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Talking Bitcoin with Andreas Antonopoulos – Lightning, Halving, Privacy, Dollar, & Tech

VIDEO TRANSCRIPT

Welcome to the show, everyone. It’s the Krypto Lark I’m very, very excited to have on the show today. Andre is Antonopoulos. He’s Bitcoin educator, tech entrepreneur, host of the most educational YouTube channel related to Bitcoin and podcast as well. So and is an author of many, many fantastic books, including The Internet of Money, which is why my personal favorites I’d pick it up and show it to Dave has actually lent out When I friends because a book on a shelf isn’t doing a lot of good in terms of spreading knowledge. So there it is. That’s the third volume of the series. Yeah. Fantastic. Fantastic. With links down below for the podcast, the YouTube channel. And we can grab some of those books as well. But Andre is thank you so much for coming on the channel to have a chat with me today about bitcoin. Don’t think it’s a real pleasure. Looking forward to this. So I think let’s just go ahead and really dive straight into this. I think let’s start off with talking a little bit about maybe some of the bigger mission of Bitcoin. And I think what we can start off with is talking about your thoughts on where the dollar is heading these days. I mean, do you see a situation where we could be seeing hyper inflation coming or are we going to move into a more deflationary economy? We all know that meme that goes round Bitcoin fixes this. But but is it really fixing this and has this crisis kind of lifted the veil? Do you think for a lot of people on the the falseness of Fiat? Yeah. You know, when people talk about what Bitcoin’s real mission is, there seem to be really two big camps. One camp is a monetary perspective and economic perspective that is about sound money, scarcity, limited supply and low inflation. And the other camp is looking at bitcoin as an open international currency that is accessible to all anywhere, anytime without getting authorization available to the unbanked and underbanked and a non-political neutral, an open protocol for the Internet that makes money possible on a much larger scale and creates economic inclusion. I’m in the latter camp, so my perspective on the monetary economics of bitcoin isn’t probably as strident as you might think. And I’m not sure how this plays out economically. To me, that’s not the biggest and most interesting feature of bitcoin, but obviously its importance to many and the atomic implications are huge. So, you know, it’s funny how the most salient characteristic of bitcoin from a monetary perspective is revealed primarily when international currencies, various international currency, especially the reserve currency, the dollar and others shoot themselves in the foot in the most spectacular fashion and create economic conditions that are very dangerous. I like to say often that I’m here to talk to you about the biggest monetary experiments, the most crazy, risky experiment that’s ever happens. And no, that’s not Bitcoin. It’s the infinite set of quantitative easing, infinite stimulus, unlimited printing and unlimited debts experiments. I think it’s important to realize this has never happened before. So all of the people who are like trying to place bets on how this turns out, hyperinflation, deflation, stagflation spirals, Deedes authorization and all of these other things, they have no clue. Nobody has any clue. I’m part of the reason for that is because we have no historical analog to go back to. This has never happened before. Certainly not on this scale, but but not even in terms of the fundamentals. I think we’re entering a very dangerous period, and the reason it’s a dangerous period is not so much because of the economic impact of these moves, but more the political impact of these moves. And to me, the political impact of these moves is that we have detached from market forces and and the fundamental economic basis for for market pricing. And what that means is that we’ve moved into the territory of centrally managed economies that are fine tuned by technocrats. And we’ve seen back to experiments before. So we know that doesn’t end well, because if you disconnect from market signals, a lot of malinvestments and misallocation of funds tends to happen. No, no country can really scale. Especially countries, because the United States can really scale decision making to the point where a few central bureaucrats can decide which companies are essential, which companies are non-essential, which companies should receive support. Which companies should not. Which employees should. How to allocate these enormous amounts of money that dwarf gross domestic product. And all of these moves essentially basically remove markets from the equation. That’s a very dangerous move we’ve seen with the current crisis that’s going on. A lot of talk around implementing central bank digital currencies. Lieber is getting a lot of attention. Once again, we saw this I think was the first the second draft of the stimulus package in the US, the first stimulus package, not the third or the fourth when the Rons who now actually including language around a digital dollar. Do you think that De’borah and a central bank digital currency issued by whether it’s the United States or China or the European Union, whoever else, is this going to help or hurt Bitcoin? It’s going to be entirely irrelevant to Bitcoin. It’s it’s a bit like, you know, introducing a new model of cars and saying, is this going to help or hurt the airline industry? We’re flying above all that shit. Behind is Libra Central Bank, digital currencies. All of those systems lack the fundamental components that make bitcoin interesting and differance. They’re not difference at all. I use that acronym to remind my viewers what the fundamentals are and that the acronym is RIP CORD because we’re having to parachute out of a crashing plane here and REPORTSTHAT stands for a revolutionary, immutable, public, collaborative, open resistance and decentralized. And guess what? Central. Digital currencies, leaper corporate currencies are not that they are centralized, their control, their surveillance mechanisms, they have none of the characteristics of open public blockchain cryptocurrencies. The interesting thing about these new technological currencies is that they’re not controlled by a single party. In fact, their control is decentralized and they’re open to anyone who participates. And they remove all of the barriers to entry and friction points of faxing authorization and control. So from that perspective, they introduce something really novel to the monetary system really, truly open global borderless, neutral currencies which have never existed before. And the CBD seas are simply taking it, taking the name of blockchain. If they even have anything to do with technology and trying to wrap the same pig in a new package, you know, put lips comments and serve it up with something revolutionary, something disruptive, something new. It’s nothing new. In fact, it’s dangerous. Both both corporate currencies like Leaper and Central Bank digital currencies are extremely dangerous because the the end point here is the eradication of cash as an open peer to peer transparence, anonymous mechanism for transacting that no one needs permission to use. And we’re reaching the end of the era of cash and our future is going to be digital currencies. The question now is whether those digital currencies are going to be centrally controlled and surveilled. Troll and private. The problem is that if you give centralized institutions control over something as important as money in a society, they can use that control to amass enormous power. They can use that control to crush any dissent or opposition, and they will start picking winners and losers and they can turn off anybody their entire financial lives. Your ability to buy food by flipping a bit in a database. That is a very scary world. And of course, you know, first they’re going to come for the terrorists and then they’re going to come for the child pornographers. And then they’re going to come for the, I don’t know, pot sellers and gun sellers and porn magazine makers and God knows what else. And then they’re going to come for anyone who speaks up about anything that’s contrary to their politics. This is a very, very dangerous path. Totalitarian surveillance of money leads to totalitarian politics and it’s an unavoidable outcome. So we need to make a very smart choice here and the choice to use the open, decentralized than neutral currencies of the people rather than the close surveillance, totalitarian currencies of either nation, states reinventing themselves or corporations trying to become nation states. You said it very, very well there. Do you think that we can actually see a country being brave enough to embrace public open networks to actually issue their central bank currency on a public open network or to actually start acquiring bitcoin for a central bank reserve? Who cares? It doesn’t really matter. So the enforcement of national institutions of an open, decentralized, Internet based cryptocurrency is irrelevant. It’s almost like saying will governments build Web sites to offer their government services on the Web to carers? That’s not where the action is happening. The wave the old world will try to adapt to a new environment is irrelevant to that new environment. What really matters is whether people will choose to use this among many other cryptocurrencies, whether they will have that choice and whether they will exercise that choice not in exclusion or replacement of their state currencies, but to as an alternative that gives them better results, better freedoms. This is about open markets for currencies. And so the centralized enforcement or authorization of a nation state is irrelevant in the era of the Internet. Yes, some countries are probably going to adopt that, just like, you know, some countries have adopted the dollar as their de facto national currency because they either can’t afford to print their own or because their own has collapsed irretrievably. But again, who cares? We’re not we’re not looking for approval. That’s that’s it’s a bit like saying, do you think some of the horse buggy manufacturers are eventually going to transform themselves into automotive manufacturers? Who cares? I want to switch the conversation up the way here from the kind of the bigger vision stuff to watch the lightning network. Do you think that the lightning network has kind of lived up to its promise? Why have we not seen more support from wallets and from exchanges to actually implement the lightning network? Currently, I think we see more bitcoin locked up in tokenized on a theory than there is bitcoin locked up on the lightning network. So is this a failure of the Leighton network or is it still just trying to find its feet? Oh, it’s so early to. I mean, I don’t think we can really call winners and losers. Now, keep in mind, I’m biased. I’m writing a book about the Lightning Network because I think it’s a fascinating technology, but it’s really, really early days. This is like the web in nineteen ninety eight ninety nine. And it really hasn’t come into its own. One of the important things to realize about all of these technologies is that the innovation is happening in different layers. And when you have innovation like the Lightning Network, which is actually accelerates its innovation in the bitcoin space by opening up to new APIs and new more rapid development models. When when new things are introduced to the protocol level, those effectively do not exist until they exist in a user interface for users. So this is one of the fundamental issues we have in any of these technologies. You can make something great and new technology and then if none of the wallets implemented, it doesn’t exist and you have to wait for the wallets to catch up. And wallets are actually one of the least monetized, least well invested infrastructure components in the entire blockchain space. There is a weak point. So as a result, it may take two or three years. And so you see these technologies trickle in to two wallets. On average, it takes about three years. So we’re nowhere near seeing the full potential. I think the Lightning Network is a fantastic technology and I don’t really see it as competing against other technologies like decentralized finance. It’s happening in a. All of these are complementary and they work very well together. Do you think that Bitcoin’s lack of privacy could be a problem? You know, we’ve seen first hand we do have the wasabi wallet, which gives people the option to send private transactions. But on the flip side, we’ve seen regulators come after a Bitcoin mixer developer in the past and we have companies like Chain Alices, which provide governments with details on Bitcoin transactions. So is this a flaw of Bitcoin? Is that it? We have more privacy on Bitcoin or is this a plus of Bitcoin? It’s a flaw of Bitcoin, most certainly. And I’ve been talking about that for six or seven years now about the importance of privacy and strengthening privacy in Bitcoin just to make a point there. They didn’t come after a developer fixing services that came after an operator of mixing servers, which is a very, very different thing. No one has so far prosecuted developers for, I think, software the bay themselves soon all to operate. That would be a very serious First Amendment issue. So in Bitcoin security, privacy is difficult. You have to be very careful in order to maintain your privacy. And that’s a weakness. Fortunately, there are a number of technologies that are making that are likely to make that much better. One of them is a series of changes that are being introduced bitcoin now. Schnoor signatures, top rates and typescript of the technical names. But in any case, it’s it’s a package that allows transactions to appear as if there are simple payments when they’re much more complex script. So for example, a transaction that opens and closes a lightning channel instead of being easily identifiable as such and allowing you to identify which channel on which nodes interacted with it instead will appear as a single payment from a sender to a recipient’s mixed among all of the other payments. In technical terms, what that does is it increases the anonymity set of transactions, making it much more difficult to do this kind of analysis. Companies like Catamount changeless and others are basically in an arms race against privacy. And what they’re doing is they’re providing the world’s worst dictators and regimes, either directly or indirectly, with information that violates the civil rights of millions of people. I think it’s fundamentally immoral to even work at a company like this. And just like I would consider it’s immoral to work for a weapons manufacturer or, you know, a company that builds cages for refugee concentration camps. You have to make some choices when you work. And those moral choices are important, but they’re an arms race that they’re gradually losing and they will eventually lose because it simply becomes harder and harder to track these transactions. The lightning network is another privacy technology that is going to help with that. Together with some of the other technologies being introduced. But yeah, it is a weakness. And that’s also why I’m interested in the broader ecosystem, because Bitcoin isn’t alone. It’s part of an ecosystem of cryptocurrency, some of which have stronger privacy characteristics that are very easily interchangeable with very low barriers and switching costs. And I think it’s important to look at the ecosystem. Do you think that Bitcoin might be developing too slowly? LICHTMAN stuck on five transactions per second for a very, very long time. And I don’t see where we’re going. Aside from Lighton network, of course, where we’re going to go beyond that, a lot of people do call it all is a weakness of Bitcoin that it hasn’t been perhaps developing its fastest way to basically see happening across the crypto ecosystem. Well, Bitcoin is fundamentally the most conservative system out there because it’s intended to be extremely robust and secure and able to resist attacks by collusion or cooperation between nation state level actors. And so far, it has resisted attacks at that level, whereas many of the smaller competitors that are attempting to scale things up by reducing decentralization are going to pay a very big price and they’re much easier to attack than than Bitcoin. So from that perspective, that’s a design choice. It’s not an accident. It’s not a it’s a deliberate design choice to keep things conservative in order to maximize decentralization. There are some fundamental design tradeoffs here that you can’t just wave away. If you create a system where everybody has to validates everything and that’s a security feature, then that system will necessarily not scale. If you increase the scale of that system, then it becomes a burden on everyone who’s trying to validate. And that means you lose validators until eventually you have very few validators easily identified, easily coerced, and the system is is vulnerable to attacks. So that’s the fundamental tradeoff. And it’s not an easy tradeoff to solve. One of the best solutions in my mind is to move off chain many of the transactions that do not need to be validated by everyone while maintaining the same security models through smart contracts. And that’s what the Lightning Network is doing, given the ability of the lightning network to do millions of transactions per seconds while maintaining the full security of the bitcoin chain. I think that’s a much better avenue for scaling the system. It’s a really revolutionary technology when you start to understand what the lightning network is. And like you said, it’s still the very early days for outside of the Bitcoin ecosystem specifically. So why do ecosystem overall. But what is the technology that’s getting you most excited right now in the entire cryptocurrency space? Well, there’s there’s a couple of technologies that are keeping me most excited. Certainly I’ve been interested for the past four years. And smart contracts and blockchains that execute smart contracts on a virtual machine such as the theorem I’ve written about, that’s one of my books, mastering a Theorem from a technical perspective. And I think we’re beginning to see some early examples of how these can express a rather rich applications. Of course, we’re still at the toy scale and there’s all kinds of complexity and risk that comes with that. But it’s very interesting to see the very rapid pace of developments, for example, and decentralized finance. A lot of interesting examples coming out there. And what’s interesting here is that I’m hoping that we’ll move from the stage where technology is used to replicate or mimic the status quo, the existing sets of applications. So you have a better tool and you use it to build the same thing you were building before, just bigger, better, faster. And the next stage of that is where we start building things that simply could not be done with the existing set of tools. That’s when it really is innovative. And I think we’re reaching that point with decentralized finance. You know, when we look at the Internet, for example, in the early days, everyone was like, OK, how many fax machines does this replace? Because the only way to perceive the Internet and to measure its value was by the metrics of the previous system and to understand it and how it it simulates or mimics the previous system. But of course, all of the value does not come from there. It comes when you that question stops making any sense. So how many bank accounts can you replace with cryptocurrency? Is this level where. Now, when we stop asking that question, we start thinking about applications you couldn’t do before. That’s when we really see the innovation that excites me. The other one that excites me equally and for the same reasons is the very rapid developments in cryptography, fundamental research that has been spurred on by bitcoin. If you think about it, Bitcoin is the largest civilian deployment of cryptography ever. It’s the largest practical application of cryptography that has reached consumer level ever other than, let’s say, a hard, hard drive encryption. And it’s as such, it’s it’s kind of pioneering cryptography. And as a result, it’s it’s spurred research. Zero knowledge proofs is a perfect example. The amounts of research that has come out of the zero knowledge proof area just in the last two years is staggering and it’s moving really, really fast. All of these things within a decade will turn into practical applications that truly revolutionize finance. I think that’s one thing that a lot of people, they get very anxious and impatient about how quickly this technology is going to roll out. But if take the long term perspective, you know, you said right, 10 years from now, whereas this technology, I mean, was the application level of that going to be now? The final topic going to touch on here with you is the bit coin having obviously about I think 20 days away at this point. There’s been a lot of speculation on what it’s going to mean for Bitcoin, the markets, the miners, all of this stuff in a wider perspective. What’s your take on the impact of the Bitcoin having? Well, interestingly enough, the Bitcoin having is happening in stages because there are a bunch of Falk’s of Bitcoin. That’s because of various quirks in the development. Ended up mining a lot more blocks and got to the having first and they saw some really radical effects because of the low hash rates. They became vulnerable to attacks and very low cost. It’s kind of a preview of what happens when you have a system where you can move to a more profitable competitor with the same mining equipment. Now Bitcoin doesn’t have a more profitable competitor with the same mining equipment. It is the most profitable competitor. So we’re not going to see that’s in fact, with the Bitcoin having I think in the short term, we’re going to see a lot of volatility. People are obviously worried and they’re going to be trading on on the emotional impacts of all of that. It’s going to take months after the having for everything to kind of settle down and for us to start seeing some of the fundamental impact of the constraint and supply that that will be because of the because of the halving in terms of demand. Demand is still very, very strong in Bitcoin. And I expect it to be even stronger as we see, you know, various national experiments with currency creating very weird conditions. People need safe haven assets. Right now, I think Bitcoin is one of them. That’s a personal opinion. I can’t give you financial advice, but so, you know, a whole lot of nothing is going to happen with the having. It’s just going to happen. And then ten minutes later, a new block is going to come out. And then ten minutes later, a new block is going to come out. And all of the people who wrote articles about the death spiral of Bitcoin that is imminent and how bitcoin is going to die again and again and again, they write obituaries so fast are going to be proven wrong. And of course, are not going to revise any of their obituaries. So I’ll just find a new reason to write more. That’s what Bitcoin does. Ironically, the story of is bitcoin dead yet is one of our greatest marketing successes, because every time someone here is that it’s not dead yet, that builds a bit of cognitive dissonance in their minds. And gradually they realize this thing is rather resilient. Haven’t needed a bail out yet. That is a great point. There is no big bailouts for bitcoin. Just a bit of a follow up to that question. The long term impact of having is going forward, not just this time. We’re talking potentially even decades down the road. Do you think that the incentives will actually keep pace as we see the block awards falling and miners needing to really subsist off of basically transaction fees at some point in the future? Well, first of all, we have a very, very long time to to look out for that. And we already know what that’s going to be. So people adjust their expectations accordingly on a daily basis. These profitability considerations happen every single day. Miners look at fees and block subsidy. Electricity costs. Operating costs. Hardware costs for mining. And they make decisions as to which miners are still profitable and which ones are not turning off the ones that are not. ET cetera, et cetera. It’s a constantly, dynamically adapting system. So in the long run, you know this we don’t know obviously how this is going to play out. But from my perspective, I think that we’re going to see is more transactions with more expensive fees, substituting for the block subsidy quite comfortably. And, you know, we have enough proof of work mining right now to keep the network secure. So even maintaining it at this level is perfectly fine. I don’t see a problem with that. It’s such a long term consideration and so much will change with Bitcoin. You know, we were having this discussion at the last having I guess, well, lightning that we’re didn’t even exist then. So how do you know that completely changes the equation of how fees are used to open on closed channels. So how can we possibly predict what’s going to happen in four years? You know, 50 percent of Bitcoin’s life time in in in a space that moves so fast. Perry, very interesting stuff. Andreas, thank you so much for taking the time out of your busy schedule to come and come and chat with everyone here on the channel. Again, just a reminder, there are links down below. We can check out the YouTube channel. The podcast and of course, get yourself one of those fantastic books that Andre has written. If you haven’t read the Internet of money yet or four volumes, two or three, you definitely get your hands on one of those. Sondre is. Thank you so much for coming on and having a chat. It’s been a pleasure, Laura. Thank you so much. Thank you.

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