S16 E30: Peter Rizun on Scaling Bitcoin with Hardware
Search this conversation
0:49Vlad CosteaHello there and welcome to the Bitcoin Takeover Podcast. This is Season 16, Episode 30. We are live with Peter Rizun, Chief Scientist at Bitcoin Unlimited. And this episode is sponsored by Edge Wallet, Bitcoin.com News, LayerTwo Labs, NoOnes.com, Hodling.ch, SideShift.ai, and Citrea. It's really good to have you, Mr. Rizun, because I know that I was doing some research prior to this interview, and I discovered that you're almost going to get on Peter McCormack's podcast a few years ago. And then he decided he doesn't want to have you criticize Lightning because you're on the Bitcoin Cash side, and he had Peter Todd instead, and it was this scandal.
1:28And it's so disappointing that we don't have much space for conversations.
1:34Peter RizunYeah, it was an interesting time. But I actually did get on his podcast. So he invited me, then he cancelled me, and then there was an uproar from the other side, and eventually I was able to go on his podcast. So I did have an opportunity to criticize Lightning. And I still criticize Lightning to this day.
1:58Vlad CosteaThat's good. We can turn that into a major topic. The reason why we are here today is that you are working on something very interesting with accelerating hardware for validating a full Bitcoin node with big blocks. I think it's a very interesting approach. In the case of Greg Maxwell, he will say, well, it just doesn't scale, and let's not even attempt it. Your approach was to say, well, let's attempt it and then work our way around to make it work. I think it's useful research. I think it pushes the boundaries of what Satoshi left us, this Bitcoin design.
2:38And I think in order to get to this, why we need hardware acceleration and why you plug that into your motherboard's M2 port, and I did look at the documentation a bit. But I think it's useful to start with this whole concept of scaling Bitcoin and where it all started, why some people propose increasing the block size. I think the first attempt was by Jeff Garzik in November of 2010, and he wanted to give Bitcoin, I think it was a seven megabyte block size for his client.
3:11And Satoshi replied to that, said, well, it's a bit too early for this. You should not run this code because you're not going to be on the same network as everyone else. Do you remember that? Were you around at the time?
3:23Peter RizunI wasn't around at the time, but I do recall reading some of those posts. And it's interesting because I think very early 2010, 2011, people could see that this block size limit hard-coded in Bitcoin, what is now known as Bitcoin Core, would become a problem in the future and would be hard to remove once we hit it. So those people were very good at predicting what would happen, but we didn't resolve that back then, and that led to the problem we have today. But we're going right back to the beginning.
3:57So let's ask the question, like, why do we want to scale Bitcoin in the first place? And I think the answer is because we want to create a P2P e-cash that the entire earth can use, all the people in the world can use. Do you agree with that statement?
4:12Vlad CosteaOf course. I think everyone in this conversation agrees. It's just a matter of how where we disagree.
4:22Peter RizunSo I think we can say, you know, the goal of Bitcoin when Satoshi created it, and my goal today is to help build better money for the world. And for that, I think we needed to scale to earth levels. And I don't want to see why that's a controversial statement. To me, that was always the intention of Satoshi and should be the intention of us today.
4:51Vlad CosteaWell, I think if you go back to 2009 and see what Satoshi replied on the crypto, no, it was 2008, and he got criticized by James A. Donald on the cryptography mailing list. And Satoshi did some napkin math saying, well, with the storage and the Internet that we have today, we're going to be able to scale it and it's going to be increasingly cheaper due to Moore's law. And he was discussing about how long it takes at the time to download a DVD. And he was referring to the technology that was available.
5:23And he was seeming very confident. And I think big blockers, the camp that has decided to scale Bitcoin with bigger blocks, have been using this argument which Satoshi used back in 2008 to defend Bitcoin against one of the cypherpunks was very much against the idea of Bitcoin, not increasing the block size. He was saying, well, this doesn't scale. And it's funny because we have had this conversation since Satoshi announced Bitcoin. There was this guy, James A. Donald, he went to the first announcement and he said, well, it's nice, but it doesn't scale.
6:04Peter RizunAnd it's odd to me how this has been such a hot topic from the very beginning. And like, to me, once I understood it, it was obvious to me that it scales. And I mean, you're not going to scale to global levels on a little Raspberry Pi with two gigabytes memory, but it doesn't take that much hardware to scale to global levels. And that was obvious to me as soon as I understood the system. And I think Satoshi understood that, too. But some people just couldn't see that.
6:33And so there's been this controversy ever since.
6:38Vlad CosteaYeah, it's interesting that I guess people got along and agreed to a certain point that increasing the block size is going to be maybe the solution with the least amount of tradeoffs, because it's the one that we understand the best. We know what's going to happen when you do it. It seems like people did not agree on how to do it. And I think that's what the 2015 to 2017 time was about, agreeing how to scale Bitcoin. What's going to be the activation method? Because SegWit also increased the block size, but with this soft fork that does an accounting trick.
7:17Peter RizunOK, well, let's go back to, so originally, you know, Bitcoin's had the one megabyte block size limit for a long time. But when we had much smaller usage on Bitcoin back in 2011, 2012, the miners would set a soft block size limit. So this was like the, you know, not consensus, but whatever the standards are, it was like a standards protocol, so they just wouldn't produce blocks that were bigger than 100 kilobytes. And then we started bumping into that. So then the miners increased it to, let's say, 250 kilobytes, then 500 kilobytes.
7:50And if you plot the block size on a scatter plot, you can actually see as those limits were lifted. But they were soft limits, they weren't consensus based. But then we hit this one megabyte limit and then all hell broke loose because it was no longer permissionless. Miners couldn't increase that soft limit by themselves. It required this coordinated change. And in my opinion, that's what totally changed the system because we were, every time we hit the limit for a sustained amount, we would increase it. And now we're stuck with this one megabyte limit.
8:23And that's made a radical change to the system because now we're saying we're not going to continue growing like we had up to 2015, 2016, I guess it was. Now we're going to do SegWit. We're going to do second layers. We're going to do all these other crazy things that was never part of the original design of Bitcoin and that had never been proven. We were winning. We were succeeding. We were showing how, as demand grows, we can increase the block size up, up, up. And then we just stopped doing that for some reason.
8:54And that seems very odd to me.
8:57Vlad CosteaWell, the argument against that was that it's going to become increasingly difficult to run a validator. But to go back and not make this about the people who are part of the block size wars and take it back to the people who are talking about this way before it. There was this guy, Dan Kaminsky, in 2011. Unfortunately, I think he passed during the pandemic. But he was one of the most respected security researchers of his generation. He was also friends with Len Sassaman and believed that Len Sassaman is Satoshi.
9:27Dan Kaminsky is actually the guy who inscribed this ASCII art of Len Sassaman in the Bitcoin blockchain. And that one was one of the first cases of art being inscribed into Bitcoin. And in 2011, this guy, Dan Kaminsky, went to a conference, which was not about Bitcoin. It was about hackers doing their thing. It was mostly security stuff. And at the time, he presented the idea of scaling Bitcoin. And he asked the question, well, at scale, what does it mean for Bitcoin to incorporate every transaction in the world?
10:05And the predictions that he made is that Bitcoin is going to need gigabyte blocks. And he did the napkin math for how many transactions are being broadcast every day from credit cards and banks. And then said, well, if you put that on the Bitcoin design, then you're going to need one gigabyte blocks. And for people who have one terabyte hard drives today, that's going to mean that every two weeks, they're going to have to prune away the data that they have been storing and just have the latest transactions.
10:35And also, it's only going to be data centers that will validate everything. So this goes back to 2011 with this guy, Dan Kaminsky, presenting what basically BSV became seven or eight years later. And at the time, it seemed like just a normal conversation, a few years later, it was super contentious and controversial and not very desirable. I think even BCH, which you supported with Bitcoin Unlimited, had a more reasonable approach to it and said, well, maybe eight megabytes is good enough, maybe we should increase that to 32.
11:15And I had Amaury Séchet on the show last year, and he made this case that increasing the block size is not all that scaling requires. It's just like increasing the speed limit on the road, but you still have to deal with other variables.
11:32Peter RizunOkay, so you brought up several interesting things here. So Dan Kaminsky, what I think is good about what Dan Kaminsky talked about is he's setting the upper limit. He's not saying we have to scale indefinitely. We just have to scale till we get to that Earth scale that we're shooting for, and that's around one gigabyte blocks. So the first mistake I think a lot of the small block people made is they have this like, there's this computer science principle called zero one infinity. So if you're writing software, you should either have zero instances of something, one instance you should allow, or unlimited amount of instances.
12:12So I think they took this and applied that to the system thinking for Bitcoin and thinking, well, we have one megabyte blocks, we can't get the infinitely big blocks, so we should just stick at one megabyte blocks. And I think that was a really bad answer because, well, two megabyte blocks would have been better than one. So why didn't we go to two and see what happened? And we would have doubled the transaction because we would have continued to grow, we could solve any scaling problems, then we go to four, then we go to eight.
12:43So there was this fear that we couldn't go from one to infinity, so let's just stick at one, which I think was misplaced. So I think that corrupted people's thinking about scaling and people lost out of the fact that we don't have to scale infinitely big, we just have to scale to one. The P2P e-cash for Earth, and then we win. That's why we're here. Do you agree with that?
13:10Vlad CosteaWell, partially. I think this was the thought of Gavin Andresen and Jeff Garzik and maybe also Mike Hearn. They believe that if they onboard as many people to Bitcoin as possible, it's going to be impossible for governments to ban it. That was the rationality behind this principle. But I think Eric Voskuil came up with this and he wrote it in his book, Cryptoeconomics, that it's sort of a fallacy because a lot of stuff is being used by lots of people, but is still banned, such as drugs.
13:45I can't think of other examples right now, but he makes this case in his book and says, well, it's naive to think that just because a lot of people use it, it's never going to be banned.
13:55Peter RizunWell, but I would say it's at least, I mean, Eric is a very sharp guy, so I think he's making a good point there, but I would say it's at least directionally correct. If we had allowed Bitcoin to proceed according to BIP101, which was doing what I said, you know, one megabyte, then two, then it doubles to four, then it doubles to eight. Where we'd be today is we'd have whatever would be 16 megabyte blocks by now or 32 megabyte blocks, but we'd have significantly more transaction volume on the network, which would mean you'd have significantly more people using Bitcoin every day.
14:30And yeah, I guess you could still say maybe the government will make it illegal one day, but I would say that would be less likely than it is today when people aren't using it at all.
14:41Vlad CosteaI do agree that by doing that, we could have avoided any chain split and we would not have BCH and BSV and eCash and all of these forks today. And we would not have so much activity on Litecoin, which happens to be right now the most used currency on BitPay, which is super ironic.
15:01Peter RizunWell, it's really too bad because, you know, we had so much going for us in those early days of Bitcoin because there was really no competitors. And all the mindshare, all these bright engineers that are now working on all these different blockchains, we were mostly focused on Bitcoin. And now we've just diffused. We've diffused the mind share and we've diffused chain usage. So Litecoin is the biggest payment coin. And I mean, most payments are now stable coins. And I think that's really sad because to me that's like a backdoor way into getting central bank digital currencies.
15:33And then we lose, right? Then fiat wins if we go to stable. If our future is one of stable coins or central bank digital currencies, then I think that would be a terrible, terrible outcome.
15:46Vlad CosteaWell, I had someone on the show last year who told me, well, when you see the T in USDT, just think about a Trojan horse because that's what it stands for. I'm like, no, we're just increasing the demand for U.S. dollars. We're spreading U.S. dollar adoption where banks are not able to do it. So just because the guys building it are hardcore Bitcoiners doesn't mean that their intentions are pure or that the outcome is going to be what they think, even if their intentions are pure.
16:15Peter RizunRight. See, I like stable coins. They're very useful right now and there's a lot of demand for stable coin payments. And that makes sense because the volatility of U.S. dollar is lower than the volatility of Bitcoin. But if you imagine a future where most of the transactions migrate to stable coins, so they're being denominated in U.S. dollars as opposed to some native cryptocurrency, what value does the native asset Bitcoin have in that future? I think the answer is it just doesn't have a lot of value.
16:46So what Satoshi imagined was Bitcoin would be this P2P payment system in order for it to be secure. What you're receiving, the Bitcoins you're receiving, you know, they're native to the blockchain. So it's not a representation of something else. It is the thing you're getting. And eventually that becomes the store of value in the unit of account. And so you have this new digital asset called Bitcoin, which has real value, which sucks up all the value or most of the value from fiat and other fiat denominated assets in the world.
17:21But I don't see how that can happen if people actually aren't making payments with Bitcoin, if they're using just crypto networks as a backbone to make stable coin payments or central bank digital currency payments. I think in that future we lose.
17:36Vlad CosteaI think at this point, the plan even for the lightning network is to have support for stable coins, which is once again sort of a defeat for the whole mission and the intentions that started the whole project. I don't know. But I got to say this when I'm optimistic, when I have days when I feel like everything is in its right place and I shouldn't worry. Sometimes I think that this approach of allowing the chain split to happen and opening up the free market to figure out solutions and leaving Bitcoin with this limited scaling is just a way to basically push everyone to find a more elegant solution.
18:21Because right now, I think that the usage of Bitcoin is at a very low point. The usage of paper Bitcoin and institutional Bitcoin is surprisingly high. It's mostly because of memes. It defeats the purpose of why Bitcoin was created. At the same time, it does fund a lot of development, especially from those who were able to get a lot of coins in the early days and now they want to solve real problems with the protocol and they pay developers to do this. They pay academics to publish papers and then maybe quit their tenured jobs in academia and start working on blockchains.
19:03I used to be very critical of Ethereum in the past, but now I see zk-rollups coming to Bitcoin. Now I see that they were able to do a lot of useful research for stuff which can and most likely will come back to Bitcoin. And also Zcash, I think, is the most prolific research lab that the entire industry has because they're pushing not just for cryptocurrencies, but also for mathematics. They're pushing the limits of what we know and what our assumptions are about how this stuff works.
19:37Zero knowledge proofs are super exciting. And it's unfortunate that all of this did not happen on Bitcoin because Ethereum was supposed to get built on Bitcoin initially. Zcash was this Zerocoin paper that was no, it was Zerocoin and then Zerocash by Matthew D. Green. And he wanted to include these on Bitcoin in 2013 as a soft fork. They were not accepted by Bitcoin Core developers. And that's what led to the creation of altcoins. But I do like what's happening here. And I got to ask you, because it's been almost 20 minutes since we're talking, I got to plug a couple of sponsors.
20:16And two of them are actually LayerTwo Labs who are building drivechains. And Citrea, who is building this ZK rollup on Bitcoin. And I want to ask you, what do you think about them? If you had any time at all to look into them.
20:30Peter RizunI think Paul Sztorc is a very bright guy. But to me, drivechains are neither here nor there. I think the simpler thing is just make the block size bigger. That seems to be the obvious solution. ZK rollups, I think...
20:45Vlad CosteaThat's what Peter Todd said, by the way. He was asked about drivechains at a conference, and he said it's cheaper to increase computation than to scale human politics.
20:56Peter RizunYeah, I would agree with that. And ZK rollups, I think those are fantastic. I would love that. But Bitcoin, I don't think has the right scripting mechanism. But I think this is a good segue to talk about what Satoshi got right in Bitcoin design and what he got wrong. So you made the point that since we've had this split, we've had all these different research groups, they're all kind of specializing Zcash on privacy, our our group on scalability scalability, Ethereum on smart contracts. And we've learned a lot from that, that maybe we can all kind of combine to the broader goal of just making better money for the world.
21:36So I wrote down some things that I think Satoshi got right and I think Satoshi got wrong. So one of the things I think Satoshi got wrong was his scripting system was cracked. The stack-based machine is really complex, and it doesn't allow you to do much useful things. I remember when Ethereum came out, there was all this fear that if you have a Turing-complete virtual machine, all the halting problem, the halting problem, that's going to lead to all this chaos. But I think by now we've shown that that's easy to solve in practice.
22:12You just have gas limits or computational limits or some other kind of limit to control that. But what we've seen is that Turing completeness is really useful. I think Ethereum has proved that. Smart contracts lead to all sorts of uses that we can't even predict, and it allows for permissionless innovation. So if you have a coin where the scripting system allows you to do anything you want, then you don't have to debate about, oh, can we have this new opcode CTV? Can we do this? Can we do that?
22:44You can just do it. And then if it succeeds in the wild, then it succeeds. We don't have these debates. So I think that's something Ethereum has proved. Bitcoiners are wrong in the beginning. Turing-complete is good, and we should add that to Bitcoin at some point in the future. And once you have that, then you can do all these things like with zero-knowledge proofs that you're talking about. So you don't need to have another three-year debate about adding zero knowledge proofs. You just have a scripting system that allows someone to build that, and then they just build it.
23:17So it's actually like talking about it, it seems crazy that we're not doing that right now.
23:22Vlad CosteaYeah, that's why Robin Linus came up with BitVM, and it was considered to be one of the most significant developments in Bitcoin in many years. Because he was able to create this virtual machine for Bitcoin, which was previously considered to be impossible. And now stuff like Citrea, which is a ZK rollup, is being built using BitVM. And there's also Alpen Labs, which is building something using BitVM. But the larger issue here, and I spoke with a couple of the Citrea guys, and they told me that, yeah, it's very nice.
23:58It can generate this layer for scalability. But on the other hand, they're going to be putting their verification data with zero knowledge proofs on the base layer. And if you have like three of these roll-ups on Bitcoin, you're going to end up having another scaling debate to increase the block size. Because they're going to take up most of the existing block space. You can argue that they're a net positive, because they do enable a lot of good onboarding in a non-custodial manner, where users are in control.
24:33It's better than Lightning, but on the other hand, it doesn't really scale with one or up to four megabyte blocks with SegWit.
24:42Peter RizunNo, but does anything really scale with one megabyte blocks? Even Lightning doesn't scale with one megabyte blocks, because we have these crazy volatile fee spikes. So Lightning kind of works okay for small payments when the fees are low and reliable. But as soon as you have those fee spikes up to $100 fees and the chain backs up, Lightning starts to fail. Because it relies on quick and reliable access to the base layer. So I would say even Lightning. Bitcoin has no scalability solution right now with the current block size.
25:21Vlad CosteaWell, some people are going to be upset saying, well, I have this custodial Lightning wallet and it just works. But this week we have had a situation with Alby, which is a Lightning wallet which is trying to transition to being non-custodial. And they were custodial in the past. And they gave users like a year to migrate their funds to another wallet. And it seems like that year has passed and a lot of unhappy people realize that they lost their funds. And some will say, well, it wasn't that much to begin with.
25:53But it's definitely not nice and it's not why we're here to get this sort of banking setup where you're conditioned to spend your money within a certain amount of time. Or else you're going to get rugged. The bank takes everything.
26:09Peter RizunExactly. That defeats... I wanted to hold my own coins trustlessly. That was what was exciting about Bitcoin for me. So I guess where I'm going with this is I think any solution involves bigger base layer blocks. And earlier in the conversation, you talked about Dan Kaminsky, the one-gigabyte blocks and the, you know, it was like how many terabytes did you say were coming in every week?
26:37Vlad CosteaSo I think the napkin math and I got to look it up. I don't want to misquote Dan Kaminsky. But he was saying that every couple of weeks, if you have a one terabyte hard drive, you're going to need to prune the data. So you can store more than two weeks worth of transactions on your node.
26:54Peter RizunYeah. OK. OK, great. So this is so so, you know, this is like the higher this is as high as we have to go. And if we get there, we're golden. But like so. So right now, the block chain is about point seven terabytes. And how much is one terabyte like low cost hard drive? It's like twenty twenty dollars or something. So. So that's not a lot now. And if you imagine in the future where you're talking is one-gigabyte blocks, I think that works out to like.
27:21I think it's like 50 terabytes. Yeah, 50, 52 terabytes per year of blocking storage times 20 dollars. So that would be it would cost a thousand dollars per year every year to store the block chain. That's at today's prices. So so that doesn't sound that bad to me. And it's only going to get cheaper. So I agree, it's not it's not like it's ten dollars, but it's not a million dollars either. Like if you remember that video that Peter Todd commissioned where the big block feature is these huge data centers and, you know, nobody can run a node because they cost like a billion dollars and they require like gigawatts of electricity.
28:07Right. Like that is so out of scale. It is hilarious. So so even on today's technology, you know, you're talking, you know, a thousand dollars of your dollars per year to store the chain at one gigabyte blocks. And that's outrageous. And like you said, you don't even need to store the entire chain. You only need to store the chain, the historical blocks, if you want to serve those two nodes, if you want to be an archival node. And I think what makes more sense is to move to a network protocol where new nodes are paying like micropayments.
28:46So if my node is serving those old historical blocks, you know, I would like a couple pennies for every block I serve. And that will help me to pay for that storage cost. So I think this is a self-solving problem. And it's not a huge like we're not we're eating. What I'm saying is even in today's technology levels and global scale Bitcoin, you don't require data centers. It just requires a fairly easy home computer on a decent network.
29:18Vlad CosteaRight. So what I did while you're talking was to put on the screen the slides from Dan Kaminsky's presentation. I should also send you the link so you can take a look. Or do you have a device to check the screen from our streaming?
29:32Peter RizunYeah, absolutely.
29:34Vlad CosteaIt's from Black Ops of TCP/IP 2011.
29:40And he spoke about scaling Bitcoin, which I still find exciting to discover this gem from August of 2011.
29:51So at slide five, he describes Bitcoin. He says it's an attempt at making a digital currency with no central bank, a system with economic properties I don't know anything about, an overlay network upon the Internet that people think has certain properties. And I'll just get to his describing the gossip network and how transferring works.
30:16Peter RizunUh-huh.
30:21Vlad CosteaSo just for context at this point, because some people will be confused why I focus so much on Dan Kaminsky, he wrote also a blog post that was called I tried to break Bitcoin and I failed.
30:32And this was, I think, in 2010. And also he was the first person in 2015 to denounce Craig Wright and point out to his forgeries in the way that he tried to prove that he's Satoshi. So I think in the history of Bitcoin, he played a very major role. And at slide number eight, he says the main flaws and he adds that there are a few more. Bitcoin does not scale and is totally not anonymous. Very much ahead of his time. This was around the time when Silk Road, I think this was before the Silk Road, or around the time when it was blossoming and getting traction.
31:12So he has three criteria for scalability, which are bandwidth, CPU and storage. He says a three terabyte hard disk costs less than $200 today and will be cheaper still in the future. So you'd need one such disk for every 21 days of operation at one gigabyte per block. This is exactly what I was quoting. I misquoted in the sense that I said one terabyte and two weeks. It's about three weeks and four, no, three terabytes. So basically, you're going to need one terabyte every week, according to his math.
31:51Peter RizunYeah, that's the thing that I got 52 terabytes per week is what I, sorry, 52 terabytes per year is what I calculated. So I agree with these calculations. But we can already see how far the cost of storage has fallen. So he's saying $200 for three terabytes. I'm saying more like $20 per terabyte. Yeah, so it's already fallen by like a factor of three from here. It's going to continue falling more. But my point is, you know, even that that's not that bad. That's just, you know, $1,000 extra per year if you want to store the blockchain and you don't have to store the blockchain.
32:29So I would disagree with that. I don't think that's terrible. Do you think that's terrible?
32:36Vlad CosteaWell, there are people who still want to use the Raspberry Pis and they're pissed off that the UTXO set was increased by these stamps. And stamps are basically pixelated JPEGs that a guy named Mike in Space has made using multisigs. And it's the least efficient way of putting data on the Bitcoin blockchain. You can do that without SegWit or Taproot. And it was a way for him to prove that on one hand, ordinals are not that bad. And on the other hand, he can put permanent data on everyone's node.
33:09And there's nothing that can do about it.
33:12Peter RizunYeah, it's actually pretty funny because he's saying like, these are the best because you can't prune them. Yeah. Which I thought was a nice way to troll all the maxis. And it's true because they're in the UTXO. So you've got to keep them, otherwise your node could follow the consensus.
33:29Yeah, but we were talking, right now we're just talking about the block size itself. But the Raspberry Pi's, you know, they don't need to store the blockchain in RAM, right? They can just keep flushing that to different SD cards or whatever. And they can throw on those SD cards if they don't need to rescan a block and not sort of historical.
33:50Vlad CosteaI'm not sure if Core has that sort of optimization.
33:53Peter RizunNo, I think there's a lot of things that Core hasn't done that make it annoying to run a node. But this is all things that can be done with the existing protocol.
34:03Vlad CosteaI think that libbitcoin has that, that you can dump the UTXO to the normal storage.
34:11Peter RizunYeah, yeah. libbitcoin is great. Like I think Eric Voskuil, how do you pronounce the last name? Vosskill. Vosskill. He has done amazing work. And I think this is so good, we're finally getting a real competitor to Bitcoin Core. But it kicks Bitcoin Core's ass because it's designed using proper software engineering techniques. So there's this idea called scalable, right? It is something scalable. Does it have the scalable property? And what does that mean? Well, what I mean by that and what Eric means by that is if you throw twice the hardware at it, can you get twice the throughput?
34:51And that is true for libbitcoin. So libbitcoin can really scale to any level. It's just a matter of how much hardware you need, like how deep your machine has to be. So when Dan's saying not scalable, he's using a different definition. I think he's saying it's just becomes expensive at scale, which I don't think is true either. But Eric has created what I believe is the first scalable node that can scale to essentially any level just by increasing the, like adding more RAM, adding more bandwidth, adding more CPU cores.
35:22And it just distributes the work in parallel across all that hardware. And that's a great thing because Core does not do that. Like Core is this terrible mess of code that is just like all these band-aids on top of band-aids and this big rubber ball with all this hair coming out. And if you put Core on a really deep machine, no matter how deep your machine, it can only process so many transactions per second. And we tested this a lot. I gave a talk at Stanford back in, I think, 2015 where we kind of kept pushing it until it crapped out.
35:58Because it was a problem in the Bitcoin protocol, it crapped out just because Core kind of sucks.
36:05Vlad CosteaAt the same time, so for the past week, I have been showing this to people. I watched your presentation from Scaling Bitcoin in 2015. And you are showing how in, I think it was a matter of two weeks, the number of Bitcoin unlimited nodes has gone from being a 1% minority to being like a 15% minority. And basically people are making similar projections with knots, which is just a copy of Bitcoin Core with a couple of changes. It's not even that radical or different. But it seems like Bitcoin Core still has the Lindy effect.
36:46It's the one that most people use, most people run. There is some emotional attachment to it. Maybe miners trust it more. I don't know exactly what it is about it, but it always comes out on top and it's the one that people choose to use.
37:03Peter RizunYeah, which is, I think, really holding us back. And I think it's because there's no formal specification for Bitcoin. So if someone creates a new node, there's not really a formal process that they can follow to prove that that node is exactly consensus compatible with the existing Bitcoin Core nodes. Even Core can't do that within itself. The way most protocols work in the wild is you have a formal specification that's open and then you have people competing on private competitive implementations of that. So take like DDR4 SDRAM.
37:42So there is a spec for DDR4 SDRAM and that's open and any manufacturer can make DDR4 RAM. And it's all compatible with all the others because there's a formal spec and they can test that at the bits level and prove using formal validation techniques that it's compatible with the protocol. We don't have that with Bitcoin, so there's no way for a competing implementation to really prove that it's going to work the same way Core works. And then there's that risk of a hard fork if it's not.
38:17I think Core likes this because it means they just stay in charge because they're the current ones in charge. But obviously this is bad from a competitive viewpoint because it's hard for other implementations to compete. Do you see what I'm saying there, Vlad?
38:36Vlad CosteaWhat? What was that?
38:38Peter RizunDo you see what I'm saying about the lack of a formal spec and the lack of the ability for a new implementation to prove this compatible is is, in my opinion, holding back other implementations. It's not that everyone loves Core or agrees that they're like these super smart wizards.
38:53It's just because most of the network is running Core and if you run Core you're safe. That's it. Most people actually know it kind of sucks.
39:04Vlad CosteaI agree with you but at the same time I remember reading about John Dillon. It was this character who appeared sometime in 2013 and stuck around for about six months to a year. And his emails got leaked and it was sort of a scandal because apparently this guy is the one who paid Peter Todd to do that video about small blocks. And also it was this guy who meddled with the incentives for the CoinJoin bounty. At the time Greg Maxwell and theymos and Pieter Wuille, they put out this bounty for the first wallet that builds a wallet with certain specifications for privacy.
39:45Peter RizunAnd I think he had something to do with RBF, replace-by-fee, too, didn't he?
39:52Vlad CosteaYes, very influential character. So basically what happened is that Amir Taaki came up with Dark Wallet and said, okay, here it is, let me claim my bounty. And then this guy, according to the emails that were leaked, sent some Bitcoin to the bounty and said, well, now that I'm a stakeholder I can actually have a word to say if you're going to hand the bounty. And then the private conversations with Peter Todd, he was saying, I don't think having libbitcoin is a good idea because dark wallet was using libbitcoin.
40:28And he was saying, well, it's a bad idea to have multiple implementations of the same client and Bitcoin-Qt should be the only one and not also libbitcoin. And I think that was so influential and the spirit of that argument still lives on.
40:47Peter RizunYeah, it's weird. So what is your theory on who John Dillon was?
40:58Vlad CosteaLike, I've read all the emails, trust me. I spent an entire night going through everything. It's posted on Amir Taaki's personal blog, which I think is agorism.net or something. And it's also on BitcoinTalk. You can look it up.
41:12Peter RizunNo, I've read them all a few times. But it's weird, like, so there's that kind of mystery with him. And who also pushed for replace-by-fee and that is what killed the remaining use of zero-conf transactions of Bitcoin and Peter has celebrated that to this day. But further eroded Bitcoin's usefulness as a payment mechanism. So why was he motivated to do that? It just seems bizarre to me. And then if you also go back to like the scaling debates in 2015, were you around in 2014, 2015?
41:50Vlad CosteaNo, but I'm a nerd. I mean, I was around passively. I was reading about it. I hadn't bought any coins. I remember in 2015, I actually had to do a presentation in front of the class. I was an exchange student in Paris and the professor was doing this class on advocacy for new technologies. And I was assigned to do a presentation about Bitcoin and blockchain. And I was so clueless. I was like, yeah, I just did my homework. I didn't look into it past that point. So I can't really call myself a participant in the conversations.
42:21But tangentially, I actually read the Wikipedia page. I was on BitcoinTalk Scrolling and I did some basic research for my presentation. But it's really unfortunate that we got to the point where some stuff that was reasonable 10 years ago and was considered not contentious nowadays is taboo.
42:46Peter RizunYeah. So let's talk about it. So I became quite active in 2013 and I remain active since then. And my feeling at the time, 2013 and 2015, was the grassroots sentiment was that Satoshi always planned to have increase the one megabyte block size limit. The Bitcoin design is based on the block size limit growing until we reached that one gigabyte level while we're serving the entire world. And it seemed to me the overwhelming sentiment from the community was that we need to responsibly increase the block size limit to allow it to continue to grow.
43:30There were some concerns for sure. There was definitely a strong grassroots debate about that. But I felt the support was, you know, like 75 in favor of big blocks, 25 in favor of doing something else. But then what happened is like r/Bitcoin was one of the I would say that's where the energy was back then. That's where, you know, the politics were discussed. That's where arguments got heated. And then they started censoring people like suddenly you're not allowed to talk about raising the block size limit.
44:06And that was really weird, because previous to that, Bitcoin had been a very open community, like theymos running BitcoinTalk, he would allow blatant scammers to operate. He said, no, we don't want to censor them. But now suddenly, if you're talking about raising the block size, well, that's even worse than being a scammer. So we're going to ban you. So I think what happened is once that censorship started, all these influential big blockers got banned. And there was no second place for them to really go.
44:38So that I think that lost, we lost a lot of momentum in that. And then new people kept coming into Bitcoin and they thought there was more support for small blocks and they listened to small block arguments, but they didn't realize that they were kind of in an echo chamber at that point, because all the people with good big block arguments had been purged. So to me, that's what happened. But I think it's weird, like why it happened. And like, especially he brought up John Dillon and that seems weird.
45:08And I wonder, like, who was, were people, were there powers, were there dark powers at play pulling strings back then too, trying to keep Bitcoin small, trying to make it less useful so that it didn't pose as much threat to the status quo, to the fiat, to the banks. What do you think?
45:31Vlad CosteaBut, sir, I'm just going to say what the average maxi is going to see right now. They're going to look at the mempool, notice that it's empty and say Bitcoin never needed to scale. Look, there's not enough demand for transactions. Nobody wants to use Bitcoin because it's going up in price. They just want to buy Bitcoin and hold it. And that's the only purpose of it.
45:55Peter RizunYeah, they do say that. But I mean, if you look at, if you plot transactions versus time on a log scale, transactions are increasing exponentially until they hit the block size. And there were, there were some peaks and stuff. And what we've seen since then is there'll be sudden demand for Bitcoin. The blocks will get full, fees will spike to like a hundred dollars. Everyone gets pissed off because everyone, everything starts breaking. And then I think what happens is people just stop using Bitcoin. They go to Litecoin or they go to BCH or they go to Ethereum or they go to Solana or something else.
46:29So, so no, I don't think, I don't think the fact that blocks aren't full today proves that there was no demand. I think that just shows how demand has spilled over to, to other cryptocurrencies. And to me, that's, that's a loss for Bitcoin and that's a loss for the broader P2P movement because we're just diffusing this over multiple coins instead of focusing on one coin.
46:49Vlad CosteaOne coin, not OneCoin, which was a scam. And anyway, I do agree with you. I think about this a lot, that the adoption was delayed and stalled. And then there's going to be that guy who comes along and says, well, my shop accepts payments with the Lightning Network. And then you're going to ask them, how do you accept payments with the Lightning Network? And they're going to say, well, I'm using OpenNode or I'm using some sort of payments processor, which is doing the heavy lifting for them.
47:18Or I think they're also called LSPs, Lightning Service Providers. It's not the same as running your own node. It's not the same as running your own SPV node. You're giving up on some degree of control over the infrastructure.
47:34Peter RizunBut I'd say you said SPV because I want to talk about this. So I don't think you're going to have any future world where most people and most merchants are running full nodes. But I think you could have a future where most people are using SPV nodes and they're still self custodial then. But what I think is weird, like if you look at that John Dillon and Peter Todd, all the R, Bitcoin, censorship stuff, they demonized SPV nodes as well. They said, oh, no, they're not secure, blah, blah, blah.
48:05You got to run a full node. So there's this fetish to running a full node. But it's too annoying for most people to run a full node. So they just use a custodial service instead. But the thing is like, most people are using SPV, that's a really good outcome. Most people are using SPV wallets and maybe one out of every hundred hobbyists who's a super keener like me has their own node. That is a that's a win for Bitcoin. What is a loss for Bitcoin is everyone's using Coinbase wallet or some other centralized service.
48:37But that seems to be the direction we're headed.
48:42Vlad CosteaYeah, there's also the paradox where you can run a node on a hundred dollar hardware, but you can't send the transaction because it's much, much more expensive than the hardware that you're running.
48:55Peter RizunRight. That balance seems very, very odd. Yeah. Yeah. So it's so clear. Yeah. So let's talk about that. So you don't want to like say a node cost a million dollars in order for the transaction to be one cent. Well, that's a pretty bad outcome because a million dollars for a node. Yeah, that's the realm of only huge data centers and huge companies. But I think I've already proven to you that even with today's technology and technology is only getting better, the node costs are never going to get that high.
49:26They're going to be in the thousands of dollars range, not the millions of dollars range. But then on the other hand, if you say, OK, OK, now we have these $50 Raspberry Pi nodes. So that's great. It's easier to run a node, but now fees spike to $100, $200, $400. Some people think it'd be great if fees were $10,000. You know, this is like Bitcoin is like the settlement system for central banks. Well, then who at that point who wants to run nodes anyways? They're like, who cares if they can run a lot of Raspberry Pi.
49:55It's just the scale of the debate is just so lopsided that it's absurd.
50:04Vlad CosteaI agree with this. And I think if Bitcoin had like 32 megabyte blocks or whatever, it would not be less decentralized. And the people running nodes today, they would still do it because it's a hobby mostly for people. Yeah, but I think I saw this conversation and Peter Todd contributed to it. There was someone who posted a picture of this Amazon micro SD card, which costs like $80 and has one terabyte of storage and said, what's the argument against increasing the block size now? And the people basically started commenting, saying, well, the roadblock is not really storage because that's the cheapest part.
50:44It's actually Internet speed. Because if you're going to have larger blocks, it means that you're going to basically not allow people in Africa with the equivalent of dial-up connection to be able to validate the Bitcoin blockchain. But I think that one is also getting weaker, because nowadays we have 5G and we have Starlink, and of course you're not going to ask the average African to. I mean, it depends on which part of Africa. I don't want to say that the entire continent is poor. But let's say that you have someone in the middle of the Sahara Desert, and maybe that they're not able to pay like $100 per month for Starlink.
51:25But the question is, are they running nodes? Because I saw that the solution that was made for them was to be able to send Bitcoin with text messages, with SMS. And basically what it does is that it relays information to a Bitcoin node to send the transaction. And it's a nice workaround. But are we really going to virtual signal infinitely and say, well, there is this... I think I even heard this from someone from the Netherlands, and they said, well, there's this ISP here in the Netherlands, and they have very dated internet connections.
51:58And most people use it because they get the full package with television and internet and telephony and everything else. And they're going to say, well, even in the developed world, you have these cases where you pay a lot of money for a connection that is very slow. But once again, you can get Starlink, and you're going to get like 100 megabytes minimum, and you can put that in the middle of nowhere.
52:26Peter RizunRight, right, right. So let's go back to Dan Kaminsky's one-gigabyte block scenario. So if I take that, that works out to about 13 megabits per second sustained, so there could be some overhead, so maybe 20 megabits per second, maybe 40 megabits per second. But on 100 megabits per second, your node is keeping up to that global scale where we want to be. You know, I think seriously, you probably want a gigabit per second or so. But the point is, the bandwidth requirements to run a node and keep up that hard.
53:03Vlad CosteaAccording to the math by Dan Kaminsky, he actually put that in the same slide. He says under the chapter bandwidth, let's assume on average, a rate of 2000 transactions per second, just like Visa. Shifting 60 gigabytes of data in, say, 60 seconds means an average of one gigabyte per second or eight gigabits per second. So this is what you need for terabyte blocks, one gigabyte per second internet speed.
53:33Peter RizunYou're talking terabyte blocks, we're talking gigabyte blocks before.
53:36Vlad CosteaOh, sorry. Yeah, gigabyte.
53:38Peter RizunSo you did a math mistake. Is it going to be... because one gigabyte every 600 seconds, right?
53:49Vlad CosteaSomething's off about this because it talks in the storage section, it talks about one gigabyte blocks. And here, I just think it talks about 2000 transactions per second with Visa levels back in 2011. I guess now the limit has increased.
54:10Peter RizunLet's just stick to... we're using one gigabyte, let's just stick to one. So I'm going to go one gigabyte, that's 10 to the ninth on my computer, 10 to the ninth. And then there's eight bits in a byte, so I'm going to multiply by eight. And then we're going to send that every 600 seconds right to a block every 10 minutes. So that is 13.3 megabits per second. So obviously there's some overheads back and forth, so you need more like 40 or 100 megabits per second.
54:39But we're not talking... you don't need gigabit per second, but gigabit per second is already pretty common.
54:47So I don't think bandwidth is... just to keep up. I mean, the miners care more about bandwidth because they got to get the data really fast to be competitive. But for just a node, it seems kind of like a nothing burger. And if you're in this crazy place in the desert where you don't have 100 megabits per second or one gigabit per second, that's why we have SPV. Like SPV is like really good. You're still self-custodying your coins. You're still benefiting from most of Bitcoin's property.
55:20You're just not validating every single transaction that's taking place in the world.
55:25Vlad CosteaWell, the trade-off with SPV is privacy because you're connecting to somebody else's node and they know how many Bitcoins you have in your wallet and what transactions you're making.
55:36Peter RizunRight. There's some privacy arguments in SPV. I think we can... if there was more community mindset supporting SPV, I think we could improve a lot of that. You don't have to connect to the same node to broadcast your transactions. Your SPV wallet can connect to multiple nodes. It can do smart things to obfuscate some of this information. But yeah, the privacy is slightly weaker, I would agree. Okay, so we were talking about things that Satoshi got right and things that Satoshi got wrong. And I said one of the things that Satoshi got wrong was the Turing complete stuff.
56:13I said he should have made a better stack scripting system because Ethereum proved that the halting problem can be fixed and having flexible scripts leads to all this amazing stuff. But I think something Satoshi got right was the UTXO model. I think the UTXO model... I think the Bitcoin's architecture around UTXO is the great way to go forward. And I think he really nailed that. Ethereum shot itself in the foot by using an account-based model and that really hurt their scalability because they can't have that scalable property that I talked about where you can just throw more hardware and parallelize all the transactions across as extra hardware like you can in Bitcoin.
56:55So back to things Satoshi got right versus wrong. Yeah, the UTXO model, would you agree with that a lot?
57:03Vlad CosteaYeah, I like it. I think the UTXO model is superior to what Ethereum has from a privacy point of view, from a scaling point of view. It's also terrible because it generates issues such as dust, which once again, I have no idea how Bitcoin is going to fix this. But UTXOs that are not economical anymore and there is no way you can transfer them, you're going to need some sort of off-chain system to exchange these UTXOs, I guess.
57:35Peter RizunWhy? Explain your concern there.
57:40Vlad CosteaWell, the price is going up and you're going to have these UTXOs being valuable in terms of fiat money. But at the same time, you have limited block space and it's going to become increasingly expensive to transfer these UTXOs. So let's say that you have like 0.0001 Bitcoin, which is 100,000 base units. And maybe that the transaction fee is going to be half of that or even more. It's not economical anymore to transfer that. I see some people making the argument right now that you should use the times when the demand is low to consolidate your UTXOs, which I'm not a big fan of.
58:25I think it's bad for your privacy. But I do get why they want to do it, because they're afraid in the future they will not be able to spend their small amounts that they keep lying around in wallets or that they received as change or whatever.
58:42Peter RizunYeah. And again, this is another self-imposed problem. The reason dust can be hard to spend is because of high transaction fees. We have high transaction fees when we have too much demand for the one megabyte blocks. So I think the UTXO system is fine if you're not running into the block size limit. There is some concern about having the UTXO set. Maintaining the UTXO set will be the most expensive part of running a node in a big block future, because you need access to all this state.
59:20You have 10 billion people. They all might have a few coins. Each coin is 70 bytes. So you're potentially talking like a terabyte of state information, and you want to store that in fairly hot memory like RAM. So there is some cost there. I think that's the hardest part of scaling Bitcoin, is scaling the state. But even that, it's not that bad. I wrote it down here. One terabyte of RAM would cost maybe $3,000 at today's DDR4 prices. So one terabyte of RAM, that's basically one coin per person on earth.
1:00:00So again, we're not talking like crazy data center. We're talking a fairly expensive home hobbyist setup instead. And that's only going to get cheaper. So dust. So is dust a problem? I don't really think it is, because a lot of this dust is not going to be spent. It's been spent very, very, very infrequently. So that doesn't really need to sit in RAM. It's OK. What matters is that you can keep up with the average transaction rate. If the occasional transaction comes in, dispense a piece of dust, and my computer goes look at the piece of dust, and it finds it, OK, it's not in RAM.
1:00:42It's got to go to flash, to the SD drive, sorry, to the drive. You know, that takes a bit longer. But it's OK, because it's infrequent. And the cost of storing things in flash is two orders of magnitude cheaper than storing things in RAM. I don't see that as a problem either.
1:01:06Vlad CosteaI've also interviewed Vitalik last month, and he told me that right now he's able to run a full Ethereum node on his Dell XPS, which is like $1,000. No, it's more than $1,000, like almost $2,000 for that laptop. But still, it's impressive because Ethereum is this large mess of stuff that was added to it. They didn't think too much about scalability. They just wanted to let the builders bring stuff to their network. And being able to sync a full node on something which is like off the shelf and you can purchase it.
1:01:43In the case of Ethereum, which is once again a much worse design than Bitcoin, that's pretty impressive. Were you able to do any benchmarking to figure out what kind of system is able to validate very large block Bitcoin?
1:02:01Peter RizunYeah. Yeah, like the numbers I just said, like if you had today, if you had a machine with, you know, RAM measured in around a terabyte, and if you had like, I think it was 48 processor cores or something. I worked on the math for a long time. You're keeping up with that, like kind of one gigabyte block levels and such a machine, you know, it's expensive today, but it's not crazy, and it's only going to get cheaper. The point is, it's not this crazy, crazy data center machine.
1:02:38Vlad CosteaYeah, because of hardware improvements. And it's interesting, you mentioned about 48 cores. And Dan Kaminsky in 2011 said 50 cores plus whatever is used for mining, which is done by separate machines slash GPUs. This guy was so ahead of his time.
1:02:55Peter RizunYeah. So he said at the time, he probably said 50 cores thinking like, well, who has 50 cores? That's crazy. But I mean, now it's pretty common to have 48 cores or something. And that's only going to become more common too. So in terms of compute, like Dan Kaminsky broke it down into storage, state and compute and bandwidth. In terms of compute, compute is the least of our problems. And that's what my work on Blitz, the hardware accelerator for computing, for verifying digital signatures in hardware.
1:03:23So I've shown that when we get to specialized chips for doing this signature verification, we're talking like one microjoule to verify a transaction. So you could verify a million transactions, only a joule of energy. So that's like a million transactions per second, consuming one watt of electrical energy. It's nothing. And we can do this on a chip using like a TSMC's five-nanometer process, like a cutting edge process. And this tip, this little chip will fit on the tip of my finger. It'll be like one millimeter squared.
1:03:58So if you go to my talk from BCH Bliss in Slovenia just recently, I do all the math for this. And yeah, so a one square millimeter silicon chip that costs like a dollar to produce at scale can do all the compute for all of the Bitcoin transactions in the world at a global scale level. That's how small the compute problem is.
1:04:29Vlad CosteaI was looking at very bad pun right now, but I was looking at the AMD Ryzen processors because they have a lot of cores and they're pretty affordable. I mean, for video gamers and consumers. But I see that the Ryzen 9, which is I guess their top of the line processor, it has 32 threads and 16 cores. So I guess you need a different kind of processor.
1:04:59Peter RizunI think there are other processors that have more cores. I don't remember them offhand, but there's lots of optimization. See, I think where we're going in the future, we're not going to be using 48 cores on a node. We're going to have like specialized hardware that offsources all that computation, the expensive stuff. So you can keep up with it with like four cores and a Raspberry Pi type of thing. So you push. Do you know how much we've improved the SHA-256 hashing cloud? If you compare Satoshi's original Bitcoin CPU miner to today's cutting edge ASIC miners, we can do about 600,000 times more SHA-256 hashes for every joule of energy than we could in Satoshi's days.
1:05:55So we've improved technology 600,000 times. But that same kind of improvements can happen with all the rest of the computationally intensive stuff in Bitcoin too. And that's one of the things that we're working on at Nexa with our hardware work. So I guess what I'm saying is it's already doable today on a standard processor with many cores, and it'll become even easier as we've developed specialized chips to take that workload off those cores.
1:06:28Vlad CosteaYeah, we're going to get into that. I realize that the hour mark has passed and I need to plug some more sponsors. So I apologize for the interruption. Let's start with Edge Wallet, which is very convenient. I use it for two reasons. First of all, it's good for traveling because it has this duress mode. So maybe someone at the airport is going to ask you to unlock your wallet to show what you have inside. You type a different pin and it's going to show that you have zero funds.
1:06:57So you can say, well, I just downloaded this for fun or whatever. But it's also fun for conferences when you go and maybe someone wants to pay you in Dash or this actually happened to me. Someone wanted to send me some Dash and I was like, I don't have a wallet for Dash. I don't have time to write 24 words or something on a piece of paper because I'm traveling and I don't know how I'm going to manage this. But in Edge Wallet, you just open the software.
1:07:22You're going to find this menu where you type the name of the coin and you're going to get under the same wallet that you already set up. A brand new coin that you can add and you can receive funds instantly. So it's pretty cool. It supports a lot of these coins. And what's even cooler is that you can swap it into what you want because maybe someone sends you something that you're not going to be holding on to. But you can swap it for Bitcoin. You can swap it for Ethereum, Litecoin, whatever it is that you prefer to hold or use over the short term.
1:07:56And they have this integration with SideShift, which is another sponsor of the show. SideShift allows you to swap between coins. It's this exchange for which you don't necessarily have to sign up. You can sign up if you want to accumulate points or tokens or whatever and actually make some money and get some special discounts from your swaps. But what's nice about it is, for example, if someone wants to pay you in stable coins and you honestly don't want to waste your time trying to figure out how you can receive stable coins and then sell them and use another coin for gas and it's a headache.
1:08:35You just send that person your SideShift account address and then you're going to get this swap automatically into Bitcoin or whatever it is that you want to be sent directly to your non-custodial wallet. So it's very nice from this point of view. They have pretty good liquidity, low fees. Check that out. I don't think it works in the U.S., unfortunately, due to U.S. regulations, but maybe the Trump administration is going to change that. And there's also Bitcoin.com News, which right now I got to inform you, Peter, that is orange.
1:09:10If you go to Bitcoin.com right now, it's no longer green. They don't tell you that Bitcoin is slow and you should switch to Bitcoin Cash. Now it's orange and they focus on whatever the market decided is more popular. But I still think that they have some good journalism. So if you open their articles, you're going to find that they cover topics which maybe are not to be found on Bitcoin magazine, which right now seems to be more like this Trump outlet. On Bitcoin.com News, you also find news about India, about China, about countries in Africa adopting Bitcoin.
1:09:50And I think it's a lot more wholesome and interesting. And I also saw some news about gold. It's more, I guess, broad. And you can find something that you like more easily than on other outlets, which are more niche. So check out news.Bitcoin.com. And there are also two sponsors left. NoOnes.com, which is this peer-to-peer exchange that's trying to empower the Global South. Their CEO, Ray Youssef, has stated that their mission is to basically elevate everything that concerns the lions. That's what he calls them, the hustlers of Africa and the Middle East.
1:10:28And he's working very hard to drive up adoption to make this market more liquid. If you have any gift cards or any coins that you can sell to these people so that they can also use it in their daily life and economies, check out NoOnes.com. They have a swapping service. They have a spot exchange. They have a debit card for spending coins if you're into that. So there are lots of ways in which you can use it if you think that's useful. And last but not least, there is Hodling.ch, which is a service from Switzerland which specializes in self-custody.
1:11:03So if you're part of a company that's starting to buy Bitcoin and you don't want to trust a single guy with the keys, or you're some sort of whale who holds a lot of Bitcoin and doesn't want to have everything in his house, well, you can reach out to these guys and they're going to advise you on how to do it and also give you the benefit of a Swiss privacy. A Swiss business privacy. So it's pretty cool. Check out Hodling.ch. They're going to tell you if you need multisig or Shamir backups or hardware wallets or any other sort of specialized setup for your particular needs.
1:11:41And this is what they do. And I think they also started offering this recovery service. If you lost part of your seed phrase and you only know a few words or you scrambled the words, they can help you figure it out so you get your coins back for a fee. Of course, it doesn't come for free. Thank you for sitting through my ads, by the way. And I think I mentioned something interesting during my ads about debit cards because they're becoming increasingly popular. And it seems like some people think it's so convenient that they can use their Bitcoin with their Visa card.
1:12:15And this is so much against what we thought was going to be happening in terms of Bitcoin adoption. Is this really Bitcoin adoption at all if your coins are on some exchange and they just get converted for fiat as you're making purchases?
1:12:37Peter RizunI think there's a good side and a bad side to that. So this was kind of the inverse of the stablecoin situation. So with stablecoins, we're transferring fiat on a blockchain network. So this is kind of like transferring Bitcoin on a fiat network. So I think it's bad in the sense that it's not our end goal. We want to get, you know, P2P e-cash for the world. People turn to making Bitcoin transactions peer to peer. But it's nice because it means people value their Bitcoin. They value that ledger entry in the blockchain, which is not the case for the stablecoin payments.
1:13:13So no, it's not ideal, but I think it's still good because it still contributes value to the underlying crypto asset.
1:13:24Vlad CosteaOK, but do you think it's useful for adoption or is this like a copium mechanism where we just say, well, it's adoption. But on the other hand, it's really not because you're not using the network, you're just using the asset on some custodian's balance sheet.
1:13:40Peter RizunYeah, yeah. So I'm saying it's not perfect. But what is Bitcoin? To me, Bitcoin is a few things like Bitcoin is the ledger of value. And you're using that ledger of value when you're making one of these payments you're talking about, right? But Bitcoin is also a mechanism to update that ledger, like the Bitcoin Core nodes that are updating the blockchain. So, yeah, you're not using that part of Bitcoin, but you're still using the money, the store of value part of it. So, yeah, I think it's not the ideal situation, but I think it's still good.
1:14:16I mean, I would like to have a credit card that I can use and it deducts from Bitcoin. I should look into that. I don't have one.
1:14:24Vlad CosteaOK, I think I think NoOnes can help you. Anyway, I was going to ask you to make this segment of a short history of proposals to increase the Bitcoin block size and different clients that attempted to do it, because we have had this first attempt by Jeff Garzik, which we mentioned at the beginning of the episode. We have had Bitcoin, according to BIP101, I think the first one was XT and then Classic and then Unlimited. And then all of them sort of converged into Bitcoin Cash. And where did this all start and what is basically the story behind them?
1:15:04Peter RizunWell, I guess the story is we started bumping into the actual block size limit. Like prior to that, I was saying to the miners, we were hitting the soft limit so the miners could increase the block size. The soft limit will allow Bitcoin to continue to scale. Then we started hitting that one megabyte block size limit. And now this is a consensus change. So we're trying to come up with, well, how should we do this? And I think the most credible initial solution was Gavin Anders' idea of BIP101.
1:15:33So he wanted to, we've already talked about this, he wanted to basically jump to eight megabytes right away. And then I think it was every two years, the block size would double. So eight to 16, 32 to 64, ending in the year 2050 or something at, I think it was eight gigabyte blocks was his final solution. So well into that earth scale payment network at that point. So I thought this was a fantastic idea because it's baby steps, right? We're only doubling, we're doubling every two years.
1:16:04So we have lots of warning signs for things that are potentially going wrong. I don't know, there's just, I don't know what's wrong with that. It seems like a great idea to me, but I guess people say, well, you know, we can't handle eight gigabyte blocks. But the thing is we, you know, we could have course corrected if that really became a problem, you know, a little bit later. So I wish we had just all stuck to it and gone forward with BIP101. So he couldn't get that into core.
1:16:32They tried to do that with XT, like creating a competing client. The censorship was crazy at this point in time on r/Bitcoin. So talk of XT was not allowed. People were getting banned. I think probably even Gavin and Mike Hearn were banned. It was a very nasty time in the Bitcoin space. At some point in time, I think they kind of just gave up on that. And then the next one was classic, right? And what was classic going to do? Increase the blocks by just two megabytes or something?
1:17:02Vlad CosteaYeah, it was like the most conservative of them all, just two times larger blocks. And I think there was also BIP104 or something, which was saying this double the block size every halving cycle. So not every couple of years, every four years.
1:17:21Peter RizunRight. And I think I think I think that and BIP101, they scared people because it was it was trying to do something that would solve the problem for good. And people were saying, well, once we get on this path of BIP101, you know, eventually it's going to go to eight gigabyte blocks. And what if we can't stop it? But obviously, if it was a problem, we could of course scratch it. But anyway, so I think classic was the attempt to satisfy those people's fears. So, OK, let's not lay out this whole course to the year 2040 or 2050, whatever it was.
1:17:52Let's just double the limit to two megabytes. See, it's reasonable to me. So we were all on board with this. We wanted more, but OK, at least at least we can prove that it works, then we can do it again. But again, classic. Oh, that's a change in Bitcoin. You can't talk about that on Bitcoin. So all those people banned. It was wild. Like, why was it so? Why was it? Why did people hate XT and classic with such intensity? Why? It was two megabytes.
1:18:28Vlad CosteaI think the hatred came for the activation method. And some core developers were not happy with the idea of a hard fork because they were afraid that some users will not migrate to the new network. And they will just support the old one.
1:18:47Anyway, we got a question from the chat from BitMEX Research. If I'm not mistaken, I'm not sure if he doxxed himself, but let's say he is partly responsible for the book The Blocksize War. I'm not going to say whether or not he's that guy. I don't know. Is this Johnny 100? He wants to ask, can you talk about how broken Bitcoin Unlimited was with the sticky gate? The ironic sticky gate putting people on the opposite chain they wanted.
1:19:19Peter RizunNo, it was not broken at all. So the thing is XT and classic were both attempts to reach consensus so we could all move forward together and guarantee there would be no fork. Like if everyone comes aboard, there will be no fork. Bitcoin Unlimited was an attempt to say, OK, well, we're going to give up. Obviously, we're not going to come to a consensus. So Bitcoin Unlimited's plan was to create a mechanism that would allow people to start running Bitcoin Unlimited and allow larger blocks, start accepting large blocks a day if they come in.
1:19:55But will still fork back to the one megabyte block size Bitcoin if that chain doesn't become dominant. So yeah, there was some forking risk, but that was intentional. It was intentional because there's always going to be some forking risk if you don't have consensus. So it's kind of like, well, you can't do that because it might fork. Well, yeah, obviously it might fork, but we're trying to minimize the chance that it does fork. So I think people didn't understand what the goal was when they say it was broken.
1:20:34Vlad CosteaI got to ask you this because it's such a popular word, but it seems so vague all the time. Like, what is consensus? Because people say, well, let's add CTV to Bitcoin or whatever. Then you get Adam Back saying, well, there is no consensus. What does this mean?
1:20:54Peter RizunThat is a big thing. I don't know. I don't know. I guess you kind of know it when you see it, maybe. Like with the Berkeley DB bug, there was obviously consensus to fix that. There was obviously consensus to fix the kind of bug where after the subsidy runs out, it'll start again at 50 Bitcoin.
1:21:26Vlad CosteaThat was BIP42 and it was published by Pieter Wuille. I think it was on the 1st of April and people nowadays, they think it was a joke. And that was never happening in Bitcoin. But this is actually true because there was this issue in the way in which the condition was written. So that after the year 2140, which is presumed to be the moment when you get the last piece of the 21 million subsidy, it was going to reset back to 50 Bitcoins.
1:22:02Peter RizunYeah. So I mean, everyone agrees that that should be fixed. But yeah, your question of how do you know when you really have consensus? Where is that line? I don't think there's any way to really define it. I think what matters at the end is how does it play out on chain? Maybe it turns into a fork, maybe it doesn't. There's a big incentive. Let's say some people didn't upgrade their clients when we went to a classic, to the two megabyte limit. So some people say the one megabyte side.
1:22:38Well, they're going to have coins on the two megabyte side. And eventually, I think it's going to be pretty obvious what side wins because one of them is going to get the Bitcoin name, one of them is going to have most of the value, the other chain won't. So who really cares? And the thing is, those people that were so worried about a change that potentially happened, we got a change. That was the Bitcoin cash. Bitcoin cash was a chain slip. So the fear about a chain slip was weird because we had a chain slip.
1:23:06So why didn't we just take the chance with two megabytes? I think it would have been better. More people would have stayed together.
1:23:15Vlad CosteaWell, BitMEX Research also added, but the sticky gate put people who wanted smaller blocks on the large block or chain and vice versa.
1:23:26Peter RizunI'm not sure what anybody's asking there. But basically, I think what people don't understand is, let's say I'm running a Bitcoin node. Right now, if I'm running Bitcoin Core, my node will reject any block larger than one megabyte. I could edit my code to accept any block as long as it's smaller than 32 megabytes, and I will stay on the BTC chain. I'm not going to fork off. My node is not going to fork off because there will be no longer chain that has 32 megabyte blocks that exist.
1:23:59So even if I accept a 32 megabyte block, I'm just going to fork back to the small block chain because the small block chain is a half-car majority. So that's what we're trying to do with Bitcoin Unlimited, show that miners had to increase the block size all in sync. But users, you can increase your block size limit today on your node. You can do this in libbitcoin and you will not fork yourself off the network. People don't understand how Bitcoin works. So Bitcoin Unlimited was trying to allow a way so we could get to bigger blocks and solve that coordination problem, that messy coordination problem, and make that work.
1:24:36So anyway, it wasn't broken. That was the intention.
1:24:40Vlad CosteaHe says that there was this 24-hour sticky gate rule in Bitcoin Unlimited.
1:24:47Peter RizunIt's been a long time since I looked at that, but I remember people saying they were pointing out these certain weird conditions where you could cause a fork, and we're like, yeah, we know. Because if you don't have consensus, you always have a risk of a fork. So if he's saying that there is some hypothetical that will lead to a fork, I agree.
1:25:07Vlad CosteaI got to ask you, what did you think about SegWit2x, which was the other compromise that came out in 2017?
1:25:16Peter RizunSay it again?
1:25:17Vlad CosteaI was curious what you think about SegWit2x, which was the other compromise that came out in 2017.
1:25:26Peter RizunWell, I didn't like SegWit, but I was okay with it. I thought it was worth accepting SegWit if we got the two megabytes and we could all move forward together. So I was even willing to go with that. And until that failed, that point is when I kind of left BTC, and I think a lot of people did the same thing.
1:25:48Vlad CosteaSo what is it about SegWit that you don't like?
1:25:54Peter RizunWell, it's just a radical redesign for no real reason. What's the point of SegWit?
1:26:03Other than just adding more fixes to the big mess of Bitcoin Core, are we really winning now that we have SegWit? Is SegWit this amazing thing that allows all this cool stuff to happen?
1:26:21Vlad CosteaWell, officially, the story behind it is that it fixes the malleability bug and also enables the lightning network. That was the way in which it was presented. But what it also did was to increase the block size four times in times of high demand.
1:26:38Peter RizunYeah, kind of a roundabout way to get a bit more block size without a hard fork. So I think that's what it did. Yeah, it solved the malleability for a new type of transaction format, but there were other ways to solve the malleability that are more in line with the original design of Bitcoin. And those are being used on Bitcoin Cash. Bitcoin Cash doesn't have SegWit. It doesn't have the third-party malleability problem. So SegWit wasn't required for that. I just think SegWit is just a mess.
1:27:10We're kind of touching on things that are right and wrong. If I were to redesign Bitcoin today, I would stick with the UTXO architecture, but I would have a Turing-complete scripting language, maybe like RISC-V using a RISC-V virtual machine. Yeah, a full transaction introspection and then just allow developers to go wild. So now there's no debate about SegWit, TapWit, CTV, blah, blah, blah. Everyone can just build whatever they want because everything is possible in the native architecture of Bitcoin. That's why software is so powerful because people can just design whatever they want on their computer.
1:27:52It's not like, oh, I want to do this certain kind of loop. I have to petition Intel to allow this new opcode. No, everything you want to be doing is already possible because processors have a Turing-complete instruction set architecture. Why don't we do that for Bitcoin? I think Satoshi wanted you to do that, but then he disabled the opcodes. But I don't think he, I mean, He was a brilliant guy for sure, but I don't think he really understood or didn't spend enough time to really nail that. He kind of made a mess of the stack machine in Bitcoin script, but I think his intention was to make the scripting language really expressive.
1:28:40I know you might pull out that email where he says it's intentionally not Turing-complete, but I think he did that because he didn't know how to solve the halting problem, but we do now. And Calin from BCH, he gave a really good talk at the BCH Bliss Slovenia conference, where he analyzed all of Satoshi's ideas back at the beginning and all of his thinking about script and kind of shows where he was going, what he wanted to do, and how he was worried about the Turing problem and how he didn't have loops in script because it would guarantee that it would halt.
1:29:18But he shows how, with what we know now, a big part of that is thanks to Vitalik and Ethereum's efforts, we could have Turing-complete virtual machines in our crypto. It's not a problem, and I think we should because it would just end so much bickering because then people can build what they want.
1:29:41Vlad CosteaSo, I asked you about SegWit2x. But what did you think about that whole political movement to activate SegWit2x? Because I think before that it was just Gavin and Mike Hearn and Jeff Garzik promoting ideas. But with SegWit2x, you had a bunch of companies and exchanges and all sorts of advocates getting behind this political decision, basically. They gathered around and they said, let's do this. Let's put our signatures on this piece of paper and agree that this needs to be done in Bitcoin. And then you had a bunch of angry users saying, well, we are not part of this deal and we never knew about it.
1:30:21It was made by a cabal behind closed doors. They're trying to take over Bitcoin, control it and just make it work for themselves. And it was this huge conflict that was happening at the time. That was also when I was getting serious about Bitcoin and I landed in the middle of this scene, which was very confusing. I had no idea where to get my news. I had no idea what is right and what is wrong or what's the point of SegWit2x and whatever. I was happy when it got canceled because it made everything more clear.
1:30:55Peter RizunBut that criticism to me is misguided because I was there and the companies, they were trying to stay out of it. They were trying to allow an organic grassroots solution to emerge. And we were close with BIP101, we were close to the classic, we were close to the limited, but it didn't pan out. And then I think only then they thought, well, let's just try something. So these companies, these influential companies got together and tried to come up with a compromise. It was a pretty reasonable compromise.
1:31:27It gave both sides the minimum of what they wanted, but why were people angry at that? Their heart was in the right place. They were acting because we had failed as a community. So calling a backdoor takeover seemed, I'm going to use the word absurd again because I've been using it a lot, but a lot of things in Bitcoin history are absurd when we review it. So they weren't trying to take over Bitcoin, they were just trying to help us move forward because we'd been debating this for two years and fees were getting high, transactions were failing, we were losing users.
1:32:04Steam, Dell, there were a bunch of vendors that started accepting Bitcoin, then they started canceling the Bitcoin acceptance because the fees were too high and the transactions were too unreliable. So I think a bunch of people saw, we're wasting this beautiful opportunity we have to continue to grow Bitcoin, let's try to rectify this. That's how I see it.
1:32:31Vlad CosteaYeah. And I've interviewed a lot of people who said that initially they did sign the New York agreement, but they sort of withdrew from it the moment when Bitcoin Cash came out because they said, well, now we have a big block version of Bitcoin and we have the original Bitcoin, let's see which one is going to win. We have this free market situation where we can pick the winner.
1:32:57Peter RizunYeah, that is interesting. Why did Bitcoin Cash fork right there? I mean, I was part of it, I was working on Bitcoin Cash, but again, who was really pulling those strings? I don't know.
1:33:10Like, why did Bitcoin Cash fork then and not a little bit later?
1:33:15Vlad CosteaIt was the first of August around the same time. I think it was the exact same day when SegWit got activated, which is sort of ironic.
1:33:26Peter RizunYeah, maybe that was the reason, maybe that does make sense because then the fork would not have to have the SegWit baggage. So maybe that's the reason, but I guess, so I had forgotten about that until you said that. For some reason, I thought that the SegWit and 2x actually were the same time, but they didn't. So I think that kind of muddied the water right there with SegWit 2x. Why not at the same time?
1:33:51Vlad CosteaIt also seemed for a while that Bitcoin Cash is going to be the revenge chain for everyone who fought for how many years has it been, like three years, to increase the Bitcoin block size. Yeah. But it all led up to this all-time high that happened, I think, in late November for Bitcoin Cash. It was like $3,000 per BCH. And after that, it seems like the transactions actually went to Ethereum. And that one ended up being the network that took a lot of the mindshare and a lot of the users and use cases and adoption, in spite of, I remember Roger Ver campaigning and saying, well, you should use Bitcoin Cash, he was telling merchants to accept it, he was showing people how to use it.
1:34:38But it seems like, I don't know exactly what it was that did not make BCH successful.
1:34:46Peter RizunYeah, I've been thinking about that a lot lately, too. So at the time, what our hope was is that BCH would become Bitcoin. So were you around when the core people were really mad because they were trying to take the name Bitcoin, we shouldn't call BCH Bitcoin, it's BCH, blah, blah, blah. But that was intentional, because they both forked from the same blockchain, right? So if the BCH side became dominant, if I got the high-prime majority and stuff, then it really has a good claim to the name Bitcoin.
1:35:21If the economic majority moved in that direction instead, then I think we would call what is now BCH, we would call that Bitcoin today, and it would have the global market share. But that didn't happen. So for maybe six months, we hoped that we could prove that BTC plus bigger blocks, which was BCH, is better, and that would win, and everyone would go to BCH, and then we would proceed with BCH being Bitcoin. But that never happened, and the price kept falling, and then people lost interest.
1:35:58And I think at that point, BCH lost its shine, at that point it was obvious that it's never going to be the real Bitcoin, it was now an altcoin like all the other altcoins, it's just another one of a thousand altcoins. But at that point, now it's got to compete with the whole world of altcoins, and then what does it really have going for it? It's just BTC with bigger blocks, you have Ethereum with better smart contracts, you have Solana that's made faster, you have all these other machines that have been innovated this whole time.
1:36:25BCH doesn't stand out anymore, so I think that's what happened.
1:36:29Vlad CosteaAt the same time, I did see that there was this battle between Litecoin and BCH for being the payments coin, and it seems like Litecoin has much more of a network effect. Even though it's easier for merchants to integrate BCH, they just enable it, it's the same architecture. I think for Litecoin it's also easy. And once again, I think Eric Voskuil said this on my show, that BTC, BCH, Litecoin, Zcash, all of these are bitcoins, because they follow the design of the whitepaper. And it's the market that chooses which one is the most useful, and we should not be looking at Puritan arguments or saying this should not exist, the other one.
1:37:14It's sort of like Linux. You're going to have the same kernel, but different distributions built around it. And then we're going to see which one is going to be the most useful for all of these use cases that we have. What we are able to prove is that maybe the demand for these transactions was not as high, or maybe that the banking services were able to catch up and make it convenient, because it used to be hard to pay with your credit card, especially online. Now they made it stupid easy, especially with Apple Pay or Venmo or whatever.
1:37:52Peter RizunThat's a good point, because in the early days, I would show someone, oh, I could pay with my phone and scan a QR code, oh, that's really cool, look how fast it is, but now that just seems normal now. So maybe we squandered some of our lead there. But you brought up a good point, like why? Okay, so there was clearly demand for transactions on BTC. They were growing exponentially. But why didn't they spill over to BCH? But BCH doesn't have a lot of transactions now. Their blocks are like, what, 80 kilobytes on average?
1:38:22And Litecoin, like you said, Litecoin is kind of the payment coin, but it's still, they're still not that much transactions happening on Litecoin. So in general, there's just not a lot of crypto native transactions happening at all outside of stablecoins. I think the stablecoin market for transactions is the most robust. Now, why is that? Is it because, is it a path dependent thing? Like we squandered our chance of making crypto payments, and now we're on this alternative universe where we're never going to have that demand rebuild because people are just going to use stablecoins?
1:38:54Or is that going to come back? I don't know.
1:39:01Vlad CosteaI think I should put this up on the screen because I looked up how much are transaction fees on USDT, across various blockchains, I mean. So USDT across multiple blockchains. What's the transaction fee for this? Seems like so for Ethereum, it's like 20 cents right now. For Tron, it's $3.74 to $7.61, which is incredible.
1:39:29Peter RizunIs that the transaction fee on Tron?
1:39:31Vlad CosteaYeah, for USDT. $3 to $7 right now. It's amazing. I didn't know it was that high.
1:39:40Peter RizunThat's actually quite interesting. Because why isn't more demands... Because you can run a network. Why doesn't this migrate to a cheaper network? Because you can have...
1:39:54Vlad CosteaI guess it's network effects. I don't know. People find it convenient to use this.
1:40:02And they're willing to pay $3 to $7 to send one transaction. It's amazing.
1:40:09It's a website called gasfeesnow.com. You can check to see how much it costs to send across multiple networks.
1:40:20Peter RizunBut maybe that'll be the good side of stablecoins. Maybe stablecoins, because they're kind of blockchain agnostic, they'll have a tendency to migrate to the networks that can do the most transactions for the cheapest cost. So that's probably why I went to Tron in the first place. Does Tron have some scalability problem? Is it an account-based or something? Is that why the fees are so high?
1:40:49Vlad CosteaNo, I think it's intentional. Because if you send Tron on the blockchain, the fees are only a few cents. But if you send USDT, they made this more expensive. And I think the reason why it's more expensive is that, of course, Tether is a centralized company. And I think they issued most of their USDT on Tron. That's the network that has the most liquidity that's been issued. Maybe that they get a share or a slice of that. I don't know how this smart contract for sending USDT works, but I know that it's incredibly expensive.
1:41:30Peter RizunRight. So what you're saying is that the fee, that high fee is probably not a result of blockchain congestion, but about of some kind of middleman in a way, or Tether themselves, scraping a bit of that fee.
1:41:42Vlad CosteaI think that's the case. And also it shows us how much demand really is for USD around the world as a medium of exchange.
1:41:51Peter RizunYeah, definitely.
1:41:54Vlad CosteaI remember watching the documentary, what's it called, The Rise and Rise of Bitcoin. And you have Nick Spanos in New York saying, well, all your dollars are crap. You should exchange them for free market money. Look, one Bitcoin is equal to one dollar right now. You should get the Bitcoin. It's better. And he was trying to talk with people in the street telling them they should use Bitcoin. I mean, that spirit is lost nowadays.
1:42:21Peter RizunYeah, but I mean, I love accepting Bitcoin. I prefer to get paid in Bitcoin because it just goes, it just sits in Bitcoin and Bitcoin tends to appreciate over USD. So I prefer to buy the funds to be in Bitcoin than in USD. But I guess that's because I'm not living paycheck to paycheck. And the people that are more dependent on every payment being exactly what they expect, maybe that's the issue. And maybe that's most of the world. And so they prefer just the stability of USD, even though over the long run, they would be better off by holding it in Bitcoin.
1:43:01What in your mind explains why stablecoin payments are so much more popular than native crypto payments?
1:43:10Vlad CosteaI think it has more to do with people wanting USD, especially in countries which have terrible fiat currencies, which are less stable. One of my friends that I met a long time ago during my Bitcoin journey, he's from Venezuela, and he was also advocating for Tether in Venezuela. And I was like, why? And he said, well, you don't understand because it's very important for us to get access to dollars and it's very hard to find someone who's going to exchange your local currency for USD. And the fact that you can do this digitally is going to be huge.
1:43:48And I think this was like 2018. I did not pay much attention to it, but it did boom. There was that situation in Venezuela with the hyperinflation and it seems like the currency that actually got traction was Tether. Also, you got to look at the experiments in El Salvador, where they actually tried politically top down to push Bitcoin adoption and say, well, you should use this lightning network for these payments. And you have these ATMs where you can exchange and it's legal tender. Every merchant should accept Bitcoin if they're asked to.
1:44:27They never enforced it, as in sending the police to arrest the people who refused to accept Bitcoin. But it was an interesting experiment, which failed. And not people blame the IMF or whatever, because they made deals. It failed way before that. I remember in 2021, I think, I was supposed to go to El Salvador. Or 2022, I forget the year. But I got sick and I couldn't travel. My point is that I contacted the hotel where I was supposed to stay and I asked, how am I supposed to pay for this?
1:45:00Do you accept Bitcoin? And they said, we should be accepting Bitcoin, but we don't want to. So if you can't send us USD, that's what we prefer. And that's when I realized that there's something wrong here, because you see videos with people paying so happily in Bitcoin and being like, yeah, I just bought my McDonald's menu and I bought this pupusa in the street and I was able to buy my clothes and whatever. I guess they just selectively went to merchants that were friendly and just wanted to make some money.
1:45:28But at the same time, overall, on a larger scale, it was just a bubble. And it was only a few people sending and receiving. And I think the fact that the government tried to intervene to push their own wallet in the middle and it was not private at all. Everyone had to register for it. So part of this whole economy was, I guess, defeated by the way in which it was implemented. It was just so bad. And it was even worse in the Central African Republic, which some people don't remember, that was the second government to declare that Bitcoin is legal tender.
1:46:07And that one lasted for like six months and then they reverted. They said, well, we don't want it anymore. It's crazy how this works.
1:46:17Peter RizunYeah, it's really too bad. But if I think back to, I live in Vancouver in Canada and Vancouver was home to the first Bitcoin ATM. And we had a really strong Bitcoin meetup group and they were really passionate about getting different merchants to accept Bitcoin. And so there were lots of coffee shops and restaurants and other vendors in Vancouver. They would accept Bitcoin. And it was great. Like I would go down there and I'd pay in Bitcoin and everyone was happy. I would even pay friends. We would settle our debts in Bitcoin because it worked really well.
1:46:54And we were holding Bitcoin and Bitcoin was going up and we wanted to hold Bitcoin. But that's all dead now. I don't think any place in Vancouver accepts Bitcoin anymore and none of my friends will accept Bitcoin. I'll literally pay that $15 for a beer in Bitcoin. They don't have wallets on their phone anymore. And the 0.1 Bitcoin that I gave them back in 2013 is now worth $14,000 Canadian, and they've lost it, which I find hilarious. But yeah, all of that excitement's gone. I don't know if it's going to come back.
1:47:31It's really sad to me. So I feel we really hurt our, we squandered what was a great opportunity.
1:47:43Vlad CosteaWell, you can argue we can still get that back if we scale. But the question is, do people still want to receive Bitcoin for payments? Or are we going to get Expedia and Microsoft and Dell and all of these companies that used to accept Bitcoin to once again accept it? I think the regulation landscape has also changed and it's more difficult to accept and businesses just don't want that headache.
1:48:09Peter RizunI think so, too. So I think it's going to be harder now. I don't know. I want to see this just work out. But I mean, the trajectory we're on currently makes it seem like we're going to move into a stablecoin future, which I think will be very bad.
1:48:27Vlad CosteaI agree with that. It seems like we sacrificed so much on the altar of number go up and we said, well, we want this to go up at any price. And we accepted so many shenanigans from guys like Michael Saylor just because he's pumping the price. And then we wake up and we don't recognize the community. We don't recognize the mission of the project anymore. We're like, so what are we doing here? Just talking about going up in U.S. dollars. Can we actually spend these coins anywhere?
1:49:04Peter RizunWell, yeah. Saylor is an interesting guy because when we were talking about remember at the beginning we were saying, well, why do we want to scale Bitcoin at all? Well, just to achieve the goal of P2P e-cash, that's why we want to scale Bitcoin. And the debate earlier was, well, yeah, everyone agrees that's what we want to do. But, you know, how do we solve the technical problems to make it reasonably affordable to run a node? But Saylor is different. Saylor says, well, even if it was super cheap to run a node, we still don't want to scale Bitcoin because we don't want to use Bitcoin for payments.
1:49:38And people love this guy.
1:49:43Satoshi's whitepaper is Bitcoin, a peer-to-peer electronic cash system. And then you hear Saylor saying, no, it's a digital asset that you're not supposed to exchange P2P. It's just, what was he calling it? He calls it like a digital... Energy.
1:50:04Vlad CosteaAnd we're cyber hornets and whatever. I mean, it's such a PSYOP.
1:50:13Peter RizunImagine taking some of that stuff back to 2013. The 2013 people would think you're crazy. Like they're saying that that's not what we're trying to do here at all.
1:50:26Vlad CosteaYeah, but the question is, OK, maybe that Bitcoin is going to be this digital gold, right? And people are just going to use it to speculatively store of value with it. I think we're still going to have bear markets and moments when there's very low demand for it. But at the same time, what's going to be the network that will fulfill this mission of peer-to-peer electronic cash? Because it seems like BCH, I think the moment BCH died was when the BSV fork happened because BSV was less cautious and more nihilistic.
1:51:01They just said, OK, let's just make what Calvin said, gigamega blocks. They're like, yeah, whatever BCH does, we're going to do tenfold or whatever. That's when BCH sort of lost part of its mission or goal or people were like, so what's the point of this if it's not the radical big block version of Bitcoin? It's the conservative version of Bitcoin with big blocks. And I think we also had some interesting designs since then. We had the Mimblewimble paper, which came out, and I think that one scales better, but has other tradeoffs.
1:51:38I think now we have the Tachyon project and Zcash, which promises within a couple of years to bring billions of users to this design, which is imported from Bitcoin, but also uses their zero knowledge proof stuff with the Halo 2 protocol and zk-SNARKs. And it seems like these designs in some ways have some advantages over the basic Bitcoin design. So my question for you right now is, why do you still push to make Bitcoin scale when over the last couple of decades almost we have had these designs which are maybe more elegant or more scalable by design?
1:52:21Peter RizunI guess I would say, I think the Bitcoin design is the most scalable, but I think, like Eric Voskuil says, these other coins are Bitcoin too. So if I were designing Bitcoin today, I would stick with the UTXO model, but I would use something like RISC-V for my virtual machine. And with that, I can implement all these zero knowledge tricks. It can be Bitcoin plus what you're talking about on the same system. To me, the scalability comes from the fact that it's a UTXO machine. And the flexibility that allows you to do all these features comes from the fact that you have a Turing-complete virtual machine.
1:53:02Does that make sense?
1:53:05Vlad CosteaIt does. I was just thinking that Roger Ver, for example, nowadays seems to be promoting Zano and says, well, that one is a better design. It's basically the crypto node protocol with the option to add tokens on top. And I'm not sure if that one is more scalable. I guess not.
1:53:25Peter RizunNo, I think typically the ones that are more private are a bit less scalable.
1:53:32Vlad CosteaIt seems like a lot of people are moving away from this Bitcoin design, but you're still trying to make it work.
1:53:38Peter RizunNo, I just think I don't actually think they are.
1:53:44There's only so many different designs you can have. Is it UTXO based or is it account based? So that's one of the criteria. Is it proof of stake? Is it proof of work? That's another criteria. Then there's like the privacy axis. So in Bitcoin, all the transactions and the amounts here are transparent. And on the Zcash, Monero axis, everything is very private. You can't tell amounts and stuff. But there's trade-offs to both. With Bitcoin, yes, they have a bit worse privacy. But on Monero and Zcash, you lose Bitcoin's transparency.
1:54:17You lose the auditability. So there's no really easy way for you as a node runner to figure out if there's been inflation on Zcash or Monero without having to trust some crazy zero-knowledge moon math. So to me, that's the trade-off. And the Zcash and Monero transactions are larger too. So that's the trade-off. I guess what I'm saying is, in my mind, Satoshi got that right. I think his balance of privacy and complexity was right. BCH has done a nice job of adding privacy to Satoshi's protocol with what they call CashFusion.
1:54:57So it's kind of a CoinJoin-type mixer that works super good. And I think that's all the privacy most people need. So no, I wouldn't add any privacy beyond that if I were redesigning Bitcoin.
1:55:14Vlad CosteaI think this is also a good question to ask. What does BCH have currently that BTC does not? Because it's much more than larger blocks, right?
1:55:26Peter RizunYeah. So it has larger blocks. And what they've been doing is they've been doing script improvements. So this is stuff BTC wants to do. A lot of the opcodes BTC wants are already implemented on BCH, like OP_CAT. That's already working on BCH. So BCH, I think what happened is they wanted to be Bitcoin, but with bigger blocks. But they've lost. That's not going to happen. So BCH is now, it's never going to be the real Bitcoin. So now they have to differentiate themselves with more features.
1:55:59So what they've been doing, they've done really nice work too. The smart contracting due to these new opcodes is much more sophisticated on BCH. And if you look at some of the talks from the BCH Bliss conference, you can see some of the work they've done with stablecoin trading on it. So where was I going with this?
1:56:19Vlad CosteaThe differences between BTC and BCH.
1:56:23Peter RizunYeah. So they've done a lot of script improvements and they're going to add loops next, which will make BCH more Ethereum-like in what it can do. But again, I think that's still not enough. I think you need to go whole hog and just go with something like RISC-V. So you'd have a full Turing-complete virtual machine running on a UTXO architecture. So that's my dream. That's where I think you want to go.
1:56:56Vlad CosteaI think something else that BCH has concerns the initial sync, which is syncing blocks in parallel. Okay.
1:57:05Peter RizunBut that's not a protocol thing. That's just because core is crap, right? Like Eric Voskuil's libbitcoin already does that too. Eric can sync the blocks on a $200 or $300 node in like 90 minutes or something. It's something crazy because he downloads all the blocks in parallel. His node is fully parallelized. He's done the best job in scaling the software out of everyone. So he's way ahead of BCH. He's ahead of Nexa. He's ahead of everyone as far as I know.
1:57:38Vlad CosteaSo the question is, why doesn't BCH copy libbitcoin?
1:57:45Peter RizunIt'll be a little bit hard. I guess you'd have to move all that. It takes all the script stuff. I don't think Eric's work is fully done yet. I think. I haven't ran libbitcoin yet, but I'm excited for it. I think that's a really cool project. Let's see. So BCH is going to add UTXO commitments and hopefully they add UTXO commitments that allow for compact inclusion proofs. Are you familiar with the idea of UTXO commitments?
1:58:12Vlad CosteaNo. Could you please describe them?
1:58:15Peter RizunYeah. So if you want to run a full node, you need to know the current state. You need to know what coins exist and are unspent. And that information is stored in the UTXO set. So right now you download all the blocks and you process, go through all the transactions, then you assemble the UTXO set. And that allows you to run your node. Once you've assembled the UTXO set, you can prune all those old historical blocks because all you need is a state. So UTXO commitments is an idea where rather than downloading all the blocks, you just download the state.
1:58:52But you want that to be trustless. So right now the miners, like when the miner makes a block in the block header, they commit to what's called the Merkle root of the block. So that's like a cryptographic hash, which tells you exactly, it allows you to confirm that you have the right block. Do you understand that? About the Merkle proof stuff?
1:59:15Vlad CosteaPartially. I know about Merkle trees that are part of the Bitcoin design. If you ask me to describe them in detail, I'm not going to be very good at it.
1:59:25Peter RizunOkay. And that's how SPV works because all my SPV needs to do is have the block headers and the block headers are small. They're like 80 bytes. They're small. And then if I have a transaction... I can link that by what's called the Merkle branch. And I can do this, basically the SHA-256 operations on my transaction, and I can link that to the Merkle root that's in the block header. So I have cryptographic proof that the transaction I received from you was mined into the most proof of work chain without being a full node.
1:59:58So that's this trustless property. Like it's not trustless in the sense that I've verified the integrity of every transaction, but it's trustless in the sense that I know my transaction you gave me was confirmed into the most proof of work chain. So we already have that for transactions. So this would be for doing it for coins as well. So every block, the miners would hash the UTXO set into a big tree, and they would stick the UTXO fingerprint, the root hash of that tree, into the block header beside the Merkle root.
2:00:33So now using the same Merkle proof idea, a light client, like an SPV node, can prove that a coin exists as unspent at a certain block height. So this is great because now if I want to run a full node, I don't have to download all the blocks. I just download the UTXO set from an untrusted source. It doesn't matter where I get it from. Then I hash it, and I confirm that it hashes to the same fingerprint that's in the block headers. And if it does, then I know that my state at block N is the bit for bit exact to all the other nodes in the network.
2:01:15So it allows for faster bootstrapping in the new nodes because you don't have to verify the entire block chain. And it allows for these compact inclusion proofs. So you can prove to a light client that a coin is unspent as of a certain block height. So there's lots of benefits to that too. So that I hope will be added to BCH and Nexa as well in the next year, so to speak. And I think that's really a really cool thing because then to verify transactions, you don't actually need the entire UTXO set.
2:01:44Which is currently what, seven gigabytes and growing. You just need, it's kind of like, it would create a new class of node that's stronger than SPV, but weaker than a full node. And I think that's a sweet spot where we want to be.
2:01:58Vlad CosteaSo do you think this makes it possible to run the software on mobile?
2:02:04Peter RizunOh yeah, definitely. Definitely.
2:02:07Vlad CosteaSo basically you're going to ditch the trade-offs of SPV and have like a hybrid system?
2:02:15Peter RizunIt's still a light client because you're not downloading all the transactions, you're not verifying everything. But you're still trusting the miners. If you're a full node, you're verifying every transaction independently. So you know it's true, irrespective of where the miners are. So with this method, you're still sort of trusting the miners, but you're trusting the miners like you are for SPV, but you're able to prove the coins are unspent as well. Not just the transactions were confirmed.
2:02:52Vlad CosteaThat's pretty cool.
2:02:55Peter RizunI think it's really cool. It's been a proposal in BTC. There was a thread back from BitcoinTalk called the ultimate blockchain compression project. And it's a bunch of really bright people talking about it. They kind of came up with an idea, kind of similar to this. So BCH and Nexa, we've refined this and I think we have an ideal implementation for doing this. And hopefully we roll that out in the next year or so. But yeah, I think that's something Satoshi missed. I think he should have had some sort of a UTXO commitment system with compact inclusion proofs.
2:03:33So you could prove that a coin exists and is unspent in a compact way.
2:03:39Vlad CosteaYeah, that's really useful. You have two questions that you received. One is from Paul Sztorc and the other one is from Corbin Fraser. I'll start with Paul's question. He says your paper transaction fee market exists without a block size limit. He says it was wrong in its main point about orphan risk. My light just died. I'm going to fix it. So it was wrong in its main point about orphan risk inducing miners to curtail block sizes. However, the title of the paper was correct. It turned out not to matter because long run fee pressure turns out to be low, although Alex K believes fee apocalypse is still imminent.
2:04:21Still, Rizun's paper definitely damaged Greg Maxwell's sanity. So in that way, it was influential.
2:04:33Peter RizunThank you, Paul. I'm glad it damaged Maxwell's sanity.
2:04:40I don't think it was wrong, though. I think the paper could have gone into more depth about the advantage that large miners have compared to small miners in terms of orphan risk. But remember, at the time, there was this fear that blocks would just get infinitely big. If you imagine a world with no block size limit, then the argument was, but mostly by Greg Maxwell, that there's so much demand for storing things on the blockchain that people make these transactions and they pay a penny. But then maybe miners started including transactions that only pay 0.1 pennies.
2:05:21And then maybe miners started including one megabyte transactions that only pay a one hundredth of a penny. And the worry was that there's no limit at all. There's no natural limit because the miners are incentivized to include anything paying transactions, no matter how big the transaction is, and no matter how small the fee is, as long as the fee is non-zero. And the Maxwellian argument was that would lead to these runaway blocks that are basically infinitely big. So I think my paper definitively showed that there is a fundamental limit that, no, in order to include a transaction, the fee has to cover the orphan risk.
2:05:59And whether you're a small miner or a big miner, unless you get into like the 33 to 50 percent miner where a whole bunch of other things break down, there is still an orphan risk cost to including a non-fee paying transaction. So I think my paper was correct in the main point that orphan risk does exist and the fee has to cover that. I think it was incomplete in that it didn't discuss the nuance how whether a miner that controls 15 percent of the hashrate, his orphan risk isn't quite as much as a miner who only has one percent of the hashrate.
2:06:39So in terms of the empirical stuff, so I think what's interesting is I think we've now proven that there is not this infinite demand for block space because BCH, for instance, its blocks are never full, even though the cost to put a transaction is like 0.1 pennies. So I think you were talking about that, the low, long run fee pressures. So empirically, the fear that there was so much demand for block space, we've empirically seen over the last decade of that. That's just not true. And speaking of that, so another big push to keeping the block size limit small was to do with this fear of fee pressure getting too low.
2:07:28So this idea, what I call the Maxwellian fee market, is that we'd have this one megabyte limit, it would get hit, and there would always be this continuous demand, block would always be full. You'd have like fee pressure, would be nice and stable, and it would sit there like maybe $10 a transaction, and there would always be like a one-day backlog of transactions, and that just continues. But what we've seen is that that doesn't play out. What happens instead is the blocks are kind of half full or mostly empty, and fees are one Satoshi per byte.
2:08:02Then something happens, the blocks get full, fees go to like $100, but they only stay full for a couple days, and then it goes back to the empty case. So the whole idea that we could even create a situation where we have this sustained demand for transaction space, I think that it's also proven empirically false based on what we've seen. I think Paul would agree with that too.
2:08:27Vlad CosteaYeah. I'm not sure if you're paying attention during the halving time last year, it was about a year ago, that the on-chain fees were ridiculously high. And you had all of these people trying to get into the halving block and also inscribing all sorts of NFT collections on the Bitcoin blockchain. You were paying like $300 easily for one transaction at the time. And now it's ironic because everything is empty. It's a ghost town. Yeah. And it was funny to see, I think it was Grubles from Blockstream who said, well, we need to find new use cases for Bitcoin blockchain to sustain the security of the network.
2:09:09And I was thinking, isn't this ironic? Because now Bitcoin looks... just like the Liquid Federation. If you look at the Liquid Federation mempool, the blocks are empty, they have maybe three or four transactions. On Bitcoin, maybe you have three or four hundred transactions. But still, it's super underwhelming for something which is supposed to be the future of money.
2:09:33Peter RizunYeah, and it's all because of the block size. You can pay for one satoshi per byte. Oh, that's great. I want to use Bitcoin. It's the main coin. But then suddenly you get to these crazy spikes and now your use case just dies. Like most use cases don't work at $100 per transaction. So it's like we had an opportunity. We didn't succeed. We kept the one megabyte block size limit. And we keep getting new opportunities. Every time the blocks get full with a fee spike, that's another opportunity.
2:10:03But those are customers that we're turning away. We're saying, no, we don't want you. Or we only want you if you're willing to pay these outrageous prices and keep demand high. But probably their use case doesn't even work at $100 fees. But they don't know that because when they started it, it was one satoshi per byte.
2:10:22Vlad CosteaI think this is a very nice transition into talking about the Lightning Network because the way in which it was presented was this solution to making sure that when on-chain fees are high, you can still make very cheap and fast transactions. Off-chain. It's basically an extension of the payments channel idea, which if I'm not mistaken, Mike Hearn presented first.
2:10:51Oh, sorry. What was the question?
2:10:53Peter RizunNo, I was going to interject, but continue please. I don't have a question. I was just going to say something, but I interrupted you, so continue if you want.
2:11:04Vlad CosteaI think the intentions behind it are good, but at the same time the implementation is horrible. It's been almost a decade. It's still at the point, it's still not at the point where it was supposed to be, when it was being presented as a scaling and privacy and also fee solution as in cost.
2:11:27It can be useful. I've used it before and for example, it can solve the fungibility problem when you're dealing with exchanges because some of them, you mentioned that BCH has CashFusion, some exchanges can deny you access just because you're involved in that mixing. And if you put your coins on the Lightning Network and the exchange supports it and you send to the exchange, they're not going to care where it comes from because there is no way for them to know where it comes from. And that's one advantage that I see of the Lightning Network.
2:12:01But in terms of actual scaling, I don't think it actually onboarded more users or kept them using the network. And if it did, it's not really scaling because it's custodial. Most of it, I mean, with the people who got onboarded. And it still relies on the base layer to scale. If you read the Lightning Network whitepaper, I think it talks about 100 something megabyte blocks just to be able to work at scale. But still, I can argue that if this works reliably, it's much better than having gigabyte blocks.
2:12:39You're able to offload some of that activity to enable the Lightning Network to take on the payments function, but it's still not there.
2:12:49Peter RizunYeah, I think Lightning is broken in a high fee volatility environment. Like, the whole claim is you're going to use Lightning for small payments, so you're going to put $50 in a channel. But if fees spike to $100, then you can't even escape your channel if something goes wrong. And if it costs $50 to set up your channel in the first place, you're not going to do that for a $50 channel. So I think I like Lightning, but it doesn't work in an environment where your fees can go from a couple pennies to $50 or $100.
2:13:24So either way, you still need to increase the block size limit to prevent these crazy fee spikes from happening. But I would implement Lightning very differently. So when a node, let's say I bring in my node, so the first thing my node is going to do is it's going to start trying to connect to other nodes so they can learn about blocks and transactions. So it tries to make a connection with a node, so that becomes a TCP/IP socket between my node and another node. But what I would do is I would create a new network protocol.
2:13:58And I would make it so that when my node requests a TCP socket with another node, it has to create a payment channel at the same time. It has to deposit like $2 in that payment channel. And if it doesn't, then the other node is just rejected. So now, when my node makes a get data request to get a transaction or a block, it's going to send a little tiny micro payment to their node. So what we're going to do, and every node is going to do this, so every single connection between every node of the network is going to be a little payment channel.
2:14:32So what we've done is created a Lightning network, but it's actually really good because it's kind of a complete a complete graph, not a complete graph. But there's a payment channel between every node that has a data connection. So this does a bunch of things. So you have way better routing capabilities, and you have a way to reward nodes for being good nodes. So now, nodes that are serving more blocks than they're being served are going to accumulate Bitcoin. So I think that solves part of the long term who's going to store the blockchain problem.
2:15:12So that's what I would like to see. I'm not going to work on that because I have a lot of other things to do, but that seems like a better way to implement Lightning.
2:15:22Vlad CosteaI'm actually curious because Lightning was presented about a decade ago for the first time. What did you think when it first came out? Because the stuff that you said right now is rooted in the information that you got over the last decade of seeing Lightning in practice. But what did you think when it came out?
2:15:43Peter RizunWhen it first came out, I wasn't as skeptical as I am today. And because so many other people were saying, oh, this is great, I kind of thought, oh, yeah, it's great. And my initial reaction was positive. But as soon as I started looking into it and understanding how it works, like the beads on a string analogy, that I started realizing that it had all these limitations, and that it would tend towards a network with a few centralized hubs with a lot of like spoke connections in order for it to even function.
2:16:15So I didn't like that. And then as soon as I heard what happened in the high fee volatility environment, then I saw, well, Lightning is basically broken. It's not even going to work unless we also increase block size. But no, my initial reaction was I thought it was a pretty neat idea.
2:16:34Vlad CosteaI remember Roger Ver in the 2016 interview or something. He was optimistic about Lightning, but it didn't take too long.
2:16:42Peter RizunYeah, yeah, it came out like there was there was also weird, like why? Because it's weird how there's some solutions or some proposals that kind of they're really interesting and really, really, really useful. But they just kind of come in slowly, naturally. And there's all these other proposals like Lightning that just for some reason, it just comes in as such intensity, like what? Like there was so much excitement around Lightning initially. Why was that?
2:17:11Vlad CosteaThere was exciting about Lightning initially. And also, I guess a couple of years after it was launched on the Bitcoin mainnet, there was this Lightning torch that was passed around by people on Twitter. There were these Lightning tip bots that you could use on Reddit and on Twitter and even on YouTube if you had some sort of plugin installed. It seems so exciting. I remember looking at the time thinking, wow, this is going to be the future of content creation. You're going to get paid with a Lightning transaction for your activities and whatever.
2:17:47I think it blossomed up to the point where regulations started happening. And suddenly there was this service called Bottlepay, which was very much ahead of its time. It raised a lot of money in VC funding and they were based in the UK. And they had the most useful application for tipping with Lightning. Of course, it was custodial, but that's another conversation to be had. But my point is that it seemed to be getting traction until the point where some, I don't even know what the name of it was, but it's the equivalent of the travel rule from the US.
2:18:28So when that one came into force in Europe, it sort of destroyed a lot of these use cases. And today in the European Union, you have MiCA, which I think makes it very difficult for, for example, conferences or events to allow you to accept cryptocurrencies of any kind, because you have to explain for every merchant that accepts it, where it comes from, and a lot of information that is super unnecessary when you pay with cash or something like this. But they treat this just like a normal banking service and they want to know who's the payer.
2:19:03And all of this information, which actually you're trying to avoid when you're paying with Internet money.
2:19:15Peter RizunYeah, I know. Yeah, legally, Lightning is interesting, too, like the whole money transmitter angle, like in Bitcoin, I don't think there's any real meaningful argument that a node is a money transmitter or a miner is a money transmitter. It's picky, so I send my money to you. It might get relayed. Who knows, but that's just making, making, making other nodes aware of it. And the miners, they're not really transmitting money. They're just confirming that they're just basically documenting the transaction occurred at a certain time. But with Lightning, like if I send money to you, if I route that through Bob, well, Bob in a very real way is a money transmitter.
2:19:59He's transmitting money from me to you. And the money I give him is different than the money he gives you because remember, they're beads on separate strings. So I know the, one of those guys, the guys in DC that do the advocacy for Coin Center. Like I know they argued that Lightning, that Lightning routers aren't money transmitters, but I think it's a pretty weak argument. Like to me, they obviously are money transmitters because that's their entire purpose. Their purpose is to transmit money for a fee.
2:20:35So they are money transmitters. The fact that they, that it's somewhat non-custodial, I think is beside the point. They're still in the business of transmitting money to earn a fee. So they are money transmitters. So yeah, that's another legal reason why I think Lightning is weaker. But I think what I'm talking about where you have payment channels between the nodes, like I think that's still useful, even if you're not using, like actually routing payments using all those beads on strings. Like I think having the payment channels between those is useful just for paying for blockchain data.
2:21:13Vlad CosteaI still think there's potential behind the idea. It's just that the current implementation is underwhelming compared to the way in which it was marketed. For a while...
2:21:24Peter RizunYeah, well the implementation, but also like the blockchain situation, right? Like, I think the current implementation would function a lot better if we didn't hit these fee spikes.
2:21:37Vlad CosteaFor a while, Lightning was being presented as the one and only solution to scale Bitcoin. And even today you find people who are against roll-ups or against sidechains and they say, well, only Lightning is legit because it's the only one that's really a Bitcoin scaling layer. And everything else is what they call a shitcoin because they say it generates its own token.
2:22:03Peter RizunSo where does that attitude come from? Where does this shitcoin versus Bitcoin? Is it like a fear that the value of Bitcoin is going to go down? Is that why they're so antagonistic to other coins?
2:22:20Vlad CosteaI think it comes from the 2017 ICO situation when everything had a token and everything was going to be tokenized and you're going to have a Dentacoin, you're going to have all sorts of silly concepts. And some people bought into that and they got burned and they realized, well, it was a bad idea all along, but it seems like this Bitcoin thing, it was the one that didn't go to zero. And it's the one that went up in the next cycle. So maybe this is the only one that works and the only one that we should accept and everything else is a scam.
2:22:57And you had a bunch of conference speakers who were presenting along these lines saying, well, everything that is not BTC is a scam and a shitcoin and you should stay away from shitcoins and be aggressive or I'm not sure if aggressive, but not friendly with people who are building or promoting shitcoins. And you had this cult that was established around the idea and I find myself being guilty of falling for it for a while, like I was pretty deep thinking, well, we're the virtuous ones. We're not printing our own tokens and we're trying to be honest.
2:23:36And then once I started digging into the history of Bitcoin and I saw that pretty much everything that you find in altcoins today was built using Counterparty and Omni. And even before that, you had the colored coins and how basically we could have had a world where it was truly Bitcoin only everything. We could build everything on BTC. It's just that there was no agreement on how to do it or whether or not it's the way to go forward. And that's why we had these experiments that got launched as forks and they said, OK, let's see if there is any market for this.
2:24:15Let's see how the users are going to embrace it or use it at all.
2:24:22Peter RizunYeah, I think it actually would have been one big, glorious and weird experiment, like Vitalik would still be on Bitcoin or the privacy guys would be on Bitcoin. And it wouldn't have taken too much. If the scripting system were Turing-complete with transaction introspection and if we didn't have these block size limits, those were the only things that were holding us back, I think. And instead we get 10,000 different cryptocurrencies now.
2:24:58Vlad CosteaYou can argue you could build that on Bitcoin also. You could have tokens and you could have Bitcoin be the Ethereum, you know, which issues.
2:25:07Peter RizunWell, you sort of. But I mean, the thing is, it hasn't worked. So there must be a reason why. If what you said is true, then why do we need these new opcodes? We need these new opcodes because our script and stack machine is not expressive enough to do the things we want to do in a useful way.
2:25:26Vlad CosteaRight? Well, they say that CTV and CSFS, which are the two opcodes that they're pushing right now. Last year, I think it was OP_CAT and two years ago it was still CTV. But my point is that these are being presented as ways to make Lightning non-interactive, meaning that you don't have to be online all the time to send and receive payments. And also help stuff like Ark, which is supposedly the new Lightning that's being built, and help it be useful and also help these ZK rollups happen.
2:26:05And with that, you can also have drivechains happen, but in a way that does not provide all the protections of BIP-300. You can just have miners set up their own sidechains.
2:26:17Peter RizunI agree with what you're saying, but what I'm saying is if Satoshi had got the scripting system right to begin with, we wouldn't need these new opcodes because it would already be possible to accomplish that in the existing system. So Paul Sztorc could have his drivechains, the CTV guys could have their stuff, the OP_CAT guys could have their stuff, and we could just let it compete in the pool of ideas, Vitalik could be building building on Bitcoin or we would see how it turns out. So I think that's why I said I think a big mistake Satoshi made or a big thing that Satoshi got wrong was the scripting and stack machine.
2:26:57It just didn't really work. It wasn't powerful enough.
2:27:02Vlad CosteaI also see a lot of consensus regarding Satoshi's status within the cypherpunk community. A lot of people say, well, he was not really a cypherpunk or not a professional coder because there were some mistakes that needed fixing. And if you look at the conversations between Satoshi and Hal Finney, for example, you can get sort of this feeling that Hal Finney was patronizing him, treating him like he's a lesser coder or something.
2:27:32So maybe we're being too demanding for someone who just figured out a solution but did not know all the pieces to it, how to polish them to make them very efficient.
2:27:43Peter RizunTo me, Satoshi has a mind of a physicist. He thinks at a very broad system level, and I think the architecture he came up with is really powerful. But yeah, the implementation had maybe some weaknesses in it, but I think he was a brilliant guy. And I think Hal Finney was responsible for having Satoshi disable a bunch of opcodes in the very early beginning. And I think that's really leading to that patronizing comment you made, which I think is really too bad. I wish they had worked together to make all those opcodes safe and worked.
2:28:25And that would have been a little bit better.
2:28:26Vlad CosteaYeah, OP_CAT was part of the initial stack, and cat means concatenation. It's just putting together two pieces of data with one instruction.
2:28:36Peter RizunSo it doesn't involve real cats?
2:28:38Vlad CosteaNo, it doesn't. It's just a meme. It's a bad meme. I think what the OP_CAT, what do you call them, the Taproot Wizards, I think what they did in terms of trying to promote OP_CAT was detrimental, actually. And a lot of people said, well, we don't want to support these guys. We don't like them.
2:29:02Peter RizunMm-hmm. Yeah, Yeah, back to the thing, like, all this drama would have gone away if the scripting language was more permissive to begin with.
2:29:13Vlad CosteaYeah, we can agree on this one. You have two more questions from the audience, which I want to address before I forget. There's another one from BitMEX Research who says, you have mentioned some weaknesses with many aspects of Bitcoin. Lightning, Blockstream, Maxwell, etc. You raised some valid points, but are you able to objectively look back at Bitcoin Unlimited and identify weaknesses there?
2:29:37Peter RizunWell, I don't see the point of doing this. What's the point of this exercise?
2:29:46Weaknesses in what? In the way we were trying to increase the block size limit? I guess I don't understand the question. One thing we got wrong, Bitcoin Unlimited had a bug and a bunch of nodes were taken down.
2:30:02I think that's what kind of took a lot of momentum away from the Bitcoin Unlimited movement back in 2017, I guess it was. Yeah, so I mean, we shot ourselves in the foot and I think that's what kind of killed Bitcoin Unlimited as a valid or as a viable implementation on BTC. So yeah, I acknowledge that. But I guess I don't really understand the question or the point of talking about it. What are we trying to learn?
2:30:36Vlad CosteaI don't know. Maybe it's an exercise in self-reflection or objectivity and just being able to laugh at yourself or whatever. I'm not sure exactly. But something else that I realized is that during our conversation, you described XT, you described classic and what they do. But you didn't say that Unlimited was the one that basically said, well, let's not set a value for the block size. Let's let the miners decide what the block size should be. I guess this is why Unlimited was born and that's why it's called Unlimited, right?
2:31:11Peter RizunYeah, let's push it to the market. Let's not be gatekeepers of the blocks. And like, this is what libbitcoin does today. So if you think we are crazy, then you've got to think libbitcoin is crazy. To me, it's crazy. Core doesn't allow this. Like, why can't I just go on a little tab on my node and say, instead of one megabyte, I'm going to increase the slider to two megabytes? They think it's so dangerous to give the user that ability, but why?
2:31:48I already explained how even if you do that on your node, you're not going to fork yourself from the network. The only people that are at risk are miners themselves. But I mean, if a miner is dumb enough to do that at a time when he shouldn't, then so what? He has the block work. So there's this paternalistic attitude from Bitcoin Core that there are certain parameters that are just too dangerous to give the user access to. I think that's just convenient and allows them to control the network and keep it constrained, keep it as this one megabyte kind of weakling that just doesn't do the things that Satoshi initially envisioned.
2:32:24It's never going to become this global payment system that we all hope for.
2:32:30Vlad CosteaYeah, you just reminded me that a bunch of people were calling Greg Maxwell one meg Greg for a while.
2:32:36Peter RizunYeah, one meg Greg, yeah. Why, why, why, why the obsession with one meg? Why do we have to stay at one meg?
2:32:49Vlad CosteaWell, to be fair, we did see a lot of attempts to scale within this limitation, but it seems like it always comes back to, well, maybe it would be better if it was two or four or eight or something. Because you're going to get these second layers and let's assume that they're all great. But how do you onboard these second layers without custodians?
2:33:14Peter RizunYeah, yeah. I think I like second layers. I want them to compete with the main layer and where the equilibrium lies between, you know, our coffee payments on second layers or the main chain. I don't know. Let's, let's, let's let it, let's let the experiment play out and find out. But the thing that the small blocker said that never made sense to me was they said, well, what's the point of going from one meg to two meg if we can't go from two meg to infinity, right?
2:33:43Vlad CosteaYeah, exactly. They said blockchains don't scale and therefore we should not even attempt to scale.
2:33:50Peter RizunRight. But all we have to do is scale to earth. And we've talked about that lots in this call, how that's actually feasible already today. So, so if we go from one meg to two meg, and then two meg to four meg, and we have, at four meg, we kind of have four times the, the, the payments happening at one meg. And I think that's a good thing. I think we're four times bigger as a payment network. If we go to 16 meg, we're 16 times bigger as a payment network.
2:34:17At 32 megs, we're 32 times bigger. And probably we have more users that care about Bitcoin. And then probably maybe we have 32 times more users. And then maybe we have 32 times more nodes because we have 32 times more users. Or maybe because nodes are a little bit harder to run, instead of having 32 times more nodes, we have 16 times more nodes. But I think by increasing the network in these baby steps, you're going to see that the node count increases, not decreases.
2:34:51Vlad CosteaI want to ask you, according to your math, what is the safe value that Bitcoin could have today in terms of block size that would not affect decentralization?
2:35:02Peter RizunWell, that's the answer. That question depends on the software implementation we're talking about. Like something like libbitcoin based on Eric's stuff. I would say, I would say definitely like into the 32 megabyte blocks, at least maybe a hundred megabytes with the Bitcoin with core. I don't know. I think core probably broken, but like you could use like Bitcoin unlimited software where we fixed the bottleneck. And you could run 32 megabytes on low cost hardware today. And 32 megabytes, that's 32 times bigger. That's pretty nice.
2:35:40It's nice. It's more than a baby step, but it would be a nice, it would make up for all the all the all the baby steps we didn't take over the last decade.
2:35:50Vlad CosteaWe got a clarification from BitMEX Research. He said another way of thinking about it is what could you have done differently to win the block size war?
2:35:58Peter RizunOh, okay. I see the question. Okay. I think what I could, one of the mistakes that my side made is at the time we thought miners controlled the network. So we thought if we can get the miners to increase, to start making bigger blocks, then everyone else will have to come along because that'll be the only change. But I think what we've learned since then is the economic nodes are really the drivers. And Eric Voskuil, he's been saying that the whole time. So kudos to him for being right on that.
2:36:36So where I think we went wrong is the miners were less important than we thought. Well, we would have had to, like it's the exchanges, really. The exchanges were super important. They had to be on board. And the fact that the exchanges gave the BTC ticker to, imagine we fork tomorrow, one megabyte and two megabytes. Okay. I would say if whatever ticker gets the BTC ticker on the big exchanges, that one will become the real Bitcoin. Because they have that much power. And the other chain is going to become a shitcoin.
2:37:20Vlad CosteaUnfortunately, that's true. But I think it's also a matter of action, which is the side that forks off and which is the side that remains on the same network?
2:37:33Peter RizunWell, by that token, no. But I mean, if we went to two megabytes, that's a hard fork by definition. But it's okay. Let's say we did that. Let's say a month from now, there is a two megabyte hard fork. It's contentious. All of the exchanges make a commitment to call the two megabyte chain BTC. The BTC gets a ticker. The other one gets a ticker. And so something else, I think to me that that will become BTC, even though it is the one that forked. I think based on what I've learned over the past decade is that that's that's what that's the most important.
2:38:12Do you disagree or do you think that would happen?
2:38:18Vlad CosteaI do agree that is very political and tickers are determined by exchanges and these services that list the price because the network like your node has no idea what kind of ticker you're going to have. Tickers are human politics, you know, whereas code is code. It's open source. It's verifiable. There is no part of the Bitcoin code that says, well, from now on, I'm going to use this ticker across every business that you'll be conducting. So in this regard, I think you're right. It's human subjectivity.
2:39:03Peter RizunYeah. So I think that's something we didn't recognize just how influential exchanges were. So if we had, you know, made deals ahead of time or something, maybe that would have or got them on board with the idea of the fork and just the importance of assigning the ticker to the bigger block size, the bigger blocks, block size that that might have helped. What else did we make? The thing is like when the block size wars were happening. Like I'm just some guy working in an apartment. I didn't have any kids and I didn't have a wife.
2:39:39I'm just some keyboard warrior just doing a bit of coding, doing a bit of research. And I'm joining with other people like that. It's not like we're a big organized group that has all these powers. So this is a very grassroots thing that's happening. And a lot of the critiques about the big block movement was our lack of organization. But we were unorganized because it was decentralized. It was just a bunch of people that were concerned that love Bitcoin. And they were coming together, meeting up on BitcoinTalk and on Reddit and on other forums to try to solve these problems.
2:40:08So it was everyone was just loosely connected anyway. So we couldn't really reorganize that effectively. And if we had, like with the New York agreement, then we probably would have been accused of colluding, like being big organized companies colluding. So it's a hard thing to, it would have been a hard thing to do right. At the time, we didn't, like the whole censorship thing got really weird. Like I never expected that happening. And if I had known that like our Bitcoin was, I would say, captured by people who were only going to promote the small block size, I didn't know that.
2:40:46I thought these were very neutral places and my peers thought they were neutral places. So that was a surprise. So we weren't really prepared for that attack because we thought it was just a bunch of other guys like us that we would never be the organizers to begin with. So I guess, to summarize, we didn't foresee the censorship and all that and how that would diffuse the big block movement. And we thought the most important people to go after were the miners, but really the most important people to connect were the exchanges.
2:41:17That's my answer.
2:41:19Vlad CosteaThere's another guy in the chat. His name is Khan, and he has a Pepe avatar just like myself. So that's why I'm going to take this question. What would make you admit you're wrong on on-chain scaling?
2:41:35Peter RizunWhat would make me admit I'm wrong about on-chain scaling?
2:41:47Vlad CosteaI guess he's trying to say that you're pursuing something which is not worthwhile or something.
2:41:52Peter RizunWell, maybe I guess wrong technically or wrong about the value of it, I guess is the question. I don't think there's anything that convince me I'm wrong that it's technically feasible to scale on-chain at a reasonable price. I've been working on this for like a decade and I know it as a fact. But maybe something could convince me that just pursuing on-chain scaling is pointless. And I guess I'm already depressed in a way because we created BCH and BCH's blocks aren't full. None of the blockchains are really having many payments other than stablecoins like we've already talked.
2:42:38So maybe there will be no long, maybe we've missed our opportunity and there's not going to be demand for Bitcoin payments in the future. Maybe we're going to a central bank. We're going to a digital currency world.
2:42:54Vlad CosteaI wasn't planning to get this depressed.
2:42:58Peter RizunWell, it is depressing. Welcome to my world since 2017.
2:43:08Vlad CosteaLet's take another question. There's actually a comment from crev23 who has been commenting all through our episode. And in most cases, he was just commenting on what we're saying. So that's why I didn't mention him. But thank you very much crev23 for being here. He says, the thing is, and this is in all caps, you should want to be a miner. And exchanges are not the market. You are the market. And P.S., Peter, if exchanges made that big of a difference, XMR would have died when it was delisted.
2:43:41Now it's in the top 10 most valuable coins. So he's making the case that exchanges don't matter when it comes to tickers and listing and whatever. And it's just the market that decides outside of exchanges. But in the case of a Bitcoin fork, it's the exchanges that will have to decide whether or not they support the fork and what they're going to call it. XMR is like a different beast.
2:44:10Peter RizunYeah, I mean, I guess he's saying there exists a single exception where the exchanges don't allow you to trade Monero, but Monero didn't die. But I don't think, I mean, that is true, but I don't think that disproves what I'm saying. What I'm saying is exchanges have a lot of power in picking the winning chain, because they're the ones that label the ticker. I don't know how we ever run a controlled experiment. That seems obviously true to me. I think you agree, Vlad, right? Clearly, who gets the BTC ticker by the big exchanges has an advantage.
2:44:51Is that advantage insurmountable? Maybe not. Maybe if the exchanges picked a clearly captured stupid side to call BTC, maybe there'd be enough of an organic grassroots swell to reverse that. But if it's like a close case, like if it was a simple one versus two megabytes, I bet huge money that if they label the two megabytes side BTC as a real Bitcoin, that a year later, that's going to be the real Bitcoin.
2:45:21Vlad CosteaThere is also a comment also from BitMEX Research who says exchanges want to listen to their customers. And by mid 2017, the small blockers won the hearts and minds of the users. So exchanges listen to their customers in the summer of 2017.
2:45:38Peter RizunYeah. Okay. I mean, there could be some truth there. So the exchanges, yeah, the exchanges aren't making the decisions blindly. They are listening to the users. So I agree that it's not, it is a bit of a market process. And this takes you back to the censorship angle. Like I think BitMEX Research disagrees with me, but my, like I said at the beginning, like in 2015, 2016, 2017, it felt like the power was with the big blockers. It felt like the community wanted larger blocks, at least to go to two megabytes or four megabytes or something.
2:46:22And it was the censorship, mostly on Reddit, that diffused the big blockers coordination and created this echo chamber that allowed these memes that Bitcoin can't scale. And in fact, one megabyte is great. I guess I can't really prove that. I mean, Roger Ver did a great job in his book documenting that. And I think that's worth a read to everyone interested. But I mean, I was there. That's my perception of what happened. So I guess I can't prove that I'm right, but that's what I believe.
2:47:00Vlad CosteaWe got another interesting comment from crev23, who mentioned the case of Ethereum, because maybe when Ethereum forked in 2016 and you had that Ethereum and Ethereum Classic situation, maybe that the users could have been on the side of Ethereum Classic because it's the one that decided that code is law and they don't want to bail out the investors in that DAO. But just because there was this political structure behind Ethereum and it was easier for them to coordinate and talk to exchanges, you had a much clearer separation.
2:47:36And they said, no, it's this fork that we're going to call Ethereum and the other one can stay Ethereum Classic.
2:47:45Peter RizunYeah, definitely. So I think that's a good example of a case where it wasn't really obvious which would be the real Ethereum, because they both had good arguments for being the real Ethereum. But I think, yeah, like you said, the influence of the Bitcoin, the Ethereum Foundation kind of made the decision. And once the decision is made, kind of like in physics, you have these different equilibriums and there's like some activation to get you into this new equilibrium. But once you're there, it's pretty stable. So I think the Ethereum Foundation is just kind of, they're just rolling the ball up the hill over the hump and then once it's over the hump, it's sitting in this new equilibrium position and that's where it stays.
2:48:31Whereas if they weren't there to roll that ball over the hump, just like if the exchanges were there to give BTC the real Bitcoin ticker, then maybe that ball could have rolled into a different equilibrium.
2:48:46I think there's a lot of path dependency in crypto. I think what happens, it doesn't happen because it's inevitable, it happens because of the path we took to get there. Like we were saying, I think there's another universe where the block size of it was raised and now Bitcoin is a successful payment network and hardly anyone's using stablecoins. Bitcoin's at a million dollars, blocks are 64 megabytes on average and everyone thinks it's great. And people say, oh yeah, it was kind of inevitable because they don't know, it was a different path we took to a different equilibrium.
2:49:24Vlad CosteaBut going back to, I'm not sure if you watched this speech by Ross Ulbricht that he made like a couple of weeks ago in Las Vegas.
2:49:34Peter RizunI just, I didn't watch the whole thing. I saw a few clips, but that's it. But I understand that he was, so maxis are mad because he was more supportive of broader research outside of just Bitcoin. Is that correct?
2:49:52Vlad CosteaHe started from this metaphor that when he started Silk Road, he rented this cabin and inside of that cabin, he wanted to grow mushrooms or something. Anyway, the point is that he had some beehives inside of that, is that what you call them? Not beehives. Hive. What do you call their home? Like, where bees live?
2:50:15Peter RizunLike, yeah, I mean, beehive or...
2:50:18Vlad CosteaYeah, beehives inside of that home and basically he had to remove them one by one with a towel. And he said that if there was any reaction whatsoever from one of the beehives with bees coming outside, he would just run away and give up.
2:50:37But his point was that Bitcoin is resilient and has participants fighting for the cause of Bitcoin because there are a lot of blockchains around it. And he said that the decentralization is not given just by the Bitcoin nodes, but also by the other blockchains that are operating using Bitcoin code or else something entirely different, which gives the whole system resilience. And all of them will come defending Bitcoin if that's ever necessary. So he made this argument as a metaphor for his situation of getting rid of the beehives.
2:51:14And in his situation, he was like the federal government or whatever, being able to effectively remove the threat, but said that Bitcoiners are much more aggressive and are able to stand up for themselves. And just in case, we have the decentralization, which also includes these other chains. And that's why a bunch of people were not happy because they said, well, this guy should come to the Bitcoin conference and only speak about Bitcoin and not mention that other blockchains are good. And they were saying that he's like this 2013 or something libertarian when it comes to it, and maybe that he spent too much time in jail and is not aware of the 2017 scams or whatever.
2:51:55But I do think that he's right. I do think that these other networks, especially when you get something like Terra Luna or something, and it's an obvious scam, it's going to DDoS everyone involved in investigating this kind of situation. It's going to basically consume all of the human energy and leave more room for improving Bitcoin if that's still part of the plan, because it seems like there's not much improvement happening lately.
2:52:25Unfortunately, and I think Zooko was right about this, the amounts of regulations and surveillance that happened on public blockchains was much faster than the developments that took place for privacy to create some sort of deniability or obfuscation or ideally not have any sort of information being stored, which is the design that he's working on with zk-SNARKs.
2:52:55And there are a lot of naive assumptions about what Bitcoin is and what it can do in the early days. The Silk Road is maybe a very good example of assuming that it's anonymous and the CoinJoins are nice, but just not good enough. It's like putting your fingerprints alongside 60 other people on a dollar bill and then you're going to give it to someone and they're not going to know exactly who it was. But the more time that dollar bill spends being circulated, the more information you're able to gather about who used it and who it might have been.
2:53:34And in the case of public blockchains, it's even worse because it just takes one mistake that you can make to divulge information about your transactions. And all the efforts that you made to make your coins private will be futile.
2:53:54Peter RizunOkay. Yeah, I mean, I agree with what you're saying, but in a way it sounds like you're defending, like, criminal use of blockchains.
2:54:01Vlad CosteaNothing criminal. I mean, what is criminal anyway? Because you're going to have people trying to flee their authoritarian governments, right? That's criminal, but we can argue that it's morally good.
2:54:11Peter RizunI'm definitely a privacy advocate. But I guess what I'm saying is that the CashFusion, like you said, leave your fingerprints, right? I'm hoping that what most people are doing with Bitcoin is not so bad that anyone cares to investigate that much. But to me, it's kind of nice that they've caught some of these exchange hackers, right? So the fact that they did leave some fingerprints is a good chance. I don't know. I don't think hacking exchanges is good. So I'm glad those exchange hackers got caught.
2:54:57Is that a controversial statement?
2:55:00Vlad CosteaI see what you mean. Stealing is wrong. We can agree with that.
2:55:05Peter RizunI guess if you imagine a perfectly anonymous crypto, is that the best thing for us? Where's the right balance? I don't know. I don't think it's super, super anonymous. I think that would have more downside than upside.
2:55:31Vlad CosteaWe actually got someone in the chat, and I got to thank him because he gave us the exact quote by Ross Ulbricht from his speech. He said the wasps were strong because they were decentralized across seven nests, but they were ultimately weak because they were not unified and did not react when their fellow wasps were taken down.
2:55:54Peter RizunRight, as a metaphor for supporting the other chains. I think that's a good metaphor.
2:56:00Vlad CosteaI do agree with his message. If we're trying to build something that's useful, I don't think one implementation will be able from this point on to encapsulate everything unless we get drivechains. But even in the case we do get drivechains, you still need experimentation.
2:56:18Peter RizunYeah, that's a nice way to look at it. And then the whole privacy angle. So we just kind of had an argument. Not an argument, but I was saying that in my ideal world, the chains wouldn't be perfectly private, but maybe someone else's ideal would be worse. So we have those different blockchains. People use them and we see what actually wins. And we can have more than one winner. The longer time goes on, I kind of think we might go towards something that Eric Voskuil talks about, how there's lots of bitcoins.
2:56:52Bitcoin as a term more broadly, not just for BTC, but all the BTC-like chains. And there could be like five or six of them at any one time and they all have significant economic value. They have transactions happening on all those different chains, and those chains have different properties. Some have maybe much higher throughput. Other ones have no fees. Maybe other ones have a much better privacy. I think that's OK. I think the fear, this idea that some maxis have that, no, we have to have one chain to rule them all, I don't think that idea holds water anymore.
2:57:35I think it's dead.
2:57:37Vlad CosteaBut we could have that. Like 10 years ago, it was still possible. I'm trying to think of myself, aren't I?
2:57:46Peter RizunNo, you're not.
2:57:48Vlad CosteaBecause as time goes by, I guess it makes more sense at this point to launch more chains, to try stuff as opposed to build it on the trillion dollar chain and then get blamed by everyone for crashing their nodes or something. Maybe that's some experimentation?
2:58:07Peter RizunIf Satoshi had done what I said he should have done, and we had a super powerful scripting system, couldn't we have one chain that's both anonymous and non-anonymous? Would that work? So the people who wanted to be anonymous could just... I don't know. Like I said, you have this more anonymous chain and you have this less anonymous chain over here, but can you just have one master chain that's both? I don't know if you can, because I think in order to create a really anonymous chain, it's not going to be as auditable in terms of inflation.
2:58:44I think that's fundamental.
2:58:46Vlad CosteaI think that's why Zcash went for this design, where they have the Bitcoin side and they also have the zero-knowledge proof side, where you basically put your coins into that pool, and then within that anonymity pool, you don't even know if a transaction took place.
2:59:03Peter RizunYeah, so I think that's why that trade-off has to exist. So I think if you demand really good privacy, then you lose some of the public auditability of Bitcoin. And I like the public auditability. I like the fact that I can confirm the coin supply and check for inflation pretty easily.
2:59:27Vlad CosteaYeah, one way to look at it is that right now in Bitcoin, you have arithmetic, which means you can just add up numbers to get to that total supply of coins that were mined and then something like Monero or the shielded side of Zcash. You have more advanced cryptography and you have to trust that the cryptography works well or else you run it on your own machine to verify that it works. But you cannot add numbers on a piece of paper.
2:59:56Peter RizunNo, but even if you verify it on your own machine, you still have to trust that there's no weird backdoor that you didn't understand the math. This is not simple math. Adding numbers, everyone understands. Okay, my node goes through all the numbers in the UTXO set and adds them up to check the coin supply. The zero knowledge proofs prove that there is no inflation. I don't think anyone really understands. Yeah, I could see that I could run a program and it says, okay, all is good, but I don't know, do I really believe that?
3:00:25It's not the same to me because it's not just some simple addition. So that's what I mean. It seems less auditable, even though you can argue that, no, we have this proof, but it's a weaker proof to me.
3:00:43Vlad CosteaIt's really amazing to me that we went on for three hours now and we haven't touched on the hardware scaling stuff that you're working on, which I think is the exciting stuff that I advertised in the title because I said scaling Bitcoin with hardware. And I think it's useful for you to mention that. And before that, I still got to ask Corbin Fraser's question, which I got on Twitter.
3:01:08So first of all, he said, maybe could you ask if he sees BCH as a failure or not? How does it potentially reclaim mindshare in the Bitcoin dominant cycle and EVM L2 dominant cycle?
3:01:23Peter RizunI mean, BCH is definitely a failure in the sense that they've lost the block size war, like we didn't win and it's a failure in that it's no longer is the real Bitcoin. Everyone says no, Bitcoin cash is separate. Is it a failure overall? I would say no, like BCH has done lots of really good things. Like I love BCH because the Electrum wallet works really good, the CashFusion works really good. It has low fees. They've added all these script improvements that prove that Satoshi's ideas did make sense.
3:02:02They just had to implement it properly. So no, BCH has made significant contributions to the broader crypto ecosystem, even though the price has gone down more than the BCH proponents would have liked.
3:02:19Vlad CosteaI also want to argue something which is super controversial and my fellow Maxis are going to crucify me again for it. But I'm happy that it happened at that time and within, I guess, within brothers, you know, in this community that was once unified and everyone knew each other and they trusted each other. And then they decided, no, I'm going to basically continue my path using this vision. And then if you disagree with me, you can just fork off because I can see today with situations like Michael Saylor, for example, or BlackRock or whatever.
3:02:56They're going to look at this course of events that happened and say, well, even within their own community, they were able to make BTC resilient and resist this attempt to call something else the real Bitcoin. If we're going to try it, it's going to be even more obvious that we're trying to hijack it. So in a sense, I think that the existence of BCH and the context in which it was created and the whole battle that happened in the next couple of years was actually useful for making Bitcoin more powerful and more resilient and giving, I guess, governments and institutions this sense that there's nothing they can do to split the community further.
3:03:39They can split it socially, but not technically.
3:03:43Peter RizunYeah, we've seen how splits play up empirically now, and that's useful for moving forward. Agreed. What was Corbin's other question? He had two.
3:03:56Vlad CosteaHow does it potentially reclaim mindshare in the Bitcoin dominance cycle and EVM L2 dominance cycle?
3:04:07Peter RizunI don't know. I don't know if I can. I mean, I love BCH, but to me, it's neither here nor there now. Like it's lost its Bitcoin shine, but it's not doing things as aggressive or innovative as some other chain. So it's kind of in this spot where it's just not as exciting as it could be. So I don't think it really can. Unless they get like a bunch of really, really useful features implemented, I don't think it can. Like, I think they need to, the scripting needs to be more expressive.
3:04:44They need to have the loops, they need to make these UTXO commitments. They need to do everything they can do to match the features that some of these other coins have, I think.
3:05:00Vlad CosteaHe also mentioned that you're going to have a lot of interesting takes on block size scaling that you've lived and because you've lived in this world, both theoretically and practically. And what do you think about the spam debate in Bitcoin right now, where people say, well, this type of transactions is not economic and therefore because it's only storing data, it should be filtered out. Do you believe that it's healthy to decide what is the right kind of transaction or do you believe that the fee, the transaction fee is the filter?
3:05:39Peter RizunI see the transaction fee as the primary filter, but I think it makes sense for nodes, including mining nodes, to set parameters on what is garbage, just being good citizens. It might cost me a bit more of my time to throw my garbage in the garbage can when I'm out for a walk, to throw my coffee cup in the garbage rather than just throwing it in the ground. But I invest that extra two seconds because it creates a better community, a better environment that I'm a part of.
3:06:14So, I think it makes sense for nodes to filter and for miners to filter things that, but a lot of times when we're doing analysis in Bitcoin, we're viewing miners or node runners as these agents that are just greedy. They're purely self-interested, greedy agents, and they're always going to do the profit maximizing thing. And if you look at the world through that lens, then, you know, nothing is really secure, right? You know, you should be like stealing from other people and stuff. A lot of the reason society works is because we have etiquette.
3:07:05We don't necessarily do what's always in our short-term selfish, greedy best interest. And I think we see that playing out in crypto, and I think that's fine. That's just the way the network is.
3:07:23So, I think what will happen in the future is what's already happening now is that nodes and miners just don't include, if transactions have too much data in them, they just don't include them. They just chuck them, they just reject them, even if it pays the right fee. You know, so yeah, some miners might include that, but I think you have a culture that emerges that just rejects that.
3:07:50Did that answer the question?
3:07:51Vlad CosteaNow, I'm actually curious, do you believe there should be a limit to OP_RETURN data data, or can it be as large as the block itself?
3:08:06Peter RizunI would, in my implementation that I would create, I would have, I basically have no limits at all, right? So, I might have like some upper limits on block size and computation time and things, but it would be kind of like a free-for-all, and it would be node policy and miner policy that would control that. The thing is, I guess what I'm saying is that if you say that and people say, well, then everything's going to fail with spam because, you know, the spam will crowd out.
3:08:33But what we see, that doesn't really, really, really happen. I think just because there's just not that much demand for spam. And you have this altruistic behavior of node runners and miners that's not captured in these agent-based models where we're assuming everyone is a selfish, profit-maximizing agent.
3:08:55You think that's the fact? People just do the right thing to do, not because, oh, I did the right thing, yeah, it cost me, I made one penny less, but I did the right thing. People will do that, right? If you talk to a lot of these miners, like I'm sure, and say, hey, guys, if you tweak your policy a bit, it has this benefit. They might say, oh, yeah, that makes sense, OK, yeah, we're not going to make quite as much money, you know, I'm going to have to cut two lattes out of my monthly budget.
3:09:20But everyone's laughing, like people do this, like this is how the world works.
3:09:28Vlad CosteaIt's definitely interesting because it's so controversial these days in Bitcoin, and this is like the talk of the hour right now. And it's annoyingly long, if you ask me. It's been going for longer than a month. Some people are taking this very personally and are saying, well, this should not be on my node, but this should be and let me run this other client. Maybe this will eventually get people to use libbitcoin, hopefully.
3:09:54Peter RizunWell, hopefully. The debate to me is made worse by Core's paternalistic attitude again. But they already have, it's already adjustable. You can already control like the size of the opportunity, the size of extra data that your node accepts. But they're trying to deprecate that. So I think you should give the user more dials to fiddle and just allow these emergent properties to emerge based on everyone's reaction. But Core takes this really top-down approach where they're like, again, just like the block size limit, there's certain things that are too important that you shouldn't be able to fiddle with.
3:10:32So I think that's what created, it's not the OP_RETURN data, it's more the Core's paternalistic attitude saying, no, we're increasing it and you're going to take it and you're going to like it.
3:10:43Vlad CosteaYeah, I think way before the block size war, there was the OP_RETURN war that happened because of Counterparty. And some people, this was before Ethereum, they wanted to build their own companies on chain and have their tokens and pay dividends and stuff like this. And the Core developers were not happy because the concern at the time was that one of these tokens that you issue on Bitcoin, which is basically OP_RETURN data that is interpreted by some third party protocol, is going to end up having more value than the coinbase reward, which is going to mess up with the mining incentives.
3:11:24And potentially you're going to have miners trying to double spend blocks to claim those tokens.
3:11:33Peter RizunYeah, I mean, stablecoins, I mean, I think it's accepted that that is part of all blockchains now, you're going to have tokens trading on top of it. But yeah, they were they were worried to me in the early days about that.
3:11:48Vlad CosteaI think this was also a concern in Ethereum, but in many cases, I think lots of these NFTs were sold for amounts much larger than the block reward. Yeah.
3:12:01Peter RizunBut I mean, it's turned out that that's not really a problem. Like so many things, people worry about all these problems, but a lot of them turn out to not be problems. I think instant transactions, zero-conf, right? Like Core has been, and the maxis are just so against anyone that accepts zero-conf, so bad. But the thing is like, well, until RBF came and messed everything up, they were fairly secure. Like people would use them and they were pretty reliable. Yeah, I guess you could double spend them if you really wanted to.
3:12:34But the thing is, most of the time you're accepting from people in a sort of trusted situation. And the thing is, most people aren't scammers. Like the fact that, like it's again, where they're viewing people as these selfish, like these agents that just always do the short term profit maximizing thing, which would be to double spend zero-conf. The thing is, like I said, most people aren't like that. That's why zero-conf worked, even though it had that security and it was still useful. But they couldn't have it because it wasn't perfect, because it wouldn't satisfy their fetish with these like proving things in these super hostile scenarios where everyone is a profit maximizing selfish short term agent.
3:13:22Right.
3:13:24Vlad CosteaSo I think RBF is the most influential contribution that Peter Todd has made to Bitcoin in terms of code, at least. And it's being advertised as this solution for basically if you send a transaction by accident and it was not mined yet, you can use RBF to basically pay a higher fee. So it returns to your wallet or I guess if you make a mistake and you want to send the coin somewhere else, you can do this, too. Or if you're paying a much lower fee than is required to get into the next block, you can also RBF your transaction.
3:14:04So these are sort of the use cases being advertised. But the trade off is that I think before RBF, you had this first seen rule, if I'm not mistaken. Right. So your transaction was stored in the mempool and it was immutable. There is no way for you to get your coins back.
3:14:25Peter RizunYeah. And if you sent a conflicting transaction to double spent what was in the mempool, well, all the nodes would reject that. So it would never make it to a miner. If it didn't make it to the miner, the miner would reject it, too. So Peter Todd would say all these things like, oh, well, what if that would have that second double spending transaction had a higher fee? Well, now the miner is incentivized to replace the legitimate transaction with this higher fee transaction. But again, most miners, they just don't do this because it's antisocial behavior.
3:14:57So it's not worth it to them. And then the few miners that do, well, yeah, yeah, maybe a couple of things get double spent. But, you know, it takes two bad actors, the person that's double spending and then the miner that accepts it. So, yeah, sure, that'll happen. There'll be some base rate of zero-conf fraud, but it doesn't mean we should throw out zero-conf. It just means that we have to realize that in the real world, there is a bit of risk with zero-conf.
3:15:23And it's up for people to use it in situations where it's still useful to them. But instead what we did, we just killed it. We said it's not perfect, so it's gone. And that attitude happens all the time through the Bitcoin's history. And it's driven by these guys like Peter Todd, Greg Maxwell, and the core Maxi group. They just say that they just, I don't know, they don't think that people are human. They think they're these, I don't know, maybe that's how they are.
3:15:55Maybe they're greedy, short-term profit-maximizing agents themselves and they can't see other people behaving differently. But I don't think that's true. I mean, I've met them. They're nice, cool guys. I don't know.
3:16:10Vlad CosteaLet's talk about hardware. I feel like we should get into that. Because you built this cool device which is supporting the validation of full nodes. You plug that into your M2 port on your motherboard.
3:16:26Peter RizunYeah, so what I want to do is I want to get people away from core somehow. And like Eric Voskuil is doing a great job with libbitcoin. He's kind of taking a whole new approach. He's creating a whole new node. I'm looking at ways you can take pieces of what a node does and offload that to hardware. So this is one of our, this is an earlier version of our Blitz device. So this is a M.2 card that would plug into an M.2 slot on your motherboard.
3:17:02And it talks over the PCIe bus. And your computer can send that signature to check and it will return whether the signature is valid. So it offloads work from your computer's processors to dedicated hardware that's designed to solve that problem using less clock cycles, less energy, less transistors. So it does it much faster. So this, we talked about a custom ASIC earlier in the call. This is using FPGA, a field programmable gate array. So it's not quite as, you can do more with a custom ASIC. But even this will do around 200,000 signature verifications per second at around three watts of power.
3:17:50So that's already well into the gigablock range of blocks. And it just demonstrates that compute is not going to be a bottleneck even in a huge block future.
3:18:06Vlad CosteaOkay, so in practice, what are you going to do with this chip?
3:18:16Peter RizunWell, it's a bit of a chicken and egg problem because I say, well, we have this new technology that allows nodes to process transactions. You know, you can have a cheaper node that can have a high throughput. It can have a higher, it can start support gigabyte blocks and we can prove it. But then who's going to buy it? Who wants it? Because there's no demand for gigabyte blocks, right? So it's pointless for me to do this. Why work on software or hardware to scale? Well, even if you succeed, like there's no demand, but there's no demand because people say we can't scale.
3:18:58Vlad CosteaOkay, I get it. But let's say that you're running this version of Bitcoin with gigabyte blocks on a normal computer, like a normal desktop, and you're going to be plugging that. What's the advantage?
3:19:13Peter RizunThe advantage would be, so if you imagine a big block future, in order to do all the, in order to process all those digital signatures, all like 48 cores of your big beefy machine are going to be grinding away. So you're not just going to take CPU power away from your other... Other software is going to be heating up your office because it's, you know, 100 times less energy efficient. And it's just not as nice. And it's a more expensive machine. Whereas you can do the same computations for, you know, a hundredth of the power or less than an ASIC on something that costs a lot cheaper.
3:19:50So my vision for the future is I don't want to run Bitcoin or whatever, or Nexa, whatever it is on my main desktop. I want to have a little tiny node that is plugged into my router and, you know, can handle 10 gigabytes, 100 gigabytes blocks. And I just SSH into it whenever I need. And that's the world I want to see. And for that, we need specialized hardware to scale down to that size and that energy level. And what's great is that it's super cheap, too.
3:20:24Like I talked about my BCH Bliss talk, where I go through the math. And the chip, like if you turn this into a custom chip, like a Bitcoin node chip, it would cost like a dollar to produce. It's going to be like fit on the head of a pin. And it solves everything Bitcoin core does now, but on something that costs a dollar and uses hardly any energy. You would still need some RAM for the UTXO set, but if you actually optimize hardware to be a Bitcoin node, it's amazing like how small and cheap this thing can be and still process all of the transactions in the world.
3:21:06So that's like the long-term goal. That's where we want to get to. And we're doing this part by part. So the first obvious thing was just to offload digital signatures. So it's kind of like trying to prove to the world that this works just because, you know, I love Bitcoin, so I want Bitcoin to succeed.
3:21:25Vlad CosteaI took a look at that AMD Ryzen processor earlier, and it was more than a thousand dollars. And it's, I think, top of the line 9550 XT or whatever. It has 16 cores and 32 threads. And I was wondering, does your chip have more cores or how does it work?
3:21:46Peter RizunYeah, so it's not solving it with a processor. Like there's actually like a digital logic circuit made with AND gates and OR gates that's doing the computation itself. So there's no processor running code. There's actually like an electronic circuit that you put the signature to verify in and it goes beep, beep, beep, beep, beep, beep. No processor and then it spits out, true or false. So it's a totally different model of computing. It's kind of like when your processor adds two numbers together, so it'll fetch those two numbers from memory and then it'll take those two numbers and it'll push it through something called an ALU, Arithmetic Logic Unit.
3:22:31And that's like a custom piece of hardware that's going to do some arithmetic function on those two operands. So for adding, it's going to add them. So there's, inside your processor, there's this custom circuit that's really good at adding. So your processor puts those two numbers into this adder circuit that looks what comes out the end and it puts that back in memory. So this is the exact same thing. Instead of just a simple adder, it's like a digital signature verifier. So it's a block of transistors.
3:22:59You stick in your signature one end and then it comes out the other end. And to do that, it takes about 5 million transistors to make one of those modules and 5 million transistors, that's like a speck of dust. So I do the math, you can fit like 30 of them in like one millimeter squared of silicon. So those kind of become your cores and they cost pennies. Once it's designed, once your fab is set up, the incremental cost is pennies. And they're super fast and super low energy.
3:23:36So yeah, I mean, you're going to have tiny, tiny little nodes in the future. They're not going to really consume much energy, they're going to be cheap and they're going to verify all the world's transactions.
3:23:50Vlad CosteaYou think you can put this in a box, like put it alongside RAM and a CPU and a mainboard and basically sell that as a package that people can buy as the Bitcoin node they put next to the router or something?
3:24:06Peter RizunYeah, that's what I would like to see. So I would like to see like a more hardware, like a dedicated hardware node and all the computationally expensive stuff is done in dedicated hardware. And then we have like a simple like RISC-V processor. This can be part of the chip that's running, you know, some stripped down version of Linux. And that's just kind of acting as a monitor and it allows you to SSH in and connect your light client, like your SPV wallet to it. So it can serve all the proofs, but you're still doing the validation yourself.
3:24:39So I think that's a feature I would like to see. Because then these nodes are, they would become a commodity at that point. So we talked about, did we talk about a formal spec?
3:24:51Vlad CosteaA bit. You said that Bitcoin core lacks a formal spec or Bitcoin in general.
3:24:59Peter RizunRight. So I think we talked about RAM, like DDR4, SDRAM, like DDR4 RAM. If you want to make DDR4 RAM, there is an open specification and anyone can make that, make RAM and they can prove using formal validation techniques that their RAM meets the specification. So what's nice about migrating things to hardware is you gain from all this, you know, decades of formal validation procedures in the hardware world. So the modules that make up your hardware node, the creation of, to do that in Verilog, Verilog description of the circuits becomes basically the formal specification.
3:25:40So you end up where nodes are commoditized. So the description, like a formal description of the behavior of a node is public and anybody can implement that on an FPGA, on a different chip. And they can make some tweaks to it to maybe make it better, but they can prove using existing tool chains that it meets the spec. And I think that that would be really useful because it'll turn nodes into a commodity. It'll kind of decouple Bitcoin core and all the wizards of development from Bitcoin itself.
3:26:16And I think that's a really good thing to happen. So I want to fire Core. I want Core gone.
3:26:24Vlad CosteaNow you sound like Paul Sztorc. He's saying the same with his drivechains. He wants to fire everyone. He wants to open the free market to be able to build.
3:26:33Peter RizunYeah. We want to make it as easy as possible for people and companies to compete towards a common goal.
3:26:44Vlad CosteaRight. So your goal right now is to make it as easy as possible and as affordable as possible to validate a full Bitcoin node with one gigabyte blocks using hardware. Is that correct?
3:26:56Peter RizunI would say that's broader than my current goal. My current goal is just to ship this eventually, which will be some signature checks as part one. But I would say that's a longer term goal. The longer term goal for us would be we can make some small little box that's like a node in a box, kind of like Raspberry Pi size, maybe even smaller, but it's not Raspberry Pi power. This is like super high powered. So this can chomp on gigabyte blocks all day and not even break a sweat.
3:27:26Vlad CosteaOK, interesting. But once you get this done, don't you think you're going to run into the same excuse that, well, maybe Internet is not fast enough?
3:27:35Peter RizunYeah, probably.
3:27:38Vlad CosteaBut still, it's pretty cool because it's replacing much more expensive and I guess inefficient machines because you buy a laptop, let's say that's two thousand dollars. Maybe it will be able to validate a full node using gigabyte blocks, but it's not the most efficient way to do it. At the same time, I do have to ask you, what is the production process like? Because we see this in the ASIC industry where they're not able to meet the demand for ASIC miners. And it's usually a few mining pools that have privileged access to the new devices that get shipped.
3:28:18And the end user is sort of screwed because obviously everything is out of stock and you have to buy a pre-owned machine or get lucky or have the right connection.
3:28:31Peter RizunYeah, I think that's always going to be the case in Bitcoin mining, just because Bitcoin mining is so competitive and you have such an advantage if you have the latest, greatest stuff. But we're talking about running a node and there's not like a huge arms race running a node. So there's not this huge demand for the latest, greatest node. Like if a little tiny $2 chip can process 10 gigabyte blocks, then we're only at 100 megabytes or 32 megabytes or one megabyte. There's a lot of room there before we run into this problem.
3:29:03So I don't think that problem exists. Let me just tell you a bit about like my shirt is Nexa. So this is a project I'm working on. And what the reason, my reason, there's a lot of reasons that we did that. But one of the reasons I like Nexa is Nexa's proof of work. So one thing I think, another thing I think Satoshi got wrong was using SHA-256 for the PoW. So what Nexa uses for PoW is it uses elliptic curve point multiplication. And a UTXO lookup as part of its proof of work, and these are the two computational bottlenecks computational bottlenecks for scaling.
3:29:42So elliptic curve point multiplication, that's part of verifying your digital signature. So if you have an ASIC that can do fast curve point multiplication, you can do fast signature checking. And if you have an ASIC or a system that can do really fast UTXO lookups and inserts, then you have a system that can do really fast UTXO lookups and inserts for processing transactions. So every time a Nexa miner hashes, he's doing basically the equivalent of a signature check and a UTXO set insert. So if a miner wants to make custom chips to earn more money mining Nexa, they'd have to develop the same circuit that's going to make their node process transactions faster.
3:30:29So our goal is to make the bottlenecks for running a node one-to-one with hashing. So all the gain you get by making specialized hardware to hash better, that immediately allows nodes to be better, to process transactions better, signatures better, and UTXO lookups better. Like I talked earlier about how SHA-256, Satoshi's original Bitcoin miner compared to modern ASICs, modern ASICs are about 600,000 times more energy efficient. So they can do 600,000 times more SHA-256 operations per joule of energy compared to doing that on a CPU.
3:31:13Well, that happened because there was such an economic incentive to improve SHA-256. Why don't we take that same economic incentive and put that towards making hardware that does signature checking and UTXO set management? So that's what we're trying to do in Nexa. We're trying to tie proof of work to the bottlenecks in running a node. So a byproduct of profit-driven miner innovation is better hardware for running a node. So that solves that chicken and egg problem because I said, why am I developing this hardware if no one's going to use it because the blocks aren't big enough to need it?
3:31:54Well, the answer why I'm developing it is because it's going to mine Nexa better. Does that make sense?
3:32:00Vlad CosteaYeah. So is Nexa basically what you're describing when you said if I was to redesign Bitcoin and do this and that, is Nexa your redesign of what you think Bitcoin should have been?
3:32:13Peter RizunI hope to get there. Right now Nexa is, I would say it's maybe 25% of the way there. But we started on the Bitcoin Unlimited code base, which is the Satoshi code base. So we've inherited all of the problems and inefficiencies of Bitcoin Core. So that's what I call the top down. We're trying to get to that ideal coin. So Andrew Stone, he's a lead software developer. So he's kind of working from the top down, modifying the existing software from the Satoshi code base to slowly make these improvements.
3:32:49Well, I'm working from the bottom up, like as a pure hardware re-implementation of the Bitcoin protocol. So I'm just doing little bits and pieces when I can. He's taking the whole system and we hope that, you know, several years down the road we get to this point where they converge and we have basically Bitcoin improved with all these fixes I'm talking about. And we have a formal spec for the hardware implementation of that node. And now I think you had a great point because you have a Bitcoin protocol that's perfectly scalable by definition of scalable, meaning that doubling the hardware doubles the throughput.
3:33:29There's a formal spec, means that anybody can compete on this. Hopefully the virtual machine, the instruction set architecture of the Bitcoin virtual machine is Turing complete. So any innovation can be done on this and it becomes a commodity at that point. So it's just some IP block that anybody can license, anybody can redevelop. And the Bitcoin node is just a commodity, it's not even interesting anymore, it's just like an ARM processor.
3:34:04Vlad CosteaOkay, so what is the reason why you built so much relying on the RISC-V architecture? Is it the open source design or... because in many ways it's not necessarily the most efficient. It's just something general purpose and open source.
3:34:21Peter RizunYeah, well that's just my proposal. Currently Nexa is using basically a modified version of the Bitcoin stack machine in Bitcoin script. This is just an idea I had. Basically I was working on implementing the Bitcoin stack machine in Verilog, like as a hardware circuit, and I realized it is a big huge mess. And then I had this idea that, well, we could do this all with RISC-V. RISC-V could be the virtual machine and RISC-V is dead simple and it's open source. So I got excited about this.
3:34:53But then at the same time Vitalik started talking about this too and I'm like, that's interesting that he had the same idea at basically the same time. So I think there's something to this and that's what I'm exploring about, but we're not even close to having that implemented. This is just an idea at this point in time.
3:35:10Vlad CosteaOkay, so do you see Nexa as this experimentation layer or do you see it as the end game?
3:35:17Peter RizunI see, well, right now it's an experimentation layer. So it has a tiny little market cap and that's good because we want to be able to make whatever changes we want. And we made that really clear, but how this plays out, I don't know. So maybe we solve the, maybe we create eventually the perfect crypto framework or the perfect crypto tech stack and Nexa overtakes Bitcoin, I don't know. Or maybe other coins adopt it and this tech stack becomes just a commodity, like I said, and now everything's running on it.
3:35:53So you transfer the Bitcoin ledger to that new tech stack because like we talked about earlier, Bitcoin is two things. It's a ledger of value and it's also the ledger updating machine, which is currently Bitcoin core. The Bitcoin core sucks, so maybe we use something else in the future. So I don't know how this is going to play out. And obviously it would be really cool if Nexa succeeded and became a super successful coin. But if it doesn't, if this technology is applied somewhere else, that's a win for me too.
3:36:24What I want to see is Satoshi's initial experiment to see, that's what's most important to me.
3:36:31Vlad CosteaI appreciate the honesty. Like you could have said, oh, Nexa is the best thing ever. It's the greatest blockchain in the world. Buy some tokens now before we hit one dollar or whatever. So I do appreciate that you're honest, that you're basically taking the design that you created with Bitcoin Unlimited and you're refining it to do something which you think is very useful.
3:36:54Peter RizunRight, right. We're very slowly trying to correct all the things we think Satoshi didn't quite get right.
3:37:03Vlad CosteaThat's really cool. Speaking of Satoshi and right, who do you think is Satoshi Nakamoto? Who's your favorite candidate?
3:37:14Peter RizunI definitely don't know. Definitely not Mr. You-Know-Who, but I don't know. I don't think we're ever going to find out.
3:37:23Vlad CosteaWas it weird to be on the side of BCH where you also had like this Satoshi guy who also went on to create his own chain?
3:37:34Peter RizunIt was really weird and I learned a lot about my own biases.
3:37:41So he comes along and he claims he's Satoshi and you know, so two things that made me take him seriously initially was, A, Gavin Andresen seemed to be supportive of him and I really admired Gavin and trusted him. And the core guys hated him. And to me, if the core guys hate him, then I think maybe he's legit. So I looked into it more and the more I looked into it, the more I became confident that he's just a bullshitter. And then we started talking like technology and some math problems and it was clear that he was incompetent.
3:38:22He didn't know, like he just techno-babbles words and phrases. His papers are mostly like copy and pasted from other academic papers that he pieces together and then modifies a couple words. So I think at this time you're now legally allowed to call him a proven fraud because he's been a proven fraud. And that eventually became very obvious to me, but initially it wasn't. So I had to go through that process of trying to understand who he was and read a lot of his work. But then other people figured out that he was a fraud much quicker and I don't know how they did it.
3:39:03Did they just trust other people or did they actually investigate it? And then there's still people today that think he's Satoshi. And how can you think he's Satoshi today after all that's happened? So basically it took me about, I would say about a year until I was super convinced that there's no way he is Satoshi. But other people took two years, three years. And there's still some people today, yeah. But he's got this. He's got this cult of followers who still believe in Satoshi.
3:39:34Vlad CosteaI know. Just last night I was on the show of Sal Mayweather. Yeah. And he invited me last week. I was unaware that prior to my invitation, the other guest is going to be Craig Wright. So I had to sit through that and listen to it. And I even had my moral dilemma, like, do I want to be the follow up act after this guy? Like, to which audience am I going to speak if this happens? But I did listen to him technobabble about stuff and say, well, I know better and Bitcoin is Turing complete.
3:40:08This is a claim that he has been making for a decade now. And this and that. And he had it all figured out. And his design is immaculate. And they questioned him a bit. They asked like, if you're Satoshi, why can't you just send me one dollar from your Satoshi coin stash and just prove that you're Satoshi and that puts an end to all of this conversation. And for the first time ever, I heard Craig Wright saying, well, I think proving Satoshi is sort of anti Bitcoin.
3:40:41I was like, why the hell are you even here? What's the point of all of this? If you're saying that it's anti Bitcoin?
3:40:48Peter RizunYeah, but he is the one making the claim that he's Satoshi.
3:40:52Vlad CosteaExactly. And people believe him. And I've asked, I think Paul Sztorc is one of the smartest people and one of the people who understood that he's not Satoshi very early on. And I've asked him, why do you think these people after they denounced him? And it was a movement when he lost the court battle against Hodlonaut and Peter McCormack. It was like a big thing among BSVers to say, well, I was wrong. I'm sorry. I got fooled by this guy. I really believed that he was going to be able to prove himself in court.
3:41:26And now I got to admit that I was wrong. And I apologize to the people that I also misled. Like this was a movement. But I guess they realized along the line that they need this leader. They need this guy because otherwise BSV and what they invested in is pointless. So maybe that they they understand that, well, they do need to present him as Satoshi to get other people to buy into BSV so that they can sell. Maybe that's the rationale. That's the way in which I see it right now.
3:41:58Peter RizunRight. They need to keep the belief that he is Satoshi out there because the whole framework of BSV relies on that rumor being potentially true. So as soon as everyone acknowledges it, it falls in.
3:42:12Vlad CosteaAre you aware of the work of Daniel Krawisz?
3:42:23Peter RizunYeah. Yeah. So he he that's another guy. I like him. I met him in person. He's a very smart guy.
3:42:29Vlad CosteaVery well read.
3:42:31Peter RizunVery smart guy. He writes these fantastic articles, has these really insightful ways of looking at things. But then he's totally he was totally is he still sold on, you know, being Satoshi?
3:42:42Vlad CosteaOh, yeah. He was on my show like a couple of months ago. I was trying to ask him questions like, are you the same person who wrote this article 10 years ago? Like, don't you see any sort of dissonance between the two arguments? Don't you think maybe you're wrong right now? It's very weird. But at the same time, he had some moments like I don't want to speculate. People can go and listen to that if they want. But he had some moments when he basically revealed that he sort of sold out and he's not allowed to talk about it.
3:43:18Like maybe he signed some sort of NDA. Maybe he's getting paid to say what he's saying. And I also asked myself, why the hell did he choose to do this interview with me? And I think the reason why is that he needed like a sparring partner, basically someone to ask him hard questions so he can come up with improvised answers, because he was very I don't know, he was moving goalposts all the time. It was hard to debate him. And then I was thinking, why did he do this in the first place?
3:43:49And then maybe it's just because he needs some training. And he needs to know what to say to people who ask the same questions from the BSV camp so that he has all the answers ready for them.
3:44:04Peter RizunInteresting. So you're saying that you think he might be a paid shill at this point?
3:44:09Vlad CosteaThat's what I think, because he's way too smart to not see beyond this. And he also wanted to have an entire segment of 30 minutes in which he spoke about narcissism, and why it's important to educate yourself in terms of identifying narcissists and how they can mislead you and get you in some very disastrous relationships where you lose money and time of your life. And I was thinking that everything is like an allegory for him to say that he got into a sticky situation and he's not able to get out.
3:44:42So I've asked him, are there any narcissists who are causing you trouble right now? And he said, yes, the Bitcoin Core developers and Greg Maxwell, and the core cabal, and I was like, okay, interesting. He's not able to say it, but he can speak in many ways. But basically, he was one of the first people to present that Craig Wright has plagiarized some papers.
3:45:10And even his peers from the Nakamoto Institute, Pierre Rochard and Michael Goldstein, they agreed that he was always a big blocker. So there is no sort of misalignment there. He was always a big blocker. It's just weird that he chose to not just get into BSV, but worship Craig Wright, get into this cult.
3:45:32Peter RizunSo I guess what you're speculating that he actually doesn't believe it, but he's either being paid to or he's being blackmailed.
3:45:39Vlad CosteaI'm saying that he's way too smart to not see through this. He's way, way too well read. He's been around. I think he's been in Bitcoin for longer than Craig Wright has.
3:45:51Peter RizunSo I wonder how much, you know, maybe like things like that, you know, being paid at best, and at worst being blackmailed by certain people behind the scenes, how much that has shaped what's happened in the broader Bitcoin development by going back to the block size wars, right? Are you earlier? I'm curious now that you see that because there's so much behavior, I can't explain like why people did certain things.
3:46:21Vlad CosteaEven Gavin, I'm not sure if you're in contact with him. I would love to have him on the show one day, but he's very reclusive and he doesn't want to talk about it. He sort of destroyed his reputation when he participated in that signing ceremony with Craig Wright and then came out and said, yes, he is the man.
3:46:42Peter RizunYeah, I would like to know that. Like he said, oh, maybe he got bamboozled. But no, Gavin, I don't see Gavin getting easily bamboozled.
3:46:53Vlad CosteaOh, I got a very funny question from BitMEX Research. He said, when you were the Bitcoin Unlimited Chief Scientist and CSW was nChain Chief Scientist, didn't you have some fight and CSW called you a dickhead?
3:47:10Peter RizunYeah, I think I had a fight with him, but he actually did call me a dickhead.
3:47:23Vlad CosteaOkay, I'll let you say it and then I'll present my theory.
3:47:26Peter RizunNo, no, go ahead.
3:47:28Vlad CosteaSo do you believe that Craig Wright was the reason why the big block version of Bitcoin was compromised from the beginning? Because he was being introduced as the Satoshi guy and the movement sort of lost credibility?
3:47:49Peter RizunI mean, like, I think at the beginning, we kind of liked him there, or at least I did before. Remember, I said I wasn't convinced. It took me, you know, six months or a year before I was convinced he was a fraud. I was skeptical. But at the beginning, I thought, well, maybe he's useful because maybe he is Satoshi and he's promoting big block ideas that I like, so maybe he's okay. And then eventually I realized, no, this guy, all he's doing is damaging relationships. He's damaging the big block movement.
3:48:20So I'm sorry, I gotta get lost here. What was your question again?
3:48:23Vlad CosteaSo would you say that BCH lost because of him? Because, first of all, he was there pretending to be Satoshi, and then like a year later, he created this fork, right?
3:48:36Peter RizunRight. So I think he definitely poisoned the big block movement because by creating BSV and then doing their, you know, their giga megs, the meme from Calvin Ayre, they kind of made a mockery of what we were trying to do. And they made it seem not serious. So I think that, and they took a lot of the mindshare, like Daniel Krawisz and another bunch of insightful people. They all kind of followed Craig Wright over to BSV. So we lost what I think are really smart people.
3:49:07Like some of them are slowly returning, like Ryan Charles. He's issued an apology, says that he was fooled. I don't know. It's interesting that it took so long because he's another really sharp guy, but he's come back. So yeah, I think Craig Wright really damaged the big block movement and Bitcoin Cash.
3:49:32You've got the wheels turning, Vlad, and now I'm thinking there's way more blackmailing and bribes and shit happening than I ever suspected.
3:49:40Vlad CosteaHonestly, these are my shower thoughts. I'm like, you know, it's very unfortunate that the community was split, I think, so the more I interact with BCH people, the more I realize that they're genuine and they're for real. And they really put up a fight thinking that they are right about this. And it's very hard to blame them for it, because for a while it seemed like scaling with big blocks was the way to go. There is nothing evil or malevolent. It's like a war between two brothers.
3:50:15And then you discovered that they were raised by the same family and they have similar principles, but they disagree with how they should put them into practice. I also think that BCH is a very useful experiment in proving whether or not some ideas are real or not real, functional, and also whether or not there is market demand for big block Bitcoin.
3:50:40Unfortunately, there was a lot of demand for Ethereum, which ended up becoming the revenge chain.
3:50:47Peter RizunYeah, well, that's what people say. Well, Peter, you know, if there is so much demand for big block Bitcoin, why is BCH sitting at 100 kilobytes? And I don't really have a good answer. I guess my answer is because the demand didn't come to BCH. It went to Ethereum and Solana and everything else instead. But yeah, it's disappointing. It would be nice if BCH had more demand.
3:51:10Vlad CosteaI've received some more quotes from BitMEX Research about stuff that Craig Wright said about you. He said, Peter, expect little trust ever again. You underhanded shit. Is this real? Do you remember this?
3:51:25Peter RizunNo, he's crazy.
3:51:28Vlad CosteaAnd he also posted this, so I'm not even sure if I can read this. Let me put it on the screen so people can see. It's saved on the Wayback Machine. And he said, no, Peter, you're a duplicitous shit who is too fucking dumb to get the MAFs. So make spurious attacks.
3:51:51Peter RizunWhat does it mean to get the MAFs?
3:51:52Vlad CosteaAs in, get the MAF right? I don't know.
3:51:55Peter RizunHe doesn't call it math. He's from England, so he doesn't call it math. He calls it maths. And he probably has a spelling mistake or something. But no, I think, yeah, we had a bet. It was to do with selfish buying, and he lost. He just didn't understand the math. And then he got really, really mad. And he couldn't accept it. He never paid me. He owes me a Bitcoin. I think that's why. I think we've got one Bitcoin. And he still owes me this day. He's never paid me.
3:52:18I clearly won the bet. It's really documented. I want my Bitcoin, Craig.
3:52:24Vlad CosteaSend the man his Bitcoin, even though I think he owes so many people a lot of money at this point. I don't think he's ever going to pay. I think Roger mentioned, Roger Ver mentioned that he never got paid after he sued Craig Wright and proved, because I think the conversation between them was about checksums in Bitcoin addresses. And it seems like Craig Wright was not aware that these even exist. And then Roger was like, how the hell can the guy who invented Bitcoin? Not know that there are checksums in addresses?
3:53:00Peter RizunYeah. Like I said, you know, I thought Craig was a fraud after six months a year, but Roger still thought he was legit for a while after that. And I think that was a real decisive point that convinced Roger that, no. Like, Roger is not a technical guy, but he knew about the checksums and Craig didn't. Craig's claiming to be Satoshi.
3:53:24I was very happy that Roger came around and Bramley did.
3:53:30Vlad CosteaYou know, sometimes I think that Craig Wright was the nation state attack that we expected.
3:53:35Peter RizunWell, I think he might have been.
3:53:38Vlad CosteaWhen we're imagining that the state is going to come for Bitcoin, it did not come directly to arrest developers or whatever, but it did come under the shape of maybe this one guy who sued everyone and started filing patents for open source software.
3:53:55Peter RizunRight. Like, what was his motivation? Like, what was he hoping to achieve? And did he achieve it? Like, is this the end result he wanted? Or did he want something else? And what did he expect to happen?
3:54:10Vlad CosteaWell, if you take it at face value, he was expecting to get acknowledgement from a lot of people that he's Satoshi and get a bunch of heads of state and politicians and whatever to, I guess, people from the industry, not necessarily from the cryptocurrency industry, but like internet historians or whatever to acknowledge him as Satoshi and put his name on the white paper and stuff like this. But I don't think that was the end game.
3:54:38Peter RizunI don't think, I don't even think he could have believed that was the end game because he, he would have known, like, like, like I said, some, he's not Craig Wright is a lot of things, but he's, he's at least a little bit intelligent. Like he's not like he's some, but he, he, he's smart enough to know that if he's not Satoshi, he's going to get caught at some point in time because he's making these claims that he can spend big coins, but he never proves it. He never proves anything, but he must have known that he was going to get called out.
3:55:15Right?
3:55:17Vlad CosteaYeah, of course. And this happened very early on. If you think about it in 2018, there was this conference in Korea Deconomy and basically Vitalik Buterin got up during his, during Craig Wright's speech and said, you're a fraud and you're wrong. And I hope you don't get invited to conferences anymore. And that one moment basically canceled Craig Wright from a lot of other conferences. So he was not welcome in any other places except for CoinGeek events. And that was instrumental, but at the same time, he was able to do so much damage to this day.
3:55:56You have Wladimir van der Laan, for example, he was not able to contribute to Bitcoin. It was more of his own choice. He was afraid of the legal consequences because he got sued by Craig Wright. But while he was still settling the case, he did not contribute a single line of code to Bitcoin. And then you had Jonas Schnelli. He was also a maintainer of Bitcoin Core and he also quit. And people were saying, well, they're going to come back with pseudonyms and contribute. I don't think that happened.
3:56:25Peter RizunYeah. Yeah. So maybe the most likely scenario is Craig came to hurt Bitcoin and there was some other people pulling his strings. They're either blackmailing him or threatening him or bribing him. Maybe that seems to make the most sense because like you said, he really hurt the big block movement in BCH. He also put huge chills in the development community. I think he kept development centered around Core, which is easier to control than a whole bunch of other competing implementations. But he still managed to get a bunch of developers all worried about contributing.
3:57:07So, yeah, he did huge damage. I can't see any motivation, how he ever would have benefited by his actions. So it's a good explanation is the damage was intentional.
3:57:24Vlad CosteaI'm also curious if so Amaury Séchet, he was the guy, according to Bitcoin.com CEO Corbin Fraser, he's the guy who went French and said, OK, fuck you guys, I'm just going to fork off. And he created Bitcoin Cash. I'm curious if there was any interaction whatsoever with Craig Wright or if he was whispering in his ear telling him just create the fork or something, because maybe if Bitcoin Cash was not created, maybe there was some time like a couple of months when you guys could have agreed to not fork off and stay on the same chain and maybe make SegWit2x happen.
3:58:00Peter RizunMaybe. It's funny because I never met Craig Wright until a bit after the fork. But all the Craig Wright people were emailing me, they took me out for dinner a couple of times in Vancouver, and they would talk about collaborations, but they were really kind of strange. And they had a very kind of dark energy to them, where you think that there's something very secretive about them. But we met with them anyways, because at that time, I wasn't convinced one way or another about Craig. But this was leading up to the Bitcoin Cash fork.
3:58:35So maybe they were, I'm sorry, I never asked him that, if he was also talking with them and what happened. But yeah, they said they would just compliment Bitcoin and say, oh, you guys are great. We want to work with you. We love what you're doing. But it was never really clear what they're offering. They would say things like we have 80 software engineers, and the guy who I went out for dinner with, they went with a couple of them in Vancouver. He was saying they had some office building where they had all these different people, but nobody ever took me, all these computer guys working and stuff.
3:59:19It's probably all kind of bullshit.
3:59:26Vlad CosteaAlso, I have to show you this. I'm going to put it on the screen. It's thanks to the guy behind the BitMEX Research account that we got a Slack screenshot from your conversation with Craig Wright when you made the bet. Okay, let me adjust it a bit. So there's this diagram at the top. And you disagreed on the math. And you pointed out and said, here is the bet. Do you take it or not? And Craig Wright replied, I said when we were in Canada, Peter, I would write this up.
3:59:57I have started. It is t equals five. I have already run it. And you said your interpretation is not correct. The answer is t equals 15 minutes. So the bet is on Craig one BTC. And he said, you can look at the R script when I get to finishing the write up. And you said, can you please be clear whether or not you agree with this bet? And he said, if you wish, I have already done it, but so be it. So he does owe you one Bitcoin.
4:00:27We have the proof right here.
4:00:28Peter RizunThank you. We've now documented that for posterity.
4:00:35Vlad CosteaExactly. How much was one Bitcoin at the time? Like $4,000.
4:00:40Peter RizunYeah. Now I'm going to spread today.
4:00:44Vlad CosteaYou should get this.
4:00:47Peter RizunYeah. So yeah, that'd be cool. But now you've got me really suspicious that like all the stuff with nChain and Craig Wright, like it makes the most sense for it never for their whole plan to have not made sense. Like they were there was always some ulterior motive. And now maybe you got my conspiracy wheels turning. But now I think you're right. Like I think he was he was sent or being compelled by someone to hurt Bitcoin. I believe that's probably true. That's the most that's the simplest explanation at this point.
4:01:21Vlad CosteaAlso remember, was it Mike Hearn who said this that the way to kill Bitcoin is like death by 1000 forks? Yeah. To divide the community indefinitely on very small differences. And you remember back in 2017, it wasn't just Bitcoin cash that forked off. It was Bitcoin gold, which I think the only purpose of that one was to mine it with GPUs. There was Bitcoin Diamond, there was supposed to be SegWit2x. And then there was actually a SegWit2x that had nothing to do with the original team.
4:01:58Peter RizunYeah.
4:02:00Vlad CosteaThere was Bitcoin private, which turned out to be a huge scam, because the guy who built it essentially premined 1 million coins for himself.
4:02:11There were a lot of forks. And it seemed to be like the fashion at the time to fork Bitcoin and create a new currency, different parameters.
4:02:21Peter RizunAnd how much of that was organic? And how much of it was done for the purposes of discrediting BCH? I think a lot. I remember Adam Back and those Blockstream guys, they would talk a lot about Bitcoin gold, Bitcoin Diamond, to try to put BCH in that same camp. And clearly, Bitcoin Diamond and a lot of these are just probably scams. But clearly BCH was a legitimate fork. There was a real community there. And they had legitimate grievances, and they tried to solve it. So now, there's all these other forks, and then it just muddies the water, right?
4:03:04So that muddies the water for forking. Craig Wright's muddying the water for bigger blocks, and then he puts off the BSP. Yeah, so it's all, all this stuff is hurting what I would say is the grassroots organic community's efforts to try to rectify the problem in Bitcoin, which is the 1 megabyte is not allowing us to grow to be that world currency that we want to become.
4:03:33Vlad CosteaAnd this is how we got to using stablecoins, I guess.
4:03:37Peter RizunYeah, so now, stablecoins and central bank digital currency is in our future, Vlad. So maybe the Bitcoin experiment just fails.
4:03:49Vlad CosteaWell, it hasn't failed as long as we still use it and we accept it.
4:03:53Peter RizunYeah, no, I agree. I think we still have some runway left. The first lesson in economics. I appreciate you speaking with me and a bunch of other people from a broader, from the broader community, peer-to-peer community, because it would be nice if we can kind of come together again. So there's so many people like yourself and like all these other developers who kind of spread out to all these different projects, but we all want the same thing. Like, I don't think, at the end of the day, I don't think everyone really cares if it's, you know, the blocks are a bit bigger than I wanted or the privacy is a bit less or a bit more.
4:04:31We all want to see it succeed. We want peer-to-peer electronic cash, an asset, a native asset on the blockchain. And we want that to be used all across the world.
4:04:43Vlad CosteaI think the holy grail all along was to make Chaumian e-cash decentralized. And once it became clear that Bitcoin can do partially, because Chaumian e-cash was pretty private, right? So the way in which Satoshi compromised with it was to make it open. And now we have two different directions of research. We have, on one hand, actually, you can argue three. You have privacy, you have scalability, and you also have contracts. Contracts is a more novel construct, which maybe was influenced by the presence of Nick Szabo.
4:05:21But these are like the three main branches where research is being done. It seems like scaling is the more difficult one because it's very hard to define the parameters of what it means to scale. But privacy, at least you have some metrics and you can say, well, this is good enough.
4:05:42Or this is a good enough design that we can use.
4:05:46Peter RizunBut I guess for any of them to succeed, that underlying asset, the underlying blockchain asset, whether it's BTC, Nexa, Ethereum, Zcash, people have to be using that and holding that. Right? That's what you need. I think that's what's so important. You need to move to a world where I think people are accepting payments in the underlying. Otherwise, you're going to get taken over by stablecoins and CBDCs.
4:06:25We're not really competing. If you say that the privacy chain has different tradeoffs than a scalable chain, has different than a smart contract chain, then the three chains can all be solving kind of different problems. So in a way, they're not competing. And I don't think, is it a terrible world if there were three blockchains that all had lots of economic value on them? One is really scalable, one is really private, and one is great for smart contracts? That's still a win in my book.
4:06:54Vlad CosteaYou can argue at the same time that the one that is super scalable can still do smart contracts for the simple reason that it's scalable. And then you're going to get people from this school of thought because you have different types of privacy. But you also have this idea that being able to hide in the largest crowd gives you the best privacy, which is actually deniability. And therefore, the chain that scales the best is the one that is also going to have the best privacy. But once again, the question always remains, where does the experimentation happen?
4:07:31Because if you're going to experiment on something which is worth a lot of money and has lots of users, and you break it, I think the consequences are far worse than if you break something which was made like a sandbox. Which is meant to be broken, which is meant to move fast and maybe make mistakes along the way. And I think Ethereum used to be that. Right now, they also became sort of conservative, and that's why maybe Solana is eating their lunch. Because Solana was not afraid of breaking and making mistakes, and Ethereum was.
4:08:05But at the same time, these are just attempts to make contracts possible. To me, it's not as interesting as scaling and privacy. These are more cypherpunk, whereas contracts and reinventing banking is something that maybe bankers appreciate more and are much more interested in. And there is a reason why JP Morgan invested in Ethereum very early on, because they wanted to run some financial experiments. But to me, I think Zcash and everything that happens with scaling, including trying to make Bitcoin work with larger blocks, is super interesting.
4:08:47And I want to present Dan Kaminsky's take on this, because we started from this assumption that nothing is new and it was already presented. Were you about to say sorry, you have to go? No, no, no. I'm happy you don't say that. Basically, we have this blog post from 2015, if I'm not mistaken. I'll get it right immediately. Just let me crop it. It's called The Cryptographically Provable Conman by Dan Kaminsky, May 3rd, 2016. And he explains why Craig Wright is a fraud in 2016. And he was the first person to do it publicly.
4:09:37And he uses responses that he got from an email from Gavin Andresen.
4:09:46And he says, Craig Wright seems to be doubling down on his fraud again. And I don't care. This guy, the guy took an old Satoshi signature from 2009 and pretended it was fresh and new and applied to Sartre. It's like Wright took the final page of a signed contract and stapled it to something else, then proclaimed to the world, see, I signed it. That's not how it works. And he calls him a cryptographically provable con artist. And this is so ahead of its time.
4:10:20Peter RizunYeah, I remember I remember seeing this argument. I didn't connect the dots about with Dan Kaminsky that did this. So, yeah, so he had a lot of early insight, didn't he?
4:10:30Vlad CosteaIt's such a shame that this guy passed. He was such a treasure.
4:10:38He was an early Bitcoiner. He presented. So once again, I'll go to the slides of his presentation from 2011. Where he explained what what it takes to scale Bitcoin. And he presented bandwidth, CPU and storage as the bottlenecks or the challenges.
4:10:59I'm happy that we still have his blog. I'm not sure who's paying for hosting it. Maybe he paid for many years in advance, but we should definitely preserve this because it's good to have. Next time someone says, well, BSV was the first one that came up with gigabyte blocks. Point out that there is nothing original about it. This was being discussed and proposed way earlier. This is from August of 2011.
4:11:28Peter RizunLet's just do the math. I think let's do the math on this 2000 TPS. So 2000 transactions per second. Let's say, let's say 300 bytes per transaction times 8 bits.
4:11:444.8. It's only 4.8 megabits per second. So he made a mistake on that. The bandwidth calculation.
4:11:57Vlad CosteaYeah, maybe.
4:12:01Peter RizunYeah, it's not nearly that high.
4:12:04Vlad CosteaAnd then what else did he say?
4:12:07Peter RizunThe CPU. Yeah, I agree with the core. That's kind of right in line with my estimations too. But now a 50 core machine is not crazy. And by moving it to specialized hardware, like I've demonstrated, we can cut that down by another factor of, you know, 100.
4:12:30Yeah.
4:12:36Vlad CosteaI think this guy believed that Len Sassaman was Satoshi.
4:12:42Peter RizunWho is, I've heard that name, but remind me who Len Sassaman is.
4:12:45Vlad CosteaHe was this academic who passed away in 2011 or something. Yeah. He was a cryptographer. Apparently very nice guy. There's this tribute that Dan Kaminsky put in, put on the blockchain. He called him Len "Rabbi" Sassaman. Len was our friend, a brilliant mind, a kind soul and a devious schemer, husband to Meredith, brother to Calvin, ta ta ta, co-author and co-founder, and Shmoo and so much more. We dedicate this silly hack to Len, who would have found it absolutely hilarious.
4:13:26I think he has a Wikipedia page. So if you want to find out more, you just look up Len Sassaman.
4:13:37Interesting. But these guys, like, I wish they were still around because they were so much ahead of their time. I'm not even sure if this is the first time someone spoke about gigabyte blocks in Bitcoin. Maybe there's some BitcoinTalk thread, where you can find this. But it's the first time that I'm aware of when someone takes this outside of the Bitcoin world and talks to hackers and people from, I guess, the broader computer science field.
4:14:20Peter RizunMm hmm.
4:14:20Vlad CosteaAnd he also explains how anonymity can work on Bitcoin. So ahead of his time, check out dankaminsky.com with a K and the Y at the end. So K A M I N S K Y.
4:14:38To people on Spotify, they're not going to be able to see this, but you should definitely check it out. It's like, you know, what are we even trying to do? Just replicate something that someone already discovered before I even heard about Bitcoin.
4:15:00But it's cool. And once again, if you go back, James A. Donald is the name of the guy. He still runs a blog. I know about this so much because I did this tiny comic book that's called Bitcoin Year One. Maybe I should send you a copy. And I spent a lot of time on the cryptography mailing list to see what the conversations were at the time. And James A. Donald was the first critic. He replied to Satoshi, I think, the next day after he published his white paper.
4:15:38And so it was 31st of October. And this guy was able to tell, well, it doesn't really scale and you're going to need this peer to peer like torrent network to be able to send coins at scale. And maybe that he sort of described what the lightning network became. I don't know. Maybe that's what inspired it. But there are also a bunch of guys that like there were these old school cryptographers working for Sun Microsystems or whatever, and they tuned in to say stuff like, well, it's not good that you don't register users because it would be nice to tell when someone is cheating or trying to double spend transactions to identify them and call the police or something.
4:16:26And I guess they were so stuck in this old school mindset of building stuff with the help of the state or relying on the state to provide security. And fast forward a few years later, I got to tell you this. I had an interaction with Luke Dashjr on Twitter. And I happen to like drivechains. He does not. And he said, well, the Liquid Federation is good enough for this as a sidechain. And I'm like, so what's the security model? You just tell someone that you got robbed or something?
4:17:03You go to a court of law to settle your transaction? If one of the Federation members or a majority of them does something to your coins? And he said, well, at least you can sue someone as opposed to miners who are independent actors who are spread around the world. And you can't single out someone from a mining pool and say, well, it was this guy. Or maybe you can, but it's not that easy.
4:17:32But I don't know about you. I like the idea of building without permission, launching it on the Internet and just letting people use it however they think is right for themselves. As opposed to thinking, well, if something goes wrong, there's this company that's running it and you can sue them in a court of law.
4:17:50Peter RizunYeah, that's a totally different mindset, right? Bitcoin's all about being decentralized and the code is the law. But what's funny, though, is if you look at examples where people have paid ridiculous transaction fees, very efficiently, the mining pool that mines it returns the excess fees. So even though it's decentralized and they don't really have to do that if it was a valid transaction, they still do.
4:18:19Vlad CosteaThey present a lot of coins as transaction fee by accident, right? I think F2Pool did that. I think F2Pool did that.
4:18:31Peter RizunWell, there's been a bunch of examples since my time at in Bitcoin back in 2013 when I started. People will have some large coin, let's say they have a 1 BTC UTXO, and they peel off, maybe they have some custom software that peels off 0.1 BTC to make a payment. But then the rest just gets turned into a transaction fee because they didn't realize how the protocol worked, maybe they made some custom software. The miner takes it, but then the guy just goes, hey, I screwed up, and the miner gives it back to them.
4:19:03That's happened many, many times. And I think it's cool because it shows that there's faces behind these nodes, and we're not, I mean, we're relying on cryptography and we're relying on economic incentives, but people still do the right thing, even when things go wrong. But that's nice.
4:19:28Vlad CosteaI think I've also read about a situation where very early on there was a mining pool that was able to get more than 51% of the hashrate, and they chose not to. They chose not to do it. And it's really amazing because they realized that they can become a threat to the network, so they held back from mining more coins.
4:19:54Peter RizunYeah, yeah. And I don't think this is really unusual in most markets. Like, I think, you know, you know, most markets have trade groups, and they talk about the health of their market. They want to create healthy environments so they can all thrive. And this is an example of that. Like, it's not always this short-term profit-maximizing agents fighting each other.
4:20:20Vlad CosteaI gotta ask you, did you read the books that were written about the block size wars? And if so, were they accurate? Or do you think there's more that was not published and needs to be researched?
4:20:34Peter RizunI mean, I have Roger's one right here. I have not read it, though. I should have read it. But, you know, I have three kids now, and I used to do most of my reading in the evening, and now after I put the kids to bed, I don't have as much time for reading like that. So I plan to. I haven't read Jonathan Bier's book either, but I should do that too, so I can't comment on them.
4:20:59Vlad CosteaI think I like them both. I disagree with them to an extent. Like, Roger is trying very hard to prove that nodes are pointless, and you should not be running your own node, and SPV is good enough. And Jonathan has a point very early on in the book where he said that increasing the block size required a hard fork, the same hard fork that can change the Bitcoin supply, or I guess change ownership of coins or something. And I read that and I was a bit baffled.
4:21:32I was like, that was never part of the conversation during the scaling wars. Like, of course you can do that. But it's like saying, well, it's a kitchen knife, the same knife that you can use for stabbing someone. But once again, that's not the purpose of it. It's not why it was made.
4:21:50Peter RizunYeah, I guess he's making a bit of a slippery slope argument, right? Like, if we set a precedent for doing a hard fork once, then there's going to be all these hard forks in the future, and anything is possible with a hard fork. So imagine if we make 40 million Bitcoins with a hard fork. So yeah, I think it's a pretty weak argument.
4:22:08Vlad CosteaThat's the funny part. We already have 40 million Bitcoins.
4:22:11Peter RizunYeah. On paper.
4:22:16Vlad CosteaNo, I don't mean because of the split. I mean, because of institutions selling BTC that they don't have. And that's another issue. Rehypothecation and all of these situations in the finance world where someone somewhere is going to get screwed because there's not enough Bitcoin.
4:22:34Peter RizunI don't know. We have really that much evidence that that's actually happening. But like, I know the speculation.
4:22:41Vlad CosteaYou look at all of these companies saying that they bought Bitcoin when really they buy ETFs or they sign a piece of paper and then they get another piece of paper that says you have this amount of Bitcoin. But if this was true, the price would really spike, right? Right.
4:22:57Peter RizunBut I mean, I read some of the prospectuses for some of these ETFs and they're tightly regulated. Like, I don't think, like, are you saying that they're fraud and then they're not actually following the prospectus? Like, like when people say there's paper Bitcoins, like, what are you saying? You're basically saying someone is doing something fraudulent. It's somewhere in the chain, right?
4:23:26Vlad CosteaI'm saying maybe that they're double selling. So they only own one Bitcoin and they're selling it to two people.
4:23:35Peter RizunBut I'm skeptical of that because, like, these are big, tightly regulated companies. I don't think that's blatant fraud. I don't think that's happening. But there could be some funny things happening, but I don't think that's it. Like, I think if there is some kind of double counting, I think it's being done in some weird legal way that allows it. Like, where someone's pledging an asset and the contract allows them to move it on. But like, if you look at the prospectuses for the ETFs, I think it was pretty obvious that that couldn't happen.
4:24:16Vlad CosteaSomeone says in the chat that they're short Bitcoin in that scenario. They'll be squeezed when they need to redeem if that's happening.
4:24:29Anyway, we're almost 10 years later. It's eight years later from the block size wars. And it seems like this fighting doesn't make much sense anymore. But at the same time, we still haven't solved the most important issues that were being presented at the time. And maybe that the time that was spent fighting could have been used to actually fix stuff. Like, did you sell all your BTC for BCH or do you still hold BTC?
4:25:02Peter RizunI hold BTC, yeah.
4:25:03Vlad CosteaSo you didn't go all in on BCH like other guys did?
4:25:09I think in hindsight that was smart.
4:25:12Peter RizunThere was a fork, so I had, you know, whatever BTC I had, I got the same amount of BCH. Yeah, so.
4:25:20Vlad CosteaYeah, but there are guys who basically traded their BTC for BCH because they believed so much that BTC is going to go to zero and BCH is going to be the one Bitcoin.
4:25:34Peter RizunWell, to me that was, I could see a rational argument to kind of reallocate. If you think BCH is going to win, maybe, you know, a little bit heavier BCH. But to go all in, it seemed, it seemed greedy to me. If a fork like that happens, you kind of win either way, right? Just hold both and you automatically have the winner. You don't have to buy it. You already have it. So, yeah, I think people were foolish if they sold all of their BTC for BCH.
4:26:01If they maybe sold some, it would have been heavier. That's what we do. We're investing, so you got to put your money where your mouth is and you're trying to make a profit. But yeah, you get too greedy. Like if you assume you know what's going to happen and it doesn't happen, then you lose a lot of money. And it's hard to make predictions about what's going to happen in the future. Because a lot of things can happen that you don't expect.
4:26:33Vlad CosteaI guess you played right in this situation.
4:26:43Because I've heard of people who lost everything, not everything, you know, they just swapped their BTC for BCH. And of course, maybe that they sold in November, maybe, but maybe they did not. And now they're stuck holding something which is like how much is BCH $300?
4:27:02Peter RizunYeah, it's lost. It hasn't nearly kept up with BTC. It's too bad. But maybe that's why there's so much tribalism. Maybe people are just talking from their pocketbooks too much. Like, it seems to people really good. They're like, they're a fan. It's like sports teams. Like, oh, I'm a fan of BCH. I'm a fan of BTC. Like, it doesn't feel like that.
4:27:27Vlad CosteaIt is like that. Yeah. But I think BCH people were more open minded to Ethereum or something else. Whereas BTC people, they said, well, everything that is not our coin is a scam and a shitcoin. And it's very funny because the goalposts, and I talk about this a lot on Twitter, initially shitcoin was something that was just a copy of Bitcoin and did nothing interesting. Like, let's say, for example, Primecoin or Peercoin or all of these forks that basically changed one parameter. And they said, well, it's a different coin now.
4:28:05Maybe you can argue that that's a shitcoin, but something which is a complete rewrite and does something different from Bitcoin, like CryptoNote, which resulted into Monero. You can't argue with a straight face that it's a scam and a shitcoin because it does something different. It uses some of the same technology, but in a different way, and it doesn't use the same code. And to argue that everything that is not this first design is a shitcoin and should not exist is, I guess, first of all, if you make this argument, you're not for open source software and you don't believe that people should build something or experiment with building.
4:28:50To argue that Bitcoin is already perfect when it hasn't solved scaling and privacy is also dangerous. But a lot of people seem convinced that Bitcoin is the perfect money and there is nothing better that can ever be built. I'm actually curious if you believe that we're going to get another solution for the double spending problem, which does not involve blockchains and is decentralized. And if you think that's going to come out and basically destroy what Bitcoin built and absorb all of the activity in the mindshare that Bitcoin has.
4:29:29Peter RizunNo, I don't think so. I think Satoshi's design will stand the test of time.
4:29:36We talked about, you know, nodes becoming commodities and just part of a kind of a generic tech stack. So I think that'll look like you'll have, it'll be the UTXO model, becoming model like Ethereum shut itself in the flood. They're not, I don't see how they're going to get out of that. I just can't scale because it's just the wrong architecture. And it's going to be proof of work. Like proof of stake, in my opinion, is not even a coin. Like, what is proof? Proof of stake is basically like a share in a company.
4:30:06Like you have shareholders, you know, staking their shares, deciding which transactions to approve, but the transactions are just like other shareholders reassigning the shares are the shareholders. So it's like the whole holding yourself by your own bootstraps things. There's nothing, there's nothing tethering proof of stake to the ground. So I don't see how, like, how is Ethereum not just like a company and Ether is just a share, but it just has a shareholder agreement where they've agreed that using this proof of stake mechanism is how they allow people to trade shares.
4:30:39So it's just a bunch of shareholders all over the world voting with their shares and what share transfers to allow.
4:30:49Vlad CosteaBut in spite of all of this, which is very legit, you see that the industry is pivoting towards proof of stake.
4:30:57Peter RizunYeah, I think it's not money. I mean, I guess you could say anything is money if the people accept, but it's not what Eric Voskuil would call market money. Like market money, Eric does a way better job than me to explain this, but market money has to enter the economy at its cost of production. So it costs something to produce a Bitcoin and that's my proof of work. It costs nothing to create more Ether.
4:31:22There's nothing real behind it. It's just they can just issue more shares whenever they want. I mean, they probably won't because they won't vote for that, but they could, they would enter the system at zero value. So I don't see, I'm not saying that Ethereum, I like Ethereum. I think they've done really good things. I'm not saying that proof of stake is bad. I just think proof of stake is not money or proof of stake is not good money. Proof of stake is like shares in a company.
4:31:54Proof of work is market money. And I think when we look forward, you know, 30 years and we actually solve, we create this great, better money, this Satoshi vision, it's going to be proof of work because I don't think anything else makes sense. Like another way to look at it is let's imagine you had, like there's like society, most of society is destroyed. Bitcoin has thrived for a long time. In 2050, society has kind of crumbled and then we slowly rebuilt. So then someone from the future finds the Bitcoin blockchain and they're like, well, look at these block headers.
4:32:34Look at all these leading zeros in these block headers. That must have taken like the enormous computational power to solve these hash puzzles. Why did that happen? That would be so interesting. If you look at the Ethereum block header, it would mean nothing. Like there's nothing physical that was hard to create about the Ethereum block, the chain of headers in Ethereum. Like if you start with the original Ethereum coins, this is the this is the nothing-at-stake problem, you could recreate a new Ethereum blockchain that's just as cryptographically valid as the current Ethereum blockchain.
4:33:20But it won't be accepted because all the people are here alive today. But if you looked at that from a hundred years in the future, they're both equally valid. But Bitcoin is different because it's proof of work. What goes into the Bitcoin proof of work, you have to expend significant resources and someone from the future can still tell that, even if the people alive aren't there to tell the true story. So I see proof of work as the only feasible consensus mechanism for decentralized market money.
4:33:53Vlad CosteaBut what do you think about a scenario where the coins were already mined into existence? Do you think proof of stake makes sense?
4:34:06So let's say that we reached the year 2140 and all the coins have been mined. Does it make sense to have proof of stake or do you think it should still go on with proof of work?
4:34:19Peter RizunI would definitely go on with proof of work. I guess that's a hard, yeah, my argument isn't as valid then because you're no longer creating the coins.
4:34:31I don't know, proof of stake just rubs me in the wrong way because it seems like there's nothing, there's no tether to the physical world.
4:34:40Vlad CosteaYeah, I get that. That's why I think in Ethereum they implemented the minimum staking requirements of 32 ETH, I think. You need to basically put that collateral into the system to run the node. And then if you try to cheat the system, you lose your deposit. And I think you can put more than that for your node. I think Coinbase, for example, has more. I remember at one point there was this movement to try to slash Coinbase and slash is the term they use for destroying their stake and calling them a bad actor or something.
4:35:16But once again, it sort of maximizes human politics because it introduces voting with your money as a consensus mechanism. But at the same time, I got to ask you this, if BlackRock and Michael Saylor and all of these actors who buy a lot of Bitcoin are able to not dictate but influence the direction of development to a disproportionate amount, wouldn't you say that it's already proof of stake because people listen to people with most skin in the game?
4:35:49Peter RizunWell, I guess you could say it's analogous to proof of stake. But no, it's still proof of work. It's just you're saying some people have influence over the protocol. Let me go back to your earlier question about the Bitcoin future when we transition to proof of stake when there's no more coins. I think that still wouldn't work because as soon as you say you're voting with your money, but as soon as you say I'm voting with my money, then my money is just shares in some company.
4:36:18I don't see how a proof of stake coin, whether it happened to Bitcoin when all the coins are mined or whether it happens at the beginning, how a proof of stake coin is not just a company. It's just a company and it's like articles of incorporation define the rules for transferring shares and it just happens to use a blockchain.
4:36:45There's nothing that makes it a company.
4:36:51And then to the Michael Saylor thing, so you're saying while he has some influence over the protocol, that's more of a second order. I would say that the proof of work and the proof of stake is the first-order thing. That's what's making the decisions on the block by block decisions on what's a valid block, what's an invalid block. So yeah, I guess you could kind of shape what happens in the future with influence over development. I think it's important to this point where people say ossification and I think ossification is bad if you ossify in things like the one megabyte limit and you ossify in a crappy, incomplete scripting language.
4:37:32But if you actually had, if you could ossify in a way that where you have limits that can move, we can adjust the limits in the future and you ossify in a way where you have a virtual machine that's Turing complete and with transaction introspection and anything is possible, then I think ossification is good then because what else do you want to do? You can do anything.
4:37:58So I think I would love to get to that point where the Bitcoin node is commoditized, the protocol is ossified, but there's no limits. I mean, we can, we still have these soft limits that we can adjust and the scripting is so flexible that people can do whatever they want without asking for permission. That's the point, yeah, it's ossified now, it's good. No one has, no one has really influence over the, it doesn't matter. Like the power of the Core devs is gone at that point in time.
4:38:27Vlad CosteaYeah, but how about this scenario? Let's say that BlackRock wants to fork Bitcoin and Michael Saylor is on board with this and they're going to say, well, we're going to double the supply of coins, make it 42 million and we're going to make this change. And then when it gets listed on exchanges, it's going to get the ticker BTC. And they do have that power to influence exchanges and at least a chunk of them, the ones that are from the US, and tell them, well, this is going to be the new BTC and the fork that we're leaving behind is something that we want to abandon and please delist it.
4:39:06Like, isn't this basically proof of stake?
4:39:11Peter RizunWhat would be proof of stake if those coins, if the coins enter the market at zero cost, then yeah, it's not market money. It's not really proof of work. It's no different than issuing a bunch of shares. But I mean, is that a realistic scenario? Like to me, like who's going to go, so BlackRock says, we're just going to increase the coin supply from 21 million to 42 million and I'm issuing 21 extra million Bitcoins to myself. That's what it looks like. Like, give me an example where this might actually happen.
4:39:43I mean, obviously people, like you must agree to that, that's not, that would never happen.
4:39:48Vlad CosteaWell, that depends. I'm thinking about a situation where maybe that BlackRock is selling more Bitcoin to people than they actually have. And they sort of are under pressure to not get sued and not have a situation where they have to give out a lot of billions of dollars to their investors. And then they're going to see a situation where Bitcoin hasn't figured out its security budget situation. And say, well, you guys need more rewards for your miners. And then they promote this as a way of saying, well, we're just going to make everyone happy.
4:40:31Forget about your 21 million meme. Let's just do what works, what is best for business. They're going to frame it in a certain way that to some people will seem reasonable and they will say, well, it's good for miners. It's good for themselves. It's good for the market. The number is going to keep going up because they already sold more. Coins than are actually on the market. So it will probably not impact the market price. So people will go along with it.
4:40:56Peter RizunOkay. But I mean, this is a different. So now the coins are still entering the market at the market price. There's still a competitive proof-of-work mining process to create. You're basically just changing the issuance schedule. So I could see maybe that happening in the future. I mean, Peter Todd wants to do that, right? But to me, that would, I mean, I don't want that to happen. Demurrage,
4:41:19Vlad CosteaPeter Todd wants to do something like tail emission, which is a constant percentage of inflation that gets added as a reward perpetually. And I think if he does like two percent, it takes about 50 years to double the supply.
4:41:35Peter RizunI can see that maybe passing in the future sometime if there's not enough transaction fees. But I don't want that to happen. I think Bitcoin can survive off the fees alone if we get the block size up. But even if that did happen, that's not the end of the world, right? The coin is still entering the market at the market price. There's still a competitive process to get those new coins. So I don't, I would see that as not ideal, but I don't think that kills Bitcoin.
4:42:10And I also don't see how that really benefits BlackRock.
4:42:16Vlad CosteaOh, just to be able to give the coins that they sold on paper to people who bought from them.
4:42:25Peter RizunBut they would have to still mine them, right?
4:42:32Vlad CosteaYeah, you're partially right. They will have to mine it and they'll have to buy from the miners.
4:42:38Peter RizunSo I don't think there's too strong of an incentive to really do that, because there's little benefit. Because it costs as much to make the money as it does, as the money's worth.
4:42:51But yeah, so I guess you could say, but yeah, maybe there's another fork where the fork is just to create an extra thousand coins for BlackRock. A good example is XEC, Amaury's coin, right? So that's kind of what they did. So that's an interesting fork. So instead of 25 Bitcoin per block, we're going to issue 20 Bitcoin per block, and 5 Bitcoin goes into my pocket. So, I mean, this is what we call the dev tax. But essentially, Amaury changed the code so that a portion of the mining reward went into his wallet.
4:43:27Which was preposterous. But it passed! They forked off. But that's still a viable chain, and it's still working. So yeah, maybe that could happen in the future. I mean, a lot of different things can happen in the blockchain world, because computers can do a lot of different computations. Like, you can program any behavior you want, is what I'm saying. Yeah.
4:43:58Vlad CosteaDo you believe that the 21 million cap is worth defending, or do you think that we already have more because we have a lot of forks of Bitcoin?
4:44:07Peter RizunI think until we can show that there's going to be a security budget problem, I see no reason to change the current emission schedule.
4:44:23However, if we remain at one megabyte, I don't see how we are not going to run into a security budget problem in the future.
4:44:31Vlad CosteaWell, unless we get drivechains. But once again, maybe we do get drivechains, but the users don't come. And that's the other issue. Like, Bitcoin can get the capacity, can get the technology, but it doesn't mean that it will get users. There's no guarantee there. Of course, you can assume that everyone's gonna want to use Bitcoin because it's the one that has the largest market cap, most liquidity, and all of these advantages. But once again, maybe that they get better incentives on Ethereum or Solana or something.
4:45:08Peter RizunYeah, yeah. And I guess even zooming out from that, there's no guarantee that Bitcoin even wins, right? No. Like, I think a lot of people, like, they start with the premise that Bitcoin will always be the number one coin and will win.
4:45:28Vlad CosteaIt's inevitable. That's what they say.
4:45:30Peter RizunThat's not necessarily true. But it's also not necessarily true that any crypto wins. Like, it's also possible that our future is central bank digital currency. So there's a lot of different things that can happen between now and the end of this experiment begun by Satoshi.
4:45:52Vlad CosteaI mean, when you look at it, you're going to find that Cory Fields, Bitcoin Core developer, at one point, if I'm not mistaken, he was supposed to be the guy to replace Gavin Andresen, like his right hand man. Is that what you call someone like the trusted wunderkind of the whole crop of Bitcoin Core developers? He worked with MIT to build Project Hamilton, which is their pilot for CBDC in the U.S. And if you read the white paper of Project Hamilton, you're going to see that a lot of the research and development that went into Bitcoin was also used for their CBDC pilot.
4:46:34So this is not some wild conspiracy theory that we're presenting here. It's happening.
4:46:41Peter RizunNo, it is. It's happening.
4:46:45Vlad CosteaAnd maybe we're just like the early adopters of the CBDC technologically, you know, and then they're just going to come in and say, well, from now on, this technology that you've been testing is banned, but at least, you know, the user experience and you know how it works and you know how to develop for it. And from now on, you're going to use the state BTC or whatever it's going to be called. Identical user experience, infinitely scalable because it's centralized. And they can even promote features like, well, for amounts lower than 100 bucks, you can have privacy.
4:47:25Peter RizunYeah.
4:47:29Vlad CosteaBut the merchant will not have privacy or something like that. That could be our future. I spent a lot of time thinking about this. And at least here in Europe, they do talk about the digital euro being implemented. And some voices say, well, it's just talk to make it look like they're up to something and they're not just wasting their time at the European Central Bank. But I do believe that they're testing the waters and they want to see the reactions to it. I think that the generation of kids who grew up just tapping their card or double pressing the side button on their phone to make payments, they're going to have a very easy time embracing CBDCs because they never.
4:48:19I mean, not never, but they rarely ever used cash and they did not understand why it makes sense.
4:48:28I think this is sort of the last bastion of freedom. I don't think cryptocurrencies, I don't think Bitcoin can succeed without the existence of cash in parallel.
4:48:42Peter RizunI don't know about that.
4:48:44Vlad CosteaThat's the only situation where you can have like a somewhat private transaction where you exchange Bitcoin for cash. If you don't have that, you're just going to involve banks and by proxy the state.
4:49:04Peter RizunMaybe initially, but I mean, if you if we do succeed in a lot of people are using Bitcoin or some native crypto asset, then that kind of replaces cash, right?
4:49:13Vlad CosteaOf course. But that's the hope, I guess. It's not really happening.
4:49:19Peter RizunYeah, no, it's not.
4:49:20Vlad CosteaBecause we're close to the all time high right now. What's the price? Just for the record for people listening to this later, maybe $106,000 right now. But the question is, in how many places can you spend a Bitcoin today?
4:49:37Peter RizunWay less than in 2014. Way less. And the thing is, like, nobody seems to really care about it anymore, either.
4:49:47Vlad CosteaYeah, I mean, Michael Saylor got Trump to say, never sell your Bitcoin.
4:49:54Peter RizunYeah. But do your normie friends that aren't into Bitcoin, do they still talk about Bitcoin? Are they interested anymore?
4:50:01Vlad CosteaNo, this is the interesting part. Like four years ago, in 2021, they were asking me like, hey, what's this Bitcoin? Oh, I see it went up. Now it seems like nobody cares anymore. Yeah. And I don't know what's wrong. Maybe it's not in their news cycle. Or maybe they've become numb to the idea. And they're like, yeah, it went up again. I missed out once again. I don't care.
4:50:28Peter RizunYeah, they've just been hurt so bad by missing out so many times. It hurts too much for them to think about it, maybe.
4:50:36Vlad CosteaBut this time around, nobody reached out to me to say, hey, Vlad, I remember you were into Bitcoin. Do you still have some? Or just some stupid question like, is it a good time to buy? I didn't get that.
4:50:51Peter RizunNo, I didn't get any either. And then just like the interest in even understanding it seems to be mostly gone by people. And it's a shame because it's like learning about Bitcoin forces you to learn about money, like what money is, about central banking, about fiat currency, about all these interesting aspects of technology, computer science. So it's a door to a really interesting educational experience. So it's a shame where people don't get to experience that. But the interest is gone. It sucks.
4:51:27Vlad CosteaIt does. And it almost seems like this bull market, and maybe it's obvious because there is no action in altcoins, but this bull market is not driven by retail, at least not yet.
4:51:41Peter RizunYeah, I mean, I guess that's what's good, why I'm not, you know, I'm depressed, but I'm still doing well because I still hold Bitcoin. But I am surprised that the price is holding up as good as it is, given that, yeah, this seems like normal interest is gone, retail interest is gone. This basically fails as a payment system. I guess what's keeping it alive is this, you know, basically Saylor's idea. We're kind of banking on Saylor, but that's what's keeping us alive, right? Just this digital store of value narrative.
4:52:18Vlad CosteaAnd every day you get news about some new company deciding to buy some BTC on their balance sheet. You got all of these companies that think they discovered the infinite money glitch where they repeat the MicroStrategy playbook in different countries. And they have a small company that takes on the loan and then buys Bitcoin with it and then takes another loan, takes collateral against the Bitcoin, buys more Bitcoin. And I don't know where this is heading. At one point, the price is not going to go up anymore.
4:52:52At one point, the whales are going to sell and crash the market. I don't know. What comes next? And once again, my question, because four years ago we had Elon Musk being interested in Bitcoin and we had Tesla adding BTC as a payment mechanism to buy a new car. And I was asking myself, what's next? Because it seems like every cycle we had something bigger. And how can you get bigger than this? And now we have Donald Trump endorsing Bitcoin. We're dealing with a situation where David Bailey organizes the largest Bitcoin conference in Las Vegas and has the vice president speaking and has all of these politicians coming and telling us that Bitcoin is great.
4:53:38And once again, we will inevitably have another bear market after this. Maybe it's going to take a year. And then we're going to have to rationalize once again what Bitcoin is and what it's good for and the purpose of all of this effort. But what's next? How can this become even bigger? That's my question. Maybe that the price discovery has reached its peak or maybe not. I don't know.
4:54:06Peter RizunYeah, I guess I'm surprised at how well it's done given its failure as a payment mechanism and a failure. That's something interesting to normies. But it's still held up, like I said, by the institutions and the ETF, the investors to store of value. But there's potentially still a long way to go there, right? Like, I think, you know, people make the analogy to gold and gold market cap. We still have we still get the 10x, right? I think. But gold market caps like 10 times Bitcoin's or something like that.
4:54:41Vlad CosteaI got to check that there's a website that's called 8 market cap and it stands for infinite dot com. So gold is at twenty two point eight trillion. Bitcoin is at two point one trillion. So, yeah, we do need a 10x to flip gold.
4:54:58Peter RizunOK, so that takes us to around a million dollars US per coin. And I can see us achieving that just with the store of value narrative.
4:55:11I mean, that's pretty good. That's a lot of money considering where we were back in 2009, 2011, 2013.
4:55:26But, yeah, basically, maybe that's where Bitcoin ends. Maybe it just becomes this digital gold that just companies hold, people hold. It's just kind of a way to protect themselves against inflation. It allows it to soak up the fiat currency from all the money printing by the Fed and central banks across the world. Maybe that would help the world. Like what's happened in Canada and most of the Western world is, you know, the crazy increase in house prices because, you know, they're basically being used, you know, as a speculative investment vehicles.
4:56:06And through, you know, lowering interest rates, increasing the money supply, a lot of the money ends up in these different bubbles. And then the housing bubble is the last big bubble that's happened. So what allowed the government to print or the central banks to print so much money without stoking too much inflation is the fact that most of it ended up in rising house prices. But that's kind of bad for society because now housing, at least around me in Vancouver, is out of reach for most young families.
4:56:35But if that money goes into cryptocurrency, into Bitcoin, well, that's a more pro-social bubble, right? Because you're not depriving people of their housing needs. It's just going into these speculative assets. So who was it? It was that guy from Abra.
4:56:57Vlad CosteaBill Barhydt or something. Bill Barhydt?
4:57:00Peter RizunYeah. So he talks about this once in a while. Bitcoin can be like this sponge for central bank printing. And the central banks could actually like it in the sense that it allows them to increase the money supply and solve those political problems. Do people want lower interest rates? They want more money printed? Without stoking too much inflation because instead of going to housing, now it's going into Bitcoin.
4:57:32Vlad CosteaBut I do have to ask you, if that's the case and this is all there is to Bitcoin, what's the point of your work? And why do you wake up every morning focusing on how to scale this design that Satoshi Nakamoto left us?
4:57:46Peter RizunThere's no point in my work there. There's no point. I mean, if that's the end goal, we already have the technology to achieve that. But I don't want that to be the end goal. That's not why I got involved. I got involved for peer-to-peer electronic cash.
4:58:09I remember talking to a friend. It was like a year or so before I discovered Bitcoin. And he said, isn't it weird? Let's say I meet some guy on the bus and I want to give him some money. I can pull two dollars out of my pocket and give him money. But if I don't have any cash, even if I have my phone and stuff, there's no way for me to actually give him money that doesn't involve going through a bank or something. That is kind of weird, right?
4:58:36Everything is so digital, but there's no digital analog for money. It all has to be routed through like banks or some third party. And we thought that was kind of odd at the time. Well, that kind of makes sense because, you know, how could you have something digital that's also scarce? Because you can just copy it as much as you want. But then, so he solved that, right? Like, Bitcoin is weird because it's a digital thing that's also scarce.
4:59:11So that's really, really cool.
4:59:17This conversation has been so long, my brain is going many directions at once. So when I learned about that back in 2013, I was like, wow, that's so wild. You're creating something digital that's also scarce. And that's going to become our money for the future because it's decentralized. No one's really controlling it. I always thought you'd have to have some bank or something controlling the money that is digital. So that's kind of cool. Where we can have gold or paper in person. But no, Satoshi's found the solution that allows people to exchange money, peer to peer, in a way it is still purely digital.
4:59:56So that is like, this will be remembered in history, I'm sure. And hopefully, hopefully we're using it in history when it's when it's being remembered. But that's, that's, that's what I'm fighting for. That's what I want to see. And I want to be able to go anywhere in the world and just say, hey, I'll send you some digital cash from my phone or from my cool little electronic gizmo that I made or something.
5:00:23Vlad CosteaIt's funny because I looked at the chat and there's someone who said, what's up, Vlad? Did you, did you guys fix it yet?
5:00:32Hasn't fixed Bitcoin. I mean, it's easy. No, it's not easy. I was going to say that it's easy to criticize Bitcoin and overlook all of the nice stuff about it. But once again, it's really not easy to present good criticism about Bitcoin to be on point. Because you can be a Frances Coppola who said, well, you can divide it infinitely and therefore it's not scarce. And people were making fun of her like, hey, I have this pizza. I can basically cut slices as small as an atom.
5:01:12Does that mean that I have more pizza and I've created pizza inflation?
5:01:19Peter RizunYeah, that's it. Did she actually believe that or did she? I don't know. It seems so dumb.
5:01:25Vlad CosteaIt is dumb.
5:01:28But you did. You could, I think, on the Lightning Network, send amounts smaller than one base unit. And people were calling that inflation.
5:01:41Peter RizunOh, yeah. Yeah, it's not, obviously.
5:01:47Vlad CosteaBecause the smallest unit is no longer the smallest unit. You have like a thousand times of a smaller unit.
5:01:56I'm happy it did not become a thing.
5:02:00I remember people were racing in the beginning of the Lightning Network to send the smallest transaction possible and have it routed.
5:02:11That was I think it was an Armenian guy named Melik. I'm not sure if he's around anymore. It's so sad. You know, when when you stick around for longer than a market cycle, you see that all the friends that you made along the way in the early days, they either sold out. And by sold out, I mean they just got normal jobs or got jobs in a company and they don't care about this anymore. And they don't talk about it. They're not fun. They don't post like they did before.
5:02:38Or else they go and not too many of them stick around. And then you're stuck with all of these memories of your early days and how fun it was. And when you ask yourself, well, who is still here to have some of that fun? And you realize, well, not too many people. And it's sad because everything happens so fast in Bitcoin. Like you would not expect this technology to move and have like a changing of the guards of developers so fast. You look at the maintainers in Bitcoin Core today, like you can complain all day that it's made by it consists of gatekeepers and the same guys.
5:03:17But if you look at it, so many people have come and gone over the years. And everything in Bitcoin is sort of accelerated compared to real life, like the market cycles that we see. I guess they would see this bull bear cycle in traditional markets maybe once in a lifetime. You saw like a huge bull market and then a terrible bear market. And maybe it did not happen within a few days. It happened across a couple of years. But now it's on the Internet. It's 24-7.
5:03:54You have millions of people participating at the same time. And it's accelerated.
5:04:02It's really crazy when you think about it.
5:04:07Peter RizunYeah. I mean, we're living through a major change like this is what we're doing here is making history.
5:04:15Vlad CosteaAnd we're the first generation to be exposed to this kind of technology. And I remember my first month in Bitcoin, I was watching price charts all the time and I couldn't sleep. It was really crazy.
5:04:30Peter RizunYeah, I remember that. I'd just wake up in the middle of the night: oh, check the price, check the price of Bitcoin.
5:04:36Vlad CosteaI was trying to see patterns in it and be like, well, it looks like every morning at five, it seems like the Asian market is waking up 5 a.m. being like 11 or something in Japan. And I would see like small price movements upwards. And I was thinking, man, I'm such a genius. I'm going to trade these movements because it always seems to go up at this exact time. And of course, I got wrecked. Yeah. You can't really establish patterns. That's one of the worst mistakes you can make to assume that whatever happened in the past is going to keep on repeating. It's wild, really.
5:05:16Peter RizunYeah. Yeah. But I think it is. It is. It's cool to be part of this big experiment. Like I remember I gave a talk at Coinbase during the block size wars and I was walking in San Francisco afterwards and I remember I was on the phone with my, with who's now my wife and I said, you know, I feel like what's happening now will be remembered for 100 years in the future. Like we talked about, you know, we were talking about the block size. I just feel that this is going to be part of history.
5:05:49And that feels really cool, you know, to be there, seeing it happen. And I think that's true. Like now there's two books on the block size wars and we're still talking about it. And I think, yeah, so we're going to be talking about like as long as there's humankind, like I think Bitcoin will be a chapter in human development.
5:06:13Vlad CosteaSo it's true that Bitcoin is life-changing technology.
5:06:19Peter RizunWhy did it change when I... just got away?
5:06:23Vlad CosteaI've heard some people saying this and it turns out to be true in some cases.
5:06:28Peter RizunOh, yeah. I think there's a couple of cases.
5:06:33Vlad CosteaI'm not sure if I have any more questions at this point, which is a shame because you're a true treasure of knowledge.
5:06:40Peter RizunWell, thank you. I've had fun, bud. You've done a great job. I think it's been nice, you've asked me many good questions and really made me rethink things as well. So I appreciate this interview. Yeah, we've covered a bunch of notes and we have covered everything on my notes too.
5:07:02Vlad CosteaWhere do you see Bitcoin? Because you made a bunch of predictions, right? And one of them that you made turned out to be wrong. You said like in 2019 that five years from now we'll not talk about BTC and BCH anymore, which may be implied that there's going to be a clear winner and the other camp is going to move to the chain of the winner, which did not happen.
5:07:26Peter RizunNo.
5:07:27Vlad CosteaAnd I gotta ask, where do you see Bitcoin five years from now, both BTC and BCH?
5:07:32And maybe what you're working on, Nexa or eCash, which is also a fork.
5:07:39Peter RizunI really want, I hope people can see Bitcoin more broadly. Like, I hope people take Eric Voskuil's view that we're all kind of Bitcoin, we're all working on the same goal. And I would like to bring people back together. And you see really fantastic technological discussions on Reddit, on BitcoinTalk, everywhere. There were great conferences, like the Scaling Bitcoin Conference was awesome. I would love to rekindle that with the broader crypto community. So that's what I would like to see us. And I don't even want to talk about what coins are going to win, because I don't really care.
5:08:26I just want the project to succeed. So I would like people to come together more and work towards this common goal of creating, we're trying to make better money for the planet. So let's come together and do that.
5:08:44Vlad CosteaI think my views were changed radically when I started getting into Linux. And also in one of the interviews that I recorded with Pavel Rusnak, he's the former CTO and co-founder of Trezor. He said that before he got into Bitcoin, he was working for Arch Linux. And he said that there was like a rival team working on Fedora Linux. And in his mind, in the beginning, it was like this race of trying to figure out stuff first and trying to get more users. But then he understood that both teams are building sort of for the same goal on the efforts of the others.
5:09:24Because if one of them discovered something, the other one could use the code and so on and so forth. And basically it was like having two separate teams working on the same project, except that they had the illusion that they're competing.
5:09:40Peter RizunRight, right. Because it's not zero-sum. Like value is accruing to, you know, to those two teams. So they both benefit from the presence of the other. And that's the same in crypto, right? It's not zero-sum.
5:09:55Vlad CosteaIt is zero-sum if you're an Austrian economist and you go, well, this is gold and everything else is fool's gold and whatever. But if you're a cypherpunk, there is no way for you to deny the fact that this is useful. Or even if you're, I'm not a cypherpunk, I'm like this open source enthusiast. I do like software. I'm a computer nerd. That's how I started with everything. And I do see that it's useful. In the beginning, it's not obvious. And you're going to be like, oh, another fork, such a shitcoin.
5:10:27But then you see that it does something different because, of course, it needs to have its own identity. It needs to legitimize its presence on the market. It needs to have its own story, build its own user base. So it's going to try something different. Like, for example, Litecoin, it took a lot of crap over the years from Bitcoiners. But what they did was to add the MWEB, which is Mimblewimble Extension Blocks, which is a way for them to both increase the block size and also add privacy in one software.
5:10:59This is so good. This is something that both BTC and BCH can take and implement, like off the shelf.
5:11:11Peter RizunYeah, yeah, yeah. We're all contributing to that the same pool of knowledge. So the research on Nexa, the research on Bitcoin Cash, research on Ethereum, anyone can pick it up and use it.
5:11:28Vlad CosteaAnd we also get market feedback. Like, we see what gets demand. We see transaction volumes. We see number of transactions. We see what's being used, what's being most forked. And that's our best metric for understanding how we should be getting to having the perfect form of digital cash.
5:11:49Peter RizunYes, that's what we're working towards.
5:11:53Vlad CosteaYeah. No, I got to say I'm disappointed by Blockstream or disappointed in Blockstream because they seem to have everything figured out. At least when I first got in, I was sold on the fact that they're smart.
5:12:08But in a way, I feel like they got what they deserved with no users on Liquid and having a minority Lightning implementation and having their developers leave and always seeming like they're presenting something like a solution in search of a problem to solve.
5:12:33Peter RizunBut why do they keep getting funding?
5:12:37Vlad CosteaI have my theory about that. And maybe you can call me conspiracy minded or something. I do believe that Blockstream has this reputation as the team of people that has the political power to dictate what's going to happen with Bitcoin, because they're the ones that funded and made SegWit possible. And it was their engineers who made Taproot possible. They created it, they coded it, they promoted it, they pushed it. It happened. And maybe that they have this reputation of the company that basically controls what the next upgrade to Bitcoin is going to be or even worse, and I've seen that happening, they have the power to destroy improvement proposals.
5:13:27And I've seen a situation with Adam Back joining the CTV Telegram chat, and he presented every piece of FUD that was available at the time and tried to tell people, there's no consensus to this, the approach that you're following for activation is wrong, you're terrible and blah, blah. And he was able just by himself to go into that chat to get his followers on that chat to agree with him. And he stalled the development of CTV by at least a couple of years. Just one person joining that chat and just by himself being Adam Back.
5:14:04That's why I can't ever believe that this guy is Satoshi, because he's very nice and accepting and inclusive in his public demeanor. But at the same time, in private, he seems to take down a lot of these efforts.
5:14:21Peter RizunYeah, I agree.
5:14:22Vlad CosteaAnd that's why I think Blockstream is getting funded, because, of course, they're going to say they're a research team that's trying to build for Bitcoin. They can't present any successful evidence that they're building something that's good for Bitcoin, except for the soft forks on which they worked.
5:14:40But I think this is the value of the company. It's like this political influence that they have. And this, I guess every time someone publishes a YouTube video saying, well, Adam Back might be Satoshi, it sort of benefits the aura of authority around Blockstream. And even though Adam Back denies it, there are people who say, well, he acts in a certain way that makes me think that he's Satoshi.
5:15:10He's not, because, first of all, he's a much better coder. He worked for Microsoft. There are some mistakes that Satoshi made in version 0.1 that maybe a professional coder would not make.
5:15:29And also his privacy solution Confidential Transactions, which he built with Greg Maxwell, that was only ever used by Liquid, which used to be their Elements sidechain project. I don't think anyone else embraced that. And they also created their own weird scripting language for smart contracts called Simplicity. And once again, nobody's using that. They were bragging at one point that they can put it on T-shirt.
5:16:02Peter RizunYeah, but how would those even become a real product? Like, what's the pitch? How does Blockstream really make money or what's the potential for how Blockstream would make money? I don't, I've never received a good answer.
5:16:17Vlad CosteaI don't think they do make money.
5:16:19Peter RizunWell, no, they definitely don't make money. But I mean, how, like when people invest, how are they being pitched? Are they being pitched to, what's their plan to make money? I don't even see how they could have one.
5:16:30Vlad CosteaOh, if you put on your conspiracy furious hat once again, and you remember the stuff that the big blockers were saying back in 2017 about AXA and the Bilderbergs financing Blockstream, maybe it's just people who are so close to the money printer that they don't care. And to them, it's just a few million dollars. And they're like, we're just going to put some money into this and we're going to buy more time for Visa and for these other networks for payments to catch up with the user experience that Bitcoin provides so that nobody will have any justification for paying with Bitcoin.
5:17:13Peter RizunYeah, it could be nefarious like that. You actually gave me an idea earlier that it could be even simpler. It could be just that they're perceived as having a lot of authority. So the value in the company, like you said, is just that perceived authority that is potentially valuable sometime in the future. Maybe that's enough. Does it even require nefarious motivation by the investors?
5:17:37Vlad CosteaThat's possible. I remember at one point they wanted to, I mean, the whole pitch for Liquid was that they're going to try to tokenize Wall Street. And they said, yeah, we have the right technology, we have the right people, we have the right asset, it's going to be L-BTC and it's just going to scale according to demand and it has some opt-in privacy. It turns out that, first of all, these market actors don't care about the opt-in privacy because they know that every time they send a large transaction to and from exchanges, they're sending a market signal that they can exploit for their own gain.
5:18:18You have all of these bots or whatever, whale alerts that you get with transactions happening and they know that whenever that happens, they have some sort of advantage informationally about what's happening on the market. And secondly, it seems like Wall Street doesn't like regulations as much as the Blockstream people thought they would like and they just went to Ethereum because it gives them more freedom. And there's also merit. I mean, a lot of people criticize the EVM and the smart contracting language that Ethereum provides because it's buggy and can lead to a lot of misinterpretations by the programmers that can be exploited later.
5:19:00But it did get the network effect. And there's so much money that went into these smart contracts and these applications built on Ethereum that it's very difficult to imagine that just because you make a much better scripting language, everything is going to get ported to it.
5:19:22I think right now the race in Bitcoin is to create the ZK roll ups, which are being funded by a lot of the people who are working on Ethereum projects, and they do want to bring their projects to Bitcoin one way or the other because they're going to tap into much more liquidity. The fact that there is 100,000 wrapped Bitcoin on Ethereum is no accident. It's a lot of people wanting to use smart contracts with their Bitcoin, and they would feel much safer using on a layer that's native to Bitcoin as opposed to this custodial situation with BitGo.
5:20:00And yeah, it's just not ideal.
5:20:05Peter RizunYeah, it'd be nice if we can get that done. That'd be great. Like I think, like we talked about much earlier in the talk, like Ethereum has proven without a doubt that smart contracts are useful. People like them. They want to use them. So other cryptos should have them if they can. It's only a win.
5:20:28Vlad CosteaShould have been obvious. But yeah, smart contract.
5:20:32Peter RizunWell, there was all the fear. At the time, there was fear that somehow, like the halting problem. Oh no, there's way too much computation and stuff. You can't really control that. And we'll have all these weird attacks. But it turned out that was all easily manageable. And people didn't see that initially. But now we do. Now we know that like the computational cost of running a blockchain is the smallest cost. So we can afford more sophisticated smart contracts where it's not really hurting us at all. And it's giving us lots of useful new features that people demand because people are using Ethereum.
5:21:10Vlad CosteaI just checked to see how many people watch this. It's more than 1600 at this point.
5:21:16Peter RizunOh, wow. That's great.
5:21:18Vlad CosteaIt's pretty cool. And I want to thank everyone like sitting for five and a half hours almost. And knowing that.
5:21:29Peter RizunNo, I had and I was gonna tell you, I gotta pick up my I gotta be done at about 4:30 to pick up my kids. I'm like, well, there's no way we're gonna go that long. But we're within an hour of that. So yeah, this is a, yeah, it went by really fast. It was a it was actually really, really cool just to kind of go over, like all that history that we went through since since the beginning of the block size wars.
5:21:51Vlad CosteaYeah, I'm gonna do my best to transcribe this and publish it on my website so that people can find if they ever search on some sort of search engine or AI agent or whatever. They can find this information. You know, I don't want it to get lost. It's useful. It's a story about the history of Bitcoin. And who knows, maybe one day someone will write a book using this. Yeah. So thank you very much, Peter. How can people follow you?
5:22:25Peter RizunI am on Twitter. Twitter is where I'm at. Peter Rizun or at Peter Rizun is me.
5:22:32Vlad CosteaIf they want to know more about the chip that you're building, where's that information?
5:22:39Peter RizunThat there's we don't have a website for that yet. I think on the Nexa website, there's there's some stuff. But that'll come later when we we started when we started actually selling little dev kits with the chip. But right now, I normally post updates on Twitter and post the talks on Twitter and stuff. So I wouldn't say there's a nice central repository where you can go to.
5:22:58Vlad CosteaYou mentioned that the chip is going to be affordable, but what's the price that you estimate for it? Maybe someone listening will want to buy it.
5:23:06Peter RizunI'm not saying that. Never say price until it's listed. But it won't be super expensive.
5:23:15Vlad CosteaOK, that's good. Peter Rizun, thank you very much. And also thank you all for listening. More than one thousand six hundred people. That's pretty cool. And once again, thanks to the sponsors. I will name them once again before the end of the episode. Bitcoin.com News, LayerTwo Labs, Citrea, Edge Wallet, NoOnes.com, Hodling.ch and SideShift.ai. Thank you very much. And I'll see you in the next one.
