Before becoming the CEO and co-founder of Synonym, John Carvalho was one of the most prominent Bitcoin and Lightning advocates. He was joining podcast interviews to shape up a reasonable discourse for the Bitcoin maximalist camp, he was very active on Twitter trolling everyone from Roger Ver to Naval Ravikant, and in a sea of HODLers he was pushing for a circular economy.

But after nearly four years of being at the helm of Synonym, it appears that John identified a series of inconsistencies which concern the memetic optimism surrounding the Lightning network (which finds itself at odds with the technical realities of the system) and Bitcoin’s approach to scaling. John, who was once in favor of voluntarily reducing the Bitcoin block size to 300 kilobytes in order to accelerate Lightning adoption and build a competitive fee market, is now more open to the idea of scaling through block size increases. He believes that the extra storage and computation costs are much cheaper than the sum of workarounds that are also subjected to the base layer’s limitations. And he also believes there are some reasonable limits within which Bitcoin can increase the block size.

Furthermore, John Carvalho goes as far as arguing that high fees create centralization (only a small amount of people can afford to make transactions) to a comparable extent as increasing the block size makes it harder for people to run nodes. Under these circumstances, the Synonym CEO argues in favor of a moderate scaling schedule which balances the two extremes – one in which anyone can run a node but only a few can spend, and another where only a few can run a node, but everyone can afford to spend.

This isn’t John Carvalho’s only unpopular opinion in the world of Bitcoin: he also runs full node software that precedes the activation of Taproot. Though he is aware that he is no longer fully validating, he still advocates for optionality to the point where older versions of the Bitcoin Core client should receive relevant updates even in the absence of some soft forks.

Under these circumstances, you might assume that John Carvalho should love sidechains – but you’re wrong. He is no fan of Liquid and Rootstock. When it comes to Drivechains (BIP300), he’s also not a fan. He isn’t particularly impressed with ZK rollups either, as the tech is still young and mostly overhyped.

In spite of John’s personal views and understanding of the tech, his company Synonym is still building a Lightning network wallet and continues to work with the LDK (Lightning Development Kit) team. While Synonym appears to mostly try to change the base unit symbol as of lately, there’s a lot of work going on in the background to ship a new and improved version of the BitKit wallet.

This interview with John Carvalho is definitely different from the other three we’ve recorded since January 2019. It feels like talking with someone who got older and wiser, to the point that he no longer cares about what other people think. And by listening to this recording, I hope that you will learn more about how Bitcoin works.

This episode is sponsored by Wasabi wallet, LayerTwo Labs, and Hodling.ch.

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Time stamps:

The Bitcoin Takeover Podcast (00:00:16) Introduction and a brief history of John’s appearances on the show.

Synonym’s Evolution (00:01:07) Changes in Synonym’s product and philosophy, including the transition from operating on the Omni layer to more recent developments.

The Use of Omni and Tether (00:02:53) Discussion about the use of Omni, the birth of Tether, and the practicality of using tokens on Bitcoin.

Synonym’s Recent Developments (00:04:28) Updates on Synonym’s team, app audit, legal issues, rebranding, and upcoming product launch.

Issues with Lightning Network (00:07:42) Challenges and concerns with the Lightning Network, including complexity, fragility, and scaling issues.

Block Size and Lightning Network (00:09:07) Past intentions regarding block size reduction, concerns about increasing fees, and evolving perspectives on the Lightning Network.

Apology to Roger Ver (00:15:04) Attempts to apologize to Roger Ver and the refusal from Roger’s side to publicly apologize, leading to failed interview attempts.

Roger Ver and Lightning Network (00:18:56) Comparison of Roger Ver’s predictions about Bitcoin Cash and Lightning Network, and the complexities and user behaviors associated with Lightning.

Wasabi Wallet Advertisement (00:22:07) Promotion of Wasabi Wallet’s new features and services, including the buy anything button and increased minimum CoinJoin size.

Bitcoin Privacy (00:24:01) Discussion on methods to make bitcoin private, including software tools and the effectiveness of CoinJoining.

CoinJoin Value Proposition (00:24:52) Exploration of the value proposition of CoinJoin in terms of privacy and the challenges associated with avoiding surveillance.

Bitcoin Fungibility (00:27:26) Analysis of Bitcoin’s built-in fungibility system with transaction fees and the potential implications for privacy.

Lightning Network Vision (00:29:53) Discussion on the evolution of the Lightning Network, and a comparison with Liquid.

Lightning Network Challenges (00:35:26) Insights into the challenges and limitations of the Lightning Network for small transactions and node management.

Block Size Increase (00:40:07) Debate on the potential benefits and implications of increasing the block size in Bitcoin, including considerations for inclusivity and cost analysis.

The block size debate (00:46:50) Discussion on the impact of increasing block size and the argument against it.

Puritan view of Bitcoin (00:48:12) Debate on the restrictions on Bitcoin usage and the argument against filtering certain use cases.

Issues with Liquid and Sidechains (00:53:29) Concerns regarding the use of Liquid and sidechains, and the comparison with custodial solutions.

Drivechains and competition with Bitcoin (00:58:30) Debate on the role of Drivechains and how they affect Bitcoin’s incentives and competition.

Tether’s popularity and impact (01:02:11) Discussion on Tether’s popularity in third-world countries and its impact on Bitcoin and Lightning Network.

Competition between Synonym and Blockstream (01:08:39) Considerations about potential competition between Synonym and Blockstream, and the investment relationships coming from Bitfinex and Tether.

Lightning Network and Bitcoin Investment (01:09:51) Discussion about Lightning network development, investment in Bitcoin companies, and the influence of investors.

Hodling.ch Ad (01:11:26) Promotion of Hodling – a company providing Bitcoin security services and consultancy on setting up and maintaining a self-custodial Bitcoin infrastructure.

Introduction to Synonym’s Product (01:12:34) Introduction to Synonym’s product, BitKit, and its features – along with details on how to access and test the app.

Redesigning the Bitcoin Symbol (01:14:21) Explanation of the proposal to redesign the Bitcoin symbol and the rationale behind the change, emphasizing the use of bitcoins instead of sats.

Unit Denomination in Bitcoin (01:17:01) Discussion on the unit denomination in Bitcoin, including the debate between satoshis and bits, and the preference for using Bitcoin as the unit.

Synonym’s Vision and Upcoming Product (01:21:21) Discussion on Synonym’s vision for revolutionizing the internet, focusing on a web of trust and a peer-to-peer-based web, and the teaser of a new product with the tagline “You Are the Algorithm.”

Debate on Taproot and Soft Forks (01:22:56) Debate on John Carvalho’s decision not to validate Taproot transactions and his concerns about soft forks – including the risks and complexities associated with software updates.

Blockstream and Soft Forks (01:29:56) Discussion on the influence of Blockstream in endorsing soft forks, the portrayal of developers, and the community’s perception of different proposals.

Scaling and Extension Blocks (01:32:17) Discussion on scaling solutions, including the possibility of a block size increase, and the example of Litecoin’s extension blocks for increasing block size.

Litecoin’s Role in Bitcoin Development (01:33:11) Discussion on litecoin’s role as a testbed for bitcoin’s future developments and its scalability and privacy features.

Predictions for the Bull Market (01:36:23) Speculation on the potential peak of the bull market and its impact, including expectations for the next bear market. John suggests that the price of bitcoin will go beyond $150k.

Selling Bitcoin and the Narrative Around It (01:37:57) Debate on selling bitcoin at its peak, the controversy around holding versus selling, and potential actions by influential figures like Michael Saylor.

Consistency and Evolution in Bitcoin (01:44:04) Appreciation for consistency in beliefs and actions over time, contrasting with the evolving narratives and approaches in the space.

Changing Culture in Bitcoin Community (01:51:38) Observations on the evolving culture and practices within the bitcoin community, particularly related to the use of Lightning and privacy-focused services.

Planning for the Market Peak (01:55:53) Discussion on strategies for selling bitcoin at the market peak and identifying signals indicating the peak, including the sentiment of elation and widespread enthusiasm.

The wife indicator (01:56:27) Discussion about the “wife indicator,” a signal of a possible local top in the market when Bitcoin investors express elation to their loved ones.

The super cycle and supra (01:57:09) Introduction and discussion about the concept of the “Supra cycle” and the “Supra” as an alternative to owning a Lamborghini.

Owning cars and future of transportation (01:59:31) Conversation about the preference for not owning cars and the potential future challenges of car ownership, including the shift towards electric vehicles and regulations.

Bitcoin, financial phases, and societal labels (02:01:38) Discussion on the evolution of Bitcoin ownership, the concept of “OG” status, and the societal implications of self-labeling as “plebs” in the Bitcoin community.

Wealth, ideas, and society (02:05:46) Exploration of the role of ideas and work ethic in acquiring wealth, as well as a comparison of sociological theories regarding wealth and societal structures.

Violence, society, and Bitcoin’s impact (02:09:02) Reflection on the role of violence in society, its impact on societal structures, and the potential limitations of Bitcoin in addressing broader societal issues.

Synonym’s Journey and the Atomic Economy

One of the key topics we delved into was the latest developments at Synonym. The company, which aims to create an atomic economy around Bitcoin, had previously considered operating on the Omni layer. John Carvalho clarified that while they had successfully demonstrated the first Tether transaction on Lightning using OmniBolt, they ultimately decided to move away from this approach for various reasons.

Synonym has grown to about 19 employees and is in the throes of preparing for the formal release of their app. However, they’ve encountered legal hurdles with the app’s name, leading to a rebranding effort. John also shared insights into the evolution of Synonym’s business model and the strategic narrowing of their product, Blocktank, due to legal considerations.

The Lightning Network: A Complex Reality

Our conversation took a critical turn when discussing the Lightning Network. John, who had previously tweeted his skepticism, elaborated on his concerns. His hands-on experience in building a product using Lightning revealed the network’s complexity and fragility. He cautioned against the exaggerated narratives surrounding Lightning, particularly regarding its economic scaling issues.

The Block Size Debate and Community Dynamics

The topic of block size was another area where John’s views have transformed. He reflected on his past support for reducing the block size and how his perspective has changed, now criticizing the centralizing effects of increasing on-chain fees. He shared his disillusionment with certain figures in the Bitcoin community, including Luke Jr., and their stances on block size.

We also touched on Roger Ver’s skepticism about the Lightning Network and his public bets on Bitcoin Cash (BCH) versus Lightning. John acknowledged that Ver had some valid points but criticized his arrogance and decision to fork Bitcoin.

Watchtowers, Wasabi Wallet, and Bitcoin Privacy

The intricacies of the Lightning Network, including the role of watchtowers, were discussed, as well as the recent developments in Wasabi Wallet, the main sponsor of the podcast. Wasabi’s new feature for buying products with Bitcoin using a Tor-routed interface was highlighted as a significant advancement.

John shared his personal experience with Wasabi Wallet and his lack of belief in coinjoin as a privacy method. He believes there are cheaper and more effective ways to achieve privacy and maintains that the best method to keep your Bitcoin private is not to disclose your strategies.

The Future of Bitcoin Transactions and Sidechains

We explored the potential impact of increasing the block size on Bitcoin transactions. John argued that a larger block size could enable more people, especially in the global south, to use Bitcoin. He dismissed concerns about spam transactions, stating that as long as they pay the fee, they should be considered valid.

The discussion also covered custodians and sidechains, with John expressing skepticism about solutions like Liquid and Federated Sidechains. He likened them to banks and questioned their necessity within the Bitcoin ecosystem.

Tether, Altcoins, and Bitcoin’s Store of Value

The use of Tether and other altcoins in various regions was discussed, highlighting the challenges of using Bitcoin for everyday transactions in certain markets. John expressed concerns about the potential loss of value stored in Bitcoin and the impact of high on-chain fees on Bitcoin’s future as a store of value.

Investment Dynamics and Synonym’s Roadmap

We concluded with insights into the investment dynamics within the Bitcoin ecosystem and Synonym’s roadmap. John clarified Paolo Ardoino’s advisory role with Synonym and discussed Bitfinex’s investments in both Blockstream and Synonym, emphasizing the lack of direct competition in a collaborative industry.

Synonym’s Products and How to Engage

For those interested in trying Synonym’s products, John recommended BitKit, a mobile application supporting Bitcoin lightning and slash tags features. It’s currently in beta, with significant updates improving its performance. The app is set to get an official app store release in June 2024, marking a milestone for Synonym.

Final Thoughts

Our conversation was a deep dive into the ever-changing world of Bitcoin. From the technical intricacies of the Lightning Network to the philosophical debates on privacy and the future of Bitcoin transactions, John’s insights provided a wealth of knowledge for anyone interested in the space. As we wrapped up, I was reminded of the importance of open dialogue and the value of diverse perspectives in understanding the complexities of this novel tech.