what can I expect?
And the short version of that is that this is an open collaborative project.
No one, even the most experienced developers or the richest whales who have been in the community for the longest, no one has the authority to tell you what Bitcoin is, like what Bitcoin should be.
You have to determine that yourself and then participate in the conversation with the rest of the people in the ecosystem to try to find a consensus for what Bitcoin should be.
I have my own perspectives and beliefs of what I would like to see happen with Bitcoin,
but those have been shattered multiple times over the years and I'm constantly being surprised by things that happen in the space.
So we don't know what is going to happen long term.
But if you want to make the system better, you have to participate rather than just being a passive observer.
Well, thank you so much for participating in both the ecosystem and this interview.
If you ever have anything you want to get off your chest, please come back on the show sometime.
Great, will do.
Thanks, man.
Where can people find the educational resources that you were talking about and generally find you?
So my website is lop.net, that's l-o-p-p dot net, and my Twitter handle, very similar, also just lop, l-o-p-p.
This episode of Coin Talk was taped on February 1st, 2017 at 11 p.m. Eastern Standard Time.
The Bitcoin price index was $8,690.
That was Coin Talk.
I'm Aaron Lammer.
My co-host is Jay Kang.
The show is produced in partnership with Medium.
You can find us on the web at medium.com slash Coin Talk.
You can send us mail for the mailbag, hi at coin talk dot show.
And if you're interested in sponsoring the show, also hi at Coin Talk show.
We've been getting some good inquiries about that, so hopefully more on that soon.
I hope you're enjoying the show.
We will get them out to you as quick as we can, even during crashes.
We'll see you next week.