Ep. 30 Mickey Sets His Eyes On Bitcoin
In this episode of The Unhashed Podcast: FinCEN just announced its first ever penalty on a “crypto exchange”, but in reality the guilty party was just a power crypto trader. Is this going to be the new normal in the crypto space, with regulatory agencies acting a de facto muscle man for the larger more formal trading platforms? Bisq is finally launching its allegedly long-awaited DAO. Is this just more shitcoin bullshit or a clever ruse to make regulating the DEX more difficult? And...Can Disney do for Bitcoin what it did for itself by making congress its bitch in the realm of IP protectionism?
0:04:55 Moon browser extension and startup drama
0:09:40 Canadian provinces offering incentives to attract bitcoin miners
0:13:05 FINCEN and US Justice Dept. assign punishments very differently
0:15:54 Does Bisq really need a token?
0:33:20 Gemini adds full SegWit support
0:35:53 Belarusian government funds mining project
0:39:43 Disney offered controlling stake in crypto exchanges
0:43:10 Retirement of the ICOMG section...and special announcement of the first Unhashed Podcast "swag"
0:44:53 Listener questions about SegWit and Blocksize
1:10:33 Lightning Round!
Weekly News Wrap Up:
Crypto payment startup Moon has announced an online web browser extension that allows crypto users to make purchases on e-commerce sites like Amazon.com with Lightning Network payments. However, according to a post on r/startups, one of the co-founders is whistleblowing the app for ousting him
A number of provincial governments in Canada, including British Columbia, Quebec, Manitoba, Alberta and Labrador, are offering lower rates to attract bitcoin miners and Labrador’s government is considering energy incentives to attract what it says are “outstanding requests for service” from bitcoin and other “data centre” processors, according to a report from the National Post.
FinCEN announced its first ever penalty on a “crypto exchange” via its website on April 18, 2019, declaring that it had levied a civil money penalty against bitcoin trader Eric Powers for “[failing] to register as a money services business, [having] no written policies or procedures for ensuring compliance with the Bank Secrecy Act, and [failing] to report suspicious transactions and currency transactions.”
In other words, Powers was acting as an unregistered exchange by carrying out approximately $5 million worth of transactions, carrying out individual transactions worth more than $10,000 over 200 times. Earlier this month, Jacob Burrell Campos was charged by the U.S. Department of Justice for similar crimes, acting as an unregistered exchange. A key difference between the two cases, however, is that FinCEN quoted a civil penalty of $35,350 dollars for Powers while Campos was sentenced to two years’ imprisonment. Both men were required to forfeit $100,000 and $800,000 in crypto assets respectively.
Bisq, one of the Bitcoin’s more well known decentralized exchanges, introduced version 1.0 of its software this week, which includes what the developers call Bitcoin’s first DAO. “[It] is (to my knowledge) the only attempt of its kind to decentralize a project's management and funding to the extent it does,” Steve Jain, a Bisq contributor, told Bitcoin Magazine. Bisq’s software operates on Tor, and each user must run their own separate instance of the program (akin to running a node on a much smaller scale) to access the exchange, making it completely peer-to-peer.
The privacy-minded exchange offers a rare, KYC-resistant fiat ramp for bitcoin trading, allowing users to facilitate fiat exchange with payment apps, bank wires and even hard cash swaps, like LocalBitcoins offers - minus the KYC. With each trade, bitcoin is locked away in multi-signature contracts, requiring arbitrators to resolve any conflicts should a dispute arise in a trade. “The DAO was intended to be a part of Bisq from the day it was first conceived in 2014,” Jain revealed, adding that this launch has been in the works since before even the infamous Ethereum DAO.
Gemini, the cryptocurrency exchange run by the Winklevoss Twins, has become the first major exchange to add full support for SegWit, including bech32 (native segwit) addresses, as explained in a recent medium post. (additional article here) They cite several reasons, including fee savings and being foundational for further developments like lightning.
President of Belarus proposes major data center for bitcoin mining. This is seen as a move to try to improve the country’s tech sector and reduce their reliance on oil and gas. On twitter, Nic Carter shared the news in a thread showing that Belarus is following in the footsteps of the Philippines and Georgia as countries that are setting up policies to encourage cryptocurrency development within their borders.
Disney has reportedly been offered a controlling stake in the parent company of South Korean video game publisher Nexon, which specializes in online games for PC and mobile. Nexon is the biggest game developer in South Korea and is the world’s second-largest online games market. Its parent company, NXC, owns two major cryptocurrency exchanges: Bitstamp, based in Luxembourg, and Korbit, based in South Korea. The deal comes via a private sale offering from South Korean Billionaire and NXC Chairman Jung-Ju Kim who has been looking to unload his stake since January and will take final bids by May 15th.
Colin: Hello and welcome to the Unhashed Podcast, the show where we bring crypto down to earth and cut through all the block chain bullshit, I'm your host Colin Auld and I'm here with your co-host Ruben the Windmill, the Dutch Rudder, Somsen,
Colin: And your other co-host Mario, the maple leaf, the gib, the jib, the glib, the tactful but verbose, Gibney.
Mario: Hi everyone.
Colin: I'm feeling rhythmic today, I’ll see if I can do it one more time.
Mario: You sound rhythmic.
Colin: My brother, my blood, Bryan, the belt buckle Aulds.
Colin: There he is. I think that's three in a row right there on arrhythmic introductions for my co-host. What do you guys think?
Bryan: I think you've got a backup career if this podcast doesn’t pick it up.
Colin: I had a backup career before this podcast was going to fail, thank you very much.
Bryan: You could be an amazing slam poet.
Colin: I could you know, my favorite slam poetry scene is the Mike Myers scene from – I believe it’s, I married an axe murderer, where he goes – “woman, wo-Man! You guys remember that part of that movie?
Bryan: I’ve never seen that movie.
Mario: That movie is pretty bad.
Colin: It’s so good!
Mario: Really, it sounds pretty good Bryan.
Colin: That scene is great, that scene is so good. Well anyway, guys welcome to our show, this is actually – if you can believe it, can you guys believe we’re on 30 episodes right now? This is the big 3-0!
Ruben: Yeah, I saw the total timer; we recorded like 2 full days of recording –
Bryan: Yeah, like 45 hours, something like that.
Ruben: Its 48 hours I guess after this show.
Colin: Oh, is that how many hours are in two days?
Ruben: No, I mean that's actually the amount of recording we will have done after the show.
Colin: Oh. After the show. Okay yeah.
Bryan: That's making me think that we could make things a lot easier for the next 30 episodes, we can just do it all in one go. We can lock ourselves in a room for 48 hours and just talk –
Mario: Doesn’t sound problematic at all.
Colin: You know, we could actually realistically all live where we live and still do an in person show if we just committed to every quarter – or every six months even, every two quarters, getting together and just pumping out every episode in two days. We just record nonstop.
Ruben: What about if we just talk about an exchange going down and everybody losing their money and we insert the word of which exchange it is later – that will work right?
Colin: It would probably work better – I mean we joke but it would probably work better than we are expecting it would, actually. I don't think it’s a horrible idea. You've had worse ideas.
Colin: You're welcome. Well guys I guess we can hop right into it. We’ve got a decent amount of material to work with here today, so let’s hop in.
Number 1: Crypto payments startup Moon has announced an online web browser extension that allows crypto users to make purchases on ecommerce sites like Amazon.com with lightening network payments. However, according to a post on our startups, one of the co-founders is whistle blowing the app, for – I guess what I can tell is, he’s basically been ousted by force from his cofounders and then I don't know if there was some other red flags there or if that was the bulk of it, I was just made aware of this by Ruben literally as we were about to start recording so – can you read the whole thing Ruben?
Ruben: Yeah. I mean there are like three whole posts he made, or at least two posts, one is on our startups where he just kind of very generically talks about the problem and he didn't initially say which startup he was working for, and then later he went on to post it on Reddit, unfortunately that post disappeared but you can still find it if you Google for it, and basically what happened is that, he started this project with him being the CTO and the CEO essentially being somebody that in hindsight he said he probably shouldn’t have worked with but he did and the end result is basically that he got kicked out of the company, without any shares and he did the majority of all the programming work and he also has a bunch of complaints about how the CEO is handling security, apparently they have coin based API keys stored in an insecure way and they can literally take all your money and the extension is apparently also tracking every site that you go to, including the ones that are not coin based or Amazon, the ones that they are trying to actually target. So, yeah, it’s basically the extension is tracking you, the data they are storing is not secure. They can theoretically I guess take money from your coin-based account if you have it linked and their CTO was just completely mishandled. Therefore, I think this is not an app you want to trust unless there are some significant changes that somehow rectify this whole situation.
Colin: Was he ousted only after whistle blowing the security stuff or did, he just whistle blow the security stuff after he was ousted?
Bryan: Yeah that's what I was about to say, I think we do need to disclaimer: this is based on one person who could be a jilted lover, we’re not sure.
Ruben: Yeah, I find his story very convincing but that is absolutely true and yeah, it’s kind of a combination of both because essentially their CEO was not giving him access to certain things and was not allowing him to do things that he thought were necessary for proper security. So – but yeah, he got kicked out and after that he whistle blower on the security issues because those were things that he wanted to fix but didn't get the chance to fix basically.
Colin: Yeah I mean maybe this is just my inner pessimism coming out but I just assume automatically, if I am adding a chrome extension and its asking me to log in to different accounts – A] I assume its tracking everything I do on those accounts and B] I assume it’s also gathering data on everywhere I go on the internet because that is just how most of these apps make money in the first place, is by selling this data to third parties. So, I'm not terribly surprised by that.
Ruben: That's pretty jaded I’d say, obviously I’d agree that that risk is always there and it’s not great that you have to rely on how trustworthy the company seems in order to have some kind of security or hunch your chrome extension, but the fact that this is so clearly and openly happening I think is a pretty big red flag and it does make sense to at least avoid the grave offenders.
Colin: Number two: a number of provincial governments in Canada including Bridge Columbia, Quebec, Mario is it Que – beck or K- Beck?
Mario: It depends how French you want to sound.
Colin: What is the most French way? K-Beck, right?
Mario: Yeah. If you want to sound really American you could say Qee-Beck!
Colin: That's just awful, I would never even dare. Manitoba, Alberta and Labrador are offering lower rates to attract bitcoins miners and Labradors government is considering energy incentives to attract what it says are outstanding requests for service from Bitcoin and other “datacenter processors”. According to report from The National Post. Not much to say here but just interesting that these provincial governments are maybe offering incentives to get more Bitcoin miners. I wonder why they care who is using the power?
Ruben: I just wonder if it’s profitable.
Mario: I mean, I think it makes sense cause a lot of – the places here, like I'm not sure about Manitoba and Alberta but I know that British Columbia, Labrador and Quebec are well known for having just tons and tons of hydro power that often they don't know what to do with, and I know that recently – like there's a big rush towards Quebec for security mining power and they weren't sure what to do with it so they assigned all these really unfavorable rates for anyone trying to use power for mining and I think it was meant to kind of just temporarily stem the tide cause they couldn't deal with this big influx of people or of demand and like the power was there but I guess they didn't have the bureaucracy set up or whatever but then I think it was a month or two ago, they actually ended up dumping water out of one of their dams because it was getting too full and the pressure was building up and so – it’s good to see that at least they're moving in the right direction long term here, but yeah it is good to see this news at least coming out and I think it makes sense. I think Canada actually is – I'm biased because I think it would be pretty cool if we kind of became a big mining nation, but I think we’re pretty well positioned for it, just A] we do have a lot of excess hydro power which is very well suited to Bitcoin mining because it doesn’t fluctuate with day and night cycles like solar power will or like wind and it – hydro power tends to be – its limitations when it comes to human demand, like location, you don't often have hydro plants just sitting outside f large urban centers and so they have to deal with transporting the power somewhere. Miners can go just set up their data centers near the dams themselves and there are other advantages like its cold in Canada a lot of the times, so it saves – it doesn’t cost as much to cool down your main supplies and we’re pretty well – Canada has got a decent tech scene, you can find – you can source talent – you're not going to have to worry about your internet connection and there are a lot of regulatory hurdles but we’re stable, we’re not going to deal with situations like in China where like twice a year the government decides they're going to scare all the miners and make them feel like their leaving. We’re probably getting pretty consistent over time. So, I'm not terribly surprised by this, I think that – I would guess that you're going to see a lot of mining in Canada happen in the coming decade.
Colin: All right, well that's that. Number three – FINCEN which I believe stands for financial crimes enforcement network announced its first ever penalty on a “crypto exchange” by its website on April 18, 2019, declaring that it had levied a civil money penalty against Bitcoin trader Eric Powers for “failing to register as a money services business having no written policies or procedures for ensuring compliance with the banks secrecy act and failing to report suspicious transactions and currency transactions” in other words Powers was acting as an unregistered exchange by carrying out approximately 5 million dollars’ worth of transactions, carrying out individual transactions worth more than $10,000 over 200 times. Earlier this month, another person Jacob Burrell Campos was charged by the US department of justice for similar crimes acting as an unregistered exchange. A key difference between the two cases though is that FINCEN quoted a penalty of $35,000 for Powers while Campos was sentenced to two years imprisonment. Both men were required to forfeit a $100,000 and $800,000 in crypto assets respectively. So pretty big difference here between these two agencies in the way they chose to deal with them. I found it interesting that they were considered exchanges simply because – I guess because of the volumes of the transactions they were doing, because it sounds like they were basically just running really high-volume local Bitcoin deals. More or less. They weren't like an exchange you can go sign up for and transact with. Someone had to know him or something.
Bryan: Yeah, I'm not sure where the line in the sand is when they're looking at these things, like ‘oh he was just buying it and then selling it for personal use’ versus, he was buying and selling as a business, which it seems like that's pretty grey, like where that line would be. But I think –
Colin: Yeah both of these cases it probably – I would say were well over into the black, as far as – and they're probably looking at the time like ‘oh well he bought and then sold like within five hours of each other’ whatever –
Bryan: Yeah, I guess the lesson here to learn is, if you're going to piss off one of these two agencies, piss of FINCEN and don't piss off the Department of Justice cause the Department of Justice is going to have a heavier hand for you. So yeah, I wonder if you're Jacob Campos, if you try and appeal this saying ‘well this other guy was doing the same thing and he only got fined, I got to go to jail for two years, what's with that?’
Mario: I think it might also be difference in terms of scale here because both were required to forfeit $100,000 and 8 – sorry is that a 100 Grand US dollars and then 800K in crypto and they both were required to forfeit the same amount? Is that -?
Mario: Or was it that one of the them a 100K [inaudible 16:17]
Colin: I believe one had to forfeit a 100 and the other had to forfeit 800.
Mario: Oh yeah, cause my understanding was like Campos – like sure, probably it had to do with the agency that took him down but I would guess it’s got a bit – like probably got a lot to do with the amount of volume they were dealing with as well.
Colin: I don't know if that's necessarily the case, I think the difference – I think the agency probably went to both of them and said, you need to hand over all the Bitcoin you have and that was all the Bitcoin both of them had, just Campos had more left in crypto. That's what I thought when I read it.
Number 4: Bisq one of Bitcoins more well-known – I have internalized my phones autocorrect – one of bitcoins more well-known decentralized exchanges introduced version 1.0 of its software this week, which includes what the developers call Bitcoins first DAO. “It is to my knowledge the only attempt of its kind to decentralize a projects management and funding to the extent it does,” Steve Jain a Bisq contributor told Bitcoin magazine. Bisq’s software operates on Tor and each user must run their own separate instead of the program, akin to running a node on a much smaller scale, to access the exchange, making it completely “peer to peer”.
The privacy minded exchange offers a rare KYC resistant fiat ramp for Bitcoin trading allowing users to facilitate fiat exchange with payment apps, bank wires and even hard cash swap like Local Bitcoin offers, minus KYC of course. With each trade Bitcoin is locked away in multi-sig contracts requiring arbitrators to resolve any conflicts should a dispute arise in a trade. “The DAO was intended to be part of Bisq from the day it was first conceived in 2014” Jane revealed, adding that this launch has been in the works since before even the infamous Ethereum DAO.
So, we were kind of hesitant to talk about this today but then we started talking about it amongst each other and then I just said, well let’s just hold off and then talk about it in the actual podcast. So, it seems like what Mario and Ruben were saying is that they totally don't understand how its proporting to work but it seemed a bit over engineered maybe you would say?
Ruben: Oh well not just over engineered, they are creating a token which is always a very questionable thing and then they are making this claim where they're saying, oh we were envisioning the DAO before the DAO in 2014, whereas Bisq hasn't been around for that long in terms of actual people being aware of the project and now they're using – first they're introducing the fact that they've been working on this for “5 years” and then they utilize that to award themselves tokens. They're giving themselves something like 3 million tokens to compensate them for this supposed five years of work.
Bryan: But how do they – sorry, how do they give themselves tokens, cause my understanding is, they're not just creating tokens, you have to input a Satoshi to get out a Bitcoin. Like there's coloring Sats right?
Ruben: No, it says 3.6 million Bisq has been minted in order to compensate the team for more than 200 contributors for their five years of labor to get Bisq and its DAO up and running. So that's what it says. So minting, awarding, clearly, they're creating these tokens.
Bryan: You can put all 3 million of 300,000 or whatever the number is on to one Satoshi, if you want it.
Ruben: Right. Yeah.
Oh! Okay. I thought 1 Sat equals 1 Bisq and it’s just that input output is always equal. No.
Bryan: So, like, I could have a Satoshi with 10,000 but you could have a Satoshi with 100,000 and then you could spin that and split it into 1 Satoshi with 50,000 and another Satoshi with 50,000?
Ruben: I mean you don't even have to do the Satoshi; I think it’s better to just think of it as a coin that is just completely disconnected from Bitcoin, thinking about it just makes it more confusing, I think.
Bryan: I think I kind of disagree because the security model rides on top of the Bitcoin miners because using colored coins.
Ruben: Yes, I mean the currency. So, it runs on the Bitcoin network but it doesn’t matter how many Satoshi’s I'm moving in the background, that's what I mean.
Bryan: I agree with that. So I guess while I understand all of your critiques, I think that from a regulatory perspective you might be missing something and the fact that Ether Delta guy was hemmed up by the SEC and made to pay a bunch of money and I'm sure was threatened by the Justice Department, we kind of just talked about the difference between the two basically. So when these guys are looking at that, they're seeing “oh we’re doing something similar, how can we put another layer between me personally and what Bisq does in general” and so I think having the tokens and then having some sort of corporate DAO, whatever you want to call it, I just basically think of it as shares in a company and if you – like all had equity in this company and had worked on it and you wanted to divvy up – and its making money, so they need some way to divvy up the proceeds the company is making, then having it ride on this token seems like a somewhat effective way to do it.
Ruben: Yeah and I do think there is some level of security or – they do get some distance from regulators by doing things like this but I guess they're also in a way trying to obscure things and that makes it harder for regulators to get them but that also makes it harder for users to trust what they're doing because it’s now this convoluted complex system and it’s hard to get a gauge that what they're doing is correct or not, and it’s not just that they're awarding themselves coins – they're even – If I'm not mistaken, they're minting new coins to award future people that help them out and the process as to who gets the money is decided by the stakeholders and then obviously since they have five years’ worth of stake, they are the ones who are the stakeholders. So I'm not disputing that, that might be the case where they opt to escape things to a degree where it’s hard for regulators to get to them and there's certainly a high level of – in general like a crypto currency stead that are kind of taking that strategy where it’s just hard to point to who you have to arrest, if you wanted to arrest somebody, but that doesn’t alleviate my concerns as to whether or not this is scamy or not –
Colin: Sorry what does the – go ahead Bryan.
Bryan: No I guess, what are you worried about as far as – so there's this exchange that matches asks and bids – or I guess there's a system out there that is matching asks and bids and here the person either giving the bid or the ask is maintaining control of their coins the whole time, so what are you worried about the owners of the tokens running away with?
Ruben: I'm worried about the ICO aspect of this, so even though they're not directly selling the coin to investors, they are indirectly doing so by awarding themselves coins that they can then sell to the market and they are then generating new coins for people that do the work that they deem useful, such as marketing. So you know, I'm not disputing that maybe this – I don't think it does a lot to – for people that are using it to just trade on the platform but I'm just saying the whole system around it seems to have a lot of bad incentives that just revolve around pumping the token.
Bryan: So, what would be the different – just take the word token and then insert the word share and what would change about what they're doing? I don't think it would change at all, like they all have sweat equity, or I assume anyway that the people who are dolling out the tokens/shares, all have what they all deem as – let’s just assume anyway, for the sake of this conversation that everyone who is getting awarded the shares, feels like the share distribution was equitable, was fair. And then they're controlling this entity, the shareholders, that sounds like just a regular company. And the fact that they can then create more shares again, just like any other company – so I don't know, I was just kind of like –
Ruben: Yeah so, I think there’s kind of like a theoretical possibility of doing this all by the book, but A) there is no regulation to oversee whether or not it’s being done by the book. B) They are introducing a bunch of complexities that are not there in the traditional system. The very fact that you can buy and sell this token on the market right away, that's not something that regularly happens with startups. You know, when you have equity, it’s not like there's a liquid market out there that allows you to get in and out, pump the token and then get out and just abandon the project. On top of that, it’s also supposed to be some kind of utility token because it’s going to be like the currency that you pay –
Bryan: It provides discounts for trading. Yeah. It gives you discounts on trades.
Ruben: Yeah, so I'm disputing that its theoretically possible to do it the right way, I am just questioning whether or not that's happening here and whether the incentives especially would have any open markets where there is clear profits to just pumping it. If that happens, they've just got a natural incentive to go for lots of marketing and get your coin pumped up. So, it just worries me all over the place and I'm not fully convinced that they're strategically solving the issues that they're trying to solve.
Bryan: Yeah, I am not going to weigh in on whether they are solving the decentralized versus centralized exchanges. Yeah, I haven't looked at that code and even if I did, I wouldn’t even trust myself than reading Greek, but I will say that the inefficiencies surrounding startup equity are extremely large. The Billfodl equity is tracked literally on a binder, like with pen and ink. So, it is not like –
Which is fine when you only have two people, but –
Bryan: Yeah, but if you have these contributors that are all putting in significant amounts of sweat equity and they built this thing that is making money and yet maybe one of them has to pay for diapers, it seems like having access to that liquidity is a positive thing rather than just “Hey I know that you have to pay for diapers, but the ledger of ownership of this company is sitting on a literal three ring binder in someone's desk and you can't just go sell it because that's a pain in the ass” that is not a good system, and –
Ruben: I think the – yeah sorry.
Bryan: No go ahead.
Ruben: Yeah, I think the – again its theoretically possible but we live in this world where we’ve seen all of these friggin ICO’s with all these coins coming up and every time it just becomes this shit show of things pumping and dumping, people abandoning projects and can it theoretically be different? Is this time going to be different? It’s all possible but I'm just severely skeptical considering what's been happening and the degree to which this is kind of like a new or unique or convoluted thing is just so high that I think it requires a significant amount of convincing to really prove that this is not one of those moments where it’s just going to be an utter issue.
Bryan: And, I don't want to be on record saying, Bisq is the thing that will change the world or whatever, like I'm not saying that this is the time when –
Ruben: This time it’s different.
Bryan: Yeah, exactly. I totally understand your pessimism. I mean we have a section on this show, God rest his soul, called ICO My God, They're serious, like I totally get what you're saying as far as the track record but the free market theory as far as it goes, does seem to suggest that we need to have - liquidity in these markets is better than not.
Ruben: I will say the free market theory suggests that we need pumps and dumps because that's what the market wants. Everybody wants pumps and dumps, that's kind of the problem and that's why the free market doesn’t really work because that's what you get, that's what people are clamming for you know, but yeah look, to your argument, I agree that there is definitely – there is probably a way in which you can do this where it’s all legit and it all adds up and it just kind of all makes sense. So hopefully these Bisq guys have figured it out because I liked their project before, they seemed to be very Bitcoin focused and trying to do the right thing and now suddenly this token pops up and it just red flags all over for me and that is very sad to see, so I really hope I'm wrong and I hope these guys do know how to get it all working in a way that we all want it to work.
Mario: Yeah, I guess Bryan is just saying that just because it’s been all bath water so far, doesn’t mean we shouldn’t keep our eyes open for a baby.
Bryan: Well I think it’s like how many airplanes had to crash before one took off and flew, like a bunch! And I'm not saying that this one –
Mario: I will bet you there were fewer failed airplanes than there have been ICO pump and dump.
Bryan: I don't think so, I bet there are a lot more failed airplanes but –
Mario: Research for next episode –
Bryan: Yeah maybe but eventually we’re going to figure out how this structure works and I think it’s going to make a big impact on corporate governance structure.
Colin: We shall see, I don't want to spend too much more time on this because we have a lot to go through, but I did want to ask Bryan real fast, I'm confused as to how adding a coin creates less regulatory risk and not more? It seems like once you add these coins into the mix, it just becomes a huge gamble for – If you're reachable, is the idea that it just creates – is it security through obfuscation like I don't know who belongs to who or who has what so I don't know who to arrest, or - ?
Bryan: Yeah, I think that's the model, if you're going to go on this, if you're going to put out a coin, because I get your point. On this if you're going to put out a coin then you have to stay either very minority share, so like, oh well I only owned 0.5% so it’s not like I can make any decisions anyway or be completely anonymous.
Colin: Got you, okay. Number 5: Gemini, the crypto currency exchange run by the Winkle Voss twins has become the first major exchange to add full support for SegWit, including bech32 addresses. As explained in a recent medium post, they cite several reasons, including fee savings and being foundational for further developments like lightening. So, yeah more good news from Gemini, seems like they've been doing some cool stuff ahead of that last week the cheeky tweet they sent out saying that they actually never supported Bitcoin SV. So yeah kind of interesting stuff I don't know if you guys have anything else to say about that, but its good news.
Bryan: I think its kind of interesting cause I know that the Winkle Voss twins and Gemini, they don't really seem to get involved with a lot of Bitcoin happenings in the internet. They seem to position themselves a little bit separately and I know that they also are in the eye of a lot of Bitcoin community with their marketing campaign.
Colin: Crypto Need rules.
Bryan: Crypto Needs Rules and kind of appealing to people who wanted regulation stuff and yeah so it is interesting as well to see them being one of the first exchanges to – first major exchange to add full SegWit support. Considering that SegWit is like – the fact that a lot of exchanges really drag their feet and are still dragging their feet on SegWit, has been kind of a frustrating thing for a lot of proponents of it to watch, especially since a lot of people are complaining about traffic fees being high when we know a lot of these transactions on chain are just between exchanges. So, if they implement SegWit, if they start doing things like batching, that's going to alleviate a lot of things that people complain about and then almost none of them really jumped on SegWit when it came out. So, it’s nice seeing Gemini do this, especially since they're not one of the kind of – they don't style themselves as a very ideological company really trying to be one of the hardcore Bit coiners, hard core companies there. They seem to be presenting those “yeah we’re just a business, we’re here to – “yeah so, I think it’s a pretty validating thing for SegWit as well that they wanted to do that.
And hopefully as well it puts pressure on their competitors to do the same.
Colin: Yeah totally agree.
Number six: President of Belarus proposes a major data center for Bitcoin mining. This is seen as a move to try to improve the country’s tech sector and reduce their reliance on oil and gas. On twitter Nic Carter shared the news in a thread showing that Belarus is following the footsteps of the Philippines and Georgia as countries that are setting up policies to encourage crypto currency development within their borders and I think I read in a separate news article that they were going to try and run it off of a nuclear power plant. Is that right?
Yeah, I saw that.
Colin: I don't know who added this news item but –
Bryan: I read the news item; I didn't know the part about the nuclear power but I think that also makes sense. I think – I was raving about hydro earlier in this podcast but nuclear is also a type of power source that's very, very well suited to Bitcoin mining just because there are places in the world where there's a lot of excess nuclear power that's like a steady stream and it doesn’t fluctuate day and night or with other variables to control, so yeah it doesn’t surprise me at all that it would be done, and yeah also it’s an ex-Soviet, eastern European state so they're kind of known for their nuclear power plants, and yeah its interesting as well. I don't know how successful this is going to be in invigorating Belarus’s tech sector, it might be – I have no idea. But it’s interesting to see it like – we’ve really come a long way if countries are really incentivizing Bitcoin industry as a way to try to reduce their reliance on oil and gas. It’s kind of a – it feels kind of futuristic and there they are, Nic Carter – I originally saw this from a tweet of his, he has one of these tweet threads going where you can reply, so once or twice a year when countries do things to really try and incentivize Bitcoin and crypto currency development there – cause it seems to be a thing you know, if a few nations start doing that and it become very profitable, then that's going to put a lot of pressure on other countries to make favorable regulation or provide incentives for people to build their Bitcoin industries there. So, I think it’s a good sign, I think there's going to be a lot more of this going forward.
Ruben: Yeah, I think the main thing that I like about it is just having more decentralized mining. Right, like the more places there are where people are mining the more countries that has some percentage of the hash power, I think the better. We’ve got to distribute that as much as we can or have it become distributed.
Bryan: It’s also interesting that you – if a bunch of places did this you are sort of getting decentralized mining through centralized action, so I mean it’s like – the government of Belarus is mining Bitcoin, it’s like a really centralized entity but it’s actually improving the decentralization of the mining of Bitcoin, it’s kind of ironic.
Mario: Although I mean if you look at countries from an international standpoint, I think you've made this point to me before Colin that countries exist in a state of anarchy between each other – so from this context it doesn’t even make sense to view them as centralized entities; it makes sense to view them as competitors.
Colin: Yeah, I agree, totally agree. It’s just ironic because we think of these entities as centralized entities because they are in their own habitat, but yeah in the greater eco sphere I guess you could say they are individuals in a way.
Number 7: my favorite bit of news from this week, Disney has reportedly been offered a controlling stake in the parent company of South Korean video game published Nexon which specializes in online games for PC and mobile. Nexon is the biggest game developer in South Korea and is the words second largest online games market. Its parent company, NXC, own two major crypto currency exchanges: Bit stamp based in Luxembourg and local to Rubin – Korbit, based in South Korea. The deal comes via a private sale offering from South Korean billionaire and NXC chairman Junk-Ju Kim who has been looking to unload his stake since January and will take final bids in May 15th. I have to say, this is probably not going to happen, but he did meet with a Disney representative so I would love to see Disney take control of these exchanges and start investing in local US exchanges as well, because the truth is, if Disney wants something, the US government is Disney’s bitch. Disney has single handedly on multiple occasions increased the amount of copyright, like time granted to a creator, I think like 2 or 3 times now, Mickey mouse should have gone into the public domain and every time it’s coming up for public domain, Disney comes in, just magically the laws change and add 10 or 15 or 20 years onto that time limit. So, you can just imagine what Disney could do for Bitcoin if they had some control or some interest in it succeeding.
Ruben: Are we going to see a Mickey on the Block Chain?
Colin: Actually, if I remember correctly, Disney has invested large sums of money in creating a block chain for god knows what reason. I mean it’s probably just like some executives like – hey what's this block chain thing? We have 5 billion dollars in RND money, so we’re going to chase every single possible rabbit there is and they looked into it and they're like okay yeah, this is pointless for us, but that's probably what happened. I'm guessing.
They started dragon chain and then they divested and got rid of it.
Colin: Oh, is that what it was?
Colin: Oh okay. So, was it a supply chain thing?
I thought you were joking.
Colin: No, it’s real. What was the purported used case for dragon chain?
Bryan: It was going to do stuff within the parks and allow you to get into certain stuff I think was the first dream iteration and then they realized –
Ruben: A cue skipping token or something?
Bryan: Yeah. Yeah stuff like that and then I think they realized that, wait a second – with ICO My god I'm serious.
Bryan: Maybe this ends up with them looking at exchanges.
Colin: Yeah, I hope so, it will be sweet, I really hope they buy this and then spend a bunch of money, spend a bunch of that Star Wars marvel money on buying coin base or something, that will be sweet.
All right, guys we have officially nixed the ICO My God they're serious section, it served us well, rest in peace, but you know it was time for that section to move on to the great section in the sky and we remember ICO My god you're serious fondly and it remains in our thoughts and our prayers, but it was its time to go. But that's okay because we have a new section that we have titled –
But before that I think we need to say that as we flush the ICO My God they're serious section, we are going to be bringing online ICO My God they're serious toilet paper, so that you can read through –
Bryan: The shit coin TP.
Colin: Yeah, the Shit coin TP, you can read through the highlight reel so to speak, of all the ICO’s and then flush them yourself in the comfort of your own bathroom.
Bryan: Yes we have taken pieces of the white paper of our favorite coins that we have done on the show and we have printed them on rolls of toilet paper that we will be putting up for sale on our website for you to buy as a commemorative, or just to wipe your ass with, cause that's what those white papers are good for. So, we’ll have more details about that later on but keep your eyes peeled for that, we’re really excited about this project. I think it’s a good way to top off the end of this section.
Colin: So, with that lets go into our new section, and I hope this is a section we can do every week with different people.
Ruben: I was going to say, I'm not so sure if we can yet, but –
Colin: I don't know let’s see; hopefully this will encourage some of you to write in with your questions but a listener Nathan Simmons wrote in, you can follow him @gighorizons on twitter. He had a series of questions for us and so we wanted to go through and spend a little bit of time, hopefully we can get to all of them, there's five questions here but hopefully we can answer them all at the same time cause they're kind of tangently related.
He had some questions for us so we wanted to answer those, so – let’s see for his first question – does SegWit activate wallets/nodes? How does the additional block size impact propagation and compare to resources such as memory and bandwidth? Does this have the same negative impact of full node operators as bigger blocks?
Mario: All right, the way I understand the question is – there are a bunch of reasons given why we didn't increase the block size through a hard fork earlier including – yeah the effect it would have on running a node and then as it turns out SegWit did increase the block size, does that have the same negative effect? Short answer is yes. Yes, it does. There are four main concerns you have when running a node. This could be bandwidth, both for the initial block size download and then for keeping up with the chain. There's going to be your memory. So, being able to – you're going to have to keep the UTXO set, the current state of the network in memory to validate new blocks very quickly. There's going to be storage for around 200 GB right now for storing the block chain. Now that could be reduced to the prune node, but it is a concern still, and then processing powers. That just being able to validate quickly.
Now, increasing the block size kind of increases all of this stuff. It means that the amount of storage space you’ll need to store block chain will grow quicker. It means that this could be more transactions in a block, so you'll need more CPU power to validate them. It means that the UTXO set is going to grow quicker, because more transactions will happen and the biggest concern is for bandwidth, because it really increases the amount of time it takes you to download blocks, especially if you're syncing up a new node. If you're somebody who wants to join Bitcoin and you want to validate for yourself, right now depending on how fast your machine is and how stringent it is, it might take you a few days or a week if blocks get significantly bigger, then that increases more and more over time, and yeah that applies to the block size increase from SegWit as well. Those blocks are larger now, so it takes more time.
Ruben: So, there are some mitigations as well though, so it’s not just all worse, there are a couple of things that basically make it easier to verify the blocks. Like there is a quadratic hashing issue that got resolved, so kind of the worst case scenario is better under SegWit and there are the way that the witness data has been discounted, makes it better for people to actually spend UTXO’s instead of creating more UTXO’s before SegWit there was a weird incentive to avoid or to generate more UTXO’s because that was cheaper in a way. So, it’s kind of fixes some of those incentives that allows the UTXO set to hopefully be a little bit smaller. I believe coin join became a little cheaper as well. So, they are kind of reasons why it is after SegWit it was safer to increase the block size through the trick that SegWit used.
Mario: So, I guess yes but just not as much as a regular block size increase would have done.
Ruben: Yeah definitely, I mean on the bandwidth side for example that's just a clear increase, so there are definitely downsides yeah.
Colin: Number two, why is there a limit to how much we can increase block size with SegWit?
Ruben: Yeah, I can take this. So basically, it is really a trick to allow more transactions to fit into the block without doing a hard fork and the way this is done is by taking half of the transaction, mainly the signatures and putting them in a separate area. So, for old nodes they don't really see the parts that you separated and so that means that from the perspective of people that didn't upgrade, the blocks – it seems as if transactions became half the size they were before whereas in reality they are not half the size. It’s just that utter half moved to a separate location that old nodes are not seen, and because we can only cut out so much and move it to the separate storage section, there is just an inherit limitation to how much size increase you can get with SegWit and basically we’ve already gotten the maximum out of it. You could under certain scenarios maybe squeeze a little bit more out of it in theory, but in practice I don't think that's going to happen, so really this is kind of a one-time soft work block size increase and we've gotten out of it what we can.
Bryan: Yeah you would never be able to get a 20 times block size increase using this method.
Ruben: Yeah, not naturally. Like you could create ridiculous transactions with lots of witness data and theoretically you could make a 20-megabyte block but it would not be from logical normal block chain use.
Colin: I really want it to let us do 20x. So, will that change things?
Bryan: I mean well, yeah because you could save up a lot of money and then basically buy yourself entire blocks worth of block space. I mean what's the max you could get out of SegWit right now? I guess 4 megabytes is the theoretical max.
Colin: Is that realistic?
Bryan: Yeah, but the thing is it would be a single massive useless transaction that you basically have to buy an entire block to make. So yeah if you want it and you've got like 70K you want to throw at it – go nuts!
Colin: Number three – are nodes that haven't upgraded to SegWit still validating the block chain?
Mario: That's a good question – kind of. So, there are certain things that those nodes can still validate. You can still validate that there have been no extra coins created. So, you can be sure that the 21 million supply cap is intact and you can be sure that no previously existing rules have been broken. So, no one would be able to spend from an address that didn't belong to them for example. However what SegWit did, like what essentially all soft forks do is –
Colin: Which is by the way the name of our next podcast that we’re creating – What SegWit did.
Mario: What SegWit did, watch out peter, we’re coming for you.
So SegWit added a new set of rules where there were certain unused op codes that allowed – that anyone could spend, so no one would ever send to these outputs because they would get interpreted by old nodes as – well anyone can spend these. With the SegWit rules they had special spending conditions. So if the network has switched to SegWit and you're running a non SegWit node, you haven't updated – what it looks like is a whole bunch of people – a certain portion of the network, have started to send funds to these open addresses that anyone can claim, and then someone else is claiming them. Now what's really going on in the background is there's a set of rules that's being enforced there by the SegWit nodes, and you're not validating that those are being enforced correctly, but you can see enough to know that there are no extra coins being created and no one’s going to be able to steal your coins for you.
Ruben: I personally I think Mario what you're saying is pretty much the general view that most people hold, I personally have a slightly kind of twisted – which is almost the same thing but I like to see it as those transactions are just actually being valid from your perspective, so it’s true that you can see this anyone can spend transaction and you don't know if it will spend correctly according to the SegWit nodes, but if you're running an old node, you specifically do not care about the SegWit rules, so therefore an anyone can spend transaction that happens to go to Bob that is actually just fine and valid from your perspective. So, I personally think that, that means that it’s not really true in any pure sense that you're not validating something. I mean you are not validating something, but that something is something that you specifically chose not to validate or that is not part of your rule set and yeah, I think it’s a very minor distinction but I like to look at it from that perspective.
Bryan: Oh yeah, I absolutely agree. Yeah, you're not validating the new rules but you can still validate all of the rules that you signed up to validate with your node. That's all.
Ruben: Yeah, I don't think its fundamentally different from what you're saying.
Mario: Like I'm guessing the concern in this question is asking like, will I be able to be cheated somehow? If I'm running an old node, and the answer is no. You don't need to run SegWit – I mean you're going to want to, there's no reason not to once the network is upgraded, but if you insist on running an old node, you can continue using it to validate your transactions that don't use the SegWit rules, and you're safe.
Colin: Yeah, as long as no one wants to pay you in – I guess you're never going to hand out a SegWit address so then –
Mario: And even if you do, no one else will be able to spend that. Like you would just sit there until you decide to update to SegWit and then you claim it them.
Colin: Yeah okay. Number four – I’ve heard some people say that we want to see full blocks. Why is this? What are the benefits? And how does this optimize the fee market?
Mario: That's a good question.
Ruben: I just really want people to pay high fees and that's really what it’s about.
Colin: We just want Bitcoin to be as unusable as possible. That's the goal.
Mario: Well the block subsidy is going away and we’re going to need to secure lining somehow and that's going to have to come from somewhere and if you don't have full blocks then block space is basically free. I ensure – you have to pay some trivial amount, so that means that you have to have a shit ton of transactions happening on the network which means blocks are going to be so massive that people just can't validate anymore and then you don't have a trustless system, you don't censorship resistance, so it’s really the only long term option we have is for blocks –
Bryan: Yeah, I mean theoretically you could fork and then add a permanent block award.
Mario: Yeah, yeah that's true and although I used to think that as well until Ruben set me straight earlier, where is that actually doesn’t really help with the censorship resistant part of it though, because you kind of would still need to add fees to incentivize miners to include the highest fee transaction. So yeah that would keep mining going but –
Ruben: It would allow things to function the way they would function today, if you had inflation.
Mario: Sure. Right. So yeah, your option there are basically lift the supply cap or let mining security go away or just totally give up on the whole decentralized promise. That's it in a nutshell.
Ruben: Yeah, I was just going to summarize what you were saying basically in that its solving two issues, right? Like the first one is there needs to be a limit to make sure that everybody can verify everything and keep up with the network and if you start a new full node you have to catch up. So that needs to remain possible, that's why we need a limit. And secondly, we need the limit for fee markets to come into existence that will replace the subsidy. So instead of miners receiving these 12.5 bitcoins every block, they will receive this excess amount or reward from the fees.
Colin: And on a related question Nathan asks – will the Bitcoin base layer remain affordable and inexpensive for those that have a low – say a week to a month time preference, or will the mempool get to a point where it’s so saturated that only transactions with higher fees ever get confirmed. I'm imagining the answer to that is probably – well we don't know because it’s hard to tell the future, but I'm thinking what you guys are probably going to say is, yes, it’s going to get to the point where only higher fees ever get confirmed.
Mario: Well yeah, I mean another way to formulate this question is, do we expect going forward that the mempool will still empty out from time to time, so that one Satoshi per byte transactions can get confirmed, and that seems unlikely. I mean there are a bunch of different angles you can take to look at this, one of them is – do we think that five or ten years from now, if Bitcoin is still churning away, are people going to be able to – do we really expect that there's still going to be this low demand for block space? I kind of doubt it. I think there's going to be a lot of used cases built up and people are going to realize that its incredibly useful to be able to cheaply post things to the block chain, even if they're just transactions and you're probably going to see gradually more and more competition for spending fees on block space and that will make it less and less likely for the mempool to ever empty.
Now that doesn’t mean that people are going to be locked out entirely from the Bitcoin base layer, you can do things like cooperate with other parties, things like – and you know second layer technologies that you use, although I guess that isn't quite the question is – can we make the base layer affordable? Do we expect that ten years from now you'll be able to eventually get your single transactions that someone else confirmed for one Satoshi per byte? I doubt it.
Colin: Is there theoretically a way to coordinate with other parties as you mentioned and do it trustlessly?
Ruben: If you coordinate, you can get the fees down in terms of saving block space, but it all comes down – if you're talking about on chain, it all comes down to how much block space are you using at the end of the day. So going off chain is kind of the way to utilizing your Bitcoin’s more effectively, like if you put on – let’s say if you put on Bitcoin on the lightening network, you can utilize that one Bitcoin very effectively on the lightening network, but you've still made an on chain transaction, so you've still got to pay for that. And, one thing I also want to add is, he does ask about the low time preference, and that is still true. Like if you wait long enough, you'll get a cheaper fee but that is not a low fee. Right. So, it will be lower than maybe if you don't wait, but it will still be high fee.
Colin: So one follow up I guess that I’d like to have to all this is if lightening – if the base chain fees do become too high or permanently high, then let’s say that I onboard via lightening and I buy a $10 channel from someone else, and then the Bitcoin base layer fees are $15. Could my channel be attacked by the other side and closed? And they take my $10?
Ruben: That wouldn’t exist though in the first place.
Mario: It depends what you mean by $10 channel. Do you mean a channel where you have $10 on your end and they have $90 on their end or do you mean there's $10 in the channel total and all of its on your end?
Colin: $10 on the channel total.
Ruben: I can answer it – that's not going to exist because you cannot get the channel without an on chain transaction, so somebody has to send you $10, somebody can open a channel for you, but they have to send you $10 on chain and why would they send you $10 on chain if the fees are $15? Right? So that's not going to happen unfortunately. But I think the way you've got to look at it is, it will scale up. You're not going to have a $10 channel when fees are $5 or whatever, everything just has to go up. Like if it costs a $100 to make a transaction then you need to open up $1000 channels.
Bryan: Well couldn't the channel have been opened when the fees were much cheaper and then the fees go up and you're trying to close the channel and then –
Colin: Yeah, they auto close, is that correct Ruben? If fees become too great?
Ruben: I don't know about auto closing, but I do think it kind of invalidates, if you have a $10 channel and the fees grow to $10 then basically closing the channel - zero.
Bryan: Yeah, you're zeroed out.
Colin: And think of it this way, you wouldn’t open a $10 channel if fees are like $1. You probably wouldn’t open a channel if fees were like 50c even. You're probably going to open a $10 channel if you can get it confirmed for like – at least tens of cents or something, and so fees would have to go up very, very substantially very quickly and very permanently for you to reach that scenario where you're stuck.
Ruben: I think this is a good thing to think about. I’ll pain a scenario which like totally sucks and nobody wants it, but let’s say fees are going to sky rocket and they're like a $1000 or something and Bitcoin can only be used between banks for settlements or something silly like that. Right. Even then, lightening makes sense for those banks, because the on chain fees are so high that they're going to create these lightening channels between each other and pay through there and even though the fees are a $1000 to open a channel and $1000 to close a channel, they use this fees to set millions of dollars and therefore it’s still cheaper for them. So that is kind of a ridiculous example that shows that lightening is useful at any fee level, but it becomes a different beast in terms of the volume that you have to push through.
Bryan: I kind of want to bring things back a little to the original context in which these questions were asked because if I recall correctly, I think Nathan Simmons when he was asking these, came after a discussion he and I got into on twitter where I think he was trying to respond to some criticisms of the Bitcoin scaling growth map and the –
Colin: Bitcoin scaling growth map or Le Bitcoin?
Colin: The Bitcoin scaling roadmap or Le Bitcoin?
Bryan: Yes, not Le Bitcoin, I think it’s – he was trying to figure out why is BTC development heading in the direction its heading in when there are critics of that saying that, “oh you know, this isn't going to be an affordable road to use, we don't want that” and like keeping in mind that it’s not that we are supportive of this direction of development, because we don't care about people using it cheaply. We would love for everyone to be able to using it cheaply, but unfortunately this appears to be the only path forward that allows the network to continue to function and still retain its censorship resistant properties and still have the supply cap and still have the things that make it Bitcoin, and everyone’s BTC were like, we’re doing our best to make it available to as many people as possible, but things might not work out ideally for every single property want. You just have to figure out how to do it to keep the core value intact, and I think a lot of their criticism is misguided because people come in thinking this Bitcoin thing should be available for everyone and then we’ll kind of use that as a starting point, but then they don't realize that the approach that they're trying to use to make sure it’s cheap and available for everyone, actually sacrificed the other core values. So, it’s not that we’re saying – yeah no we don't care that people aren't able to use it, or we’re designing it to be only used for rich people – No. Unfortunately, this is how –these are the constraints that we’re going to have deal with.
Ruben: Yeah and one thing to add to that is that there is also a very strong long-term view of Bitcoin Whale Scale, just regardless of what we’re doing, by the very fact that completers get better. So given enough time, we’ll have scalable Bitcoin and that's also why I'm very optimistic about the future in terms of – yes, someday it’s just affordable enough to put all these transactions on the block chain by the very fact that everybody has such fast computers that running full node and verifying everybody’s transactions is doable. So there will be a very far future where its inevitably going to scale and we’re trying to bring that future more forward by techniques like lightening network and maybe finding other layer two solutions and hopefully we can get there sooner rather than later but we’re still trying to get there and we will get there eventually and I think a lot of these other ideas are trying to take an advance on that progress and saying, oh, we’ll just get there even sooner by taking more risk and that just seems detrimental to the long term view.
Colin: Well and the other thing to think about here guys is that in 10 years 100 US dollars will be worth like a dollar, so it will be fine.
Bryan: I was just going to say, the point that Ruben made, yeah in 10 – 20 years it could be great, we could have bandwidth and computer power in storage that's 20 times better than it is today, and great! Then we can increase the block size a whole bunch, but it’s kind of important to do it in that order. To make sure we have the computing, the technology first rather than a lot of these alternate proposals that are like – well let’s just assume we’ll get there in 10 years and scale up now on that assumption, which is not really a safe way to manage something.
Colin: I think it’s worth pointing out right here that there are people that will say, we can already handle way more than 1-megabyte blocks and that's true in the first world, but it’s not so true in other places. So – now who is caring about the third world – Bitches.
Ruben: I think we all care about it, it’s such a [inaudible 01:09:51] to say that “Oh, small blockers don't care about the little man” no, we all want to get there, we do.
Bryan: And we will. Probably.
Colin: All right. We hope that answers your question Nathan.
Yeah. We did it all for you Nathan. All right, again you can call Nathan at @gighorizons on twitter and we want to thank Nathan for sending those questions in to us, and if you have questions you want to ask the resident Unhashed Experts –
Bryan: You can ask any questions you want, we may not answer them, but you can ask.
Colin: But we may. You can send those to firstname.lastname@example.org or you can just DM us @unhashedpodcast. But with that it’s time for the lightening round which we are keeping because it’s still a great source of joy for everyone I think, especially me and everyone else. So, this week its Bryan, so Bryan would you please endow us with an order please. Shower me.
Bryan: We’ll go opposite alphabetical order, Ruben, Mario, Colin.
Colin: I'm always last. Yeah. Okay. Question number one. This is a would you rather – would you rather – Bitcoin mining takes over 50% of the world power supply, but its running completely on renewable energy, or it uses its current supply percentage, but it’s using only fossil fuels. Ruben?
Ruben: Well if its renewable energy, why not I guess. Downsides to that, I guess it is a lot of equipment that has to be built but assuming we don't have to keep renewing that equipment as well with wasteful techniques, then I guess it can be okay if it’s all renewable.
Mario: Yeah that's good renewable. That's great and it sounds great for immutability. Sounds like we’ll have a very secure chain.
Colin: I'm thinking renewably just because that means that 50% of the world’s energy is coming from renewable, that seems like a good thing.
Ruben: At least 50.
Colin: Yeah at least 50 at that point, so –
Mario: Yeah and through economies of scale it should also make renewable technologies way, way cheaper.
Colin: And I can stop hearing about people talking about how Bitcoin causes a 100% of the world pollution, so – yeah that seems like an obvious choice. Yeah.
Ruben: So maybe that's the good thing after all, if Bitcoin uses more and more power, it incentivizes renewable energy, therefore Bitcoin is actually helping earth getting renewable energy for earth.
Mario: There are actually quite a few articles out there that argue just that, I don't think it’s a terribly strong argument but yeah, you're saying it – factitiously but there are a lot of people that are saying just that.
Ruben: I think it’s true but that will happen regardless of whether or not – like if energy gets used more and more, we’ll get there eventually anyway, so no need to speed that up.
Colin: I think the argument is that it justifies the building a lot of compacity, like investing a lot in the compacity right away and then overtime as that compacity gets used up by things that aren't Bitcoin mining, it just allows them to monetize the early end of the investment.
Mario: So how did we do Bryan?
Bryan: Well I was going to disagree with all of you, because I thought 50% of the worlds power supply, even if it is on renewable, was just outrageous. But I don't know, maybe you convinced me.
Mario: Yeah who cares? Its renewable. Doesn’t really matter right?
Bryan: Yeah, I guess so, it just seems –
Bryan: Well it just offends my non consumer sensibilities.
Mario: No, it does sound pretty dumb though –
Colin: I mean I guess you could never mess with it at that point. It would be truly immutable, however I think that just the – it would mean there would be so much extra infrastructure built up that, like okay the power supply would be renewable, but what about all the extra metal and stuff and all the extra equipment?
Mario: Metals are a renewable resource.
Colin: I don't think so, not all of it. Like recyclable maybe, I don't know.
Ruben: Yeah but the processing cost might be [inaudible 01:15:13] it depends, for me at least in the question I was kind of assuming there's no pollution whatsoever.
Bryan: Yeah, I mean if you're going to sneak in to Aha! It’s really bad for the environment anyways –
Colin: So technically it could be run on wind but there's a whole bunch of fucking of the earth that you do to create these wind turbines. To create the wind. So, it’s definitely not zero, but yeah, I guess after you create it theoretically it should be pretty good.
Ruben: Its possible we’ll rotate slower because of all the wind mill. Days will be longer.
Colin: I don't even know – I'm assuming somebody on the internet has made that argument, it sounds like a flat earther –
Bryan: It’s a bullshit argument because Ruben doesn’t realize that you just place the windmill in different directions, so half will go one way, half will go another way and then the problem is taken care of –
Ruben: But earth is flat, so is it going to be like the flat surface is going to rotate – what's going to happen there?
Bryan: Like a lazy Susan. If you're in the middle then you're going to get really busy.
Colin: Well no I mean actually you're spinning faster if you're on the outside.
Bryan: I guess but your angular momentum – I don't know.
Colin: I'm not sure how that works, I just know if you're on the outside of a spinning disc you're spinning much faster than on the inside so –
Bryan: That is true.
Ruben: We are clear experts on the field of astrology and anything flat earth.
Colin: Yes, all of our flat earth fans are going to get real pissed at us after this. All right, number two: before everyone leaves. Would you rather get –
Bryan: Why do you assume all of our fans are flat earthers?
Colin: You know what you're right. If you're a flat earther I don't want you listening. Get out of here.
Bryan: No that's not nice, you're allowed to listen. I'm okay with it.
Colin: You're allowed, I just don't want you.
Bryan: You're allowed to be wrong and listen to our podcast.
Ruben: I mean, they listen because they're just laughing at how foolish we are.
Bryan: We didn't even mention the turtle.
Colin: Okay, we’ve got to move on. Moving on – all right, would you rather get front row tickets to your favorite band forever or be in your favorite band?
Ruben: Man, I would be in my favorite band, I like being on stage man, getting some attention cool. Yeah.
Bryan: Sounds like quite a big-time commitment though, because I think if you're in your favorite band, that’s your life, now right?
Ruben: It’s your favorite, you're making money from it presumably. Or maybe your favorite band sucks and doesn't make any money but –
Mario: Can I quit the band after the year? Can I just – yes, I can. I'm going to be in the band and just spend a year on tour just basking in – [inaudible 01:18:31], some rock and roll, and then come back to Bitcoin. Yeah.
Colin: I'm just trying to imagine the monkey paw scenario if your favorite band is like electric light orchestra where there's like 60 people in it and you end up – you're in the band but you're actually just like a quiet person – Cowbell, you're just a dancer on something like that just like it’s really embarrassing cause you're bad at dancing – it’s like how did you get in this band? It’s like well I made this wish and I had a choice between front row seats or being in the band and I kind of thought I’ll get to be the lead singer but I'm actually just a shitty back up dancer, so – you know it’s the monkey paw – I'm going to choose - be in the band, because I feel I could actually add something.
Bryan: [Inaudible 01:19:20] after that?
Colin: Yeah cause my favorite band –
Bryan: I like how you paint that big scenario like – no if it was me, I’d be important!
Colin: Well I'm also not picking a band that has 80 people in it, so – there's a very limited spot.
Bryan: What's your band?
Mario: Yeah, you've got to go through and say your band.
Colin: No, I'm not saying it.
Ruben: What if your favorite band is like an all-girl group?
Bryan: I'm going to go with Lord, so I would just like to be Lord.
Bryan: You're going to be Lord, okay.
Colin: I'm going to go with Exo, the K-pop band that we mentioned a couple of episodes ago.
Ruben: A bunch of Korean K-pop girls and Colin.
Colin: Well yeah that's the dream. Right there.
Bryan: I think that would be a hit. My favorite ICO.
Colin: Ruben? Favorite band?
Ruben: Oh, god! I'm not much of a music guy, I’ve got to skip this one, I don't think I want –
Mario: Are you really serious, you were all gung-ho about being on stage –
Colin: Yeah, you were going to be in the band –
Mario: Yeah and now you're like, I don't even like music really.
Ruben: Just a generic getting on stage and rocking in front of an audience, that idea was cool. I didn't have any band in mind.
Colin: I'm going to be the lead singer of Motley Crew – it’s going to be –
Bryan: Is that your favorite band?
Colin: No but I would make it my favorite band just so that I could be in that band, that would be cool.
Bryan: I thought you were going to say that's your actual favorite band. Or meatloaf or something –
Colin: I could be – Yeah Meatloaf would be fun, but Motley Crew. I'm talking about the like – you want to be like 80’s hair rock and roll, that's the band you want to be in.
Bryan: What's the next question?
Colin: All right, you're the CEO of a major Bitcoin company, do you prioritize profits, or efficient block chain utilization?
Ruben: Well you know, I think I said this last week but I would just be a very crappy CEO and be very pro Bitcoin and go bankrupt, so that would be me.
Bryan: Trick question, because efficient block chain usage is profitable. Boom!
Mario: I’ll choose profitability but I'm not too worried because as long as I survive long enough in this space, then it’s going to get there eventually.
Bryan: Yeah okay. Profitability.
Colin: Yeah, I kind of agree with Mario but I guess if I have to choose, the point of a business if being profitable, so if you can't be profitable, just don't start the business. So be profitable.
Mario: And even if it’s not the point of the business, you kind of need to be profitable to do the other things.
Colin: Exactly so it seems like that's really the only choice you have.
Bryan: You've got to survive first.
Ruben: You could not be in the business and I think that's a real choice as well –
Colin: I don't think that was a choice.
Bryan: It wasn’t a choice though in this binary.
Ruben: No, but like I'm saying going out of business is kind of not doing the business right. You're pro – you're keeping to your convictions and your business goes down and now you're no longer in business, right?
Colin: Okay. I guess – yeah. The reason I would prioritize the profits and then efficient block chain utilization, this question kind of came about through reflecting on kind of – because Jim and I has full SegWit bech32 addresses now, so it kind of like just reminded me of when coin base was getting criticisms for not batching and not adopting SegWit and do it faster and – so I think there is some real considerations that the companies have before they do stuff like that and it might be profits, it might be security which is then tied in with profits, that – then they have this outside force and that's how much they're paying for block chain space and some people wanted them to outweigh – attach a higher weight to what they're paying in block chain utilization fees, transaction fees than what they're really paying, which seemed unfair to me.
Ruben: I mean I can give a little bit of insight because it really is difficult for these exchanges to manage all the UTXO’s and decide how to spend them and which ones to send to the cold wallet, which one to send to the hot wallet and therefore they're taking a lot of shortcuts, such as address reuse, such as not upgrading when – even though SegWit is cheaper it’s just going to be such a hassle, and then on top of that, especially if blocks are not full, you don't really have an incentive to use SegWit, because a cheap transaction or a slightly cheaper than cheap transaction is still a cheap transaction.
Mario: All of it just comes down to prioritizing your resources, it’s always going to be making more financial sense to be upgraded and to be using the latest tools that are at your disposal but it doesn’t – it takes quite a bit of time and resources and engineering power to do that safely and profitably. This is something we run into at Green a lot, there are so many things we would love to be adding to the wallet and that people want, but we’re a limited sized team, we don't have resources so we need to pick and choose which tings are the most important, go ahead and do that.
Bryan: I mean this isn't just in the Bitcoin world, its anywhere in software development –
Mario: Yeah, it’s a general business principal.
Bryan: Yeah and you don't always use the latest brand new framework for every single project that you have, sometimes you just stick with the old stuff because your people understand it and they know how to use it and they know how to build quickly and it costs money to refactor and to upgrade, so yeah, it’s not that simple for sure.
Ruben: Yeah, and often the choice is like – are you going to work on adding BSV and BCH or are you going to work on making Bitcoin a little bit cheaper to use? And then it’s like well if you add another shitcoin, we get more money. So therefore, that's where our time goes.
Bryan: That being said I think everybody should still keep pressuring new businesses to make these changes though because it just adds extra incentive for them to do so.
Colin: I totally agree with that, cause really, they're just making me pay higher fees by not doing it, so of course I want them to do it. But then I don't get the sweet, sweet shit coins.
I need them to add Bitcoin ABC’s, Satoshi’s vision calvenier versus the Craig Wright split. Kind of like when those two break up.
Colin: Quick question about this, I was blanking today and I mean to ask you guys, what was the Bitcoin fork that someone created just so the BCH people couldn't call – oh, was its Bitcoin Core?
Someone created Bitcoin core fork, right?
Bryan: Yeah well that was Bitcoin Core, it was a fork of Bitcoin Clashic which itself was actually the original Bitcoin cache when Bitcoin cache hard forked about six months after coming into existent. Clashic Bitcoin.
Ruben: I think they called it BTCC.
Bryan: That's right, which is very useful, not at all confusing.
Colin: But bitcoin core fork was created just to troll the B-Cachers calling it Bitcoin – Bitcoin core, right?
Bryan: Pretty sure the name was chosen for that reason.
Ruben: But to be fair actually they did it first by having a – I don't think they actually forked but they had a claimed coin that would call itself B-cache so they were saying like “oh when you say B-cache, do you mean this other coin?” so yeah – it happened on both sides.
Bryan: Clever. That's good.
Colin: All right next one. Greece or Grease? Greece the country or Grease the musical?
Ruben: Or grease the fluid?
Mario: I thought you meant grease as in the yummy stuff that makes food taste delicious.
Bryan: Oh. Well that might be better, I think that's better.
Colin: You guys, Greek food is generally not very greasy.
Ruben: I like the musical Grease so I’ll go with that.
Colin: Whichever three, it’s a triple choice.
Mario: I have never seen Grease the musical. I'm aware of the song Grease Lightening, it’s a pretty catchy tune, but anyways I'm going to go with Greece though, the country I think it’s pretty classic and I’ve never been, I know lots of things about the place and I think a lot of interesting shit went down there back in the day, and today as well.
Colin: That place was fucking popping man!
Bryan: It was and it was actually the – I'm going to stop before I get really boring, I'm going to go with Greece the country.
Colin: All right I'm going to make it short and sweet, I'm going to go with grease the delicious thing that makes food taste amazing.
Colin: Yeah, the correct answer is grease the substance that makes food better.
Mario: How is that a correct answer?
Colin: Moving on. Number five: last question, from this day forward, would you rather only be able to pay for things with Bitcoin, or never be able to pay for things.
Bryan: Is it just me or everyone?
Bryan: Like I can basically force everyone on earth to use Bitcoin.
Colin: Oh. No. I'm saying just for you, right now. You wake up tomorrow morning and you go to use your credit card and they're like, no. Sorry. And it’s not that places that don't take Bitcoin now start taking it, it’s like you have to figure out some way to pay them through whatever channels exist right now –
Bryan: So, I can use a bit refill or something like that to –
Colin: Yeah exactly. And then as adoption will normally happen, it will start happening.
Bryan: And the alternative is – what happens to my Bitcoin then? I’d just have to sell it before spending it? If I can never spend?
Bryan: Okay got you.
Ruben: What I find tricky about this question is that it seems that al the merchants that you're paying, they're receiving fiat from you anyway, even with bit refill. You're giving them your Bitcoin, they sell it for you and they give the merchant fiats, so it’s all fiats in the end, you know.
Bryan: Yeah but I think it’s a kind of future proofing thing, like if you're barred from ever using Bitcoin ever again for the rest of your life, then you're cut off from that payment gateway in a way.
Ruben: So maybe I didn't fully understand the question then, it is either that I have to pay for everything in Bitcoin right now and then I just have to find somebody that helps me facilitate this transfer? Right? Or I will never be able to pay in Bitcoin?
Colin: Yeah that's right.
Ruben: And then I can just –
Colin: So, then we assume 10 years from now –
Ruben: What do I do with my bitcoins if I can't pay with them?
Colin: Nothing, you can't spend them. Right. So that means you can't even sell them.
Ruben: Does that not mean that they're just like useless tokens. Like their function as money becomes irrelevant.
Colin: Yeah exactly, what's the confusion though?
Ruben: I mean that makes it an obvious question right, of course you're going to spend Bitcoin rather than never spend Bitcoin.
Colin: No, in the never able to pay for things I envisioned you could find some guy on the street who – like do a local Bitcoin and he’d sell you fiat at whatever the going rate is –
Ruben: Right but that's the problem with the question because that's what Bit refill does for you, it’s just a more automated service right, they take my Bitcoin and then they give fiat to the provider so it’s kind of the same thing.
Colin: But that's a real pain in the ass right now.
Bryan: This seems like – I don't understand what's confusing about this question, it seems like the tradeoff is –
Ruben: I will answer last, how about that, then you guys can explain.
Colin: It seems like the tradeoff is, inconvenience now versus potentially catastrophic inconvenience in the future, so it will be really annoying right now because it will be really hard to find merchants that take Bitcoin, you'd have to use bit refill for everything, but if Bitcoin becomes this very ubiquitous thing where everyone's using it and prefers it over fiat, or maybe you can't even use fiat anymore, then you're really boned.
Mario: Yeah, that's correct.
Ruben: I'm probably making the question – I get the spirit of the question so I guess from that perspective I will answer – I guess I’ll just pay things in Bitcoin but for me the distinction between a merchant being somebody who takes my Bitcoin and then gives fiat to anther merchant or somebody I give my Bitcoin, they give me fiat and I give the fiats to a merchant, that I pretty much the same thing in my opinion. That is why I'm saying well – it’s a different route to achieve the same thing but it’s practically the same thing.
Bryan: Yeah I mean the route is the some always because you're just trading a commodity for a product that the merchant is selling, I mean that's always going to be the case no matter what happens, but it’s just about like, what infrastructure is in place now versus the infrastructure you think will be in place in the future and making the decision based on that.
Ruben: Yeah but the exchanges are on the infrastructure that's in place now right, like I can only sell my Bitcoins for fiats and then use my fiats to go and buy something. Or I can find a friend that takes my Bitcoin and gives me fiats or I can use bit refill, who I can give my Bitcoin and they will give fiats to whoever I'm paying, like it seems all the same to me, but anyway, in the spirit of the question, I will just start paying everyone in Bitcoin.
Mario: Yeah, I will pay with Bitcoin.
Bryan: Yeah, I’ll pay with Bitcoin.
Colin: All right. That was fast once we finished hashing out –
Bryan: Well I had a bunch of quibbles but Ruben got them all out of the way.
Colin: Wow, I still don't understand the quibbles but whatever, it doesn’t matter.
Guys you can find us at Unhashedpodcast.com [inaudible 01:34:43] this episode, episode 30, as well as all the others and you can follow us @unhashedpodcast. Please, please send us an email with a question that you have that we may or may not answer if we feel comfortable to email@example.com and I’ve got to ask you to do one more thing, I’ve got to ask you to go onto whatever podcast tab you're listening to this on or whatever service you get these downloads from, find the review section if you have one, leave a review, it helps us show up in the searches. Leave us a five star or four hearts or whatever metric that they measure quality on the podcast, leave us the highest version of whatever that is and subscribe to us, share this on twitter. We make these little video clips that are little teasers of the episode, share those, retweet those, helps us out a lot. Helps us grow the show. And I think that's really all I have for you. I'm going to try and become a lot better about asking you guys for your help and helping us grow this show, it means a lot to us and we really do rely on word of mouth I think more than anything else to grow this show and to help people better understand Bitcoin. So, we appreciate your help in that matter and we hope that you'll do that for us, and send us your question so we can answer them on the show. With that guys, this is Unhashed Podcast, the show where we bring crypto down to earth and cut through all the block chain bullshit and we will see you next week. Good bye.
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