Title: S16 E60: Jonathan Bier on Bitcoin Civil Wars & BitMEX Research
Podcast: Bitcoin Takeover Podcast (host: Vlad Costea)
Guest(s): Jonathan Bier (the author behind the BitMEX Research account and blog; author of The Blocksize War and Reckless; Bitwise advisor, Brink board member and Bitcoin grant administrator at Arthur Hayes' family office Maelstrom)
Published: 2025-11-24
Duration: 3:12:03
Episode URL: https://bitcoin-takeover.com/audio/?name=2025-11-24_s16_e60_jonathan_bier_on_bitcoin_civil_wars_bitmex_research.mp3
Audio: https://bitcoin-takeover.com/audio/media/2025-11-24_s16_e60_jonathan_bier_on_bitcoin_civil_wars_bitmex_research.mp3
Transcript: CORRECTED. Base: local Whisper medium.en transcript with automatic diarization (recorded live), reconciled three ways against a full-episode local small.en re-transcription with word timestamps and the YouTube livestream's automatic captions (word-level diffs), with 78 doubtful, dropped, garbled, looping or hallucinated stretches re-transcribed locally from short audio clips (61 with medium.en, 17 with small.en plus VAD) and 2 medium.en re-runs. A looping "X, X, X..." stretch (Counterparty burn address, 01:28) and a hallucinated "Thanks for watching!" (03:09) were replaced with the actual speech. Speaker labels fixed with a full-episode local speaker-embedding scan (TitaNet reference voices for Vlad and Jonathan) and by hand (Vlad Costea, Jonathan Bier; mis-split or mis-attributed turns corrected at 01:19:11, 01:39:46, 01:53:29, 02:32:09, 02:59:54, 03:01:42, 03:09:27). Names and jargon checked against the title, the feed and the web (BitMEX/BitMEX Research, blog.bitmex.com, bitnod.es, Arthur Hayes, Ben Delo, Bitfinex hack 2016, perpetual swaps, the troll box, Mt. Gox, ICBIT, Bitcoinica, Zcash/Zooko, The Blocksize War, Reckless, Bitcoin XT, Bitcoin Classic, Bitcoin Unlimited, SegWit/SegWit2x, UASF, BIP 103, Mike Hearn, Gavin Andresen, Jeff Garzik, Pieter Wuille, Greg Maxwell, Luke Dashjr, Peter Rizun, Roger Ver, Jihan Wu/Bitmain, covert/overt ASICBoost and version rolling, InnoSilicon DragonMint T1, WhatsMiner, Deadalnix/Amaury Séchet, Bithumb, OP_RETURN wars of 2014, Counterparty/XCP, Mastercoin/Omni, colored coins, Ordinals, Taproot Wizards (Udi Wertheimer, Eric Wall), Bitcoin Core v30 OP_RETURN relay limit, Bitcoin Knots, BIP-444, forkmonitor.info, Marathon Slipstream, Ava Chow, Gloria Zhao, fanquake, Murch, Theymos, Matt Corallo, Peter Todd and tail emission, James O'Beirne at OP_NEXT, Citrea, Alpen, WBTC/Justin Sun, Lightning, sidechains/drivechains, Saifedean, Matthew Kratter, Andreas Antonopoulos, Amir Taaki, Mircea Popescu, Christine Lagarde, MicroStrategy/Michael Saylor/STRC, Metaplanet, Cory Klippsten, BlackRock IBIT, Bitwise, Brink, PayJoin, silent payments, Samurai, Tornado Cash, Ross Ulbricht, Carl Mark Force, Shaun Bridges, Curtis Green, Dread Pirate Roberts, Tim Draper, Aaron Swartz, Satoshi's reply to James A. Donald; live sponsor reads kept, with sponsor names standardized: Bitcoin.com News, LayerTwo Labs/Paul Sztorc, SideShift.ai/Andreas Brekken, Noones.com/Ray Youssef). Light clean verbatim: ums, false starts and stutters removed; factual slips by speakers are kept as spoken. Intro music (0:00-0:46) omitted. Remaining doubtful words are marked [unclear: best guess].
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[00:00:46] Vlad Costea: Hello there and welcome to the Bitcoin Takeover Podcast. This is Season 16, Episode... I had to double check. It's 50. No, it's 60. Oh my god, we've gone so far. We are live with Jonathan Bier, the man behind the BitMEX Research account, the author of some of the best research articles you'll find in the entire space, and also the author of the Blocksize War, which is an incredible book that tells the story of what happened to Bitcoin between 2015 and 2017. Yeah, I wish I had a hard copy around.

[00:01:21] I think I have like the Kindle on my phone, which I've been reading. And it's really amazing, man. I gotta tell you, I kept myself from saying this when we were just doing the prep talk, but I came across your work, I think in 2018 or something, when I was working at Crypto Insider. I was like, who is this guy and how does he have so many resources to go so much in depth with his articles? I was so jealous. I was like, okay, so there's the journalists around and you look at CoinDesk, you look at Bitcoin Magazine.

[00:01:55] Look at us at the time, Crypto Insider, and we don't have time for this. We're given like two, three days max to work on something and then you had such extensive research and that made me jealous because nobody would ever fund me to do that. And secondly, I really wanted to do something like that. So it's really good I finally meet you.

[00:02:18] Jonathan Bier: Thanks so much for those really kind words. Appreciate it. And yeah, great to be here. And I've watched many of your shows, including the five hour ones at 1x speed.

[00:02:29] Vlad Costea: 1x speed? I've spoken to a lot of people, they say they listen at 2x so that they can go through everything. But thank you. It means a lot coming from someone who spends so much time doing research. And I know that when you do research, you don't have time to look into other people's research. So that means a lot. It's just like music. When you make music, you don't have time to listen to other people's music.

[00:02:59] So when did you start doing this? Because obviously, you've been around for a while. And how come something as degen as BitMEX has the best research?

[00:03:12] Jonathan Bier: Well, yeah, I guess my background is like an equity researcher. So I was like, searching stocks, and like digging through accounts. And then yeah, I guess when Bitcoin came out, I started blogging a few things on Bitcointalk mostly. And then, but I always say the main job is a kind of working in TradFi, studying stocks. And then the opportunity came up, I met the BitMEX co-founders in Hong Kong at the Bitcoin Meetup. So I met Arthur Hayes and Ben Delo and one other member of staff they had at the time, this is probably 2015.

[00:03:54] And then I was just like, okay, I'll help you guys write a blog. So I just, instead of writing just anonymously on Bitcointalk, just kind of professionally did it at BitMEX. And I guess Arthur had some kind of vision, because of course, he's also from investment banking. So they have like, kind of sell side research that produces research to give to clients to boost the brand of the bank and to kind of make them execute orders through the bank. So he was thinking, oh, well, if I bring Jonathan on board, he'll write research, it will be like a sell side from an investment bank, and that will give us more clients.

[00:04:33] And then I think he was, or BitMEX was the first company to kind of do that. So not many other crypto companies at that time had that approach. And then BitMEX was very successful for a number of reasons. And then now loads of crypto companies have research arms and stuff. So I think Arthur was the first one that kind of had that vision of a crypto company needs a research arm, like an investment bank, sell side research, I guess.

[00:05:03] Vlad Costea: Yeah, and I gotta say that Arthur also writes some amazing blog posts. I remember reading a few of them, especially after the FTX era. He was on fire. I don't know if he still does it. But he was on fire.

[00:05:18] Jonathan Bier: I completely agree. Yeah, he still does it. So I think Arthur was a phenomenal blog writer in the space, writing some of the best stuff. And then there was a small dip kind of after he was indicted where the quality of the blogs went down a bit in my view. And I just thought that that was it. He's not going to come back and be the best blog writer in crypto again. And then somehow out of nowhere, especially around the time of the FTX failure, his blogs were on fire, especially his white boy one about Sam.

[00:05:50] Vlad Costea: I remember that. Yeah.

[00:05:52] Jonathan Bier: So he then, and I thought it was sensational, but he's suddenly like, spiked up and was writing these phenomenal, amazing blog posts again, that, you know, made you laugh and were brilliant. So yeah, he's, he's a fantastic blog writer.

[00:06:09] Vlad Costea: I think he's also an amazing storyteller, because the way he was starting, for example, the white boy one, he started by telling a story from his university days and how he had this experience or situation. And then he sort of went on from that one. And it became obvious from the very first lines, what he's alluding to, but the way that he said it was actually quite nice, very literary. You would not expect the guy who is memed basically into being the 100x guy who gets people wrecked to have such depth and write so beautifully.

[00:06:48] Jonathan Bier: Yeah, I know, it's quite weird that he, some of the reputation that BitMEX had was there were just like, very high leverage, get wrecked. But at the same time, I think Arthur is incredibly intelligent, and he's an incredibly good blog writer.

[00:07:06] Vlad Costea: I think there are two components to BitMEX that made it successful, or at least memorable. It's the 100x, which is super famous and has been copied since. I think someone actually went 250 or whatever. And it's also the trollbox. The trollbox on BitMEX was one of the best places.

[00:07:28] Jonathan Bier: Yeah, well, I think the main factor for the success is that people wanted to speculate long on crypto with leverage, and have capped downsides. So the invention of perpetual swap allowed people to do that, where you could have a limited downside, uncapped upside and go long very easily. And it just became more easy than Bitfinex. So Bitfinex at that time, 2013-14, was the main venue for Bitcoin price formation, and the main venue where people traded on crypto with leverage. And BitMEX made that easier. And then in the 2017 bubble, a lot of BitMEX's competitors had scalability problems and couldn't keep up with demand like Kraken.

[00:08:15] Whereas BitMEX's systems back then proved more scalable than the competitors. So as competitors had to reject orders, because their trading engine was at capacity, we kind of got a lot of that demand. So BitMEX was very successful in late 2017, 2018 and 2019.

[00:08:32] Vlad Costea: I remember that people were selling Coinbase accounts, because you couldn't register to Coinbase anymore.

[00:08:39] Jonathan Bier: Yeah, I remember during I think the Bitcoin Cash, Bitcoin fork on Kraken, you would submit an order to say, sell Bitcoin Cash, and then it would just wait there. And then 48 hours later, the message would come back in exchange, and we've received your order. So that's how clogged some of the systems were at that point.

[00:09:01] Vlad Costea: It almost sounds like there was a human who had to manually accept every trade, if it was that slow.

[00:09:08] Jonathan Bier: Yeah. And then ironically, BitMEX lost a lot of market share to FTX. Because FTX copied the BitMEX front ends, and our products, but they faked our back end. So the BitMEX back end was like very sophisticated, and was basically every single time anything happened on the exchange, every order, every price change was checking, summing up all the accounts, all the balances. All the margin balances, making sure we had enough Bitcoin in reserve. And if at any time there was a shortfall, we didn't have enough Bitcoin, the exchange would automatically shut down.

[00:09:47] And that was very computationally intensive. So we had to reject orders. So there's the infamous order submission error, when the engine didn't have enough capacity. Whereas FTX didn't have that problem, of course, because they copied the front end of our products, they copied the idea of an insurance fund, the perpetual swap, the auto deleveraging. But the back end systems never worked. Of course, they didn't have to check anything, because they never actually had any Bitcoin in reserve. So the user experience with FTX was a lot better than BitMEX, a lot smoother, and a lot of our clients weren't there.

[00:10:21] And in BitMEX, we were thinking, oh, my God, FTX is such a mathematical geniuses. They've sold all these like engine problems that we had, and all these scalability and multi portfolio margining problems. How did they mathematically solve this? They must be such geniuses. Turns out they didn't solve it, they just literally faked it. And then, yeah, BitMEX never really won that many clients back after we lost them to FTX. When FTX failed, a lot of them went just to Binance. Bybit, OKX.

[00:10:54] Vlad Costea: It's still a mystery to me how Binance, which came around in 2017, was able to get this big. Like, in hindsight, to some people it seems obvious, like they had low fees, they had no KYC for a while, they were able to avoid some regulations. But when you look at it today, they have a huge volume, like I think more than 60% of the entire crypto market goes through Binance. And that's disproportionately large.

[00:11:25] Jonathan Bier: Yeah, well, I guess another key mistake BitMEX made was we were too slow to adopt stablecoins, like Tether. And Binance is a key venue for these stablecoins. And then it's that trading pair of Tether versus Ethereum, Tether versus Bitcoin, Tether versus all these altcoins that became dominant. Whereas at BitMEX, we were far too slow to adopt Tether, partly because of the August 2016 Bitfinex hack, where 120,000 Bitcoins were lost. And then Arthur put out a lot of blog posts at that time, highly critical of Bitfinex making various accusations against them.

[00:12:03] And then again, then when there was the Bcash Bitcoin split, and then Bitfinex had this distribution coefficient of 0.85. I don't know if you remember that. So yeah, when the split happens, instead of getting one Bitcoin and one Bitcoin Cash, you got one Bitcoin and 0.85 Bitcoin Cash. So BitMEX was quite skeptical of some of Bitfinex and Tether systems. And because of that, we didn't implement US dollar Tether in our systems. And it was just a perpetual swap contract, Bitcoin settled, Bitcoin margins. And then if you wanted to trade Ethereum perpetuals on BitMEX, you had to do the Ethereum versus Bitcoin.

[00:12:45] So which made the price less appealing for some traders, right? Because they like seeing the Ethereum price is $3,000 or $4,000. They don't want to see, oh, it's gone from 0.06 Bitcoin to 0.07 Bitcoin. So the price was less appealing to traders. They couldn't, they had to use Bitcoin as the margin and settlement currency as well, which made those contracts quite complicated. Whereas a lot of the other platforms like Binance is very fast to adopt the stablecoins. And there's a lot of synergy, I guess, between Tether and Binance.

[00:13:20] And yeah, Binance are also very quick to list all these altcoins, which BitMEX were never really a spot market with altcoins. We were just mostly a derivatives market with perpetual swap contracts for a few large crypto coins.

[00:13:40] Vlad Costea: But to be honest, I'm looking at CoinGecko right now, and it seems like over the last 24 hours Binance processed about $20 billion in volume. And basically it's larger, this volume is larger than the next 10 of its competitors. So it's really amazing how far they got. And to be honest, they were not fast to adopt USDT. I think they tried to compete with it for a while, they had their own stablecoin. And it took them a few years to accept that, okay, this one is the industry standard, we're not going to push our own.

[00:14:16] They had their BUSD or something.

[00:14:19] Jonathan Bier: Well, yeah, they've been through a lot of stablecoins, and there tends to be like a so-called Binance favored stablecoin with like lower fees. And then that stablecoin issuer has like a relationship with Binance that some people would point to as there might be issues there. But yeah, I mean, they were much faster than us to accept Tether, I guess. But yeah, obviously we're behind other exchanges. Yeah, I don't know, I don't know how they became so successful and became the kings, really.

[00:14:57] Vlad Costea: Yeah, looking at BitMEX right now, you guys are 86th in terms of volume. With $400,000 over the last 24 hours.

[00:15:12] Jonathan Bier: But $400,000 of what? Notional? It must be higher than that in terms of...

[00:15:18] Vlad Costea: I don't know, it just says 24 hours volume.

[00:15:22] Jonathan Bier: That might be like the spot volume or something. Yeah, our notional volume on the perp, say over 24 hours, is higher than that, it's pretty low. I think it's like $400 million maybe. That might be what you're saying, $400 million?

[00:15:40] Vlad Costea: No, it's six digits. Okay. So I don't know what this number is, it's just CoinGecko. Let me check CoinMarketCap, maybe it's more reliable or more accurate. So I go to exchanges. Oh, there's spot and derivatives on CoinMarketCap.

[00:16:01] Jonathan Bier: The derivative volume, the spot volume should be very low. But the derivative volume, yeah, it's low relative to peers, but it should be about $100 million a day.

[00:16:13] Vlad Costea: Oh, it's interesting because it also shows a different number. No, it's the same one, sorry. So $392,000 for spot and if I go to derivatives, BitMEX, it's the 47th largest exchange with $445 million in open interest and yeah, $500 million in trading volume.

[00:16:48] Anyway, it's kind of amazing that you guys were able to survive for such a long time. Because most businesses or exchanges, they really don't. There's a few exceptions, but when you look back, there are so many failures. Was BitMEX the first of its kind? Or were there other attempts to create this kind of contracts?

[00:17:14] Jonathan Bier: So yeah, you can read about this in my other book, Reckless, the history of cryptocurrency interest rates. And it talks about kind of the emergence of Bitcoin lending markets and Bitcoin derivatives. So I guess the first kind of Bitcoin futures was ICBIT in like 2012. That never really gained that much traction. Then there was kind of Bitfinex in 2013 that had the Bitcoin lending markets. Where you could, basically what everyone wanted to do, right? They wanted to go long Bitcoin with leverage. So they didn't want to borrow Bitcoin because they wanted to spend that Bitcoin in the economy.

[00:17:59] They wanted to borrow Bitcoin so that they could buy more Bitcoin and have a leverage position. So people would deposit dollars into Bitfinex, buy Bitcoin, use that as collateral and borrow more. So that became very popular. And then people tried to develop perpetual rolling futures contracts. So futures contracts without an expiry date. And BitMEX innovated in several key ways. I think they invented the funding rate mechanism to keep the futures, the contract price near the actual underlying spot price. So the first way they did it was they basically used the funding rates on BitMEX.

[00:18:51] So if the price to borrow Bitcoin on Bitfinex was 3%, if you wanted to go long Bitcoin on BitMEX, you'd have to pay an annualized rate of 3% or 20%, whatever it was. But turns out that didn't work well because the average leverage ratio on Bitfinex was say about three times, whereas the average leverage ratio on BitMEX was 12 times. So people had more leverage, so it wasn't an appropriate rate. So then they came out with a new idea of saying, okay, we're going to take the average difference between the price of the perpetual contract over an eight hour rolling period and compare it to the spot price of Bitcoin and then subtract those numbers and then we'll get a percentage there.

[00:19:35] So if it trades at a premium to the spot price, then longs have to pay a funding rate every eight hours to the short to kind of drag it back so that the perpetual follows the spot price. And then the other key thing BitMEX invented was the kind of auto deleveraging system and insurance fund system. So with TradFi, if you trade on leverage, of course you can go liquidated and your account can go bankrupt, but you've done KYC. So the exchange, if you go bankrupt can basically approach you for the money, write to you, sue you and try and get that money back.

[00:20:16] And if you don't pay, it's bad debt and they have to write it off. But with crypto, of course, with non-KYC accounts, if people's accounts go negative, you're not going to chase them for the money. You're just going to write it off immediately. So that creates a problem, right? If you're long Bitcoin and I'm short Bitcoin and the Bitcoin price goes up, I go bankrupt, my account's empty. How do you know that you're going to get those profits?

[00:20:44] There's something called auto-deleveraging, which means that you're not guaranteed to get those profits if you're a winning trader, because there might not be enough equity in the system. So to mitigate that, yeah, there's auto-deleveraging where some winning traders don't always get their money. And then we also invented the insurance funds to reduce the likelihood of auto-deleveraging. So if you get liquidated at a liquidation price, better than the bankruptcy price, that money doesn't go to you. That money goes into an insurance fund, such that if there's winning traders and then the losing traders don't have enough equity in their position to compensate them, the winning traders are compensated by the insurance fund.

[00:21:32] And only when the insurance fund gets depleted does auto-deleveraging occur. So that innovation, yeah, made the perpetual contracts much more robust. So it proved, you know, they were tweaking the contracts a lot in kind of 2015, 2016, early 2017, and then they kind of got all these kind of values right and it mostly worked. And then I guess it did like kind of a trillion dollar volume a year in 2018. And then, yeah, all the competitors copied the mechanisms of the perpetual swap contract, and that is now the dominant contract type for Bitcoin trading in terms of notional volume.

[00:22:14] Vlad Costea: I have to admit that half of what you said went over my head, but it's really amazing that something as basic as leverage trading, which seems obvious, like, OK, you just go 10x, 100x, whatever, requires so much work in the background and so much knowledge about how to set this up. And of course, you don't have KYC. You have to actually make sure that this is going to be fair for everyone in a situation where you can't chase your customers. And I never thought about this, to be honest.

[00:22:49] Yeah, that's smart.

[00:22:54] I think I should also use, so you don't present yourself as a Bitcoin historian like a bunch of people do, but you, I think, are much better Bitcoin historian than they are. You've been around for a longer time and know a lot. And I do have to ask you, when was the first time you came across Bitcoin? I know it's cliche or whatever. And why did you decide to stick around? Because I guess it was not very interesting at the time.

[00:23:23] Jonathan Bier: No, I think that I was definitely going to stick around because it touched a lot of fields that I'm interested in. So I was interested in mathematics and cryptography, also finance and game theory and economics like macroeconomics. So I guess if you're interested in all those different fields, Bitcoin is definitely the perfect area to get involved with, right? So I think I first studied mathematics at university and I studied some modules on cryptography, including elliptical curves. So I knew what elliptical curves were, the very basics of how they worked and stuff.

[00:24:03] So the first thing I guess that attracted me that I remember is that I thought it was a very novel use of elliptical curves and it was pretty cool to have an entire financial system on one curve. And yeah, I guess I don't know. I remember when I first downloaded the blockchain, it was about two megabytes or something. So it synced very, very fast. There was no waiting for an IBD to take hours. And it was probably maybe towards the end of 2010 that I did my first download running the Bitcoin software.

[00:24:43] Vlad Costea: I should send you one of these. I've been working on it with my girlfriend. It's called Bitcoin Year One. It's a comic book about the first year of Bitcoin, which I have dug up from various sources like the cryptography mailing list. And I did discover something interesting because in December 2009, there was actually the first ever mobile Bitcoin transaction on a Nokia N900, between two users who discovered how to basically hack the Bitcoin QT software to make it work on this Linux machine, which was portable. And they sent an amount of Bitcoin to each other, which was amazing.

[00:25:24] So I guess you came around a few months later after this.

[00:25:30] Jonathan Bier: I did not know about that. That's amazing. Yeah. But towards the end of 2010, so a while after that. I guess I really became fascinated during the bubble to kind of $32 in June 2011. And the Mt. Gox kind of issue then when Mt. Gox exchange was then shut down for six or seven days. And there were rumors that like a hacker had maybe stolen 250,000 Bitcoin from Mt. Gox. And I think it really kind of hit me then, well, hang on a minute, this thing is like non-reversible.

[00:26:06] If a hacker stole that much Bitcoin, then they could have kept it and there's nothing anyone could have done. So that really kind of hit me that Bitcoin really works and could be quite like transformational for society and the financial system. So I think that's when I really became fascinated, I guess, was this whole kind of big scandal when Mt. Gox was down for six or seven days.

[00:26:31] Vlad Costea: Yeah, that was so early. Most people were not even around. But yeah, 2011. It's also interesting that you refer to bull markets as bubbles. It's the second time when you mention it. You said there was the 2017 bubble and then the 2011 bubble.

[00:26:50] Jonathan Bier: Yeah, they definitely were bubbles, right? The price went up a lot and then there was a crash. The 2011 bubble, the crash kind of went down to one cent on Mt. Gox. And maybe that was just because someone had hacked, someone had got Jed McCaleb's credentials. There was a lot of Bitcoin in there, so they tried to crash the price, so they just sold it all down. And then the price went down to one cent. So yeah, bull market or bubbles, you can use either word, I guess.

[00:27:25] Vlad Costea: Yeah, I mean bubble is like the more financial term which also criticizes the way in which Bitcoin is being used or promoted. But I have to admit that basically the bear market price is what we get to after price discovery ends and the hype gets removed. And we just have that. I think that's sort of the fair price and then we have the hype cycle price or whatever. When people become irrational about what Bitcoin is. And I think we are in a bubble right now. Would you agree with that?

[00:28:04] Jonathan Bier: Probably, yeah. I think most of the time Bitcoin has been in a bubble. And certainly if you're trying to value Bitcoin on any kind of logical, fundamental basis, yeah, it's pretty much always at a huge premium to that. So if you look at the people that need to use Bitcoin and are using it, or if you look at it on the valuation of the multiple on transaction fees, yeah, it's a huge multiple. But it deserves to be trading at a huge premium because it's a pretty neat invention.

[00:28:32] And it's probably going to grow over time. But whether it needs such a massive premium, I don't know. Yeah. But one valuation metric, of course, you look at total transaction fees per block, annualize it, divide that by the Bitcoin market cap and here you get a pretty steep multiple at the moment.

[00:28:56] Vlad Costea: That's a very good approach as opposed to just looking at the production cost, which is derivated from this. What's it called? The Marxist labor theory. Price of labor theory, something like this.

[00:29:14] Jonathan Bier: Labor theory of value or something? Yeah, exactly. Something's value based on the labor.

[00:29:19] Vlad Costea: But I hear that a lot, even from people who say otherwise that they're not into socialism and Marxism. I think John McAfee popularized it and then Max Keiser.

[00:29:33] Jonathan Bier: Yes. So the mining costs should, the marginal mining costs should always follow the Bitcoin price, right? It's not the other way around. The mining cost doesn't cause the Bitcoin price to go up or down. The Bitcoin price going up or down causes changes in mining costs.

[00:29:51] Vlad Costea: Thank you for this. I think I'm going to ask my video guy to make a short clip so people remember that it's the other way around. I do want to ask you a bunch of questions about the history of Bitcoin and the stuff that you've seen. But before that, I will present the ads, but in a funny way, because basically one of the sponsors is Bitcoin.com, which is no longer the website that we remember from the block size wars. Now they changed their logo. It's orange.

[00:30:22] Now they don't tell you that BCH is faster and cheaper than BTC. They just try to be a normal news website. And what I like about it, and it was me who actually approached them for the sponsorship, is that they're so different and they're more balanced than Bitcoin Magazine or CoinDesk. I think those are the two extremes. Bitcoin Magazine is too political and CoinDesk is too institutional and I think there's a sweet spot here and it's sort of filled by Bitcoin.com News. And yeah, I sort of like their coverage nowadays.

[00:31:00] I check it out sometimes to look for articles. So if the listeners are into this and they want to find lesser biased coverage, I think it's a good hub, much better than you remember. And there's also LayerTwo Labs and Paul Sztorc has been sponsoring this show and is a fan and he compares it with Bitcoin Uncensored sometimes, which I think I don't deserve. But essentially, instead of plugging the usual ad, he has a question for you. And the question is very binary in some ways, like, do you believe that Lightning was a complete waste of time?

[00:31:40] Jonathan Bier: I don't know. Definitely not a complete waste of time. Not at all. Well, [unclear: it's also had pretty, really good success]. I definitely disagree with him on that one. It has shocked me how successful it's been, and I use it [unclear: all the time].

[00:31:57] Vlad Costea: I use it too, but not in the ways that I expected. Actually, he framed it as, does he think Lightning is a scam? So I processed it with my own brain. So is it a scam or not?

[00:32:10] Jonathan Bier: No, I don't think it's a scam. I use Lightning.

[00:32:16] I mean, it's not as successful as many people thought in 2016, 17, 18, right? And in a way, it's not as successful even because Bitcoin was getting a lot of merchant adoption traction in kind of 2014. So like Microsoft accepted it, Valve accepted it, Expedia. And that was really exciting, especially for a lot of people at the large blockers. And Lightning today doesn't really have that even that same level of merchant adoption that Bitcoin had in 2014. But it's still used. I mean, probably in terms of volume, it's probably much higher.

[00:32:56] But in terms of names of large brands that ordinary people use, it's probably not as successful. Well, I guess now you've got Cash App. But in terms of transaction volume, obviously Lightning volume is a lot larger than merchant payments in 2014. But yeah, I think it's been successful to some extent, but clearly not to the extent that some people believed back in kind of 2015-16. It's taken longer, the technology is taking longer to build out. And even if we do get all this technology right, and it does work amazingly well, doesn't mean we're going to succeed in getting merchants or people to use it, right?

[00:33:36] That's also a big challenge.

[00:33:41] Vlad Costea: In terms of adoption, I think it's sort of a longer journey. And I also believe that it was wrongly marketed. There was a lot of hype surrounding it, it was maybe fueled by the aftermath of the block size wars. But basically, it was promoted as this one true solution to scale Bitcoin and the only one that we need. And anyone who actually ran a node or read the Lightning whitepaper would understand that this was not going to be the case, it's not going to scale, unless we're going to fall back on custodians, which seems to be a popular way to use it.

[00:34:23] Jonathan Bier: Yeah, a lot of this is a difference in objective, right? So I think Paul often talks about, oh, we want to get, I think it's 8 billion people using something. And whenever I'm evaluating these things, I'm not really thinking in those terms, I'm thinking maybe we can get 10,000 people using it, and then we can get 20% year on year growth over the next kind of 20, 30 years. I think Lightning could definitely do something like that. And then if it's something growing at 20% year on year or 30% year on year, and my book is incredibly successful and astonishingly successful, but other people have different expectations.

[00:35:03] And they think about, they want the whole world to be using something. I don't think it's realistic to jump up to the whole world using Lightning in a few years. I think we should be thinking in terms of, can we get to 20% CAGR? And can it scale at that level? And of course, if something grows at that rate for long enough due to exponential growth, then yeah, eventually the whole world might be using it. But I just don't think it's realistic now to like evaluate it on, can 4 billion people use Lightning?

[00:35:33] Or same with Bitcoin, right? So I've never, I've always been against this logic or camp that is always thinking in terms of, can we get to a billion people or 4 billion people using something? Just don't think it's a helpful way of thinking about it.

[00:35:51] Vlad Costea: Well, yeah, but it sort of lends legitimacy to the project. Like if it can technically do that, then it means it's pretty good.

[00:36:03] Jonathan Bier: Yeah, but that's, I don't think we can build something that can technically do that.

[00:36:09] Vlad Costea: We never had a proper sidechain. Maybe this goes back to my ad for LayerTwo Labs, but we were promised sidechains like a decade ago, and we never got that.

[00:36:20] Jonathan Bier: Yeah, I think people, again, they had unrealistic expectations about sidechains, especially on the technical side, because the main challenge of sidechains is getting Bitcoin on the sidechain in a non-custodial way. So, yeah, you can build a sidechain, but if it doesn't have Bitcoin on it, or it's got custodial Bitcoin on it, is it really that useful? And I think people didn't really appreciate how technically difficult that was until, you know, past 2020. Whereas when Blockstream launched in 2014, I don't think that was, they thought that that would be such a big problem at that time, I guess.

[00:37:03] Vlad Costea: Yeah, at the same time, I see a lot of smart people working on bridges nowadays and trying to make them trust minimized. I think that's going to be the way to create better layer twos. I've been thinking about these zk-rollups that are coming to Bitcoin. I think they're interesting in the sense that they do provide the extra features and they don't require soft forks. I don't think they're the best way to go forward, but we're going to see whether or not something like Citrea gets traction, because it's basically Ethereum on Bitcoin.

[00:37:39] And I think the main target for that is wrapped Bitcoin coming from Ethereum, which is like 100,000 BTC at this point.

[00:37:54] Jonathan Bier: And I would definitely not want to invest in that. Is that there's Justin Sun now taking over the custody of that.

[00:38:01] Vlad Costea: Oh, you mean wrapped Bitcoin? Yeah. Not Citrea, because that one I don't think is funded by Justin Sun. But it's going to be interesting to see if Bitcoiners are so culturally opposed to having something like Ethereum on their chain. And to this concept, I think the ongoing filter wars, or I don't know how you should label them, but they're essentially about filtering transactions. Whether or not Bitcoin should be censorship resistant or the mempool policy should be neutral. And basically Citrea and Alpen, which are two of these ZK rollups, will be using Bitcoin as a data availability layer, which means that they will inscribe ZK rollups into the Bitcoin blockchain.

[00:38:50] With the added benefit that they can run these layer twos and add more users, have more features, basically scale a Bitcoin, but at the expense of using Bitcoin in a way that stores data.

[00:39:09] Jonathan Bier: Yeah, so, yeah, there's this kind of culture war slash filter war going on at the moment. So yeah, I don't know, there was basically there was in January 2023, someone invented this inscriptions or Ordinals idea. And then they were putting kind of images on other data in the Taproot input script. So they were benefiting from the 4x witness discount from SegWit. And then a lot of people were very angry at this because some of the images that they were putting on were kind of marketed as like, this is pissing off some of the hardcore Bitcoin maxis, like Taproot Wizards by Udi Wertheimer and Eric Wall.

[00:39:55] And there was like a four megabyte image in there. So that made some people really angry. Whereas personally, I'm like, I really did not care at all, if they're putting images in there. Like, I think I accepted long, long ago that you can't stop people putting stuff in the blockchain. And I think it's a bit immature to kind of get very pissed off and whiny about it. And the mature attitude is to say, I like Bitcoin as money, I want Bitcoin as money. People are doing this image thing, I'm just going to be more mature and ignore them.

[00:40:28] Now, I personally think the idea of putting images on the blockchain is a bad idea. And the people investing in those images will probably lose a lot of money. They really have lost a lot of money, and it's a very bad investment. But yeah, people got pretty annoyed about it. And then there was this kind of deep resentment building up in some sections of the community that I wasn't quite aware of how strongly they felt, I guess. And then there was this other kind of phenomenon that was going on that a lot of people are unaware of, which is that there was a lot of debate among developers about the effectiveness of certain relay policies.

[00:41:06] So, I mean, for years, they've always debated, like, what should the min relay transaction fee be, especially when the Bitcoin price goes up. So I think there was a min relay fee, or an absolute floor of one sat per V byte. And when that was introduced, the Bitcoin price was something like $1,000 or something. And then the price went up to $100,000. So the argument was, well, hang on, why are we keeping this min fee the same way, when in dollar terms, it's gone up 100x?

[00:41:39] Then also, at the same time, full RBF happened on the network, despite Bitcoin Core filtering full RBF. So you could look at what miners were mining, and you could see that they replaced transactions with higher fees, despite the absence of a full RBF flag. And then you could see all the pools that were doing this in something like 99.5% of the hash rate, where it decided to implement full RBF, and were ignoring the filters by Bitcoin Core. So Bitcoin Core was caught a bit off guard here.

[00:42:15] And then people were like, do you need to implement this? So then Bitcoin Core finally, after 10 years of debate, implemented full RBF to make sure that the Bitcoin Core mempool worked and was predicting what miners will mine. And the developers felt, or some of them, oh, dear, we were a bit slow. We didn't keep up to date with what real conditions were on the network. We should have implemented full RBF earlier. We should have preempted what the miners would have done. And then there was sub 1 sap per V by its summer, as they call it.

[00:42:51] So people started ignoring the filters on Bitcoin Core and just relaying sub 1 sap per V by transactions. And then we got to a position where 40%, 50% of all the confirmed transactions were below this min relay rate. So the filters were not working. And again, Bitcoin Core was caught off guard. The mempool wasn't working effectively at predicting what miners will mine. Compact block was degrading. So the Bitcoin developers had to act quickly and lower the min relay rate in Bitcoin Core. There was also Marathon.

[00:43:30] So Marathon is this big mining pool and miner listed company in the US that launched a Slipstream service a couple of years ago. And that is where you can directly submit your transactions to Marathon, bypassing the mempool, and you can submit non-standard transactions. And this is an issue that developers have, again, been concerned about for years and years. We need to mitigate the risk of these direct submission services because this will cause mining centralization pressure. We want an open mempool, an open market. So we need to maybe consider relaxing our standardness rules to mitigate the risk of these centralized transaction submission services.

[00:44:10] And then the issue that really caused the controversy was the OP_RETURN limit or the OP_RETURN relay limit. So that, like the block size war, is kind of bike shedding. It was a conflict about this one number that anyone could understand what this number is. How big should blocks be? When developers spend all their time dealing with a lot of stuff, more people can get involved in the argument if they think there's one simple number. So OP_RETURN is a Bitcoin transaction output designed for arbitrary data, and it can be up to one megabyte in size, according to the consensus rules.

[00:44:49] However, Bitcoin Core had a relay limit of, well, it started at, I think, 40 bytes in 2014, then went to 80 bytes, then 83 bytes, and then it was 83 bytes all the way from kind of late 2014 in Bitcoin Core until 2025, and Bitcoin Core decided to increase that to 100,000 bytes, motivated by a lot of this stuff, right? They were motivated by they were too slow on full RBF, they were too slow on the min fee relay, they were concerned about things like marathon Slipstream, and also that filter was also being degraded.

[00:45:31] So large OP_RETURNs were already relaying across the Bitcoin network, even before Bitcoin Core had removed the filter. As I was saying, the filters don't effectively work if people are trying to get around them. You can't really stop people just sending messages to each other over the internet, right? So Bitcoin Core increased the relay limit, and this made a lot of people very, very angry, and these people supported filters. So they started saying, okay, we're going to switch to Bitcoin Core, we're going to run Bitcoin Knots, which does have a lower OP_RETURN relay filter.

[00:46:14] And now they're saying, they're kind of pivoting a bit to saying, okay, we want to do a soft fork to limit arbitrary data even more, and enforce it in the consensus rules, this thing called BIP-444, which I believe is due to activate on the 1st of February, 2026. So I think I've learned a lot about filters and how effective they are. So for example, in the past few weeks, I've been starting to run more nodes with the objective of trying to increase my peer count, and I launched a website, bitnod.es, where I've got data about the number of peers that I've got.

[00:46:55] So at the moment, I've got like 2,684 peers of other Bitcoin nodes. And of course, these are my nodes, so I can choose what filters to run. And this is just to illustrate how ineffective filters are if people want to get around them. It's not just a minority of 5% of people can subvert filters. It is one motivated person with a budget. So this website is pretty costing me about $300, $400 a year. I could increase my spend and get that up to, instead of 2,800 peers, I could get that up to say 20,000.

[00:47:33] Instead of just doing it once, I could do it three or four times. And then I would basically be connected, just myself, to the entire Bitcoin network, and could get around any transaction filtering. So filtering is very asymmetric, and I don't think it's economically sustainable. So yeah, that's why I kind of support Bitcoin Core's position in relaxing relay filters, because I think if people want to get around them, they can, and it's not worth the fight. It's not worth putting up a fight and trying to have filters.

[00:48:09] All that will do is degrade the effectiveness of the mempool, and the filters won't work anyway. So yeah, that's quite a long rant about it.

[00:48:17] Vlad Costea: No, but that was beautiful. I gotta give you credit because you put it into the right context, and you presented events that happened over time from RBF until the recent debate about filters. And I've also checked out your website. It's bitnod.es, so basically bitnodes, but split by this extension, .es. And yeah, it's really nice. It shows the node counts, and also it has a graph with the client types, connection types. It's really nice. Thanks for doing this. But basically, I've had Super Testnet like two episodes ago, and he seems very mad that people don't use filters, and he's in favor of filters.

[00:49:08] But his argument for filters is not that they stop the content from getting into nodes, which obviously they don't. It's just that they minimize the amount of bandwidth that's being used by these nodes, as if you're running on limited data plans for something, and you're trying to not have four megabytes of data every 10 minutes, but instead have like two megabytes.

[00:49:34] Jonathan Bier: Yeah, I mean, that's a bit like saying, oh well, if you receive seeding torrent files, what is the purpose of seeding torrent files? Is you want to be a good actor and push loads of data to help other people who want to download the content out, right? And that means, in a way, the more bandwidth you're using, the more of a good actor you're being and helping people out. And it's the same with running a relay Bitcoin node. I'm relaying transactions. I'm not getting much personal benefit.

[00:50:06] I'm doing that to be a good actor altruistically and help the Bitcoin network out. And I can limit that if I want. I can put a firewall or whatever that reduces my bandwidth usage to whatever number I want. And in a way, the higher, the more bandwidth I'm using, the more altruistic I'm being in benefiting the network and being a better peer to the peers that are connected to me and giving them more data. So I'm not sure that's the right way of looking at it. Yeah, you can filter stuff out and use less bandwidth, or you can just change your settings.

[00:50:42] I mean, I think there's a setting on Bitcoin Core, which is like the daily amount of bandwidth to use. So, yeah, of course. That's just like saying you can reduce your data use if you're seeding torrents by having a firewall. But the purpose of being a relay is to relay data to other people, right?

[00:51:01] Vlad Costea: Yeah, I think that's also, for perspective, a good comparison. That it's just like seeding torrents, and you do want to be a good peer and have the whole information. But also, I come back to this point sometimes that I think every generation of Bitcoiners wants to have its own crusade, its own blocksize war. And maybe that these guys came in this adversarial environment where the culture in Bitcoin was that they should dunk on altcoins and that they should have this, I don't want to call it supremacist, but it kind of is, kind of attitude.

[00:51:42] And then they discovered that something which they thought was only for altcoins ended up coming back to Bitcoin, which I think was the maximalist thesis all along. Like, whatever is experimented on altcoins is going to come back to Bitcoin. At least that's the kind of maximalism that I like. And they realized that Bitcoin is not what they were told that it was. And now they're in denial and they're trying to make it be what they want it to be. And they're fighting their own war right now, which is, I think is more, and this is cliche, it's almost like Fight Club, it's more spiritual than it is actually technical or grounded in anything.

[00:52:25] But they do say, so if you look at Bitcoin Mechanic, which is this guy who blocked me on Twitter, he does mention a lot that this is a battle for the soul of Bitcoin, whatever that means.

[00:52:38] Jonathan Bier: Yeah, I think you're absolutely right. Yeah, a lot of these people read about the block size war, or saw the block size war, and they thought it was this big battle. And they saw the kind of underdog win that war, right? And some of them might be, maybe didn't participate in that war. And then they kind of are a bit annoyed that they missed that. And they want to have a fight for Bitcoin, and they want to win. So, yeah, they don't like spam on chain. And then they see similarities between the upt return relay limit and the block size limit, right?

[00:53:16] So the large blockers wanted to increase this number from one megabyte to two or eight megabytes. And then now the enemies of the filter group want to increase this number, the upt return relay limit from 83 bytes to 100,000 bytes. So they see it as a similar issue, they see themselves as the underdog. They see that the small blockers won by doing things like running nodes and doing a UASF. So they want to copy those same tactics, but this time they'll be the ones doing it.

[00:53:47] And they want to have that enjoyment and excitement of victory that the smaller blockers had. So, yeah, I definitely think that the block size war is living in the minds of a lot of the filter people and influencing how they behave. And I think, yeah, I think the block size war had some outcomes that we didn't necessarily foresee that were maybe negative. And one of which is like, oh, the small blockers were the toxic side and the toxic side won, therefore toxicity is good. And then maybe, you know, another outcome was people were too conservative.

[00:54:31] So the small blockers were conservative and didn't want to change the consensus rules that much. They won the war and now maybe people have taken that too far and they're too conservative with their Bitcoin consensus rules and they never want to change it or they only want to change it in extreme circumstances. So, yeah, it's kind of like a pendulum. And because the small blockers won such a decisive victory, maybe we've kind of swung too far in the other direction and now become too conservative with the consensus rules.

[00:55:02] And, yeah, I think a lot of the filter people kind of see themselves like the smaller blockers in the block size war. So I kind of tried to write down a list of reasons why they see themselves as the smaller blockers. One of them is in 2015, Mike Hearn released Bitcoin XT, which is this larger blocker client, and he wanted to increase the block size limit from one megabyte to 8,000 megabytes by, I think, 2036. And a lot of opponents of that said, well, this is ridiculous.

[00:55:35] You're increasing it by 8,000 X. That's such a big increase. And the reason you're doing that, they accused Mike Hearn of saying that he was trying to, quote, assert dominance, like show that the large blockers mattered and these small blocker people were insignificant. We can do what we like, so we're going for an 8,000 X increase. And that's what the filter group people think about Bitcoin Core, right? So Bitcoin Core changed the opportunity really a little bit from 83 bytes to 100,000, which is an increase of 1,200 and something, maybe 1,200.

[00:56:12] And they're like, this number, 1,200, that's such a big number. That's not realistic. You are trying to assert dominance to show us that we don't matter. Whereas if you did something more moderate, like increase it 100% or 50%, that went from 83 bytes to 160 bytes, then that would be a more moderate position and maybe we wouldn't have this big kind of confrontation. So that's another way that the filter groups see themselves as the small blockers.

[00:56:44] Vlad Costea: Yeah, and another misconception that they have is that Bitcoin is some sort of democracy and it matters how many nodes are spinning up. And they keep pushing these statistics, which once again goes back to Bitcoin XT. There was this 2015 or 2016 presentation by Peter Rizun, where he was showing the growing number of Bitcoin XT nodes. And he was making projections saying that, well, if we keep increasing the number of nodes by this rate, then by next year, we're going to be at this point where we are the dominant client and everyone's going to be running this.

[00:57:21] And it's a fallacy. It's an assumption that, first of all, exponential growth is real. It's like looking at a baby growing from the first year of his life to the second year of his life and being like, oh, if this growth keeps going, I'm going to have a baby of the size of Empire State Building or something in a few years. But it's also, once again, the misconception that it matters how many nodes you're running of a certain client type. And maybe it's just an intimidation tactic just to make a point that the users disagree with something.

[00:57:57] Certain businesses definitely profited from the whole situation. And I'm thinking about the node companies, those that sell devices, because they basically gave the users a reason to buy entirely new hardware instead of just installing software on something they already have. But yeah, Bitcoin is not a democracy and this is something that we need to explain better to newcomers.

[00:58:23] Jonathan Bier: Yeah, I remember the Pete Rizun presentation very well. That was in Montreal in September 2015. And I was there. And I remember vehemently disagreeing with almost everything that he said. And that's what I remember thinking at the time. Who am I? There's all these geniuses like Greg Maxwell, Gavin Andresen, Peter Todd, Andrew Poelstra. Who am I? I'm not going to speak at these conferences. I'm just going to listen and try and learn. And then I saw Pete Rizun's presentation and I was like, no, I can do this as well.

[00:58:56] I'm just as smart as this Pete Rizun guy. I disagree with everything he says about all this kind of economics. So that's why after I saw his presentation, I wanted to give a reply to it. So I wrote to the organisers and then I went to Hong Kong. So the next conference in that series and gave a reply presentation trying to refute some of the points Peter Rizun said. I think he actually said like a couple of months after that he felt my presentation was good or something.

[00:59:25] And that it seemed more balanced. Whereas on Reddit, I was maybe he saw that I was a kind of fanatical small blocker. Whereas in person and in that presentation, I tried to be like more balanced and not be like a fanatical small blocker. But yeah, I definitely remember his presentation very well. But yeah, that's another thing about the filter crowd is about the power of the node runners, right? See, in the block size war, the small blocker said no, it's economic node runners, node runners that matter.

[00:59:57] So they thought, OK, well, we're going to run lots of nodes. But I think there's a lot of nuance to it, right? It depends on what you're trying to achieve. So what they're trying to do is impose a relay filter. Now, ironically, individual node runners can be very, very powerful when it comes to relay filters, right? Even non-economic nodes with no Bitcoin in their wallets. But it's just the other way around. They can only relax relay rules, not impose them. So that's what I've kind of shown with bit nodes.

[01:00:32] I've got one or a handful of nodes. They have thousands of peers. That one node runner is sufficient to relax an incentive-incompatible relay. Now, that is... You could argue that that's a kind of positive. It shows the power of individual node runners. But they've got it the wrong way around. The node runners trying to impose an incentive-incompatible relay rule is very ineffective.

[01:01:01] So, but yeah, I think that's kind of a misconception they have. But yeah, as you say, some of them increasingly they admit that, oh, it's not about having effective filters, it's about sending a message. That we disapprove of Bitcoin Core, that we disapprove of the OP_RETURN relay limit.

[01:01:21] So yeah, I think they're welcome to do that as well. I had no problem with people running Bitcoin Knots or sending a message. They could do that in a variety of ways. They could just add a tag to their transaction saying like, we hate spam or something, or whatever. But yeah, I've got no problem with people sending messages. But yeah, I think the power of node runners, node runners can be very powerful in Bitcoin, but there's nuance to it. And in certain circumstances, like trying to relax relay filters, individual node runners can be very powerful, I think.

[01:02:00] Vlad Costea: Yeah, you said something very interesting there, like a couple of statements back that you think that small blockers were the underdog of the fight. And I want to ask you about that. But I have two more ads to present. And then we can have a free flowing conversation. First of all, I'll start with SideShift, which was created by Andreas Brekken, who is a very interesting character, because he was sort of in the middle of the whole block size wars debate. He was a big blocker, and then he was the first exchange owner to accept Lightning to list it, and then the first one to give up on it.

[01:02:42] And it was on SideShift that he enabled Lightning. And he's also the owner of shitcoin.com, if I'm not mistaken, which is a domain. Anyway, his service, which is called SideShift is actually pretty cool. When ShapeShift was essentially adding KYC, SideShift came along and sort of replaced it, because it did not require KYC, but it doesn't work in the US today. But the way in which I tell people usually to use it is to swap stablecoins for BTC, because stablecoins are not contrary to the popular narrative that they're just like Bitcoin, but the price doesn't fluctuate.

[01:03:20] They're not censorship resistant. And basically Tether or Circle or whatever company can decide that your address is impure and the origin of your funds is not certified or whatever, and they're going to freeze your funds. So don't hold on to stablecoins for too long. You never know what's going to happen. So you can swap them for BTC on SideShift. They have good liquidity and low fees. It's SideShift.ai. So check it out. And last but not least, there is Noones, and the person behind Noones is another interesting character, Ray Youssef, who used to be the CEO of Paxful.

[01:04:01] And he realized that he cannot accomplish his mission with a US-based company and decided to start Noones, which is a peer-to-peer marketplace aimed to empower the global South. He travels a lot to Africa and to the Middle East and to South America to onboard people locally. And I do sympathize with the way in which he onboards people and basically starts this grassroots revolution in the way that a lot of Westerners just virtue signal. So if you're listening to this and you want to trade on Noones, just know that you're giving liquidity to these people from quote unquote the global South, and you're empowering them to hustle their way into having access to some Bitcoin, which they're going to sell to other locals and so on.

[01:04:50] So check out Noones.com. And this was the ad segment. Do you have any opinion about any of these people involved like Andreas Brekken? Have you met him or Ray?

[01:05:00] Jonathan Bier: Yeah, definitely Andreas Brekken. I've met him several times, especially in Hong Kong in the kind of 2016-2017 period, where he was hanging out with a lot of the larger blockers at that time. I think I went on like several boat parties with him. Like out in Hong Kong, they used to kind of talk about Bitcoin, play a lot of poker. And then yeah, when Bitcoin Cash launched here, they loved Bitcoin Cash, played a lot of poker games for Bitcoin Cash. So I was definitely fascinated by him and a lot of his friends, as I was fascinated by the kind of Bitcoin Cash and Block Size War and kind of speaking to them and getting their views about kind of the tactics and the things they were doing in the Block Size War.

[01:05:45] But yeah, I haven't spoken to him in the last kind of five, six years, I guess. But at that time in Hong Kong, definitely saw him quite a lot. And he's a fascinating character.

[01:05:57] Vlad Costea: He's quite funny, to be honest. Like he used to run a show on YouTube. I'm not sure if he's still active with it. But he was coming up with names like One Meg Greg for Greg Maxwell.

[01:06:09] Jonathan Bier: Yeah, that's a good name. Yeah. And his blog was very good as well. Shitcoin.com. Definitely enjoyed his blogging.

[01:06:15] Vlad Costea: I think he's still writing. He does a weekly newsletter.

[01:06:22] Jonathan Bier: And I like how he, like, he described himself, when he met you, as the CEO of shitcoin.com, as a kind of joke on because Roger Ver, you know, spent a lot of time introducing himself and describing himself as the CEO of Bitcoin.com. So he was like, oh, I'm the CEO of shitcoin.com, which is a funny introduction, kind of maybe taking the piss out of Roger Ver a bit, I don't know.

[01:06:48] Vlad Costea: I don't know about that. But it's very interesting that even. So let's get to this. You mentioned that the small blockers were the underdogs, even though the big blockers will say that Blockstream was the best funded company in the space. And it was like a huge difference between the amount of money that Blockstream was able to raise and the average capital that some some of these big blockers actually had.

[01:07:15] Jonathan Bier: Yeah, that's definitely not true. And I don't think so. Yeah, on the large blocker side, throughout the war, you had most of the VC backed companies, especially like Coinbase, blockchain.com. There were also companies like Circle, which is a very different company back then, Bitnet, and also the miners say Bitmain, which was a huge company. These were all kind of in the larger blocker camp. And the perception certainly at the start of the war was that you had these, the main developers with a profile. So Gavin Andresen and Mike Hearn, who were large blockers, those were the ones that spoke the language of the VC world in San Francisco.

[01:07:59] They knew people, you know, Union Square Ventures, Andreessen Horowitz, et cetera, et cetera, who were investing in the startups. And it was only these kind of very weird wizard computer science geeks like Greg Maxwell, Luke Jr., Peter Todd, that were small blockers. And these small blockers didn't matter that much. And the large blockers would definitely have a victory at some point. It was just a question of when. And I think in terms of Blockstream, I would say that most of the large blockers throughout the start of the war would have regarded Blockstream as insignificant, not important.

[01:08:39] It was only as the war progressed and that they didn't get their way, that they kind of changed their opinion. And then they thought of Blockstream and Adam Back as very cunning, mischievous, behind the scenes, very influential character. And they used that as a kind of explanation of why they didn't get their way with a block size increase. And it wasn't even true. It was basically because they were wrong and they were making mistakes and kind of shooting themselves in the foot rather than Blockstream and Adam Back being very cunning and kind of outsmarting them and getting in their way.

[01:09:11] So that's my interpretation. But yeah, at the start, it was definitely seen as the big businesses were the large blockers. And most people, also most ordinary Bitcoiners as well, didn't believe that one megabyte limit would last. It was just a question of when and how to increase the block size limit, not if. And even Greg Maxwell and Pieter Wuille proposed BIP 103, which increased the block size by 17% year on year. So everyone was kind of agreed with maybe increasing the block size limit to some extent, maybe except Luke.

[01:09:51] Yeah, I think the small blockers were underdogs at various points in the war and that they only really won because the large blockers made a lot of tactical mistakes and shot themselves in the foot. If the large blockers played their cards differently, I think they would have definitely kind of won and got their way.

[01:10:09] Vlad Costea: But don't you think that we could be in a better position today if the big blockers were still on the same chain and we made like even SegWit2x wasn't much of a compromise, right? It was two megabytes.

[01:10:24] Jonathan Bier: Yeah, I definitely think I think we lost a lot by losing the large blockers. In a way, the large blockers were like the sales team and the small blockers were the engineers. And there was a communication breakdown between the engineers and the sales team. And we lost a very good, motivated, fanatical sales team. And Roger Ver was very, very effective in getting merchant adoption. Now that said, I mean some people disagree with me here and they consider a lot of the large blockers at least Roger Ver too fanatical and turning people off.

[01:11:00] See, I mean Roger Ver probably would have been very ineffective as a salesperson for BlackRock trying to sell Bitcoin to institutions, for example, because I remember there was this CoinSummit in London in 2014 where Roger Ver attended. And the summit was pitched at, oh, we're gonna sell Bitcoin to the city of London. And there was like these bankers on stage and Roger Ver had like put on a suit to kind of show how serious he was in that. And you can see that it didn't fit him and that he was like, we're going to take Bitcoin to the institutions.

[01:11:36] And I remember someone said something on stage and he like stood up angrily and like shouted across the whole room telling them, they said something about the Bitcoin price. And he was like, don't be ridiculous. I promise you the Bitcoin price is going to go up 100x. And he was shouting very aggressively. And most of the professional kind of bankers in the room thought that he was a complete maniac. Of course, it turned out to be completely right that the Bitcoin price did go up 100x or whatever.

[01:12:05] Vlad Costea: But for reference, 2014, the price was like $300, $400.

[01:12:12] Jonathan Bier: Yeah, I could say the peak at the end of 2013 was about $1,000 in the bubble. And then, yeah, I guess it corrected and spent most of 2014 about kind of $300, $400. 2015, it got to a level of $175, I guess. But I think this was in kind of maybe September 2014. So I saw then that he was a very divisive character and wouldn't be effective in terms of marketing to certain crowds. But he was very effective at merchant adoption and fanatical about it.

[01:12:50] And everywhere he would go, you know, he would go to shops and ask them, do they accept Bitcoin, try to convince them to accept Bitcoin, large and small merchants alike. But it was also a bit fanatical and would have turned some people off. So I've got a story that you might find funny. I went to another Bitcoin event in London in 2013. I think it was someone had raised money to do something. I forgot exactly what it was, some kind of Bitcoin thing. And then it was in, so they rented out this kind of bar and we were all in there.

[01:13:31] And then there's a toilet attendant in the toilet who expects you to pay him one pound. And then he hands you a towel to dry your hand, which is a thing that some toilets have. And I remember going to the toilet a couple of times and seeing some of the fanatical Bitcoin people, of course, trying to pitch Bitcoin to the toilet attendant. They refused to give him their pound and they're trying to give him a paper wallet. And he is looking at them completely bemused, quite frustrated and angry at them that he's not getting their one pound.

[01:14:04] But they were so fanatical, they were like telling him, no, no, no, this is Bitcoin, this is the future. This paper wallet could be worth a million dollars one day.

[01:14:15] And I mean, yeah, so that level of fanaticism certainly is not for me. I thought it was ridiculous. And I also saw that with some homeless people as well. They would refuse to give cash to a homeless person and try to pitch them on Bitcoin and give them a Bitcoin paper wallet. So, yeah, there's an agree if fanaticism is not for everyone. But yeah, I agree with you. I think we lost a lot in that the large block is going to another chain. We did lose a lot of merchants, as I was saying before.

[01:14:47] So we had like Newegg, Expedia, Microsoft, Valve. And why did they leave? Is it really because of the high fees or is it because of the narrative that Roger Ver spun that Bitcoin isn't for merchants? So I think it would have been better if we kept the large blockers on the side, even though, yeah, there's some costs and some of them were a bit fanatical. And we probably would have kept more of those merchants.

[01:15:17] And it's a big shame they went on to another chain. But I don't know what we could have done to keep them on board because I think a core part of that economic philosophy was flawed. A key part of Roger Ver's view was that we needed surplus capacity and blocks that exceeded the level of economic demand. And I think that's kind of an economically flawed idea because, as we were just discussing, people would just fill the blockchain out with images. And the demand to put images on the blockchain is essentially unbounded, right?

[01:15:52] So the blockchain would just be full of spam images. And there'd be nothing we could have done to stop that. The filters, if we tried filters, that of course wouldn't have worked. And I think that also explains why a lot of people had changed their view on filters, like Greg Maxwell. Because of that victory in the block size war, because the small blockers won, we now know we have a block size limit in place. We don't need to worry about people putting loads of images on chain.

[01:16:22] We've got a block size limit and we know they can only do 4 megabytes every 10 minutes. But the OP_RETURN arguments in 2014, it was an uncertainty of what the future of Bitcoin would look like with respect to a block size limit. And that's a key reason why some people's opinions changed on filters and spam, I think.

[01:16:45] Vlad Costea: Well, you can also argue that the reason why they're putting JPEGs today is that it's four times cheaper with the SegWit discount. And also because there was not a lot of economic demand for Bitcoin block space. And I do believe that many of these NFT collections on Bitcoin were sort of sponsored by mining pools to encourage more transaction fees to be generated. But I also think that a lot of the energy that went into altcoins wouldn't go there. I do believe that the winner of the block size war was actually Ethereum.

[01:17:22] Because many of the builders that were going to do something on Bitcoin, they got turned away at the time and they went on and they built on Ethereum. And a lot of smart people left at the time. A lot of companies and projects that were going to build on Bitcoin decided to go to Ethereum. And that's essentially how Ethereum became the number two.

[01:17:43] Jonathan Bier: Yeah, and it was a kind of that effect. A lot of people left Bitcoin and went to altcoins because they were unhappy with the block size limit. But yeah, not only did that boost Ethereum, it also boosted the smaller blockers, right? Because if these people were stuck in Bitcoin, there would have been larger blockers. And there would have been more larger blockers than smaller blockers. Because they had this outlet of escaping to altcoins, it meant that the smaller blockers became dominant in Bitcoin and helped them win the war.

[01:18:14] And also, yeah, Ethereum also benefited, of course, from the so-called OP_RETURN wars of 2014. I don't know if it's worth talking about that because, of course, we're arguing about OP_RETURN again in 2025. But most of that revolves around Counterparty. So, you've had Adam Krellenstein on your show, right, who was the key developer behind Counterparty, I think. So, that launched, yeah, I think in the start of 2014. And it was kind of a system that interpreted data in Bitcoin transactions and allowed you to do various things like create altcoins, create JPEG images.

[01:18:55] You could trade on a DEX, on Chain, on Bitcoin, on these altcoins. You could play rock, paper, scissors on Counterparty on Bitcoin, trustlessly with someone else. You could pay dividends to token holders. There was some sports betting.

[01:19:11] Vlad Costea: Sports betting?

[01:19:12] Jonathan Bier: I remember betting on the 2014 World Cup semi-final and final on Counterparty on the Bitcoin blockchain. So, yeah, there was all these features. And, yeah, at that time, I really liked it. I thought that was pretty cool. It didn't gain traction for various reasons, such as the 10-minute block time was quite long, so it made the usability not that great.

[01:19:43] That was, yeah, one of the factors. But, yeah, see, there was a war over this because they started using like fake pubkeys to store the Counterparty data, which is, of course, very bad from a Bitcoin scalability perspective. And then certain developers, mostly Luke Jr. And Jeff Garzik complained to the Counterparty community saying, you know, you shouldn't do it this way. And then Jeff Garzik put in a pull request to make OP_RETURN a standard transaction and then encourage the Counterparty people to move from fake pubkeys to OP_RETURN, such that it would be much more better from a Bitcoin node's resource perspective, which they eventually did.

[01:20:28] I think for most of it, eventually moved to OP_RETURN, there was a few, a couple of features of Counterparty that stayed in fake pubkeys or something, maybe because of the size limit. Anyway, so Jeff Garzik introduced this. There was a debate over whether it should be 40 bytes or 80 bytes. I think. So in the code, I think Jeff first put 80 bytes, then it went down to 40 bytes, then it went up to 80 bytes again. And then finally, there was a release. So I'm not sure if there was any ever any release of Bitcoin Core with a 40 byte limit.

[01:21:00] I think the first release had 80 byte relay limit OP_RETURN. But if you look at the code base, it did kind of go up and down as they kind of argued over what this number was. And then Counterparty moved into OP_RETURN. But Luke Jr. Continued to be pretty unhappy about this, and was kind of making negative comments saying this was spam. He had a mining pool at the time, Eligius, and he filtered some of the Counterparty transactions out. And you saw a kind of repeat of many of the arguments that we're having in the spam wars now.

[01:21:37] People saying, well, this isn't spam, these really are financial transactions. And you can't tell me what to do with Bitcoin. Bitcoin's an open system. But yeah, Luke and Jeff were quite negative, saying that they were using resources in a way that they weren't supposed to. So some people in the Counterparty community were quite perturbed by this, thinking that these influential people like Jeff Garzik were telling them they shouldn't do this on chain. And that may have influenced some of them to kind of think about Ethereum, and it may have influenced Vitalik to launch Ethereum.

[01:22:13] Vitalik says that was a reason why he launched Ethereum. Because Bitcoin didn't want these things on chain.

[01:22:22] But yeah, I think that claim by Vitalik may be exaggerated. He was looking for a justification, so he may have exaggerated the impact of that. And I think Counterparty ultimately failed, or didn't gain significant transaction volume, not because of this hostility from some in the Bitcoin community. There were other factors which are why it didn't gain that much traction. I think the market timing, it was just too early. So Ethereum just had better timing. More people were ready for these on chain kind of things by then.

[01:22:56] The 10 minute block time. Also the cost, it was getting quite expensive, especially by 2015, fees were going up. And of course, when Ethereum launched for the first three years, fees were incredibly low.

[01:23:12] I think, yeah, what else? Yeah, so I think, yeah, Counterparty failed for a lot of several reasons. I don't think this kind of hostility from the developers and the kind of Bitcoin maxis who only wanted it to be for Bitcoin financial transactions really caused it to fail. But a lot of the kind of filter people now cite this 2014 of return war as an example of successfully deterring spam on chain and filters working. And another kind of culture change is I think that people like Luke Dashjr.

[01:23:51] And Jeff Garzik were very respected at the time. And people thought the Bitcoin developers were very important, such that if they told them not to do that, that scared a lot of people. Whereas now in 2025, if the prominent Bitcoin developers of Bitcoin Core, such as Ava Chow, and whoever started telling the developers of these systems what to do, they would ignore them and think that Ava Chow or Gloria Zhao doesn't matter, right? They wouldn't care what they said. Whereas at the time, there was this kind of view that Bitcoin Core developers, that's really important.

[01:24:25] So that's another reason why there's not much hope of kind of deterring these systems now, when back then, maybe they could have been deterred to some extent. But yeah, I think another reason Counterparty didn't work was you couldn't, all those features they were implementing, you couldn't use Bitcoin for all of those features, right? So you could pay dividends to token holders, but you couldn't pay dividends in Bitcoin. Because Bitcoin, you couldn't, you could do all these smart contract things, but there were limits on how the smart contract could interrelate with Bitcoin.

[01:25:03] So, again, you, I think for the DEX, there were limits, the trade trading, you could do kind of token to token DEX, but if you wanted to use Bitcoin as one of the trading pairs, it was more complicated and more difficult. So they had this problem that the smart contracts didn't apply to Bitcoin to the same extent, whereas Ethereum didn't have that problem. So, well, it does have that problem now, to some extent, right? You can do more with an ERC-20 token than Ethereum, but has that problem to a much lesser extent, such that you could do the smart contract things directly with Ethereum.

[01:25:40] Yeah, Ethereum does have a small mirror to that problem now, I guess.

[01:25:46] Vlad Costea: Once again, I think this is very important context. And maybe a lot of people were not around at the time, or they ignored completely what was happening because they just bought Bitcoin and were not paying attention to the events. It's important to know that everything that you see today on altcoins started out as something on Bitcoin and was deployed to a degree on Bitcoin. And we had colored coins, which was the first attempt. I think at the time, it was just a way to differentiate between basically Silk Road coins and clean, quote unquote, coins.

[01:26:23] And that was colored coins. And then they figured out they can use this to do much more. And they had Counterparty in 2014, I guess after the bull market of 2013, or the bubble, as you put it. There are a lot of investors and financial type of people who wanted to do more with Bitcoin. They thought it's boring to just send and receive. And they wanted to have more advanced financial features, which they actually got with Counterparty, which launched in January of 2014. For the creation of their XCP token, they actually burned a bunch of Bitcoin, which is sort of amazing in retrospect, that they launched like this, it was super reckless.

[01:27:07] And there was also Mastercoin, which was the first ICO, it was launched on Bitcoin. And later it became Omni. And the reason why it's notable or remarkable is that they had USDT, they had Tether, the first iteration of it was on Bitcoin for a couple of years before it moved to Ethereum. And on the other side, there was also the Zerocoin and Zerocash stuff, which tried to add privacy to Bitcoin. So you had the suits coming in trying to do DeFi on Bitcoin. And then you had the cypherpunks coming in saying, well, we can actually make zero knowledge proofs work now on Bitcoin.

[01:27:48] So I think the year 2013 was the most interesting in the history of the project in 2014. Because you had a lot of people bringing new ideas into Bitcoin, which for various reasons ended up becoming altcoins. And they took away some of the market share that Bitcoin could have had.

[01:28:11] Jonathan Bier: Yes, so let's say Mastercoin had an ICO, so they raised money, and then they had a foundation to look after the money. So I remember thinking that I did not want to participate in this ICO, because I thought the governance would be bad, and I much liked Bitcoin's fair launch approach. So that's why a lot of people, including myself, were quite keen on Counterparty, because yeah, it had this burn, where you sent Bitcoin to a burn address, like one X-X-X-X Counterparty burn or whatever it was.

[01:28:44] I think there was like over 1,000 Bitcoin, I can't remember how much it was. And then yeah, then there was, I thought, well, there's no governance problem. So there's no pool of capital that a management team or executives have control over. It's therefore more decentralized. And therefore, I, along with a lot of other people, were keen to use Counterparty and maybe like buy some XCP rather than the Mastercoin one. And yeah, an ICO was seen as very controversial at the time, right? And then Ethereum kind of said, Mastercoin was very controversial that they had this, Ethereum kind of changed that and set a new kind of expectation that an ICO and an offering was an okay thing to do and that led to a whole kind of wave of offerings.

[01:29:32] But yeah, so their Mastercoin never really gained traction until yeah, they developed Omni and then Tether went on there. So in a way that was a very successful protocol because it had years and years of Tether. But yeah, and then there's also, as you say, Zcash. So I remember I went to the Ethereum DevCon 2 in Shanghai in 2016. And I spoke to Zooko then about launching Zcash. And again, I was like not keen on investing because it was an offering and it wasn't a fair launch.

[01:30:09] Again, there would be a pool of capital and a foundation and a management team. And my view was, oh, you don't want to invest in those things. Do you want to invest in a Bitcoin like thing? Or if you do want to invest in a management team, you should invest in a stock on the New York Stock Exchange or the SEC. And of course the Zcash launch was very, very funny. So BitMEX launched Zcash Futures, I think eight months before the launch date of Zcash, which was a very weird product because there was no underlying price.

[01:30:43] So. The price could like kind of float around because I told you about the perpetual swap, the mechanism to drag the derivative price to the spot price. But with Zcash, there was no spot price. So this instrument was really, really volatile. And we like had these limits where I think the price could only go up 100% a day or something like that, and down 50% a day. And it kept hitting these limits. So like it went through periods of going up 100% every single day.

[01:31:12] And then on the day Zcash launched, was it like the end of 2016 or something? The futures price reached, I think, a price of 3,900 Bitcoin per Zcash. And the spot price on Poloniex when it first launched, I think was 3,299.999 Bitcoin per Zcash because of the way that Zcash worked was there was a token allocation for the team or whatever investors that was locked up. They couldn't sell that. And then there was proof of work mining. And then the first mining reward came out.

[01:31:51] And I think it was, you know, so the first block would come out and there was, I don't know, was it like 10 Zcash or something? So of course it takes time from the launch of a coin for that first Zcash to end up on the exchange. So the price was ridiculously high because a lot of people wanted to speculate on Zcash. But the coin, there was no supply anywhere. So yeah, if you look at the price chart, it starts at like 3,000, 4,000 Bitcoin.

[01:32:16] There was a lot of shenanigans going on on the BitMEX Futures contract, which is the most liquid place to trade Zcash at the time. And then, yeah, the price kind of went down and down and down, then kind of went up again in the 2017 bubble or bull market, as you call it. I think it might have retaken the high recently in dollar terms, definitely not in Bitcoin terms. But yes, I think that was definitely a very, very, very funny, fun project for BitMEX when we had this.

[01:32:49] This was like the first future we did of the thing that didn't exist. But yeah, I remember that Ethereum conference in Shanghai in 2016 was a really interesting conference because the network kind of went down during the conference and someone attacked it. And people were running around the hotel at 4 a.m. In the morning, knocking on doors. So someone knocks on my door at 4 a.m., get there, are you an Ethereum developer? We need you, there's network emergency. I'm like, no, I'm not an Ethereum developer.

[01:33:21] So I went back to sleep and then they were like kind of in a special someone's bedroom, like in a suite or something in the hotel, trying to keep the network alive. And clearly the attacker had targeted the attack at the conference because everyone went out like to the bars drinking on the rooftop bar to like 1 a.m. Or whatever. And then the attacker had deliberately targeted this attack on Ethereum at the current side of the conference when all the developers would be asleep and couldn't respond.

[01:33:51] So they had to kind of get up half drunk or whatever and kind of defend the network. That was definitely a very interesting event.

[01:34:01] Vlad Costea: Man, that's amazing. It's also interesting to me that, OK, there are a bunch of questions that I can address from what you said, but conferences back in the day used to be more meaningful. Maybe there were fewer and the people participating were actually the ones you could actually meet core devs at conferences and stuff like this. And now it's more of a rare occurrence and maybe that there are too many events and a lot of them are about price or whatever. But it seems like back in the day, the conferences were more meaningful, more memorable and actually more eventful as opposed to something today, which I still remember, you know, Fluffy Pony going on stage at consensus and pumping the Monero price, basically.

[01:34:55] Like this was a thing. You could actually make a presentation on stage and talk about something that's coming and people would get hyped because they're watching the livestream or something and trading on what's happening. And the last time I saw this was, I think, last year when Trump got on stage in Nashville. And you could see how when he said he's going to fire the head of the SEC, the price actually spiked. There was like a candle that lit up and it was amazing to see. But yeah, there used to be a time when these events were a lot more meaningful.

[01:35:35] I guess part of the consequence of mass adoption is that you get dilution of this, which maybe is good.

[01:35:44] Jonathan Bier: Yeah, I think the events, I used to really enjoy them and people were very interesting and you would stay up till 1, 2, 3 a.m. Sometimes just talking the whole time about Bitcoin or cryptography. Whereas now, yeah, people talk about other stuff at these events. They just talk about their personal life, sports. They're not as fascinated and captivated by the space as they were. And a lot of people are paid to go to these events or they're going to the events to promote their business, which is a very different kind of thing.

[01:36:20] The events, of course, used to also be at the weekend. So the assumption was people have a day job outside the crypto space and then we're going to do an event on the Saturday and the Sunday when people can come and they're doing it for fun. Whereas now, typically the events are in the week because people are going for their jobs and they all work in the crypto industry. So yeah, I definitely agree with you that some of the events in the past were very fascinating. People were there because they wanted to be there and they would stay up all night talking about Bitcoin or crypto.

[01:36:57] Whereas now, yeah, most of the events, of course, are [unclear: BD] type things. But there's still some good interesting conferences you can sometimes go to, I guess. But it's difficult finding those ones.

[01:37:10] Vlad Costea: There's actually one in the UK where I think I'm going in a couple of weeks. It's called bitfest.uk. Anyway, it should be fun. It's in Manchester. But on your point, I actually got this idea right now, which goes back to the filter wars and the ongoing situation between core and not. Because you said that when you go to events today, people talk about sports and it's much more than sports. They get together for a steak dinner. They talk about fitness and whatever. And I think there is a certain lifestyle that became associated with being a Bitcoin maximalist.

[01:37:48] And there's this image of what you have to look like and what you have to be into to be accepted in the inner circle. And these guys like Ava Chow and Gloria Zhao and Murch and all the others, they don't look the part. You have these ultra macho American guys who are like, yeah, we're going to do 100 push ups a day until 100k or something like this. And then the guys that they're supposed to be respecting are not doing any push ups. I don't think that they're working out at all.

[01:38:23] And they're just a bunch of nerds who are sitting around computers talking about technical stuff. And then you get this culture of ultra masculine people who suddenly realize that they're being represented by guys who are very much the opposite of their lifestyle. And then they sort of disrespect at the human level. And then they try to find justifications for it. And they hang on to the first argument that they find, which is, wait, these guys have increased the yap return limit. And of course, they want to put child whatever on the block chain and they're a bunch of pedophiles.

[01:39:02] And it's so easy for them to vilify them once they disrespect them as human beings. I think it's cultural and it's maybe more basic or rudimentary than we like to think.

[01:39:17] Jonathan Bier: Yeah, I think you're right. There are certain cultural issues. One thing I would say is that it's also based on the misconception. So Ava Chow and Gloria and fanquake, they don't control Bitcoin. They just control a piece of software. So I think they don't represent these people. They're not there to represent Bitcoin holders like these [unclear: macho], right-wing, anti-modern art, steak-eating American tradwife people, right?

[01:39:46] Vlad Costea: Or Lebanese. They don't have to be American.

[01:39:49] Jonathan Bier: Yeah. In the same way that that's not to say the Bitcoin Core developers aren't doing important work, right? If you fly a plane, the engineers who designed the safety systems and maintain those safety systems are very important. But they don't represent the people that use the airplane, right? They're just doing and they don't control the airplane. They're just building important aspects of the technology. And I think they over, they misunderstand their kind of role and kind of think that the core developers are kind of more important than they are.

[01:40:21] They're not there to represent them. They don't control Bitcoin. They just release pieces of technology that help make, try to make Bitcoin better, more resilient in very kind of subtle nuance ways that aren't that necessarily that important to the typical Bitcoin holder. So that's kind of. One of the issues. And yeah, the other is, yeah, this cultural thing that, you know, Bitcoin has been attracted to certain cultures with as these characteristics and you can list them. They don't like modern art. They like eating beef. They like a family.

[01:40:59] They don't like trans and woke. I can't even think of all the things. But yeah, they're right wing. But yeah, but I think the, which is fine, because if people have those values and they like Bitcoin, great. But then they, I think there's also these cypherpunk values, which is kind of different. And those are things like anonymity is also very important. And of course, Satoshi was pseudonymous. We don't know if Satoshi was anything about Satoshi, right? So we don't know his academic background, his political leanings, or we don't know the gender even or anything.

[01:41:37] We don't know if they were a tradwife or not a tradwife, or had a family. And a lot of, several other Bitcoin developers have been anonymous as well. And the open source culture and cypherpunk culture is about being merit based on what code you write. And it doesn't matter what type of person you are. And that's the same with Bitcoin as well, right? It doesn't matter what type of person you are, your transaction is treated equally to any other transaction. Whereas in the traditional banking system, the government can, or the authorities can, prejudice.

[01:42:09] They don't like you, they can kind of block your financial transactions or de-bank you. In some countries, there's racism involved. It's easier to get a bank account if you're a certain race, like in some African countries. They don't want that locals getting a bank account, unless you're kind of wealthy, have a passport or you have a certain ethnicity. So you see, the cypherpunk kind of ideas of Bitcoin are in a way a bit in confrontation to that, in that it doesn't matter who you are, your Bitcoin transaction will be treated like any other transaction.

[01:42:42] And it doesn't matter who the developers are, it's based on merit. And we encourage developers to be anonymous, so we can't evaluate developers on their career background. So yeah, I mean, Gloria Zhao has become an enemy of some of these filters and some of the criticisms they make of her are ridiculous. They look at her LinkedIn and look at her work experience and it's like, well, you want her to have more work experience before she becomes a maintainer? So it's a misunderstanding of her role as maintainer that they think she controls Bitcoin and has more power, she doesn't.

[01:43:21] All she's doing is like building certain technology and merging things once the group of developers agree. And then we don't want developers who have to have a certain background and have worked for X number of years in investment banks or in academia. I mean, otherwise, you know, why don't we go invest in the US dollar or the euro and look at the monetary policy committee and look at their CVs, you know, like [unclear: Lagarde]?

[01:43:50] Vlad Costea: Also, it's ridiculous because you had Theymos who was like 21 years old when he became a maintainer. I don't know about Cobra, but I suppose he's also about our age. And you also had Matt Corallo who was like 17 when he joined Bitcoin Core.

[01:44:07] Jonathan Bier: I don't know if Theymos was ever a maintainer, but he was very young. When he controlled the Bitcoin talk for, yeah, he was still a teenager, I think, 19.

[01:44:16] Vlad Costea: Greg Maxwell was very young. Peter Todd, very young. Let me think of other examples.

[01:44:23] Jonathan Bier: Fanquake was very, very young. I believe he contributed again as a teenager to Bitcoin Core.

[01:44:32] Vlad Costea: Anyway, it was never the case with these people that they're too young or inexperienced to be contributing to Bitcoin Core. And in the case of Gloria Zhao, there was actually like an apprenticeship process, like she didn't get straight to maintaining. She actually had to go through all the stages and she had to submit a bunch of PRs and basically get vetted to get to that position. It's not like she became

[01:45:01] Jonathan Bier: A maintainer because she was making loads of commits in the area related to Mempool and the P2P network. And because she was doing all the work in that area, it was logical to make her the maintainer of the area.

[01:45:15] Yeah, so the idea is if you care about the kind of political leanings and their career history of the people that are maintaining the currency or in a position of authority, you should invest in the US dollar. That's how the US dollar system works. You elect the leaders, the leaders have communication skills, you have the Federal Reserve Open Market Committee have appointed people that have a lot of credentials in academia, the business world, banking.

[01:45:49] But Bitcoin is supposed to be different than that, right? It's supposed to be more cypherpunk, merit based, open source. We don't care about who you are. You can be anonymous. It's about the code you write. So yeah, I think there's a lot of people complaining about these developers today. There's a lot of misconceptions both about how Bitcoin works, but also what Bitcoin is and they're projecting these kind of US dollar values onto Bitcoin in my view or fiat values.

[01:46:30] Vlad Costea: Well, there was that guy from the Bitcoin University, I think, Matthew Kratter or something, and he sort of created this list of criteria for what a Bitcoin Core developer should be like. And he was like, should be at least 35 years old, should have experience in open source projects of at least a decade and stuff like this. And once you narrow it down, you're going to get to some kind of unicorn, which maybe does not exist. Or if that kind of person exists, maybe that they're not interested in Bitcoin at all, because that's, I think this is the main criterion. You have to be interested in Bitcoin enough to work on it.

[01:47:06] Jonathan Bier: Well, 35, where does that come from? Sounds like it comes from the US Constitution, right? Exactly, he's imposing these.

[01:47:15] Vlad Costea: Maybe from the Roman culture where to be a senator, you had to be 35.

[01:47:20] Jonathan Bier: Exactly. Whereas this isn't supposed to be a political system of authority figures, where you vet people that have certain power, like Christine Lagarde has a lot of authority over the euro. We don't have that system. There's no one in control or authority over Bitcoin. Yeah, there's maintainers of Bitcoin Core. Bitcoin Core is not Bitcoin, Bitcoin Core is just a piece of software. The Bitcoin protocol is defined by the nodes people are already running, not by the Bitcoin Core GitHub repository.

[01:47:56] So yeah, I've been watching that guy Matthew Kratter's videos on YouTube about this whole kind of nuts thing. And yeah, they disagree with almost everything he says, especially about the role of Bitcoin developers, and saying they have to be 35 is ridiculous.

[01:48:13] Vlad Costea: But I do believe it's sort of dangerous and interesting at the same time, because every wave of adoption had its own educators. And I think it started out with people like Gavin in the beginning. No, Satoshi was the first person to explain how Bitcoin works. And then you had Gavin, who was sort of very active in answering questions. Amir Taaki. Amir Taaki, yeah, super active. Then you had Andreas Antonopoulos, who was like the Michael Saylor of his day. Yeah. Then you had Eric Voorhees and Roger Ver and a lot of these libertarians.

[01:48:52] And then I think it became decentralized enough, but you still had the Jimmy Song and the Saifedean and all of these guys who came and they sort of tried to explain how Bitcoin works to the newcomers. But after the Saylor era, and I like to basically delineate between the two moments in Bitcoin's history, because I think that's when it stopped being so cypherpunk. It became much more conservative and the conversation about ossification sort of became more serious when it really wasn't before 2020. And basically, I think that there is a new crop of educators that emerged in this landscape where they take some ideas about Bitcoin for granted.

[01:49:45] Like it's not a cypherpunk project anymore. It's not an open source money system. It's this rock that is never going to move. It's going to be kept in place at all costs. And anyone trying to turn this rock into something else is essentially an attacker. And the idea is not new. If you're somewhat of a historian and you are a great historian, you're going to know that. For example, there was my Romanian national, Mircea Popescu, who came up with this idea that changing Bitcoin is basically attacking Bitcoin.

[01:50:21] And I guess nothing is new. Even the filter war. You're the brilliant person who came up with the article that showed that even Satoshi and Gavin and Mike Hearn were having this conversation back in 2010 about filters and some of the same concerns were being expressed. But I think that as mass adoption happens, you have this sort of... Dilution of the message. I like to think of it as... So I'm a nerd about music. There's the bucket brigade chip, which essentially copies a sound and replicates it.

[01:50:55] It's used in delay pedals. And essentially every repeat of the same sound gets degraded. And by the time you get to the last one, it doesn't sound anything like the initial sound. It's the same pitch, but it's very different in terms of sound modulation. And I think, unfortunately, we are lowering the level to the lowest common denominator. And we're getting to a point where dogma replaces free thinking. And I used to love Bitcoin because I was interacting with some of the smartest people and I was learning all the time.

[01:51:34] And now I just see people fighting for months about something as trivial as the upper turn size and filters. And sometimes I'm watching and I'm thinking, do these guys enjoy it? It's almost like they find pleasure in doing this every day. Because they're not going anywhere. It's obvious that this is not going to change anything.

[01:51:57] Jonathan Bier: Yeah, I think I agree with you. But one thing I'd say is that, in terms of criticising the narrative now, it's dumbed down, it's more stupid. I think there's always been a lot of idiots in crypto and in Bitcoin. And I think we've got to try to be wary of some biases that we might have. So back in, say, 2014, when we were consuming media in the space, we were relatively new. So hearing these ideas for the first time was very exciting. And if we hear sailors say these same things now, we just think, well, that's stupid.

[01:52:37] That's obvious. That's not interesting. So one example I give is sailors saying, Bitcoin is like digital energy. And you can transport energy across time and space. And maybe we both think, well, that's pretty stupid. Bitcoin is not energy. It's not redeemable for energy. It costs energy to make it, but you can't get the energy back. But if I remember listening to Andreas Antonopoulos in probably like 2014, saying, Bitcoin is an unstoppable freight train. And if you get in its way, it's going to crush you like a bug.

[01:53:11] And then I was thinking, wow, what an analogy. I remember like giving a tingling sensation inside of me. God, Andreas Antonopoulos is such a brilliant speaker. This is such a great analogy. Bitcoin is unstoppable. But of course, Bitcoin is not literally a freight train. It's just an analogy.

[01:53:29] Vlad Costea: And he was also saying that transactions are free and that blocks are generated every 10 minutes on the clock, something like this. Like, of course, there are some of these details which make no sense once you understand how it technically works.

[01:53:44] Jonathan Bier: So, yeah, we have become more mature. We've learned a lot about Bitcoin, whereas other new people are coming into the space and are going through that same learning curve. And the stuff, the messages that resonate with them today won't be the messages that resonate with us. And in the same way, the messages that did resonate with us 10 years ago won't resonate with us today. So, we have to be a bit like open-minded and respect some of these new people learning about Bitcoin. They're only in a few years.

[01:54:18] But, you know, there's a lot to learn and that we were probably more steeper than them 10 years ago, right? And if we heard these messages that were said 10 years ago, we would have acted the same way as them. So, I think that's part of it. And like this stuff about filters not working, that's something that we learned, right? And that wasn't immediately obvious. And if you read stuff that people were saying in 2013, 2014, including myself, you know, I probably believed that filters, I didn't understand why the filters don't work if people try to get around them, maybe in like kind of 2013 period.

[01:55:01] I remember RBF, I remember going to a Bitcoin conference in Amsterdam in 2014. It was a huge event. And I remember Peter Todd had this big debate with Gavin Andresen about RBF, Peter being in favour of RBF, Gavin being opposed to it. And I remember listening and I was like, oh my God, I have no idea who is right. Shit, I don't know how Bitcoin works. I don't understand this.

[01:55:30] Whereas now, yeah, it's obvious to me that of course miners want to profit maximise and select the transactions with the highest fee so RBF will happen. But that was not obvious to me at all back then. So, if that wasn't obvious to me back then, why should filters not being effective be obvious to people now who have spent less time in Bitcoin than I had by 2014? So, yeah, I think a lot of that is your kind of, I raised tinted vision about how great Bitcoin was in the past.

[01:56:03] Yes, there were idiots in the past and yes, we were idiotic ourselves in the past, I guess.

[01:56:11] But yeah, so the other cultural thing you're saying about, yeah, people want it to be a rock, they want it to ossify. Of course, there's a lot of contradiction there with BIP-444, which is this very aggressive soft fork proposal that some in the filter camp are supporting and some are kind of opposing, that's kind of splitting their camp. And it's a very aggressive soft fork that will kind of, I think, produce the OP_RETURN limit in the consensus, but also maybe do things like confiscate people's coins or freeze people's coins.

[01:56:42] That's potentially very dangerous and which kind of is really antithetical to Bitcoin as money and as Bitcoin as a stable money in a way that the supposed like new wave of conservative right-wing Bitcoiners supposedly want. So it's very interesting how this BIP-444 proposal will develop. And I'm running BIP-444 client already on forkmonitor.info. It hasn't formally been released. So I just went to the GitHub repository, compiled it myself, and I'm running it. It's not, there's no formal release of BIP-444 client yet, as far as I know.

[01:57:23] Vlad Costea: Yeah, I mean, we have been using these words to describe Bitcoin for a long time, like it's permissionless, and it's censorship resistant. And now all of a sudden we're saying, yeah, but you're not allowed to do that. Like you cannot spend your Bitcoin in this way.

[01:57:45] And I think to a degree, like I do think about the slippery slope of BIP-444 sometimes, because if we basically self censor and we say, well, we should stop these transactions. What's stopping the US government from stepping in and saying, well, since you guys are doing this, why don't you enforce this OFAC list of blacklisted addresses? I mean, you already did it for something you don't like, so might as well have this too. And why don't you also have this chain analysis list of stolen coins from exchanges to stop relaying these transactions from these addresses?

[01:58:22] Like, I can see how the slippery slope can get to the point where you're going to need a license, essentially, to run a node.

[01:58:32] Jonathan Bier: Yeah, and I think BIP-444 does a lot of harm because it limits the size of Taproot scripts, right? And some people have sent Bitcoin to addresses where the only way to redeem those funds is via a large Taproot script, which will be non-standard according to BIP-444 rules. And I think there could be thousands and thousands of Bitcoin in those outputs that could be frozen. So it's not just a slippery slope fallacy. I think that BIP-444 is very dangerous in and of itself.

[01:59:05] And yeah, I think there's also a lot of other problems with it.

[01:59:12] It's not effective. So within a couple of days of BIP-444 being proposed, I think Peter Todd put the full text of BIP-444 on the Bitcoin blockchain in a way that's compliant with BIP-444. So you can just have BIP-444 compliant spam. It doesn't actually stop or determine spam at all. Well, it deters it to some extent, but it won't stop it. So it's just kind of one of the ironies of this anti-spam movement is that if they do fork off and have a new chain, that new chain will be a huge spam magnet, in my opinion.

[01:59:48] And people will just troll them by putting loads of spam on their chain, which is ironic because it rhymes with the history of Bitcoin Cash because Bitcoin Cash spun off in 2017. And then it had lower transaction volume than Bitcoin when the whole purpose of it was to increase transaction volume. It even had lower Bitcoin SegWit transaction volume was higher than and still is higher than Bitcoin Cash transaction volume. So more people upgraded to the new SegWit transaction format then decided to use Bitcoin Cash. So it was an irony in that their whole plan completely didn't work.

[02:00:24] They hard forked, increased the block size limit and then had lower transaction volume. And I think the same could happen this time. The anti-spam people could fork off because of anger about spam, have a new coin and there could be more spam on their chain than there is on Bitcoin. Because fundamentally their economic approach to stopping spam. Will prove ineffective.

[02:00:50] Vlad Costea: Yeah, it's impossible to not draw parallels between the two situations, but I do think that the big blocks, big blockers put up a fight for a while and it seemed, I think I remember eight years ago, it was in November if I'm not mistaken, that Bitcoin Cash actually pumped to like $9,000 or whatever.

[02:01:14] Jonathan Bier: Well, there's two peaks. There's the dollar peak and then the Bitcoin price peak. So the Bitcoin price peak, I believe, happened first, which was on I think is it the 11th of November 2017. So the SegWit2x cancellation email happened on Friday the 8th of November maybe. And on Sunday the 11th the Bitcoin Cash price reached 51% of the Bitcoin price. And I think that was a lot of that was driven by retail speculators in Korea. On the Korean platforms, like maybe Bithumb, maybe had a lot of that volume and a lot of that premium was coming from Bithumb. And yeah the Bitcoin Cash people were incredibly excited at that time thinking that they were going to win the war.

[02:02:05] I know some of them that were buying Bitcoin Cash at near that price of nearly 50%. And I remember seeing there was a telegram group of larger blockers called like Chain Death or something. With the idea that the Bitcoin legacy chain would die because the price would fall and the blocks would stop being produced and Bitcoin Cash would take over. And it was incredibly jubilant at that time when they were above 50%, only lasted maybe an hour or so. They at that point thought they were on the cusp of winning the war and were incredibly excited.

[02:02:42] And as a small blocker I was a bit scared then but probably a lot less scared than they would have thought. Like I was probably scared thinking oh my god there's a 5% chance they're going to win the war. Whereas they were probably thinking there's a 60-70% chance they were going to win and become the highest market cap chain. And yeah then there was a second peak which was the US dollar peak. About $9,000 and I think that was speculation. That was because the Coinbase listing of Bitcoin Cash was leaked.

[02:03:15] So it wasn't that when people were that information was leaked people were buying Bitcoin Cash and then, yeah, Coinbase announced it. And then, yeah, I think, did they have like problems in the engine, and people couldn't process the orders to buy or sell Bitcoin Cash. And I think at the time when it listed on Coinbase I think it was like $6,800 or something. And it was also coinciding with Roger Ver and CNBC promoting Bitcoin Cash as well. So that was also like a second kind of peak but yeah to me it was the percentage versus Bitcoin peak was the most significant moment rather than the Bitcoin Cash US dollar peak in my view anyway.

[02:04:02] Vlad Costea: I also think that the reason why big blockers could not compete is basically Craig Wright. Because they had him like a mascot it was very convenient that some people believed that he was Satoshi and he was on their side and they have been trying for a long time because there is this reply right it was actually in 2008 so that's about 17 years ago that this guy replied to Satoshi when he presented the white paper in the cryptography mailing list. His name was James A. Donald and he said this doesn't scale.

[02:04:40] And Satoshi presented this napkin math basically which said well if you're going to have this capacity with Bitcoin you can reach Visa levels. And this reply from November of 2008 has been used by the big block side for a long time. I think the first big blocker on record is actually Jeff Garzik. He is the one who proposed a client like a fork of Bitcoin that was gonna have if I'm not mistaken seven megabyte blocks back in 2010. And Satoshi replied to him and said it's too early for this and this was another.

[02:05:15] Jonathan Bier: That reply from Jeff Garzik was two weeks after the Satoshi one megabyte soft fork activated. So I think the soft fork activated again September 2010. Two weeks later Jeff Garzik put in that comment about increasing it. So yeah, it was remarkable how short that time frame was. They started arguing it almost immediately when the one megabyte limit went active.

[02:05:39] Vlad Costea: Yeah exactly and maybe that was actually the beginning of the block size wars but it took a few years right. You had to have SatoshiDice. You had to have a few of these events and Counterparty and Omni getting launched to actually realize. And I think there were some exchanges also that were operating on the Bitcoin blockchain directly. So it was all of these events that actually made people realize that yes Bitcoin does need to scale.

[02:06:11] Jonathan Bier: Well when you say I mean because for example when Coinbase launched the way it worked was you deposit you generated a custodial address at Coinbase and then that was your address and the principle was you know you sent them Bitcoin you could look on chain in your balance and look at that address that was your Bitcoin. Obviously it doesn't work with that anymore they have [unclear: pooled] control and they just sweep all the funds or whatever. Is that what you mean by like kind of on-chain exchange?

[02:06:38] Vlad Costea: Yeah sort of because you could see your balance and yeah. I think people were more wary of custodianship especially after some incidents very early on from Bitcoinica and a bunch of others. But there was this realization around 2016 that Bitcoin does need to scale and there something is gonna need to be done. It's just unfortunate that people disagreed. By the way, there's Alex Petrov in the chat, and I want to say hello to him. It's quite nice to see what kind of people are tuning in and where was I going with this? Oh yeah let me frame this as a question because essentially the block size words is presented as this battle between small blockers and big blockers but what is a small blocker essentially?

[02:07:32] Is it someone who rejects anything that's not the limit that Satoshi established as one megabyte or is it someone who's reasonable and says well it should be small enough so that it enables regular people to run nodes on their laptops but it can be increased at a point in the future.

[02:07:53] Jonathan Bier: Well there were many kind of key points of argument. I think one of the main ones was this argument over whether there should be surplus capacity in blocks right so I think very important to the smaller blockers in general was the idea that there should be an economically relevant block size limit such that blocks are smaller than they otherwise would have been. Whereas I think a key part of the larger blocker philosophy was the block size limit should be larger than the level of underlying demand such that there's surplus capacity in blocks.

[02:08:26] So I think when it came down to it that was what the real crux of the matter was right. The small blockers wanted an economically relevant block size limit making blocks smaller than they otherwise would have been. There were other points as well like see the larger blockers typically said miners decide the rules and the larger or the most worked chain is Bitcoin no matter the rules and then the smaller blockers often said that Bitcoin was the most worked chain within the consensus rules which is determined by the nodes people are running.

[02:09:02] So there was that other kind of disagreement as well and yeah there was various kind of points and some of it was like kind of cultural as well. So there was the larger blockers were seen as more business-like had more kind of interaction with the VC-backed companies and the smaller blockers were more computer scientists, developers, engineers and the larger blockers were more of the sales force speaking to merchants, they were more using Bitcoin whereas the smaller blockers were more kind of running nodes, theory-based mathematicians, cryptographers and computer scientists.

[02:09:42] And then of course as the war developed it just became about people wanting to be the winner right and they you know were fighting very intensely for a long time day in day in the night and what in that environment what happens is you just want to win you want to defeat your enemies and you want to be the victor and it just became more about winning than whatever your ideology or vision was going into it I guess.

[02:10:09] Vlad Costea: But I sort of disagree with this portrayal because Bitcoin Cash also has some competent developers and always had like for example Deadalnix the guy who forked I think his name is Amaury. Amaury Séchet. He's a competent developer when he was on my show he actually said that he keeps in touch with Greg Maxwell and they exchange opinions on technical stuff and there was also a Bitcoin Cash developer who found the inflation bug that Matt Corallo put into Bitcoin Core and he actually was responsible about it and submitted, like sent a very private communication to report what's happening and everything went smoothly.

[02:10:58] There was a time basically when the Bitcoin Cash side could have exploited this to destroy Bitcoin and they did not.

[02:11:06] Jonathan Bier: So yeah, what you're saying, I'm not saying all the Bitcoin small blockers were technical people and all the large blockers were business people, it's just like a general kind of bias. Obviously there were technical people on the large block side and there were business people and sales people on the small block side, right? It's just in general those were the kind of slight leanings that there were. It definitely wasn't 100% and there wasn't unanimity of opinion on the small block side and there wasn't unanimity of opinion on the large block side either, I guess.

[02:11:42] Just in general, more of the technical community were smaller blockers, more of the businesses were large blockers. There was a lot of exceptions.

[02:11:52] Vlad Costea: Yeah, I think that's a more clear definition, but you still didn't give me a clear answer to this issue, like is being a small blocker also being in favor of eight megabyte blocks or 16? Or that's a big blocker?

[02:12:09] Jonathan Bier: Yeah, I'd say you can't say, I don't think that's what it was about, I think about picking a particular number. I would say it was more about whether there should be surplus capacity or not was the key inflection point. Of course, there were some people on the small blocker side who had been happy going to eight megabytes, some people on the larger blocker side who had been happy with the two megabytes. And there was all these different views, but the biggest single inflection point in my view is this argument over surplus capacity.

[02:12:46] Vlad Costea: So today, would you say that someone coming up with a block size increase, even a 2 or 3x is a big blocker? Or is he still a small blocker if the increase is justified by demand?

[02:13:06] Jonathan Bier: Yeah, well when you say justified by demand, I think that's falling into a larger blocker type narrative, right? I think more smaller blockers... No, but

[02:13:13] Vlad Costea: I do think so. I spoke with the Citrea people and they told me that if we're going to have three of these ZK rollups on Bitcoin, we're going to basically fill the blocks and end up having another scaling debate.

[02:13:25] Jonathan Bier: Yeah, well there's also the quantum issue as well. So the quantum signatures could be say four kilobytes, and then there's going to be a whole debate there. Well, now signatures are so much bigger, do we need a block size limit increase for that? But it looks like if you look at the Bitcoin landscape now, it looks like a hard fork is very unlikely and a hard fork block size increase limit is also very unlikely and unlikely to gain consensus.

[02:13:54] But yeah, if you look at what the small blockers were saying in the block size, or as I said, Adam Back had this 248 proposal, and he's obviously a smaller blocker, but he was proposing eight megabytes. Greg Maxwell and Pieter Wuille proposed BIP 103, which was a 17% year-on-year increase, which, you know, so that's also proposing large blocks, but they were still on the smaller block side. So yeah, I wouldn't say necessarily if someone comes along and says, oh, for whatever reason, quantum signatures or whatever, we should increase the block size to eight megabytes.

[02:14:29] Yeah, that doesn't necessarily make them share the ideology of the larger blockers during the block size war.

[02:14:37] Vlad Costea: Yeah, there was this guy, James O'Beirne, who was on my show, and he went to a developer conference, I think it was OP_NEXT, and did a presentation this year about increasing the block size and said that many developers were sort of supportive and in favor, but also aware of the fact that it's very difficult to get consensus on such a thing, because it became ingrained in the ideology of being a Bitcoiner that the block size should not increase.

[02:15:06] Jonathan Bier: Well, especially this current op relay filters debate, right, is probably going to have a lasting impact, because I would guess the kind of pro filter group would oppose a block size limit increase. Actually, they're talking about a block size limit decrease, and if you really want to fight spam, probably the best way to do it, to achieve their objectives, is actually to reduce block size limit, because, you know, any transaction data could be full of spam images, and if you want to reduce the images, you've got to do block size limit decreases.

[02:15:41] Some of them are actually advocating that, and I think the existence of that group will make consensus changes harder going forward, especially a block size limit increase, unless, of course, they do actually split off with a BIP-444 chain, and then the kind of extremist elements of that group leave and have another coin, then ironically, that kind of could make consensus changes easier on Bitcoin, if there's a kind of big victory against the filter group. But I don't know, don't think that's necessarily very likely, but if that does happen, yeah, that kind of indicates the impact.

[02:16:25] So I think they're not going to have an impact on filtering transactions in the network, but I think they might have an impact on developing Bitcoin forward, they might make it more conservative, harder to do a consensus change, and less likely to do a block size limit increase. But I do think a block size limit increase is less likely, and I think the spam issue is a very good reason why we shouldn't increase the block size limit. If we increase it to 8 megabytes, we're potentially allowed 8 megabytes of JPEGs every 10 minutes, and all these things, like whatever it is, zero knowledge proofs or quantum signatures, it's very difficult to stop JPEGs using that space.

[02:17:06] But zero knowledge proof, I mean, I've spoken to one expert on zero knowledge proofs about that, I don't really understand zero knowledge proofs, but they're saying, oh, if you want a zero knowledge proof that provably is a zero knowledge proof and not a JPEG, that's like an extremely complicated topic and probably not likely to be achievable. And the same with quantum signatures, again, it probably is possible to prove that it's like a signature, but that's adding a lot of complexity. So if we do want to increase the block size limit for quantum signatures or zero knowledge proofs or whatever, then that extra space could be used by JPEGs, which I think is a valid argument for not increasing the limit.

[02:17:49] And in my view on quantum is if we do want to go down that path, I think the first step is we create a quantum safe way of spending Bitcoin. And if that costs four kilobytes of data to spend, fine, we just let people, if they want, if they choose to spend all those fees and taking up that block space to create, to spend quantum safe Bitcoin, fine, let's let them do that. Let's see how popular that is. And then if it turns out that that's very popular, then we think about the next steps.

[02:18:26] I don't know what your view is on that.

[02:18:30] Vlad Costea: It's also weird to me, bless you, that we don't talk too much about the free market mechanism of reducing spam, which is to just have more on-chain activity to the point where it becomes very expensive to add JPEGs to Bitcoin, because people do it now because it's cheap. It's very affordable. It's fun. They can just brag about having something inscribed on the Bitcoin blockchain forever. But if there were a lot more transactions, it would be super expensive for you to do this. And I don't know why people choose this extreme of trying to start a crusade, which technically limits the degree or attempts to limit the degree to which these people are putting JPEGs instead of just finding more use cases for the Bitcoin blockchain and saying, well, you should be using this more.

[02:19:22] You should use Lightning less and pay the miners.

[02:19:29] Jonathan Bier: Yeah, I agree that the ultimate spam filter is the fee market. I think that's a brilliant, fair, capitalistic, efficient mechanism to allocate block space. The highest bidder gets in there. And it would be great if that was people doing economic transactions. And I think it's stupid that people pay the fees to store images in there. And I want more demand for people to want to spend Bitcoin. The more demand there is for people to want to want to spend Bitcoin, the more successful Bitcoin is in my view.

[02:20:05] And that's the key success metric. And yeah, then I hope that will outbid people that want to put images in there.

[02:20:17] Vlad Costea: Something that I also wanted to say on the topic of big blockers is that I think they could put up a fight if it wasn't for Craig Wright. Craig Wright, wherever he went, he caused division, he caused infighting. He basically split the big blocker side and made it less effective. And then, yeah, I think by the time BSV happened, it was clear that the big blockers are losing and they don't have any chance to come back.

[02:20:47] Jonathan Bier: I think that's completely right. I think Craig Wright inadvertently had a huge positive impact for the small blockers in the blocksize war, unintentionally. And that's what I was saying about the reason the small blockers won the war is largely because the large blockers shot themselves in the foot quite a lot. And one of the examples of that is some of the large blockers, not all of them, some of them supporting Craig Wright. So Gavin coming out in support of Craig Wright hugely damaged Gavin's reputation. It's what resulted in him losing his merge access Bitcoin Core repository.

[02:21:24] And it made it, you know, more people coming in and evaluating the debate, which side do you want to be on where you want to be against Craig Wright. He's an obvious con man, right, to have people thought. And yes, it did split the large blocker camp. So I was speaking to them. I remember having a meeting with Jihan Wu, the Bitmain CEO, maybe in kind of late 2017. In Hong Kong. And he was telling me in confidence that he very much disliked Craig Wright and was very disappointed with that.

[02:21:54] Roger Ver was, you know, kind of giving him a platform and saying he believed he might be Satoshi. And he thought that was doing a lot of damage to kind of Bitcoin Cash. But he said he didn't feel the confidence to say that in public and speak out against these big personalities in Bitcoin Cash. So a lot of that. So I talked about those kind of yacht parties in Hong Kong and kind of 2016, 17, most of those people in those parties were kind of in the circle of friends with kind of Roger Ver.

[02:22:23] They very pro Bitcoin Cash, very pro large blockers, very anti Craig Wright. And they believed Craig Wright was doing huge damage to the large blocker cause. And they were very kind of disgruntled and upset by that. See, I think that's absolutely right. As I kind of talked about in the book, The Block Size War, I think Craig Wright was instrumental, one of the instrumental things in the book. The Block Size War that assisted the smaller blockers, along with the DAO in Ethereum, which also was a big boost inadvertently to the small blockers, I think.

[02:22:59] Vlad Costea: Yeah, those were big events. There's actually someone in the chat who without even knowing asked a very relevant question. His name is Wayne George. And he asks, What role did ASIC Boost play in the creation of BCH? So you mentioned Jihan Wu. Yeah, his mining pool. And I think he was also manufacturing ASICs basically had a clear advantage over the competition because they discovered how to boost their ASIC miners to have greater efficiency. And Segwit was going to disable that.

[02:23:36] Jonathan Bier: See, well, there's there's covert ASIC boost and overt ASIC boost. So overt ASIC boost is basically you want to get extra entropy as you produce your hashes, right? So if you change something in the block header, like this four bytes, like fields, I think is it the timestamp? Yeah, they just change the timestamp, like roll it. And then everyone can see the block headers changing. And that's like a more energy efficient way or a more efficient way than changing the nonce or the extra nonce. With covert ASICBoost, this is the idea is that you can change the block header by only changing four bytes of data, which is the Merkle root hash of all the Bitcoin transactions.

[02:24:38] Which is 32 bytes, you just change the last four bytes of them. Oh, sorry. Yeah. ASIC boost is about because basically SHA-256 splits the block header into chunks. So there's the first chunk and the second chunk, right? And it's a way of keeping one chunk the same, whilst varying the other chunk. Therefore, you have to do less computations and hashing, and therefore hashing is done more efficiently. So there's an overt way of doing it, which is you just change like some of the fields in the block header.

[02:25:07] on one chunk, leave the other chunk the same. And then everyone can see you're doing it, and it's more efficient. The other way is doing it covertly, which is you change only the last four bytes of the Merkle root hash. And then that last four bytes is in chunk two. So you can keep chunk one the same for multiple hashing attempts, thereby making hashing more efficient. So the accusation was that what you were doing was changing like a Bitcoin transaction or shuffling Bitcoin transactions around, seeing the impact that had in looking for a collision in the last four bytes.

[02:25:48] So if the last four bytes was the same, that meant you could keep chunk one where the... You could keep that chunk exactly the same, because it was a collision. So you could shift transactions around in your block template, which would keep the last four bytes the same of the Merkle root hash. That'll keep a whole chunk the same, therefore you add entropy to your Bitcoin mining to mine whilst keeping one of the chunks the same. Now, what SegWit did was put a hash commitment to all the Bitcoin transactions and their structures into the Coinbase transaction in the form of an OP_RETURN.

[02:26:31] So the Coinbase transaction commits to the entire transaction structure. Therefore, you can't just shuffle things around. If you shuffle anything around, you've got to recalculate everything, and then the block header changes and both chunks change. So if a miner produced a block with SegWit, which of course was optional, they couldn't do covert ASIC boost. So the accusation that Greg Maxwell made in his mailing list post, which I think was in May 2017, saying that Bitmain may be doing covert ASIC boost, shuffling transactions around, if SegWit was implemented, it would mean they couldn't include any SegWit transactions if they wanted to continue covert boost.

[02:27:19] And this was therefore the real reason, supposedly, why Bitmain was opposing SegWit. And therefore they were lying when they said it was because of all these other points about the large block of narrative that they had. Now, and then in response, Bitmain put out a press release, denying that they were doing doing this. However, the press release did say that they had the right to do so, and that they had the patent allowing them to do so, and that they may have implemented it in the software in the test network.

[02:27:52] So I'm very skeptical. I don't think it's likely that Bitmain were really doing covert version rolling in the live network. However, that press release didn't help them because it made people believe that they were, or at least they were planning to. So maybe Bitmain were planning to do that, and then maybe they opposed SegWit partly because they believed in the large block of narrative, and partly motivated by this idea that it would prevent them doing covert version rolling in the future, such that Jihan and Bitmain were not being overtly dishonest when they opposed SegWit.

[02:28:34] They did believe in the large block of narrative, just a part contributing factor to support them. It might have been their future plans to do covert version rolling. So then what happened was, was some companies invested in the technology for overt version rolling. In particular, there was a company called InnoSilicon based out of Shenzhen, and they produced some mining equipment, and I think I've got it behind me, so I'm going to show you. Hang on.

[02:29:10] Vlad Costea: Oh, man, that's amazing. Is that the WhatsMiner?

[02:29:15] Jonathan Bier: Yes, sorry, can you hear me? Yeah. So this is a Bitcoin miner produced in Shenzhen in 2017, which is a DragonMint T1 from the first batch of miners that could do overt version rolling. So I went to the production facility in Shenzhen, spoke to the people there, picked this up. And they tested it, and it did indeed do overt version rolling. So this is one of the first ever machines that was switched on that did overt version rolling on the Bitcoin network. And if you look, and then what happened was, these became successful.

[02:29:56] So gradually, more and more miners adopted it, eventually Bitmain adopted it themselves, I think towards the end of 2018. So on Bitcoin, Bitmain was doing overt version rolling. So therefore, there was no efficiency gain by doing covert ASICBoost, because you could keep one chunk of the hash the same overtly when anyone could see using overt version rolling. So yeah, InnoSilicon were the pioneers in doing that, and they were kind of motivated to develop that by kind of small blockers who collaborated with them, [unclear: thinking], oh, we've got to get overt version rolling adopted to prevent Bitmain having this advantage with covert version rolling.

[02:30:38] And my understanding is that now 80%, 90% or 95% of the blocks now do overt version rolling.

[02:30:47] Vlad Costea: Man, that's amazing. And it also reminds me that I'm supposed to send hellos and regards from Curtis Green, who ordered, so first of all, he's thankful for the research that you have done over the years, and the kind of coverage that you have made on BitMEX Research. And he was also a miner with Butterfly Labs ASIC, and he sort of regrets spending so much Bitcoin on it, but at the same time he received the ASIC basically after he had his Bitcoin stolen by the DEA agents. So he was able to mine some Bitcoin when he had zero Bitcoin left, which was something.

[02:31:32] But it was always funny with this ASIC business, because first of all, they were slow to deliver the devices. And secondly, they cost a lot of Bitcoin, which you could not make back. Like people were mining Bitcoin with their GPUs thinking, okay, I'm going to buy this more efficient machine and mine just as much or even more based on the hash rate that it can produce. But they did not take into consideration that a lot of guys were going to get the ASICs. The difficulty is going to spike up.

[02:32:05] There's going to be a halving of rewards also, and they will never recover.

[02:32:09] Jonathan Bier: Yeah.

[02:32:16] Vlad Costea: But yeah, it's risky business. Mining was always on the bleeding edge of game theory and hardware development. And it's amazing that it's still going like this and it's still competitive. And I hope we also get transaction fees to also compensate for the subsidy, because I don't think we can keep this up to double the Bitcoin price every four years, or maybe you're going to disagree with me.

[02:32:49] Jonathan Bier: Well, I don't think... Yeah, I think doubling the Bitcoin price every four years, that's not sustainable, because obviously, eventually, in about 20 years or so, we'll get to the point where there's no more economic value in the world and Bitcoin is 100% of all the economic value. And therefore, price increases won't make much of a difference. And also, there's other metrics about network security, right? So one of them is, of course, what are mining rewards as a percentage of the Bitcoin market cap? So what is the value of the security budget as a percentage of what you're securing?

[02:33:28] And Bitcoin price increases don't actually help with that, right?

[02:33:35] So even if the Bitcoin price does that every four years, it's still, in my view, a more robust, resilient security budget if transaction fees also increase.

[02:33:48] And also, I think it's healthy, right? That there's a connection between people sending transactions and the miners, and that the people using the transactions are paying for that security in the form of fees. That's a more sustainable, robust model than just kind of relying on new issuance. And then the miners are disconnected from the users. Miners may just say, well, screw it, I'm just not going to include any transactions in my block, and Bitcoin becomes less censorship resistant. If miners are out there competing, working hard, trying to get these fees, trying to get transactions confirmed, then I think Bitcoin's more censorship resistant as well.

[02:34:27] So yeah, obviously, nothing can grow exponentially forever. The Bitcoin price won't carry on doubling every four years. But even if that were to happen, I still think it's a much better, more secure model that transaction fees pick up.

[02:34:43] As Satoshi said in the white paper, incentives transition to fees.

[02:34:49] Vlad Costea: Yeah, I very much look forward to that happening. It seemed like last year, ironically, because of the Ordinals inscriptions, there was a healthy fee market. Now it seems like a tent, and you can actually have a transaction confirmed in maybe 30 minutes by paying the minimum fee.

[02:35:13] Jonathan Bier: Yeah, I mean, I do think that the lowering of the min fee rate is a very good thing. And yeah, even now you can get transactions confirmed sometimes with 0.2, 0.3 sats per vbyte. I think it's very good, and it's helping improve the structure of the market. But even though like you, I want higher fees, I think that the fees are too low, and I worry about mining incentives. I think we also want a well-functioning market that clears at a transparent market, and not having an arbitrary floor of one sat per vbyte, which means we struggle to kind of let the market clear and find a true price, degrades the quality of the market functioning.

[02:35:58] So I think that now that we have some transactions below one sat per vbyte, I think it means in a way the market is more healthy, and it can improve how price discovery works, and we get to hopefully an area of more sustainable higher fees. And I also think that diversity of what's driving those fees is important, right? So we don't want a future where people are using it all for Ordinals, and it's all images driving the fees, and then if images go away, the fees are suddenly low again.

[02:36:33] We want some people using it for payments, some people using it for images, some people using it for, you know, like DeFi or whatever. Some people are using it for zero-knowledge proof, some people using it for low-value payments in Africa, some people using Lightning channels, people using it all over the world, such that it's a vibrant, diverse fee market, such that if any one thing kind of goes down, we don't see prices that volatile. We want a lot of contributing factors all driving it, and that vibrancy and diversity will mean we have a more healthy, functioning fee market, rather than it all being dominated by like one thing.

[02:37:17] Vlad Costea: Yeah, I do agree with you. I think this is Satoshi's biggest bet, right, from the white paper. Like, there are a lot of certainties about Bitcoin, but it's unclear whether or not we're gonna have a lot of transactions to compensate for the diminishing subsidy, which is basically inflation. I did see, I think it was on Twitter, that someone posted that they... I'm sorry, this cat is choking on furballs. They were putting stickers at gas station that Bitcoin has no inflation, when in fact the whole security is guaranteed by inflation, by this monetary policy.

[02:37:59] And it's gonna be interesting to see if we're gonna be able to sustain this economy to make it work. Or else we're gonna go to Peter Todd's proposal of tail emission, which is very unpopular. It's maybe the last resort to keeping the network alive in the event that the miners don't get paid. But it's, according to some analysts, the more sustainable way, because it offers some guarantees as opposed to just letting the free market build or destroy Bitcoin.

[02:38:32] Jonathan Bier: Well, so I think this discussion is another key kind of inflection point between the filter crowd and the anti-filter. So the pro-filter side completely disagree that low transaction fees is a risk going forward. They say things like, as you say, oh, the Bitcoin price can double every four years and the Bitcoin subsidy is gonna be around a long, long time into the future. And they just say that it's not a problem, you know, people can just... We just don't want Bitcoin to change, we can just keep Bitcoin as savings, the price goes up and up.

[02:39:07] I mean, I don't understand why they don't think it's that much of a problem, to be honest. They seem to vehemently disagree that this is a major kind of risk going forward. I agree with you, I think it's one of the biggest kind of risks for the Bitcoin going forward is how do we ensure incentives, how do we ensure miners are incentivized? And I think going to Peter Todd's idea of a tail emission is a very bad and difficult idea for a variety of reasons. How will we ever agree on the right percentage tail emission?

[02:39:39] We're always going to be arguing, should it be 1%, half a percent, whatever.

[02:39:45] Vlad Costea: I guess that's when we reinvent central banking. We're gonna be like, oh, the current policy seems to work well, but maybe that this miner from China should be paid more. So how about we add like half percentage per year?

[02:39:57] Jonathan Bier: We can have a policy committee of people that decide on the tail emission every year. And at that point, people can look at the CV background of the people in the [unclear: committee], the people deciding on it, and quite legitimately criticize them, saying their CV's shit, right? But they don't have enough experience, they've only been in Stanford for two years. But while we don't have that, yeah, I don't think we should criticize people's CV. But yeah, and also I think it just creates so many other problems that there's a disconnect between people using Bitcoin as transactions and people producing blocks.

[02:40:35] And it degrades censorship resistance as well, right? It's much more censorship resistant if miners are dependent on those transaction fees to survive. And then why would they want to censor those transactions? That are paying them, that are supporting their businesses. If it's a block subsidy, then they might be more willing to censor people's transactions and just happily collect that subsidy. So I really don't want that future. And I probably consider Bitcoin a failed experiment if we have to have a perpetual tail emission.

[02:41:08] Vlad Costea: Oh, man, you're gonna go full Mike Hearn.

[02:41:11] Jonathan Bier: Yeah, I'll rage quit and the price will drop to 10%. When Wall Street Journal reports it.

[02:41:17] Vlad Costea: I remember reading that it's the reason why I didn't buy Bitcoin that year. And I felt so smart at the time. I was like, oh, yeah, I was right.

[02:41:31] Crazy. What else did I want to ask you? I think I have some personal questions for you. Like, when do you have time to do such good research?

[02:41:41] Jonathan Bier: Well, yeah, I've always kind of, I've always had like another job. So it's never been my full time job. I've just been like a part time blog writer. And I think I was very prolific in producing research in kind of December 2017 to April 2018. So that is when I produced the best contents, and the longest pieces and the most detailed pieces. And I think I was just motivated because I was also, I was doing it, I had another job, investing into Japan. And I would kind of like, secretly do these long pieces without the permission of my employer.

[02:42:17] And that kind of secrecy helped motivate me to like, kind of be really prolific in producing that content, I guess. So that explains how I was able to produce so much content in the December 2017 to April 2018 period. But yeah, since then, I don't produce as much research content, I guess.

[02:42:40] Vlad Costea: Yeah, but first of all, you should not think that, you know, your glory days are past you because you never know. And maybe you still have a lot of great content in you. Secondly, the pieces that I read are actually more recent ones. And I was always impressed with the depth of knowledge and research, because you take a lot of information. And you obviously spend a lot of time actually searching for it and putting it together, which is something that I really respect. Because in this space, I have to say that most of the research or the journalism, the reporting is mostly made for the purpose of fitting a narrative.

[02:43:18] It has to be bullish, right? And I don't think you concern yourself with that too much. You don't want to be bullish. You don't care about what other people think. You just want to find the truth in your pursuit. And that's, that's something that I really respect.

[02:43:35] Jonathan Bier: Yeah, almost none of the research is bullish or promoting coins or even promoting Bitcoin. It's all like talking about a potential weakness vulnerability or issue and exploring that issue. Rather than saying, Bitcoin is great, everyone should buy Bitcoin, prices going up. Yeah, actually, like, yeah, I recently wrote an article, Treasury Company advisory agreements, talking about these contracts, these crypto treasury companies have with the kind of promoters or strategic advisors, they call them, which are very favorable to the strategic advisors and might not be that favorable for the investors.

[02:44:15] And how a lot of these kind of treasury companies might not be favorable for investors. And one maybe should be bearish on some of these treasury company stocks. And especially the non Bitcoin ones, I think the non Bitcoin ones are often even worse than the Bitcoin ones, in terms of the structure and kind of contracts and agreements.

[02:44:35] Vlad Costea: Yeah, and we saw how a bunch of them actually are performing very poorly. Yeah, I haven't heard too much from them. But it's also funny to see, for example, Cory Klippsten, the swan guy, he made a deal with a French company to build this Bitcoin Treasury stock. And the stock is like 90 something percent down. And instead of talking about it, he's basically going back to his roots attacking altcoins. And farming engagement with this, and maybe that he hopes that people will see what he's also doing, other than shit posting on Twitter, and maybe that they will invest in the stock.

[02:45:19] Maybe it's an interesting marketing strategy.

[02:45:25] Jonathan Bier: Yeah, well, see, for example, if you look at Saylor and MicroStrategy, I think Michael Saylor is doing the right thing, right? He is selling his own stock and buying Bitcoin, and creating new products, like these bonds, like STRC, whatever they're called, and selling them at very attractive valuations and buying more Bitcoin. I think from the company's point of view, that's the right thing. If you can do that, why not do that? You're generating value for the company. But these are probably not good decisions for investors to buy these.

[02:46:02] They're not good for the investors, they're good for the company to issue them. And that's how they're created.

[02:46:11] Vlad Costea: Basically, we are in this bubble right now with all of these Treasury companies that seem to accumulate a lot of Bitcoin. And they just leverage their positions to the point where they take on more debt. And they hope that people will pump their stocks too, to get exposure to that BTC that they hold. I mean, I would love to see Metaplanet succeed. It's just that I don't see how this is. So this is a serious question for you. How is this different from a Ponzi scheme?

[02:46:44] Jonathan Bier: Yeah, there's a lot of difference. I think the main difference is that they're very transparent about what they're doing. So they are creating these instruments, they're publishing it. You know, the disclosure that MicroStrategy makes is very strong on the SEC's website. They're not promising investors a fixed return of like x percent a year, whereas Ponzi schemes typically you promise people, you know, 40% a year returns or higher or whatever. And then you're just funding that over new investment flow. In these structures, they're not committing a fraud.

[02:47:25] They're just raising money, they're creating instruments, they're writing these contracts. So you mentioned the debt. I mean, typically, you know, they're writing these debt contracts themselves. They're writing them in a way that is quite favorable to the company. You know, they have the option of converting them to stock. There's ones with like a variable interest, variable coupon, and the company can add its own discretion, lower that coupon. So they're not promising, like for example, STRC, they're not promising 10% perpetual forever. They're saying, if we want, we can lower that 10% number at 25 basis points every month until the interest rate is very low.

[02:48:05] So I guess the key difference between these and Ponzi schemes is they're not fraudulent, but one thing that the similarity between them and Ponzi schemes is the way a lot of them are set up is they're dependent on a constant new inflow of money in order for them to operate the way they're operating. So MicroStrategy keep needing to issue new shares or issue other new instruments for the flow of money to keep coming in such that they can operate the way they are. However, once that flow of money stops, I don't think they blow up as a fraud, right?

[02:48:43] It's simply that the investors who invested in these things are going to lose a lot of money as the spot price of them declines rapidly, and then people will see, MicroStrategy weren't stupid when they rate these contracts. They're actually pretty favorable. They're still doing pretty well. They're still not forced to sell their Bitcoin. They're still not going bankrupt. They've still got a huge amount of assets. It's just that, oh dear, this STRC thing is not paying me 10% anymore, and the price has crashed 80%. Oh dear, the stock's down 80%.

[02:49:19] So yeah, it's not a Ponzi scheme like that. It's that they probably won't end up in prison. They were a main solvent. It's just that the investors will lose a lot of money as the prices of these things go down a lot. Yeah, and people should read. They should read the SEC filings before buying these things and understand them before buying these things. If you don't understand how STRC works, don't buy it, because I don't think it's the Ponzi scheme at all. I think MicroStrategy had the rights to reduce the coupon, and after three years or four years, I think they can reduce the coupon down to zero.

[02:49:59] That's my understanding. I could be wrong, so don't blame me if I'm wrong. Read the SEC filings yourself.

[02:50:09] Vlad Costea: Also, how do you balance? Because I did see that you have a private account on Twitter. I was not aware of it until yesterday, and you sit on a few company boards and you advise... I'm not sure if it's a treasury company, but it's somewhat connected to it. So how do you combine this professional life with this cypherpunk world of Bitcoin? Because obviously you're not... You're sort of a cypherpunk. You have a math background, you understand basic cryptography, you were a fan of the movement early on to the point where you actually believe that this could be the new financial system as opposed to just an instrument inside of the current financial system.

[02:50:54] Jonathan Bier: Yes, so I guess I've got a background in both. So I'm also like a chartered accountant and I had a career in TradFi. I was like an accountant and an investor into the Japanese stock market. So there's like kind of both elements to like my background. And yeah, I'm an advisor to Bitwise, which is not a treasury company, but a ETP or an ETF issuer. So it creates Bitcoin ETFs and like Ethereum ETFs and stuff, Solana ETF. And it's got other ETPs in Europe. So, yeah, they're not treasury companies because those prices of those ETFs track the price of the underlying crypto very closely, right?

[02:51:34] Within like 15 bits or whatever. And they're very good, strong products in contrast to a treasury company. They've got very clear regulation, they're very liquid. They've got very low tracking error. So I would advise people, if they can, to invest in ETFs rather than a treasury company. So, yeah, I'm an advisor there and I'm also on the board of like Brink, which is a charity that pays for various Bitcoin developers. And I also work with the Arthur Hayes family office, Maelstrom, as Bitcoin grant administrator there. So I give away Arthur Hayes' money to some Bitcoin developers to work on things in Bitcoin.

[02:52:22] So there's four grantees at the moment. Some of them are working on like privacy technology, so PayJoin and also silent payments. So, yeah, I have these other roles as well as a blog writer for BitMEX.

[02:52:38] Vlad Costea: Oh, thank you for that. I think PayJoins and silent payments are some of the most interesting ways to have privacy in this otherwise transparent system. I was also a big, I still am a big fan of CoinJoins on Bitcoin. It's just that the expectations that I had that basically we're going to have blocks filled with CoinJoins did not match the reality. And I guess what happened over the last year and a half with Samurai and privacy in general in Bitcoin was really unfortunate.

[02:53:14] Still is like five year sentence for writing open source code after spending one year in court, just showing up and being humiliated. And what hurts the most is seeing how the reaction of most of the Bitcoin community was to just shrug, [unclear: feeling], eh, got arrested. It was about time, I guess, because we're becoming institutional right now and we're putting on suits pretending that we're never cypherpunks. But in contrast, like I used to give a lot of crap to Ethereum for being corporate and being funded by JP Morgan and being in bed with all the big exchanges.

[02:53:53] Jonathan Bier: The Ethereum Enterprise Alliance.

[02:53:54] Vlad Costea: Exactly. But at the same time, when their tornado cash developers got into trouble, they sent them a lot of money and they support them and they're fighting and they're saying, yeah, privacy is normal. We should be in favor of privacy. It's for everyday people, too. It's not just criminals. And I love that.

[02:54:19] Jonathan Bier: Yeah, I guess Ethereum and Bitcoin have both been through the kind of differing parts of being more cypherpunk and that cypherpunk being degraded in various ways. And I guess Amir Taaki's interview with you was very interesting on that topic when he was kind of very critical of both the direction of Ethereum and Bitcoin in abandoning its cypherpunk roots.

[02:54:46] Yeah, but I think it's fascinating if you look at Bitcoin. Yeah, a lot of people were in the early days are very fanatical, hardcore libertarian cypherpunk type philosophy. But at the same time, a lot of other people were like, oh, we're going to become very wealthy. The Bitcoin price is going to go up a lot. We're going to buy the politicians. I mean, even Ross Ulbricht, I remember people saying when he was arrested, oh, Bitcoin price is going to go to one hundred thousand dollars. Then we're going to be so rich, we're going to bribe the politicians and get him free.

[02:55:16] So amazingly, that basically happened, right? That we became such a powerful lobby. We had so much influence over the U.S. government. We got Ross Ulbricht free.

[02:55:30] Vlad Costea: And also Arthur Hayes, he got a pardon.

[02:55:34] Jonathan Bier: He got a pardon as well. But then, yeah, that's, I mean, less of a significant... That's more of a symbolic pardon, of course, because, of course, Ross Ulbricht was in jail and was released. So that was a very significant event, whereas Arthur Hayes was never really given a material punishment in the first place. But they just pardoned him just mostly kind of symbolically, which is still very cool and important. But, yeah, I guess it's different. So, yeah, I don't know if [unclear: a Curtis Green pardon]... I don't know how much that's on the table. But again, that would also be largely symbolic because, of course, he's now freed from jail.

[02:56:12] Yeah, he deserves a pardon as well, in my view.

[02:56:17] Vlad Costea: Yeah, he does. And there was a lot of misconduct on behalf of the government concerning him. And he suffered a lot. Like, in retrospect, just for that, he deserves the pardon. It doesn't mean too much. Maybe it means a lot to him because he can clear his name and he can have a clear conscience and say, well, I was right all along and the government was wrong and they just admitted to being wrong. What he could get by that pardon is just the right to vote and carry a firearm, which I guess is important in the US.

[02:56:52] Jonathan Bier: I mean, I completely agree with you. I think that misconduct by the government is also, in my view, a key part of the justification for Ross Ulbricht's pardon, right? That the officers involved in investigating him, gathering the evidence that brought him to justice were corrupt and were just stealing money for their own personal benefit. And that wasn't allowed to be used in court in the Ross Ulbricht trial. Because the indictment for Carl Mark Force and who's the other guy? Shaun Bridges.

[02:57:27] Vlad Costea: Bridges, yeah.

[02:57:28] Jonathan Bier: That only came out after Ross Ulbricht was convicted. So then if you remember that timing. So they held back on that for the Ross Ulbricht conviction, then released those indictments. See, that doesn't seem completely right to me. There's a lot of the evidence in those indictments were quite material in the Ross Ulbricht trial, if you ask me. So yeah, I think the fact that these corrupt agents were stealing money to benefit personally was pretty important for both Ulbricht and Curtis Green, in my view. I mean, that should be why... Yeah, I definitely think Curtis deserves a pardon because of that.

[02:58:08] And his mistreatment, he was basically tortured by the government, right?

[02:58:14] And he deserves compensation in addition to a pardon.

[02:58:18] Vlad Costea: Well, yeah, he does. But at the same time, I don't know where the Bitcoin went. I think Tim Draper bought most of it.

[02:58:29] Jonathan Bier: Oh, yeah, the Silk Road auctions, yeah.

[02:58:33] Vlad Costea: I don't think the FBI agents or DEA or whatever, they own much of it anymore.

[02:58:40] Jonathan Bier: No, I mean, we don't know. I mean, likely they sold the Bitcoin for dollars. I think that was in the indictment. Yeah, I think Carl Mark Force, they were like, he sold the Bitcoin on exchanges for dollars. And he didn't buy like a car or something. I don't know. But I don't know how much Bitcoin they have.

[02:59:01] Vlad Costea: I never cared too much about these people until a few days ago when I found out more stories. I mean, I knew there were some corrupt agents, but I was like, just a bunch of regular government employees. But, yeah, it seemed like they were horrible people. They also got Curtis Green to basically fake his own torture and death.

[02:59:28] Jonathan Bier: Well, then they held him down in a bath in a Marriott hotel and took photos of them and sent them to Dread Pirate Roberts. And they kind of manipulated Curtis into agreeing to do that. And then, yeah, they made him take pictures of taking his own death, which is highly unethical behaviour and is not treating him well at all. So, yeah, he definitely deserves a pardon and an apology.

[02:59:54] Vlad Costea: And then he had to pretend he's dead. He could only go out at night and he had to crawl in his own home to make sure he doesn't turn on the lights, stuff like this. So nobody knows that he still or that someone actually lives in his house, and for like six months, which must be frightening.

[03:00:14] Jonathan Bier: And this was used as evidence in court against Ross Ulbricht because they didn't charge him with murder. But they kind of implied that he was guilty of doing paid assassinations when he wasn't. It was the FBI or the DEA or whatever that created it all as a sting operation. They did that against... and they basically abused someone to fake those images. And they were also criminal agents themselves who were stealing money personally. So it kind of really discredits the evidence they put forward in the Ulbricht trial.

[03:00:52] So yeah, it's a pretty sad, horrific story, right? That Bitcoin isn't a joke. But Curtis Green was treated pretty harshly, and Ulbricht, really.

[03:01:08] Vlad Costea: Yeah, and I've always said this to people since I became aware of Ross's situation, which was like, no, I haven't always said this because I became aware of it like 11 years ago, I think, but even if you think that Ross is guilty, the sentence is abusive. Like, what he got was two lifetimes plus 40 years. And the fact that he spent like, 10 years in jail, I think is more than enough.

[03:01:42] Jonathan Bier: Yeah.

[03:01:45] Vlad Costea: Like if he had parole, and he could go in front of another judge and present his case, I'm pretty sure that he could get out after five, six years. Because the other Silk Road operators that basically got arrested after him, not just Silk Road, just dark net markets in general. They all got much lighter sentences. Like, I don't think anyone actually stayed more than five years in jail.

[03:02:10] Jonathan Bier: Well, yeah, there was a lot of politics in that sentencing. And in a way, they treated him very harshly, because he didn't just break the law. He potentially undermined the law, right? So he was building systems and technology that could enable people to break the law on a mass scale, which the Justice Department probably were much more negative about than any other criminal, a bit like Aaron Swartz, right? See, he didn't just supposedly break the law by like, publishing, legal documents, he built technology and systems that enabled anyone to kind of view these legal documents.

[03:02:49] So even though that maybe the actual crime he committed was technically a very like minor offense, like accessing like the MIT computer systems or whatever, he wasn't supposed to, the impact of it enabled a potential big change in society. So the justice system looked down on him pretty negatively, and maybe treated him really harshly, which obviously had very bad consequences.

[03:03:15] Yeah, I don't know if that's a fair comparison between those two. Maybe not fair, but both of them were kind of activists in a way and building systems that would potentially undermine the way their system works.

[03:03:31] Vlad Costea: Yeah, and it's useful to also bring Aaron Swartz into the conversation, because he was an early Bitcoiner, and he was also someone who lived and projected this spirit of changing the world with open source, and being pretty much of a cypherpunk. And I wish we had more of this in Bitcoin, we still have it, but it's just sort of fringe. And there was a time when this wasn't fringe, it was sort of the norm.

[03:04:03] Jonathan Bier: Yeah. But yeah, the culture was never going to scale. Right? If Bitcoin takes over the world and becomes the dominant currency for transactions, that doesn't mean people's opinions in society are going to become more cypherpunk. It just meant the economic incentives were there. It doesn't mean that libertarian values will necessarily take over, right?

[03:04:30] Vlad Costea: Yeah, you're right about this. I think this is a recurring joke at cypherpunk conferences where they say, well, I built this and then 100 people think it's cool, but then the rest of the world doesn't care. Because they need, first of all, to have a certain mindset to accept it, to find its usefulness. And then they also need a technical level like PGP or whatever, something that they know how to use. And by virtue of being difficult to use, it's never going to get mass adopted. But you can say the same about Bitcoin Core, for example, like it's clunky, it hasn't really improved over the years.

[03:05:11] It's been used like this backbone for the software, and maybe nicer interfaces were made, but on top of that.

[03:05:22] And ultimately, I think you quoted me at one point with this that I said that the ETF is the scaling layer for Bitcoin. I don't think I'm the first person to say it, but it seems like this is gonna be the case that the normies are not gonna be using any kind of Bitcoin layer at all. They're just gonna buy paper Bitcoin.

[03:05:43] Jonathan Bier: It's a layer two system, the ETF. It's a custodial layer two system. And you can do things like DeFi on it. So you can use your... you can buy or sell the ETF shares using a broker on the stock exchange without any on-chain transactions happening. You can use it as collateral to borrow other financial assets like DeFi type stuff. So the ETFs are kind of a layer two technology, a custodial one.

[03:06:16] Vlad Costea: Plus, you have the privacy of not broadcasting everything to the entire network. Yeah. It's like client-side validation.

[03:06:25] Jonathan Bier: So BlackRock runs, I think, maybe one of the largest Bitcoin layer twos. So if you're gonna compare it, my point was if you're gonna compare this to other custodial layer twos, like the Ethereum one, that in my view is comparable to BlackRock's IBIT. They're quite similar in characteristics. That it's fully custodial. So your assets could be frozen, or they could lose the private keys. And you can use it off-chain to do things like use it as collateral to borrow other assets. So it's the mechanics of BlackRock's IBIT and WBTC on Ethereum, in my view, are quite similar.

[03:07:10] And there you should compare them.

[03:07:13] Vlad Costea: Well, that's an interesting point of view. But I don't think you can send your IBIT shares as quickly as your WBTC to someone else around the world. And I don't think you have as many options. Like earn yield or whatever you do on Ethereum.

[03:07:29] Jonathan Bier: There's probably more options to earn yield on IBIT, right? Because you can, your broker can lend you like thousands of different types of assets using IBIT as collateral. Probably a better mix of assets than exist on Ethereum.

[03:07:43] Vlad Costea: Right. But it's not an open protocol. You have to actually negotiate a deal. You have to go like the old school way. You don't do it just by clicking your mouse a few times.

[03:07:55] Jonathan Bier: Yeah, you do. And you do do it by clicking your mouse a few times. You go into your stock broker account and you click away, right?

[03:08:03] Vlad Costea: Or are these options available for your IBIT?

[03:08:06] Jonathan Bier: Yeah, for a lot of people, yeah. You have a broker that allows you to use leverage.

[03:08:13] Vlad Costea: Okay, I'm not saying I'm gonna try that, but I'm sort of impressed. And I'm not saying I recommend anyone to do that.

[03:08:23] Jonathan Bier: Yeah, I'm not recommending it. I'm just comparing it.

[03:08:28] Anyway, I think I've got to go now. But thanks so much.

[03:08:32] Vlad Costea: Let me ask you one last question just to end. No, two of them. First of all, can you name three altcoins that are not shitcoins? Like something that's legit out there. It's not Bitcoin, but it has its place in the world.

[03:08:47] Jonathan Bier: Personally, I have a bias in favor of fair launches, as I was explaining. So I just don't like the idea of giving money in an offering to a team. So yeah, I like Bitcoin, Monero, Dogecoin, Litecoin, all these kind of fair launch [unclear: Counterparty, XCP]. Those things that didn't have a fair launch, there was no offering, there's no management team, no board. If you want to invest in a company with a management team and a board, you should go to the New York Stock Exchange in my view. So yeah, I don't know if that answers the question.

[03:09:27] Vlad Costea: Also, the last question is, do you believe that Satoshi was a big blocker?

[03:09:33] Jonathan Bier: No, I think if you read Satoshi's writings, it mostly looks like that there was some, some of it was sympathetic to the small blocker view on how to change the rules. Satoshi talked about the rules being set in stone, a second client being a menace to the network. And he like opposed Jeff Garzik's block size increase saying, you know, this will make you incompatible with the network, don't do it. On the other hand, some of Satoshi's writings were in favor of very large blocks. So as you say, in the reply to James A. Donald, he compared it to Visa level transaction volume.

[03:10:15] So yeah, it's in mostly Satoshi appeared to support the small blocker philosophy on having robust consensus rules and them being hard to change, but seemed to often agree with the larger blockers on the more narrow but literal question of having larger blocks.

[03:10:36] Vlad Costea: Oh, that's a good answer. Thank you very much, Jonathan Bier. You can follow him at BitMEXResearch on Twitter. You can read his blog, which is I think blog.bitmex.com. Yeah. And also he has a personal account. If you're into that, it's Jonathan Bier. Bier is B-[unclear: I]-E-R, not double E. And what else? I hope I'll see you at some event sometime.

[03:11:04] Jonathan Bier: Well, I'll see you in the UK if you're coming in a couple of weeks. If you come to London, it'll be great to meet up.

[03:11:09] Vlad Costea: It will be Manchester. I'm not sure if it's London.

[03:11:12] Jonathan Bier: Okay. So, oh yeah, I don't think I'll [unclear: head up] to Manchester. So yeah, maybe we'll meet at some event at some point, I'm sure.

[03:11:21] Vlad Costea: I hope so. And yeah, that's how people can follow you. That's it. Thank you very much for listening. Thanks to the sponsors. Once again, Noones, SideShift and Bitcoin.com News and LayerTwo Labs. I'll see you in the next one. And best of luck, Jonathan. And remember, don't filter your nodes. Enable permissionlessness.

[03:11:42] Jonathan Bier: Cheers. Bye.