You're listening to the Stefan Livera Podcast, focused on Bitcoin and Austrian economics.
Listen in and learn alongside me as I interview some of the sharpest minds ranging from economists,
software developers, investors, entrepreneurs and writers.
Hey guys, welcome to the show.
This is your host, Stefan, and today my guest is the great Jameson Lopp.
He is a very well-known cypherpunk within the Bitcoin community.
He is also the CTO of CASA, one of the best key management companies that is out there
today.
And he is also the creator of statoshi.info, a Bitcoin statistics website.
And he's also the curator of one of the best known Bitcoin resource pages.
So first of all, thank you very much for coming on the show, Jameson.
Pleasure to be here.
Thanks for having me.
Yeah.
So look, I think basically everyone, most of the people listening to this probably already
know you.
So maybe we can start with a bit of discussion on, you know, what are the things that you're
thinking about lately from a Bitcoin point of view you're thinking about and working
on?
Yeah.
I mean, I'm basically continuing the security focus that I've had for the past three years
with our vault product, the CASA Key Master, which we're currently targeting for high net
worth individuals, but of course, eventually want to make available to as many people as
possible.
And simultaneously, I've started thinking a lot more about Lightning as we've been working
on this plug and play node product.
So I've actually been in the trenches doing a lot of one-on-one customer support over
the holidays recently, trying to take some load off of our engineers backs.
And I've learned quite a bit about Lightning and, you know, realized that it definitely
still has a number of rough edges to be worked out.
It's definitely still, you know, hashtag reckless to be operating a Lightning node with real
money behind it.
But I definitely see a bright future ahead and there's a lot of potential and we just
need to keep on building.
Yeah, fantastic.
Actually, on that topic, what are some of the rough edges you speak of around Lightning
and what are some of the common pain points?
Well, so there are security issues with regard to the fact that you're basically running
a hot wallet.
The stuff that we're running into more often with our users is trying to figure out how
to make it as seamless as possible for a Lightning node operator to maximize the use of their
node.
And so that basically means giving them a better understanding of kind of their economic
position within the network and how they might be able to tweak different things in order
to maximize their connections or their routing of money flowing through the node that they're
operating.
And these are, you know, some of the big unanswered questions is more on the economic side of
things is how will the liquidity of this network eventually be managed?
And of course, we hope that it will mostly be managed by software and done on a sort
of autopilot basis.
But the autopilot functionality that is out there right now is definitely very early stage.
And from what we've been seeing, it has not yet reached the point where it can actually
surpass what a dedicated human operator can do if they actually understand how to config
their channels.
Yes, I've understood.
As I understand, there is a fair bit of skill that goes into the channel management component
of it, and that can make the difference between, you know, really having people route through
you versus being one of the, let's say, nodes that doesn't really route many payments.
Yeah, so there's actually a fair amount of, I guess, inefficient use of capacity on the
network right now.
And probably one of the best examples of that is actually the largest liquidity provider
on the network, Lnbig, whoever they are.
They have opened up, I don't even know how many hundred, if not thousand channels with
various nodes on the network.
And I'm pretty sure that the vast majority of them are actually not getting used.
And they seem to have just kind of gone with the spray and pray approach.
But hopefully, they'll continue to refine their own logic.
Right, right.
Yeah, that makes sense.
I mean, yeah, from the discussions I've heard of in the community, you know, guys like Alex
Bosworth has a very, he has a very, you know, well connected node, and he's getting a lot
of, you know, routing fees for that.
So I think maybe that's just a learning journey that we all go on.
Yeah, there's that.
And also, you know, just trying to take this to the next level where we don't want it to
require someone to be, you know, technically proficient or a nerd who is going to be willing
to spend a lot of time to actually understand the protocol or how the network works.
We're really trying to build plug and play solutions that are usable for your average
millennial.
And that's going to be one of the biggest challenges, I think, is just continuing to
build layers of abstraction to have a better user interface and user experience to get
as much of the complicated day to day stuff hidden under the hood so that we can just
present, you know, some nice graphs and charts and maybe some buttons for people to click.
But they shouldn't actually have to understand things like payment channel liquidity or channel
timeout configurations and all the various game theory that's actually going on behind
the scenes.
Yeah, excellent points.
Okay.
And something I've seen you write recently was a really great article, I think it was
very illuminating, which was around back more on the Bitcoin side, it was Who Controls Bitcoin
Core.
So Jameson, do you want to talk through a little bit of the background of why did you
write this article?
Well, like a number of things that I write, it's usually self serving.
It's usually something where I've had so many arguments about a specific topic or specific
point within the ecosystem.
And I'm tired of repeating myself and tired of like constantly forgetting a lot of the
nuances behind some of these very complex ideas is that just sit down and write everything
out and, you know, get some peer review input from other people in the community and try
to build what is as close to I guess, an authoritative response or resource when it comes to a question
about like how Bitcoin actually operates.
And so the question of, you know, who controls Bitcoin or who controls Bitcoin Core as a
repository comes up on a regular basis, usually by people who look at one specific group,
or look at, you know, one specific piece of software and jump to a conclusion.
And it's very easy to do because there's a lot of complexities that are going on here.
And so I basically tried to go through point by point and explain to people how, you know,
not only does Bitcoin Core as a repository have no control over the network because it
doesn't push out updates to any nodes, node operators have to go and get the software
and install it voluntarily.
But even within Bitcoin Core as a process of software development, there are a ton of
checks and balances that are happening to minimize the trust and minimize the power
of anyone who is operating in that repository, including the fairly short list of maintainers
who have the ability to actually merge code into the repository.
Right.
And so that is, I suppose, just to call out the specific role that is in relation to the
maintainer accounts that can merge code.
But then as you explained in the article, that's really more like a janitorial function
than a position of power.
Yes, for a number of reasons.
But the biggest one being that everyone is watching everyone else within the repository.
And because at the end of the day, this is all voluntary and nobody can really force
anyone to do anything.
If someone abuses the small amount of power that they do have, if the rest of the organization
decides that they can't strip that power away, then they can always just leave.
Right.
This is a kind of voice and exit issue.
And that kind of plays out at many different levels, not just within software repositories,
but within the entire crypto ecosystem is that at the end of the day, anyone who has
power in one of these public permissionless systems only has the illusion of power from
some perspectives.
Because if enough people disagree with their decisions and the way that they're trying
to change or not change the system, then they can always just go create their own new network,
their own protocol, and basically form a new focal point of consensus.
Fantastic.
And then I like how in this article, you actually went into the detail and you really sort of
spelled out each of who knows, this may not even be fully comprehensive, but there are
just numerous controls that exist from a pull request security point of view and a release
security point of view that each of these different points could catch a change or an
unwanted change.
Could you outline a little bit on some of those and then how you went about just identifying
each of those?
Was it just discussion?
Was it just your own knowledge?
Yeah.
I mean, a lot of it was reading the documentation.
I already had a pretty general idea of how the build and release system happened, though
I had never read it line by line and tried to look at the software that was being used.
But it really is all there on the repository.
You just have to dig through and find the documentation.
And I learned a few things along the way.
For example, there are scripts that you can run to verify all of the cryptographic signatures
by the maintainers on every commit that they have merged into the repository.
And they started doing that back in December 2015.
So there's thousands of commits that this script will go through and verify.
And I had never run that before and I decided that I wanted to better understand it.
So I tried to run it and I ran into a few issues and I actually ended up contributing
some new documentation and new code to the Bitcoin Core repository as a result of that.
And that's, I think, a great example of how this software and how open source in general
works is that somebody becomes interested in a project, they start learning about it,
they start trying to use it, and they might find a pain point and figure that if it's
a pain point for them, it will probably be a pain point for other people.
And so they can save future people that same pain by going through the process to update
code or update documentation.
And that's how we make these incremental small improvements that over many years end up creating
extremely high quality software.
Fantastic.
Yeah, I love the explanation there.
Also I think a related piece of news that came out was around the BTCP or BTC Private.
They had a covert inflationary pre-mine.
Now people who are newer to crypto might fear that such a similar thing could happen with
Bitcoin.
But how realistic or unrealistic is such a fear?
Would you suggest that Bitcoin Core has a much greater level of review and eyes on the
code?
The timing on that coming out just a few weeks after I published this in-depth explanation
of how to do secure open source engineering was very fortuitous.
And this was actually a question that I got, of course, after I published the post.
Several people asked, well, do any other projects out there in the cryptocurrency space have
anything similar to this process?
And my honest answer is I have no idea.
I don't have the time to go and look at all of the development processes of all the different
projects.
And I would hope that the larger projects have similar processes.
But we can see very clearly that these really small projects that only have a handful of
developers behind them, they simply don't have the manpower and possibly even the expertise
with this type of engineering, which I have often said is probably closest to something
like an aerospace engineering mindset, where you have to be extremely security conscious
and extremely low tolerance with what is allowed to happen, because the smallest little error
can be a critical system vulnerability that results in massive harm.
So that's one of the reasons why I think that Bitcoin Core as a project is extremely conservative
and why it's very easy for other, I guess, naive, less experienced developers to just
look at it as, oh, it's just a piece of software.
I can fork it and make changes to it, but without the necessary infrastructure around
the development process, without enough eyes on the project and enough people watching
each other to be the checks and balances, then it's very easy for either a malicious
person to get in and make bad changes or just for someone to screw up and have one bad line
of code that makes it through review.
And I think we'll probably talk about it later.
Even a project like Bitcoin Core, which has some of the highest level of quality assurance
and engineering, mistakes can still happen.
Exactly, and I suppose that's the perfect opportunity then to ask my next question,
which was around in the case of mistakes, such as the recent CVE 2018 17144, which was
the couple of months ago, which was the inflationary bug.
Now obviously, at the time, there was a lot of news around that.
And I think some of this comes to that concept of consensus as well.
So let's hypothetically say it had been exploited on the main chain rather than on the test
net where it was.
Do you think there would have been sufficient consensus to roll back to the non-inflationary
chain?
Yeah.
So this is where you can get really philosophical, I guess, and start going down an infinite
number of paths of what could have happened.
And so the question kind of becomes, A, what would the severity of it be?
And B, how long or how much time would pass before it was noticed?
And people would start talking about trying to fix it somehow.
Now with an inflation bug, I imagine that would be noticed within an hour or two because
there are so many people who are running various dashboards and statistic sites and have alarms
set that it would probably not be able to go for more than a few blocks without somebody
noticing simply because you'd have the change to the UTXO set would increase more than it's
supposed to.
So then the question is, well, how badly do they exploit it?
So if someone created a billion bitcoins, I think there would be no question that just
like what happened back in 2010 when someone created something like a billion bitcoins
that it was rolled back, that the chain was rolled back, I think, a matter of hours worth
and they proceeded forward.
Now then the question comes, well, what if it was exploited but not in a way that caused
a ton of harm?
Like what if someone only created one Bitcoin or a few thousand Satoshi's?
They just exploited it to prove that it could be done.
That would be much more difficult, I guess, and there would be a lot more contentious
discussion about how drastic of a change should be made.
And how much time would it be worth basically reorganizing the chain to fix that?
So it's very difficult to predict all the different possible outcomes because I think
it's really more of this like multivariable spectrum of things that could happen.
And if it's something that caused a lot of harm, then it's not going to be particularly
controversial to try to fix it.
But if it was less harmful and more of just like egg on your face, we've exploited the
bug, then we might just have to roll forward and fix it from that point on.
That's a very illustrative example, and it does come to some of this discussion around
what is Bitcoin and what exactly makes Bitcoin.
And so there was some recent discussion by Alex Morkos of ChainCode Labs, where he commented
that some bugs are quirks of Bitcoin, some are just bugs that get fixed.
In quotations, the code is the spec is misleading.
Code is the best guideline we have to what defines Bitcoin, but common sense and social
consensus are required too.
So I think that's an interesting way to explain it.
And some of that goes to this question of comprehending Bitcoin as a system.
And I think in your article, you make an analogy to language.
So there are dictionaries, but the language is still spontaneous.
The language is not defined by the dictionary.
Can you talk a little bit on that?
I hate to use the word social contract because that is so loaded and it may be the closest
thing that we have to describe it.
So there are a few aspects of Bitcoin that are fairly uncontroversial that I think that
there is consensus around them.
And one of those, of course, is the 21 million Bitcoin limit.
And one of the best examples I think that I can make about that is that with regard
to what Alex was saying of the code not being the spec, there was in fact, up until just
a couple of years ago, the Bitcoin core had a bug in the code where it would actually
create 21 million Bitcoins like every couple hundred years.
And Peter Willa actually fixed this with BIP 42, which he posted on April Fool's Day a
few years ago.
But it was actually not a joke.
It was a serious Bitcoin improvement proposal where if the code had not been changed, then
several hundred years from now, it may have been 800 years from now, this overflow operation
would have happened and 50 Bitcoins every block would have started being rewarded to
the miners.
And that's one of those things where I think everyone agreed that that was obviously a
bug because we had this social consensus around the 21 million limit.
And so it was completely uncontroversial to change the code and, quote unquote, change
consensus or at least change machine consensus.
Because the issue was that the machine consensus was not in line with human consensus.
But of course, when we start talking about human consensus and what is the human consensus
for this idea of this thing that we call Bitcoin, that's when it gets really gnarly.
And a lot of people tend to want to revert to some other traditional system like democracy,
some sort of voting system where some set of people vote or some technocrats get to
decide or create an oligopoly even where only a few people get to decide because we think
that they're the best.
And of course, as I've argued on a number of different articles and presentations, this
is crypto anarchy.
We don't really have any other type of system of governance that can really be equated to
this.
And that I think the best thing that you can equate it to is stuff like language, which
is this sort of organically emerging consensus that is constantly evolving.
And there really are no foolproof guarantees about an aspect of a language other than that
it is probably going to change over a long period of time.
Yeah, for me, it really brings analogies in the ways that even from an anarcho-capitalist
Austrian point of view, people make arguments around what would the law be in such a society.
And similar analogies there are actually drawn of, well, you see, there's lawyers and there's
judges, but in the same way that dictionaries don't fully define the law, they might codify
the law.
And in some sense, the comments you were making there is similar to that idea of, and I love
the distinction there between machine versus human consensus.
I hadn't heard that terminology before, but it makes a lot of sense to me as well.
Basically, the way that I describe it is that the awesome thing that we've created with
these protocols is a way to automate human consensus.
And in fact, the most recent presentation that I've gone around and given a few times
is something that I call using blockchains to automate bureaucracy and invert bureaucracy.
And I basically make the argument that what we're doing is we're creating basically a
sentinel that is sitting out there on the network and it is checking all the rules for
us.
But we as humans have to agree to the rules first in order to actually run this guardian
program that is checking them for us.
And sometimes, because it's software and because software is written by humans who are fallible,
sometimes that software will have a bug or it will not be enforcing the rules that we
think it is.
And that is when the machine consensus may fail and we have to fall back to the human
consensus, which I think is the kind of foundational layer of all of this cool crypto stuff that
we're building on top of it.
Yeah, that's an excellent way to put it.
Human consensus is the foundational layer on which we build the machine consensus.
Okay, so we've had a fantastic year coming to the end of 2018.
We've had so many developments in Bitcoin, ranging from Lightning Network on the main
net.
We've got Liquid Network going.
We've got further developments in Blockstream Satellite.
We've got Lightning Wallets.
We've got payment processes.
There's been developments in the mainstream financial world.
What were some of the highlights for you?
Well, I think the most interesting development has been watching the Lightning Network continue
to mature and grow and starting to see some more real commerce start to happen on there.
There's I think going to be a similar level, if not even greater level of development and
expansion over the next year on the Lightning Network, as more developers start hopping
on and building more applications on there.
But as it becomes safer for the average user.
Right.
And we've also seen, I think relevant to you very much so, is the multi-signature services.
So we've seen the rise of that.
So obviously at Casa, you're heavily involved with this.
And there are other providers such as Unchained Capital who are coming out with this idea
of collaborative custody as well.
So that is a big development for the year, I think.
And do you have any thoughts on what we'll see over the next coming year or two from
a multi-signature point of view?
Yeah.
So it's actually been interesting just this past week, we've actually seen a number of
fairly large security vulnerabilities get exposed like in Electro and several different
hardware wallets.
It's going to continue, I think, to push the boundaries of what the average user needs
to do.
And I'm still very strong belief that anyone who has a non-trivial amount of crypto assets
needs to have them in a multi-sig wallet.
And that we need to build tools that allow people to leverage the hardware devices that
are already out there, but to disperse their keys so that they're not having any single
points of failure.
And so we're trying to do that at Casa.
It is and always has been possible for people to do that, but we need to make it a lot easier.
So I think that Ledger and Trezor and these hardware wallets have made it a lot easier
for people to get to that first step of decent security.
But there's still a lot of things that can go wrong, especially from user error or ignorance
or negligence or just not understanding all of the possible loss scenarios where that,
in my opinion, is the next level that we need to get to is creating wallet software and
wallet best practices that basically protect the user from themselves.
That's a great point because over time, obviously, individuals who have a high level of Bitcoin
will obviously, they can use the premium services.
But perhaps what we'll see over the next few years is a lot of people trying to do their
own roll your own multi-signature and make mistakes and lose Bitcoin in the process,
similar to how people saw exchange hacks in the past and so on.
And the ecosystem might have hardened itself a little bit against people losing money on
exchanges and so on.
But what now with multi-signature for individuals who are at the more, let's say, retail level?
Yeah, I mean, there have always been a number of possible pitfalls.
In fact, I was just talking to someone earlier this week who told me that they almost lost
a lot of money on a paper wallet.
And that was due to this issue that not many people talk about where you may redeem money
from a paper wallet.
And if you don't send all of it to a specific address, then the rest of it will go to a
change address.
And you may not actually be keeping the private key for that change address.
So that's an example of just one of the many possible pitfalls where if you're not highly
sophisticated in how these protocols work, then you can accidentally send your money
into the ether, as it were.
So I mean, part of it is definitely user education.
But I think if we're really trying to get to mainstream usage, then we need to kind
of bake the user education into the actual software and hardware.
Really make it idiot proof and have the guide rails of the best practices built into these
products in a way that it's very difficult for you to shoot yourself in the foot.
Well, speaking of doing your own cold storage, do you have any thoughts on in terms of what
your favorite options are?
Is it Glacier Protocol?
Is it some form of roll your own multi-signature?
Yeah, I mean, Glacier Protocol is so insane that really nobody should be doing that unless
you're operating like an enterprise level operation or something.
But I generally tell people that the biggest improvement that you can get is just buying
a hardware wallet.
Like that is the best usability and security that anyone can get at like an affordable
retail level.
And then if you're thinking about more long term stuff, especially around inheritance
planning, then it gets a lot more complicated because you have to figure out how you're
going to split up your seeds and your keys and whatnot and have them available to people
who you somewhat trust in case you get hit by a truck or something.
And so that's where it gets more complicated.
And I have a blog post that I think I wrote a few months ago about my solution that I
used where I basically took all of my private key data, all the instructions for recovering
everything from all the wallets and created a encrypted data blob with Veracrypt.
And then I use Shamir secret sharing on this really long random passphrase, which was used
to decrypt that.
And then I basically took those different shards of the decryption passphrase and handed
them out to my heirs and executors and basically had a setup such that, you know, a certain
number of them would have to get together and basically collude against me if they wanted
to be able to unlock everything.
And some delicate balances and trade offs that you have to think about because while
at the end of the day, the system allows you to operate trustlessly if you want your assets
to be able to be passed down, if you cease to exist, then someone else or some other
group of people needs to somehow be able to gain access to.
Yeah, that's yeah, it's a difficult.
It's a difficult problem.
And I think it'll it'll just take time for easy solutions to come out for the on the
market for individuals.
I think the other thing that would be interesting to just talk through in terms of what's happened
over 2018 is some of the statistics.
And now you recently came out with some of them as well.
So I thought it might be interesting to just talk about the implications of some of these.
So SegWit use has gone from 10 percent to 40 percent.
Do you see any implications of that?
Well, I think that has been one of several factors that has led to the on chain transaction
fees going a lot lower, you know, demand in general has gone down.
But in addition to batching of transactions and the use of segregated witness that has
taken a lot of the strain off of like running into the block size or blocks block weight
limit, which then creates the crazy fee market.
Also a lot of improvement has happened in different services with regard to their fee
estimation.
I think that people are better understanding that if they're patient, they can save a lot
of money in certain cases.
One reason why I'm OK with the fact that it's not, you know, 100 percent or even 50 percent
is I think that this gives us some breathing room.
And I kind of see it as this natural oscillation with regard to adoption and hitting the on
chain block space limit is that if we're only at 40 percent adoption now and we start hitting
another big adoption curve and start running into the block space limits, that means that
we actually still have a lot of room for people to start using segregated witness and further
increase the amount of on chain volume.
So there are several large services that are still not doing it yet.
And if we get to the point where the on chain fees are getting really high, then I think
some social pressure against those services to actually roll out their segregated witness
functionality would actually result in us oscillating back down for a while and giving
us kind of a relief valve for adoption.
And this is, of course, all going on at the same time that lightning network adoption
is increasing.
And you know, hopefully in the long term, that will be able to orders of magnitude greater
effect of improving the efficiency of people's use of the Bitcoin network.
Yeah, right.
And then also the number of nodes is, well, reachable is sitting around 9600.
And I think, as you mentioned, per Luke-JR's stats, that the unreachable nodes has gone
from about 98,000 down to 65,000 or so.
Do you have any comments on the number of nodes or maybe we'll see more of those come
online with lightning and you know, more people buying, you know, the caster node product?
Yeah, so I think that that has definitely declined along with the interest where probably
what was happening is a lot of people were just getting into Bitcoin and they were downloading
Bitcoin Core and running the full node, possibly even as their primary wallet.
And that the majority of the stability of nodes that have kept on running are probably
the ones that are actually being used for economic purposes or being used by the more
hardcore OG Bitcoiner types, and they're not really going to be going anywhere.
Now, like you said, with lightning, at least today, it's recommended that you run your
own full node next to your lightning node.
You know, that will change a bit in the future with lightweight clients.
But I think that's actually a great incentive for more people to start running full nodes
so that they're able to operate trustlessly within this new network, especially now that
running one of these nodes actually has more of an economic impact where you're able to
collect some fees, you're able to actually help improve the liquidity of this new network,
which I think will ultimately increase the utility of Bitcoin and hopefully make the
value go up as well.
Yeah, precisely.
And another good statistic is block propagation has come down to about half a second.
So if I was a total newbie, how would you explain to me why does block propagation matter?
Well, it primarily matters in terms of preventing blockchain forks.
And what you want is for the network to all come to a consensus as quickly as possible
about the latest update to the state of the blockchain.
So if that takes several seconds or 30 seconds or a minute, then that means that miners who
are working on the next block, they may not be mining on top of the same block.
So they may actually end up creating these competing forks, which then of course result
in reorganizations and in general that decreases the reliability of a confirmation for your
transactions.
If lots of chain reorganizations are happening, then people have less confidence in the network
and in accepting a transaction with only a few confirmations.
There have been a few extreme examples on some other networks, especially like Bitcoin
Cash and the Bitcoin Satoshi Vision fork, which I think created something like a 40
or 50 megabyte block that took something like 40 minutes to propagate around the network.
And I think they were having a whole lot of orphaned blocks happen in the meantime.
And I think in general, some of the stress tests that have happened on the Bitcoin Cash
network as they've been trying to get their blocks up like around the 20 and 30 megabyte
range have really pushed the limits there of what the current level of technology for
propagating data can really do on these decentralized networks.
Yeah, exactly.
And I think there's also another implication just around for miners as well, because they
don't necessarily want to be playing this game of having to constantly shuffle and juggle
between the different blocks.
Well, yeah, I mean, it ultimately comes down to reliability.
They would prefer that what they're working on is as stable as possible and they don't
want to mint a block and put it out there on the network and basically have the reward
yanked away from them because some other miner got a block within a minute or so and the
rest of the network decided to follow that miner instead.
Yeah, it's a bit sort of unjust.
And then also from a mining point of view, the hash rate.
So the hash rate has gone from 19 extra hashes per second to 38.
Do you have any comments around what the implications of that are in terms of Bitcoin's security?
Yeah, I mean, it's continuing to increase the thermodynamic security of the network.
There was some interesting kind of fud going around recently of saying, you know, so much
hash rate has been taken offline.
Now there's enough offline hash rate that could be used to basically 51% attack the
network.
You know, that may be true on paper, but I think in the real world, it would be extremely
challenging to even find those machines, assuming they're still operational and then be actually
coordinate them to do that and see, you know, still pay for the electricity required to
do that.
But I think the more interesting question around this is why has the hash rate continued
to increase so much if the exchange rate has dropped so much?
And maybe that's because miners are still continuing to get more and more efficient
and find cheaper and cheaper sources of power, or perhaps they're really in it for the long
run.
And a number of them may have been operating at like a negative profitability for a while
under the assumption that eventually the exchange rate will go back up and that they will be
profitable in the long term.
Yeah, exactly.
So it could be that they've been very speculative and thought, like many of us, we got really
bullish during the 2017 bull run and they may have over purchased or overbought and
sort of overestimated the price growth that would come to them.
And then now as the price has come down, they've had that reality check.
But this is just the nature of mining, right, is that there are extreme volatility in a
number of the different variables of mining and that results in some pretty fierce competition
that ends up pushing a lot of the less efficient people out of the market.
Yeah, no, I think you're right.
It's very much a game of who can survive and who can speculate well over into that multi
year cycle as it comes.
And who knows what will happen with the next cycle?
Maybe the next cycle, we get another Bitmain coming out of it and it's another big, huge
mining company.
Yeah, I mean, I'm still waiting for the really big chipmakers to start ramping up and seeing
some real industrial competition.
Yeah.
Do you think it's not at that level now?
No, no.
I think that we're still in the Bitcoin enthusiast's industrial mining era.
I fully expect that over the long term, this will change as Bitcoin becomes more mainstream.
We will see the larger, more traditional tech companies start to get in there and try to
compete.
Okay.
And we've seen a lot of lightning channel growth.
So I think we've spoken a little bit about lightning and then also the liquid side chain.
So that launched this year as well.
And there is, I think you mentioned there are 25 BTC loaded into the liquid side chain.
Yeah, it's been pretty quiet.
My understanding is that they're still ramping up.
So I think 2019 will be much more interesting for liquid and seeing exactly how much pressure
they can take off of the Bitcoin main chain and help out the exchanges and traders so
that they're not having to flood the network whenever they're trying to rush for the exits
or rush for the entrances.
Fantastic.
Okay.
So now I've just got a couple of questions that are a bit more just random.
One of the questions was around, again, coming back to this idea of jurisdictional competition.
So do you think Bitcoin may enable a future of many states that are more open to individual
sovereignty?
And could we see new and improved forms of social organization that are not as dystopic
as modern nation states?
Yeah.
I mean, in the long run, this is kind of one of my great hopes is that going back to what
I was talking about with inverting bureaucracy and automating bureaucracy is that I believe
that Bitcoin is a very interesting experiment that if is successful in the long run, could
not only revolutionize money, but revolutionize like how we think about governance.
And of course, this is going more into the anarcho-capitalistic philosophies and whatnot.
But if we get to the point where we have created a type of technology that allows people to
be more sovereign and we can duplicate that to not only allow you to be sovereign about
your money, but also be sovereign about many other aspects of your life, whether that's
ownership of assets or ownership of your data or ownership of the fundamental things that
make you you, then that is where we start to get to the point where I think that an
anarcho-capitalistic society might actually be doable.
And this is because one of the reasons why these hierarchical command and control governance
systems have evolved and become so pervasive throughout human history is because they're
very efficient ways of organizing society and organizing people's skills and abilities
and allowing for you to basically specialize in certain things.
And the downside to that, of course, is that now the average human who lives in a first
world country probably can't take care of themselves very well, right?
Like we don't grow our own food.
We probably don't even know how to maintain most of the things that we own.
Rather, we have specialists who take care of those.
And so trying to transition from this type of society to a more self-sovereign anarcho-capitalist
society, that transition is going to be very tricky.
And I think that an integral part of being able to do that transition is basically being
able to have all these autonomous agents that are working on your behalf in the background.
And so you would have your autonomous agents that are working on behalf of your money and
your other assets and keeping track of other property and things that you have to maintain
and basically maintaining contractual relationships with third parties who would be helping you
with those various aspects.
And so this kind of boils down to the who will build the roads arguments, who will maintain
the roads, how will you have various services that are currently highly socialized like
health care, law enforcement, fire protection, et cetera, et cetera, is that it's perfectly
possible for any of these things to be privatized.
But one of the main reasons that they are is that it's just a huge cognitive overhead
for you to maintain all of those relationships yourself.
It's a lot easier for a government or some other third party to maintain those relationships
on your behalf.
So I think the short version of the long-winded answer is that we continue to create these
software agents that can basically start to replace pieces of government functionality.
So piece by piece, we can basically deprecate the state.
Yeah, that's a fantastic answer.
In examples of that, even as you mentioned, maintaining your contractual relationships.
On the question of who will build the roads, well, maybe we'll have lightning channels
and you will stream payments for your use of the roads and it will be based on how much
of it you use and it's like a per user basis.
Yeah, I mean, I think the possibilities are endless.
We just have to build the technology and hope that it is a sufficiently good improvement
that people will want to voluntarily adopt it and the first step I think is Bitcoin and
then if that's successful enough, then we can start talking about next steps.
Fantastic.
And also just had a question around Grin and Beam as Mimble Wimble implementations.
Do you have any thoughts on those?
Yeah, I mean, I'm keeping my eye on them.
I believe they're both looking at doing main net launches just in the next few weeks here.
So hopefully that goes smoothly.
They've both gone through a number of test nets.
I was actually looking at trying to mine Grin because I bought my first gaming computer
in probably at least five or six years.
So I've got a nice new GPU and unfortunately, that's a Windows gaming computer and it appears
that Grin is the miner is only really working on Linux right now.
So I need to decide whether or not I want to take the time to try to dual boot Linux
and get that all set up or I don't know, it's never enough time to do everything you want
to do.
Okay, and then lastly, what's the most private way to have Bitcoin without for an average
person to buy some Bitcoin without anyone knowing or the least number of people knowing?
Do you have any ideas on if it's like you do like a local transaction and maybe use
BISC, take it into a wallet and put that through a coin join and then out into some kind of
device?
Yeah, well, I mean, it mainly comes down to a real world privacy problem.
So the most private way that you can acquire any type of crypto asset or really probably
any type of asset is of course to buy it with cash because cash has some of the best privacy
of any monetary payment systems out there.
So if you can use some sort of platform like LocalBitcoins or BISC or Mycelium LocalTrader,
any of these things that allows you to meet face to face with somebody and do a cash transfer,
then you have successfully onboarded yourself into the system without tying your identity
to those UTXOs.
Then the question becomes how do you remain private while you're using the system?
And that turns into a whole big mess, which in today's standards, you'd have to be an
extreme expert into all the different types of privacy leaks and stuff.
But the easiest thing, I guess, for a user who is going to be transacting and basically
leaving trails by interacting with various third parties would be to learn about using
some of the privacy tools that are out there like the Wasabi Wall or JoinMarket or even
looking at some of the different decentralized exchanges to basically allow you to hop between
different cryptocurrencies because that's probably one of the better ways to fully break
the link between which UTXOs or which accounts are owned by you since it's not really possible
to do cross blockchain analysis if you're doing a swap that isn't recorded by a party
that's doing AML KYC.
Right.
Yeah, that makes a lot of sense.
Okay, so I think that's pretty much all we've got time for.
So listeners, if you want to find Jameson, obviously check out his Twitter.
His handle is at LOP, L-O-P-P, his website and well-known resources page, lop.net slash
bitcoin.html.
And I'll also include the link for Who Controls Bitcoin Core, which was the article we spoke
over.
Jameson, did you have anything else that you wanted to tell the listeners or any parting
comments?
I think that from looking at a lot of the statistics I've been posting of the sort of
2018 roundup, the one thing that people don't seem to be investing in as much as they should
is education.
So whenever anybody asks me financial questions, especially about the crypto space, I generally
say if you have to ask those financial questions, then it just means that you haven't invested
in education enough because you're not able to answer them for yourself.
So do your own research, and this is still the Wild West.
Yeah, no, I think that's a great way to finish it up.
I think you have to make that first investment in education.
And thanks very much, Jameson.
It's been an illuminating conversation.
Thanks for having me.
So that's a wrap on my conversation with Jameson Lopp.
Let me know what you think.
He's got a great security and privacy conscious perspective, so it's definitely worth following
what he does, whether that's with CASA or his efforts under his own name.
Because this is the final episode for the year, let's turn now to my own thoughts on
the year in review with this podcast.
I've been going for about five months now, having started in late July 2018.
I'm really pleased with how it's gone so far.
43 episodes in, I've interviewed many highly talented people within Bitcoin and I've steadily
grown my listeners, followers, subscribers.
And I just wanted to say a big thanks to everyone who has helped me, particularly guests of
the show and Patreon and Bitcoin donators and people who share the podcast and all the
people who gave it fantastic reviews.
Last I checked, I'm sitting at about 86 iTunes reviews globally with an average of 4.9 stars.
I really appreciate all the support I've received from fellow Bitcoiners.
If you'd like to support me, my Patreon is patreon.com slash Stefan Lavera.
Patreon supporters get access to a private Telegram chat group for me and my supporters.
In that group, I share some inside goss on what guests are upcoming and we bounce around
ideas in there.
If you understandably have concerns with Patreon, you can alternatively support me on Tallycoin,
that's Tallyco.in slash Stefan Lavera.
Payments there can be done using BTC or Lightning Payment also.
At the moment, my preference is Patreon just because it has subscription, but I totally
understand the concerns that many have with Patreon.
Otherwise, if you haven't already, please do subscribe, thumbs up on YouTube or five
star rate and review it on iTunes and tell your friends about the podcast.
That's it from me.
I hope you've had a great 2018 and I wish you all the best for 2019.
Check out the show notes for this episode on my website, StefanLavera.com.
If you enjoyed it, remember to subscribe so you don't miss out on the next episode and
please share the podcast with your friends.
You can also follow me on Twitter, my handle is at Stefan Livera.
Thanks for listening.