All right, everybody. Welcome. Welcome to Show 41 on Crypto Voices. Matthew Majinskas, your host here from Latvia, joined by my co-host Fernando Ulrich from Brazil.
Hello, Matthew.
And today we are going to introduce our special guest, Jameson Lopp.
Jameson is a cypherpunk, founder of Lopp.net and Statoshi.info, both of which are great resources on Bitcoin.
He is former infrastructure engineer at Bitco and currently holds the same title at Casa.
He is a prolific tweeter. I advise all our listeners to follow him if you're not doing so already.
Jameson, thanks a lot for joining us and welcome to Crypto Voices.
Thanks for having me. Great to be here.
Really appreciate you coming on. It's really nice to have you. Really enjoy your tweets, as I said.
So I just want to start out with the trillion dollar question that I have on my mind.
What is your latest definition of Bitcoin? What is Bitcoin? And will anyone ever understand it?
The main problem that I think most people fall into is trying to come up with some sort of metrics or other authoritative definition of it.
And these days, I mean, it's very hand wavy.
You just sort of have to stick your finger in the air and try to get a sense of like which way the wind is blowing.
And so we have had, of course, a lot of contention over the past few years with the scaling debate.
And then the resulting many different forks coming off of Bitcoin itself.
But as far as I can tell, it still seems to me that the vast majority of consensus,
probably like 85 to 90 percent of the users in the space, believe that Bitcoin BTC,
the one that is generally supported by Bitcoin Core and six or seven other libraries like Lib Bitcoin and Bitcoin and whatnot,
is in fact Bitcoin, at least right now.
But of course, there's no guarantees as to what that may end up being like in the distant future.
I will link to your blog post.
We're actually talking about a pre show that no one understands Bitcoin, which I still think is a very interesting way to put it.
I know you've given talks on that.
It's a very humbling way to look at the system.
I definitely can appreciate that perspective.
But maybe just one follow up, as you mentioned, we've come out of the storm.
You know, even a year ago, like if you thought back like a year ago, we had UASF was sort of becoming formalized.
SegWit2X was sort of gaining steam and we're only nine months or so from the Bitcoin cash fork and even less from the failed SegWit2X fork.
Now we have Lightning SegWit activated.
If you just reflected on like maybe just the last year, you know, thinking about like a year ago,
what you thought might have been possible today in May 2018, would you say Bitcoin is like ahead of schedule from what you thought behind schedule?
Or again, is that just a dumb question is Bitcoin doesn't care about any spec?
Yeah, that's that's an interesting point like regarding schedules and roadmaps.
And I think that that's one thing that upsets a lot of people where, you know, they try to to pin down, you know,
what the future of the Bitcoin protocol and the Bitcoin network are going to be.
They want some authority to step forward and say, you know what, this is the roadmap and we're sticking to it.
And, you know, if we get behind schedule, we're just going to work harder.
And, you know, that's that's very old school thinking.
You know, that's how more centralized institutions and companies work.
But that's not how Bitcoin works.
So as for where we are right now, I am, you know, I'm pleasantly surprised by the progress that we're making with Lightning Network.
I feel like we've made some sudden advances there over the past few months.
And, you know, started to get a lot of beta testers onto the Lightning Network.
And that just from the sort of acceleration in the number of people that are working on it,
I think that we are going to be quote unquote ahead of schedule over the rest of the year.
I basically expect to see more interesting apps and more infrastructure improvements come out.
So that, you know, hopefully by the end of the year will be near a point at which the more common Bitcoin enthusiasts might start to get involved and actually use this on a day to day basis.
But there's really, I guess, from a technical standpoint of expectations for the protocol.
I think it's more it's more about are you are you pleased with the current status of the protocol and what it's doing?
Or are you displeased and you think that it's either going in the wrong direction or not going fast enough?
And if you're displeased, then, you know, your options are either to contribute to it and try to make it better or to go off and basically fork and create a competitor.
And so we've had people do both of those.
And there's there's no, I guess, right or wrong answer to that.
It's really up to each person to decide, you know, do you want to contribute to Bitcoin or do you want to compete with Bitcoin?
And since Matthew just asked a reflection question about last year, what would you say you learned during this whole UASF and the New York agreement drama and Bitcoin cash, the forking of Bitcoin?
What would you say? How has your understanding of Bitcoin evolved in this past year?
I mean, it was there were some very interesting political and social dynamics going on and really a lot of brinksmanship.
And I would actually say I was disappointed that Segwit 2X got called off a week before it was set to activate.
I felt like, you know, that was that was basically the people behind that backing down. And I wanted it to actually come to a head.
And if we, of course, later found out that if they had actually gone through with it, the Segwit 2X chain would have gotten stuck for at least a while because of some bugs that were in the code.
But I I wanted to take it to the markets. And, you know, I was prepared to basically split and dump all of my 2X coins and, you know, fight it out on the markets.
But unfortunately, did not get the chance to do that. So it's really hard to say whether or not like the UASF movement would have worked if it had actually come down to it.
We could have learned more, but, you know, for whatever reason, it resulted in people backing down and we ended up moving forward without actually trying to do 2X.
Now, it was interesting that Bitcoin Cash forked off because this is something that has always been an option for people who have been displeased with the direction that Bitcoin has been going in.
And it's just finally, for whatever reason, some of them who were disgruntled enough got together and actually did it.
And once they did it and they pulled it off, they showed that it could be done, even though most of us knew, you know, of course it could be done.
And so, you know, immediately after that, you've got a ton of copycats that are trying to sort of ride the coattails of Bitcoin Cash.
And, you know, then we had the altcoin airdrop craze. So this is the type of thing where, you know, theoretically you could have predicted that something like this might have happened because it's technically possible.
But it's very interesting to actually see it happen just from a social dynamic standpoint.
So it's because of events like this that, you know, we don't really know what might happen over the next year or the next few years.
You know, I could speculate that we could see, you know, even more fracturing and splintering of different forks, especially the larger ones I think are more likely to undergo contentious issues.
So I'm not saying that Bitcoin Cash will have some sort of contentious fork and create another one.
I mean, we saw the Clashic fork, which was really more of a trolling fork. But there's just so much contention and aggressiveness that I feel from that particular subset of the community that it wouldn't particularly surprise me if we saw some other weird things happening.
And Bitcoin Cash, they do have another fork coming their way. I think it's May 15th, if I'm not mistaken.
Yeah, so they're they're going to re enable some old opcodes and increase their block size cap yet again, even though they're nowhere near using the current eight megabytes.
I'm sure somebody is going to have a little fun and stress tester network and be interesting to see how well it handles that.
But they are they are pretty, you know, well set on their path, which seems to be mostly like looking back, you know, all these changes that they're making are mostly changes that got disabled or restricted in years past.
And and and and then from a broader standpoint, what we're seeing is a lot of people that are building these apps on Bitcoin Cash that are basically clones of apps that people built on Bitcoin in like 2013 2014.
And the the weird thing is that they seem to be making this assumption that the reason that those apps didn't take off and go mainstream was because of limitations in the Bitcoin protocol.
But I think that it's a lot more complex than that.
So, you know, fingers crossed for them that something is different this time and they'll be more successful.
But I'm I'm not betting any money on it.
Now, in terms of other projects, you did mention there's a perhaps a misunderstanding of people in the field thinking that we should have a roadmap and there is a clear roadmap.
In fact, there is none.
But there are some developments such as Schnorr signatures and perhaps a few others.
And that will provide some more privacy and even scalability as Schnorr itself.
What other developments in Bitcoin do you that excite you at the moment?
And how far are we from having Schnorr signatures actually developed and eventually merged in the protocol?
I mean, it sounds like there has been a fair amount of work done around that.
I would be surprised if it happens in 2018, probably more like 2019.
But the stuff that is more interesting to me is is what's going on around scripting.
And so you've got masked or merkleized abstract syntax trees.
And then you've got these other concepts like graft root and taproot.
And really what we're seeing is the more conservative and privacy oriented Bitcoin development stance being taken towards the scripting and smart contracting.
And also, you know, along the smart contracting lines, we have folks that are working on simplicity, which is supposed to be a more programmer friendly smart contracting language for Bitcoin.
So this has kind of been one of the big questions about Bitcoin versus Ethereum for a number of years is do we really need Ethereum in this really developer friendly solidity programming language for doing smart contracts?
Or can we do a similar type of functionality on Bitcoin?
And simply because Bitcoin developers tend to be a lot more conservative and make changes at a slower pace.
Ethereum has had several years in which to innovate and basically propel themselves forwards and make a lot of mistakes and try to fix them and just keep going, you know, with the move fast and break things type of attitude.
But now perhaps we're going to see Bitcoin start to catch up with that and do so in a more thoughtful manner.
So it will be interesting, I think, to see if long term Bitcoin will be able to basically offer similar functionality to Ethereum, but in a more scalable and more private way.
In terms of privacy, this is one of the issues that is related to fungibility, at least at the base protocol.
And it's something that's been discussed and was the focus in last year's scaling conference in Stanford and I think it's going to be again in this year's scaling conference in Tokyo.
And how are you? Are you satisfied with the current level of privacy that we have at the base protocol?
Can we increase it? Are we going to have to rely on secondary solutions such as the Lite Network and all the protocols that we have at a secondary layer?
There's definitely a lot more that could be done. So, you know, right now, privacy in Bitcoin is almost non-existent. It's pretty terrible.
You know, Schnorr signatures is one thing that could help with that, basically allowing us to create mixers that are much better at protecting your privacy than the current style of mixers.
Though we also have people that are working on better privacy mixing type stuff. I think one of them is Zero Link.
And then there was another one that was being developed, I think, by Ethan Heilman that was using zero knowledge proofs.
And I haven't really heard too much from them lately. It sounded like they had a working proof of concept, but I haven't actually seen it out in the wild.
But then on a more day to day basis with privacy, I think we are going to see some improvements from using Lightning Network because it has various privacy enhancing features built into it.
And I think privacy is something that is more important to have on your day to day transactions.
It needs to be happening by default under the hood. You know, whenever you're just doing something that you're regularly doing, you shouldn't have to take extra steps to protect your privacy.
Otherwise, the vast majority of people aren't going to do it. And that's the effect of privacy of whatever system that is being built is not that great.
It's actually it's one of the reasons why I tend to tell people that while from a theoretical and technical standpoint, you could argue that Zcash has stronger privacy properties than Monero.
I think that from a real world standpoint, Monero has better privacy than Zcash simply because all of its privacy features are on by default.
And it's not possible to not use them. Whereas with Zcash, the vast majority of people are not using those privacy features because they're not required.
They're not default. And a lot of software actually doesn't even support them.
But then there's this this trade off of privacy against security or transparency at the base protocol.
If you have full privacy, it might be even be difficult to prevent counterfeiting of points.
So how do you see this? Also, the development of Bitcoin seems to me and this one of my questions, if it's correct to say,
we are Bitcoin is following the model of having at a secondary layer a Chomian E-cash type of scalability.
I think you would want to avoid getting into a situation where you can no longer prove the total money supply.
You know, kind of like they're sitting in Zcash where you can't actually prove the total value that are sitting in shielded outputs.
That's why you'd probably see things like, you know, confidential transactions happening before you saw something like zero knowledge proof like built into the base protocol layer.
But I mean, the nice thing is that you can still use that type of technology on second layers,
kind of like the the mixer that I was talking about earlier that is actually using zero knowledge proofs with a centralized but trustless mixing authority.
Now, we're just changing a little bit subject, but it's kind of related as well.
And you mentioned something about the smart contracts in Bitcoin.
It seems to be we are currently in a I'd say standards or protocol battle like with TCP IP and Internet.
How many crypto protocols do you personally see in the future?
Or perhaps most importantly, at what level compared with TCP IP, do you see the Bitcoin protocol being on in the future of the Internet?
Yeah, so this could go multiple ways.
I'm certainly skeptical that there will be thousands of different protocols, mainly because, you know, as a developer,
it takes you time to learn a given protocol and become proficient at it and then build stuff on it that is secure and usable.
However, you know, there are other possibilities where I think we actually saw, for example,
this new Python library got announced where it's basically trying to abstract away the scripting languages of multiple very different protocols like both Bitcoin and Ethereum.
So, you know, perhaps there will be other layers built on top of this massive, diverse ecosystem of crypto asset protocols.
And you will just be able to use some other layer on top of it that is abstracting away all of the differences that are under the hood.
It's pretty hard to speculate as to which way that's going to go.
I think you can you can approach it from many different angles, especially like the economic angle of money itself.
And, you know, how do we expect the distribution of value across these systems to be?
I mean, I think we have enough history so far that is showing that there's there's only going to be a few big ones and the rest of them are just going to follow this long tail distribution.
So when you have these networks and protocols that anybody can stand up and create a new one,
that's basically a clone of one of the existing ones with very minimal changes, then those aren't going to have very much value.
And while they will exist, almost nobody is going to use them simply due to network effects.
And you mentioned, you know, some of the economics which we like to talk about and I do want to get to shortly.
But a couple other sort of security tech questions in light of this, maybe looking at Ethereum now,
there's sort of a big debate about standardizing even recovery of stolen, burnt, frozen, inaccessible funds.
What do you think about this this sort of debate?
It's obviously started with the parity wallet issue and goes back to the Dow.
You know, that's a that's a protocol level discussion, which certainly has a lot of social implications in it.
But, you know, what is your opinion on how the discussion there is happening on Ethereum?
So the interesting thing about working in these protocols is that they're extremely unforgiving.
And, you know, that's where the the code is law mantra came up a number of years ago.
And it worked fine until it didn't.
And it's kind of a similar thing, I think, with a number of other protocol features and changes that are happening over the years of,
you know, people might approach it from the standpoint of, well, we can do this because it's working fine.
And maybe it maybe it is working fine until it doesn't.
I think that these protocols should be approached from almost like an aerospace engineering type of standpoint where you do need to be extremely paranoid
and think about the the highly unlikely edge cases because over a long period of time, highly unlikely things are likely to happen.
And because it's so difficult to, I guess, pivot one of these networks or to patch a bug on one of these networks because nobody controls it,
then you want to do everything that you can to avoid those extreme edge cases in the first place.
So I think that, you know, for Ethereum in particular, the better thing would have been to to make it very hard for people to to make these screw ups.
And it's a trade off, though, is the reason they made these screw ups is because they built a programming language that was very user friendly,
but but not very well vetted from a security standpoint.
And and so it was very easy for a developer to to write a smart contract that had a bug in it that is just not obvious to anybody who's actually reading the code.
So the result is that they need to have a more flexible community or ecosystem around it that might be more forgiving
and be willing to help these developers who are basically the victims of the ecosystem themselves
and some of the tenants that the ecosystem has has brought with it in order to become as popular as it has become.
So, you know, I'm I'm fine with with the Ethereum community deciding that, you know, they need to be flexible and and help bail out some of these developers.
I can fully understand how they got into that situation and it really sucks.
And and perhaps that's just something that they need to do until Ethereum can hopefully someday get to the point
where the tools for developing these smart contracts make it a lot more difficult for someone to shoot themselves in the foot like that.
But of course, Bitcoin has a very different community and a different ethos and a mindset to it.
And so I think that the development of smart contracts and other features on the Bitcoin network need to be taken with much greater care
because you cannot expect to get a bailout or or really any sort of emergency fork unless it's something that is dire and putting the entire system in peril.
I've read some of your blog posts on wallet security and how you had a lot of trouble going through setting up a multisig wallet for Ethereum.
And now when I see people talking about crypto assets and diversifying portfolio and putting their investments in many different assets,
the reality is we have many different protocols as well, not just assets, not just like Litecoin or Decred or any other asset that might replicate Bitcoin's technology.
It's a fork of Bitcoin. But many other assets, they do have a different technology, Ethereum for one, but many others.
And since they have another technology, they also differ in wallet security as well and wallet options.
For example, Ethereum for me, this was when I read your blog post I had.
I didn't in fact know at the time that Ethereum has no multisig native multisig at the protocol level.
And for me, this is almost a it's a no brainer.
I mean, if you don't have not even multisig, how can I store my assets securely?
So what's your view on the current state of security and for holding all these different crypto assets in this space?
It's tricky because really, I think the best user friendly security is going to come from a hardware wallet.
And of course, a lot of hardware wallets are only going to support the most popular few things.
So we're actually we're grappling with the Ethereum native multisig issue at my new company again,
because I spent nearly a year working through the Ethereum issues and having a smart contract that needed to be developed.
And I really want to avoid that.
So we're kind of going to have to work around it.
And we may end up doing some sort of key splitting with single sig on Ethereum and then and then using hardware wallets to protect that.
So I have people coming to me all the time that are asking about this random altcoin that I probably never heard of and how to secure it.
And I think most of the the answers there have to be, well, you probably need your own dedicated computer and in full know that you're running around that.
And it gets pretty highly technical.
So I think we're not going to we're not going to see mainstream user friendly stuff except for the most valuable networks where we end up having hardware security providers that are adding support to them.
Yeah. And I definitely want to get to Casa because I think that's a great use case that you are addressing.
One more technical sort of security issue, then taking it back to Bitcoin, what we've been talking about.
Clearly, the Bitcoin system has developed as a more cautious, secure, safety first system, as you mentioned.
But one, I really wanted to ask you this question because I think it's for a non-technical person that has heard even some of Bitcoin's past.
It can be daunting. And I've you know, I've heard you talk about this.
Many people have talked about this. I mean, obviously, it's documented, but you know, Bitcoin has been susceptible to bugs in the past, in the early days.
Even bugs, you know, that Satoshi missed, you know, the ability to change inputs and send and spend other people's coins.
That value overflow incident in 2010, where it's like almost 200 billion coins could be created.
I think, you know, non-developers of people are looking at Bitcoin now. Those stories are still sort of floating around.
And that seems like a scary thing, like where obviously, if that got out of control or wasn't fixed immediately, that would be pretty catastrophic.
So a couple a couple part question here to you.
Obviously, Bitcoin is way more developed than those early days, so people should understand that.
And but still, the market cap is much larger. So it's a bigger, you know, honeypot to to take down a couple questions here.
One, do you have any sort of ability in your security experience to even put a probability on something like that happening again today?
And I know that's a that's a totally hard question to ask you. But like, there seem to be quite a bit of those bugs that they all got fixed.
You know, what might be the probability of that happening again? And the second is, let's just say something happened, like for argument's sake.
Maybe it wasn't 200 billion coins, but it was a million coins could be created or something.
What would happen, in your opinion, around the Bitcoin development community and consensus to sort of fix that bug in a quick, good, like non-catastrophic way?
What do you think that would would look? Yeah, I mean, it really depends on the type of bug with regard to probability of these like black swan events happening.
You know, if you look over the history, then they're happening less and less often.
I think one of the main reasons for that is that there are more and more eyes on the code.
More people reviewing it and preventing such bugs from getting into the code base and thus then getting downloaded and installed on nodes.
And there are, of course, a number of different bugs that could happen.
And the nice thing about a lot of them is that they're usually fixable by just doing like a minor based reorganization of the chain.
So, you know, kind of like what happened with the last major bug and was it 2013?
Maybe it was it was the the BDB locking bug that caused a chain split.
And so, you know, there are a lot of people that are monitoring the network now.
You know, I even have software that monitors various aspects of the network.
And if something goes completely awry, you know, we're probably going to notice within an hour or a few hours if not almost immediately.
It just depends on what it is.
And if it's caught fast enough, then you can you can often, you know,
quickly gather some emergency consensus from developers and miners and other major ecosystem players to say, hey,
you know, if if we had a chain fork or if we had something else go wrong,
then maybe we can just go back a few blocks and then start moving forward again from that point after after applying a patch or downgrading to the version that didn't have this bug or whatnot.
For more involved stuff that's not that easy to fix, then, you know, you are talking about a major system wide disruption that would probably cause panic in the markets until it got resolved.
But this is what we're basically talking about here is the fundamental fallback like safety net for the network.
And so I I often tell people that what we have with these various protocols are sort of specialized machine consensus.
It's a way for distributed set of computers that a diverse set of people around the world are operating to automatically come to a consensus about the current state of some database.
And the important thing here, I think, is not so much the code that's being run or the machines that they're running on,
but rather the humans that are operating those machines that are deciding that they want to run this code and that they are agreeing to this protocol and these rules.
And so we're running all of the software and hardware because the humans are in agreement with each other about what we're trying to do.
So if something fails in the hardware or software, then the fallback mechanism is getting the humans back together in meat space, if you will,
and getting them to decide what needs to be changed with the software or hardware so that we can then proceed forward.
So that's the main reason why I think that these networks are so incredibly robust is because even even if something does fail with the hardware software, there is the fallback mechanism.
Interesting, interesting. And is there ever not to belabor this point?
I think that's a great answer. But is there ever like again for a non-technical person like is there a fine line where you see that?
Is it like more than 15 minutes worth of a fix by coders or or do you think it's just going to have to be a case by case?
These things are very case by case, which is why it's important that we have distributed sets of specialists all over the world who are constantly monitoring the system
because, you know, some some random edge case bug could get hit at any point in time 24 seven three sixty five and we need to have humans that are available to diagnose the issue
and then propose solutions for for how to fix it.
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I want to move now on to what you're doing with with Casa.
You I guess recently made that move.
I really like this model from what I know about and what I've seen and I don't know if you guys are the only ones targeting sort of the premium market for storing
and safely managing some of these problems that we've just been talking about.
But it seems like a very needed service in the space for new people where the technical bar is just something that can't cross.
And this is a space where a lot of people are getting interested.
So to me, it seems like a really interesting business model.
Can you tell us a little bit about why you decided to work with them?
Yeah. So as far as I know, Casa is the only service that is trying to approach the non-custodial storage of these coins for high net worth individuals who want to be their own bank.
It was a pretty natural transition for me.
So, you know, I spent three years building infrastructure at BitGo and BitGo was responsible for I don't even know how many billion dollars worth of assets that it was helping other enterprises maintain in a non-custodial fashion.
Of course, the majority of that the bread and butter of BitGo's business was around hot wallet operation, which is incredibly sensitive, and you need to have as much security around as possible.
Because if you want the ultimate security for crypto, you just take it offline.
And now you've brought it into the realm of physical security, which is a pretty well understood problem.
But for businesses that need to be automated, you know, operating online and sending and receiving funds, they have a very challenging set of security issues they need to face.
So after three years of doing that, BitGo grew got pretty big. And, you know, I had seen a lot of failures and a lot of successes and in general learned a lot. And I felt like, however, it was still it was still too difficult for the average person to to learn how to properly secure a wallet.
And after speaking to a lot of people, I realized that a lot of them are just, you know, leaving it with a custodian because they figure the custodian can probably take better care and understands the security better.
And they just don't have the time to devote to learning how to do it right.
So when Jeremy Welch came to me and basically pitched his idea, I felt like it was something that was really filling a gap in this space, where we have gotten a lot better with security and usability because of the proliferation of hardware wallets.
And even if you are building your own solution using hardware wallets, there are a lot of different considerations that that you have to worry about around end of life around loss and theft.
So even with the great usability improvements that hardware wallets have brought to us, I still think it's too hard for the average person. And I've dealt with this myself because on basically an annual basis, I go through and I review my own setup.
And it usually takes me a full day to basically go over my long term storage solution and refresh things and make sure that basically test everything to make sure that it would work in case I got hit by a truck and my heirs need to, you know, get access to my crypto assets.
So, at Casa, we've basically decided that we can use the security aspects of these hardware key signing mechanisms, and then try to build in the best practices around all of the other issues into the software.
So, I think that we have actually seen a pretty decent market for this fairly niche product arise over the past year or two, as of course the value of crypto assets have gone up so much.
And so, while we're starting out with a fairly high priced product. This is going to be basically, you know, part of the learning curve for us where we're hoping to do a Tesla like model where the people who are willing to pay more because they have more to lose are going to help subsidize the learning process and building the software, so that we'll then eventually be able to get it out to the rest of the world in a more affordable service.
Yeah. And again, I totally agree with you. I totally think that just as far as Bitcoin adoption goes, this is a very logical next step and really sounds interesting.
So, a couple questions. I don't know. You know, I know the info on the website is fairly basic, but I figured I'd ask anyway. Are there some pricing indications that you have?
And then the second question would be, how important is privacy to the client there? Like it is non-custodial, as you say, but still there is a proliferation of multisigs going around. So, what is the net effect on privacy to the client user, to their funds?
So, with regard to pricing, our initial pricing at least is going to be pretty hefty. We're looking at like around $1,000 a month. So, this is only really going to make sense for people who have, you know, millions of dollars worth of crypto assets that they're willing to pay like around $10,000 a year to have a, you know, high security vaulting type of product.
The thing is that this price is not just going to get you some software and a few hardware signing devices. This is a full service, you know, boutique security solution where you're basically getting, you know, a dedicated support engineer 24-7 if you run into any issues.
And, you know, the hope is that we will be able to build and then fine tune our software over the coming years so that it requires lighter and lighter touches and fewer and fewer interactions between the clients and the CASA employees.
And as we're able to do that, then my hope is that we will then be able to bring the pricing down simply just through, you know, automation and scale.
From the privacy standpoint, you know, there is not really going to be any privacy in a product where, you know, you're basically on a first name basis with the service provider.
Part of that is due to the fact that CASA is going to be doing, you know, key recovery service. So when you create a 305 multisig wallet through CASA, one of those keys will be held by CASA as a recovery mechanism.
And if you ever want or need to go through that process where you've lost enough keys on your own end that you need one of ours, then of course we're going to have to do some sort of identification to make sure that nobody is fishing or spoofing.
And in fact, several other parts of the security around CASA are in fact going to be reliant upon like a video authentication for sensitive actions.
So, one example is that we see a lot of sort of social engineering based thefts that happen in the crypto space.
And we also see a lot of thefts that happen because someone's phone or email account gets compromised and then that allows an attacker to get into their account and steal their money.
At CASA we're trying to close up all of those loopholes by not allowing that sort of automation.
And like any sensitive actions against a CASA user's account are actually going to require video authentication with a CASA employee if they want to change some fundamental data on their account.
So, it's kind of like having your own personal banker on the backend or personal security officer on the backend that is watching over, making sure that no hijacking is happening.
So, if I understand correctly, the customer, the owner of the crypto assets, he will be relied upon to hold at least one private key. Is that correct?
Out of the five sets of keys that you would have with a CASA wallet, one of those will be held by CASA itself.
The user will have the other four and they can either have three different hardware signing devices and keep one key on the phone that is used in the trusted execution environment on the phone, or they could have four different hardware signing devices.
That's all very interesting. I want to get to a couple of economic questions if we can, but before we finish, is there anything else you'd like to say about CASA regarding the model or what you guys are trying to do?
One of the main things that I think is interesting that's happening in this space as the institutional money is coming in, Wall Street money is coming in and all that, is that we're actually seeing a surge in custodianship of crypto.
And some of that is for regulatory reasons. Some of that is simply because the institutional money that's coming in doesn't have that technical expertise or have the people on staff that have the expertise and all of the security knowledge that is required to hold on to these assets.
And so I think that we're one of the few companies out there that's kind of pushing back against this and saying, we believe that the promise of Bitcoin is that anyone can be their own bank.
And perhaps Bitcoin has failed on that promise a bit from a usability standpoint, but that is the roadmap, I guess, that we want to try to further enhance. And I think it's kind of a cop out for a lot of the services out there to start to basically focus on the custodianship aspects because that's not a new model.
We've already tried that model before and it has failed us many, many times.
So I think that if anything, I would like to see more competitors to casa come up. I want to see more people trying to build out this unique non-custodial use case because that's where I think the real promise of crypto assets is lying.
Great. Well, I wish you luck with it. It really does sound like an interesting project and definitely needed. Totally agree with all those points.
A couple economic questions for you before we close, Jameson. I've heard you say somewhat recently that you do hope at some point, you're not sure when it's going to happen, but you do hope that Bitcoin can get back to the medium of exchange aspect or real moniness aspect as far as digital cash is concerned.
What is your general opinion on merchants today in Bitcoin? Is it necessary to think about them, to try to get them adopting and using Bitcoin more now than ever?
And this is from a development perspective. So from a development perspective, what are merchants' relationship to Bitcoin these days?
You know, it's kind of weird. I remember how excited a lot of people were back in the 2013, 2014 era when BitPay was really booming and signing up a lot of merchants and stuff.
And then we kind of saw it fall off. And I think that a big reason for that is that a lot of the merchant adoption that people were targeting was just like first world merchants that are probably already accepting credit cards and other forms of modern payment systems.
And when we're talking about crypto for those type of interactions, it's not nearly as interesting as when you're talking about using crypto for censorship resistant properties, doing transactions that may be frowned upon or not allowed through existing payment networks.
Or of course allowing for payments to happen through people who don't have the ability to get onto existing payment networks and get into the traditional banking system.
So I'm not as excited these days about the traditional payment systems that merchants are using and getting them to just start using crypto as another rail.
I don't feel like there's a whole lot of innovation or massive effects on the world for us to have just another payment rail.
We're interested in seeing new types of functionality, new types of apps and means of economic interaction being built on top of these crypto systems. Basically building new types of services that are not even possible to build through credit card and other types of payment networks.
I view the whole widespread merchant adoption nowadays, I get the feeling that it's kind of putting the cart before the horse.
I think that what we should strive for is to have merchants actually wanting to accept crypto, not just forcing them, kind of forcing them to accept or making the customer.
Then we're going to see a real use as a payment mechanism or as a currency, as a medium of exchange.
I've heard you speak about Bitcoin as a new type of reserve money. What is your opinion on Bitcoin becoming a new reserve standard?
It's going to be interesting to see if some sort of international monetary race happens. One of the things that I've kind of postulated on is that the smallest or most underprivileged from an economic standpoint type of countries stand to gain the most from being an early adopter of crypto.
If we saw even just one or two tiny little countries start to use crypto as their primary form of money or even as a reserve currency, then that could spark currency wars 2.0.
Rather than the currency war being based upon large economic powers devaluing each other's currency in a race to the bottom, we now have people adopting crypto in a race to the top, trying to be the early adopters that will get in before everybody else.
I think it's happening. Question then regarding these people who are actually doing this adoption and sort of in the same vein of custody and whatnot, which we've been talking about, insecurity.
I want to quote something that Trace Mayer actually said on another Bitcoin Good podcast, the Noded podcast. You tweeted it in support of it. The quote is, if you don't run a fully validating node, you're a second class Bitcoin citizen. If you don't hold your own private keys, you're a third class Bitcoin citizen.
One response, which I thought was interesting, and I'd like to hear your thoughts, was from Eric Voorhees. He said he didn't agree with that at all. He said, if you don't grow your own food, you're a second class eater. What is your thought as of late regarding this sort of thinking?
Yeah, that was a very controversial tweet. And I actually agreed with Eric. I said, you're right. I am a second class eater. I could definitely do a lot more to be better about the security of my food supply.
And this is one of the things of looking at crypto from a security standpoint and saying the whole point is that it is allowing us to have this completely new and strong security model.
And thus, we kind of get upset when we see people throwing that security model out the window. But that is the freedom of the protocol. Everyone has the freedom to choose a weaker security model.
And so, one of the things that I think got a lot of people kind of triggered by that quote is that they felt like it was sort of like a classism type of quote, or trying to look down on people or demean them.
And really, more of what that quote was trying to do was trying to get people to understand that there is an incentive. And it's not a class barrier where if you're a first class or a second class citizen in a country,
it's very hard for a second class citizen to become a first class citizen because there are these barriers that are set up by usually like socioeconomic rules that have been created over many generations.
But in Bitcoin, if you're a third class citizen, it takes a matter of minutes to become a second class citizen. If you're a second class citizen, it takes maybe a matter of hours to become a first class citizen by taking control of your private keys and then by taking control of the validation of the rules to make sure that nobody is defrauding you.
There is much lower friction and much lower barrier to entry to becoming a first class citizen, quote unquote, in the Bitcoin or in the crypto space.
So like a lot of analogies and metaphors, this is by far, far from a perfect analogy with comparison to other socioeconomic issues throughout the world. But the real point is that it is incredibly easy to maintain an incredibly strong security model in these systems.
And it's kind of baffling to a lot of us of how little effort some people are willing to put into that.
One more sort of follow up to actually another thing that Eric has been tweeting and we don't typically talk about people's tweets too much unless it's our own guests.
But we've had Eric on the show and generally I like his opinions on the free market. This one is relating to tokens and ICOs and not having anything to do with whether they're good or bad or healthy or unhealthy.
I've seen some tweets from him lately saying basically caveat emptor, let the buyer beware. If you don't like this project or you think this project is scammy or if you think this project is unhealthy or it's bad or whatever, just simply don't invest.
What are your thoughts on that idea as opposed to maybe more regulation or something else?
Yeah, it is tricky. We do have some people in this space who are very good at calling out scams.
Some of them go too far and call something scams that probably aren't really scams. They're just kind of dumb.
But I think the reason why people might get upset from that type of statement is that it's kind of a rule that there are going to be dumb people out there who get scammed.
This is the reason why we have various regulatory authorities and watchdogs and basically consumer protection agencies is because there are a lot of dumb gullible people out there.
Now, I don't know that you can fix that. I don't know that you can prevent there from being dumb gullible people.
As long as there are gullible people, then there are going to be predators that are going to scam them.
It's not something that I have a perfect solution for. We often talk in kind of like hand wavy ideas of,
well, what we need is better reputation systems and ways for the market to communicate that this particular thing may be dangerous or may be a scam.
I think we're a long ways away from having a distributed decentralized reputation system that can act as a sort of consumer watchdog.
I can see it both ways. I've told a lot of people, I'm very public about the fact that I have not invested in a single ICO.
That's not because I'm saying that they're all scams.
The simple reason for it is that I do not have the time and resources to do the due diligence that is required to safely invest in these products.
That's because I see ICOs as very similar to angel investing.
If you're going to be doing that sort of investing, you pretty much need to be doing it full time and need to be an expert and very well versed in the space
so that you can do the due diligence to really assess what the risk is of investing in this particular thing.
Now, Jameson, back to another technical question. I think this is going to be our final one. There's a heated debate around the issue of consensus algorithms, so proof of work or proof of stake.
One of the things that makes me a little bit uneasy about proof of stake, and I'm not a technical expert on this,
but I get the feeling that people and developers pushing for proof of stake are saying this is a superior algorithm.
They're not actually trying to come up with a more secure consensus blockchain, but actually want to try to solve the climate change problems.
That's usually how I see it.
Andreas Antonopoulos usually says we might only need one proof of work chain in all of the crypto space.
Do you agree with this assessment? What is your view on proof of stake and proof of work?
Yeah, so really what pretty much any of these consensus algorithms are trying to do is make it incredibly expensive for someone to screw with the network.
Make it expensive for them to double spend or in general defraud the network.
The main difference between proof of work and proof of stake or any of these other quote unquote faster, more efficient consensus algorithms is that proof of work uses an external resource.
It uses something that is external to the network and to the protocol, and that is energy expenditure.
Whereas all of these other ones tend to use resources that are internal to the network.
Basically staking some sort of value of tokens or reputation or something on the network itself.
You get into some more in-depth theoretical arguments about which one of those is more secure or potentially easier or harder to game.
I prefer having a real world external resource to that.
I feel like it is more egalitarian because other people can go out into the world and harvest that resource.
It just feels a bit more self entitled, I guess, to the system that you require someone to buy into the system's token itself in order to have the ability to secure it.
From a technical standpoint, you get into these ideas of short range and long range attacks.
I did write a fairly lengthy article about a year or so ago where I looked into both of these systems.
The big problem with proof of stake is that there is always this long range attack issue where even Vitalik Budrin himself coined this term of basically the royalty problem.
If there is ever a point at which a certain individual or set of individuals has sufficient ownership of tokens on that network,
then there is always going to be this possibility that they could collude and basically go back in time and start creating a new fork of the chain that begins at that point in time.
This is the sort of long range attack that we talk about sometimes.
Whereas if you try to do that in a proof of work scenario, it is always going to cost a lot of money in order to go that far back in time and create a new fork of the blockchain with a different history.
You can actually go and check out some charts of how much it would cost to do that on Bitcoin.
In fact, Peter Wille has some charts on his website that show how many days worth of current energy expenditure would be required to go back a certain amount of time.
We are basically talking about an attacker who had 100% of the current hashing power would pretty much have to expend it for a year if they were going to go back and rewrite the whole blockchain.
It is hard to specifically compare these from a metric standpoint and say, oh, this one is 30% more secure than that one.
It becomes a bit more philosophical.
We, of course, are seeing Ethereum working on their Casper protocol for proof of stake and I'm sure they'll launch it at some point and maybe it'll be good enough.
Maybe they will never have to deal with any of those long range attack problems or edge cases.
But this is kind of going back to, I guess, what we touched on very early on, which is that when you're building these distributed consensus networks, it needs to be more than just good enough.
It needs to be able to handle even the incredibly unlikely edge cases.
Well, that is a more than good enough way to end it, Jameson.
Thank you very much.
We've touched on a lot of very interesting topics today.
Really appreciate your time. Appreciate Rodolfo Novak for putting us in touch with the introduction there.
Really, really interesting. Thanks a lot for your input.
As we close, any sites, links that our listeners can find you if they don't already know.
Well, you can find pretty much everything you need to know on lop.net.
Perfect. We'll link there. We'll link to some of your other sites on Twitter.
Really appreciate your time. It was a pleasure talking with you today. Thanks a lot.
Thanks.
Thank you very much, Jameson.