I'm extremely grateful to Foundation Devices for being the inaugural sponsor of this podcast.
When it comes to beautiful, air-gapped, open source Bitcoin hardware wallets, this is a
team that I look to because I've really come to realize it's not just about the hardware.
It's also just as important to look at the ethos of the team that's building it.
You can have a crypto hardware wallet that does exactly what you need, but if the team
decides to start developing in a direction that you don't like, for instance, like Trezor
has by offering privacy tools only to those who are government approved, and Ledger has
done by adding the ability for hardware wallets to export their private keys, it's not easy
at all to make a change once you're already entrenched with that hardware wallet.
The team at Foundation is focused on more than just your Bitcoin.
They're focused on your sovereignty and your freedom, and that's invaluable when you're
looking for a hardware wallet.
You can check out Foundation and their Passport Bitcoin Wallet at foundationdevices.com.
On this episode, I speak with Jameson Lopp, the co-founder and CTO of Casa, which is an
app that protects your Bitcoin and Ethereum with multiple keys stored in separate places
for extra security.
He's also the creator of Bitcoin.Page, which is probably the best one-stop resource of
info about Bitcoin that you're going to find on the web.
That's Bitcoin.Page.
Most importantly, he's an OG cypherpunk, been involved with Bitcoin for nearly 10 years
and a vast wealth of information about Bitcoin.
Let's get right to it with Jameson Lopp.
First, thanks for doing this.
I appreciate it.
We've never spoken before, but I've followed your work for a while, and I greatly appreciate you.
You bet.
I'm always interested in having in-depth conversations with people that I've only had kind of fly-by
passovers on Twitter with.
Your Bitcoin resource, I know everybody tells you, on your website, is the best one out
there.
It's such a great example of what somebody can do just by hosting a resource like that.
Lopp.net slash Bitcoin, by the way, highly recommended.
Or Bitcoin.Page, if that's easier to remember.
Oh, no.
You got an actual direct URL I didn't know.
Bitcoin.Page.
That makes it easier.
Yeah, it just redirects, but I figured the vanity address might be easier to tell people.
That's awesome.
Who do you think your audience is?
Because I go back and forth between, am I talking to people who already know kind of
this stuff, or am I trying to talk to people who are completely outside of this world and
who want to or who need this information, who need this to be drawn in?
Who do you feel like you're talking to, usually?
Yeah, I try to mix it up.
I have my long form, in depth, highly technical writing that has probably gibberish to people
who haven't been paying attention to the space for several years.
That's kind of my exploratory research, trying to push the bounds of our understanding of
what is going on.
And then I just have my more simplistic, high level, 101 type of content.
I try to hit the whole range, and I don't optimize for any one thing.
I'm not trying to growth hack my audience like some people in the space.
If I really wanted to do that, I probably could have more followers and more normies
and whatnot.
In general, I just consider myself a thought spewer, and I'm not trying to do any one thing.
It's just like whatever comes across my radar is what I decide to spend my time talking about.
So I guess indirectly, some of what I do is certainly based on feedback and questions.
If I notice a pattern where I'm getting the same question dozens of times, and then I'll
do some quick research and try to figure out, is there a good, simple, explainer type of
resource around this question?
If not, maybe I should create it.
But if there is, then I'll put it on my website.
That was actually the onus for my resources.
This is not something that I created because I felt like it was going to give me fame and
glory and whatnot.
It was very self-serving.
It was because back in 2016, 2017, the volume of questions kept increasing and there was
so much repetition between them.
It was becoming a huge time suck to repeat myself all of the time.
So I really, I just started off where this was literally just a folder of different bookmarks
in my browser.
I'd get a question.
It would probably match something I'd seen 100 times.
I would go to my bookmarks and I would copy paste the bookmark to whoever was asking the question.
Eventually I was like, this is not scaling very well either.
I need to be able to just tell people to go to one place.
That's when I took all of my bookmarks and organized them and added them to my website.
Really today, I usually spend a few minutes almost every day doing some sort of maintenance
on that website.
You know, this space is constantly evolving.
There's link rod issues.
Some sites go away.
Some new resources are created by other people that I can categorize and link to.
So it's very much a living document and it's actually open source.
So people are free to open a pull request if they come across something that they think
is worthy of being added.
That's cool.
Yeah, I know what you mean with the same questions getting asked a lot.
I think that at least from my experience with Twitter being kind of the main place that
people look for this information now, I mean myself, I answer the same questions at least
like once a month.
It's like over and over.
Just when you think that people get it, then you post the same thing again a month later
and it gets tremendous interaction again from all these people who are like, I didn't know that.
I didn't know that.
I didn't know.
So it's almost like Twitter, it's obviously great for distribution, but it's also erased
people's memories because I feel like sometimes it's even the same people who forget the stuff
that you told them.
So to have it in one place like this for Bitcoin, I guess that's why this has become such an
important resource for a lot of people.
And I go back to your site and review a lot of this stuff even though I've already read it.
It might have been a couple of years ago, but stuff about seed phrase security and how
to make sure that your OPSEC is as strong as it can be and all this different kind of
stuff, it's like you can't read that once and just be done.
You have to almost study it over and over and over.
Who do you go to to get that reinforcement?
Do you go out there and do you have people that you look to and then you can in turn
share it with the rest of us?
No one in particular.
It's just a lot of different people.
The space has become so large and diverse that we see a lot of specialization now.
So some people are really good at, for example, privacy stuff.
Some people are good at security.
Some people are good at economics.
This is actually one of the first articles I ever wrote about Bitcoin.
I think back in 2014 was the multifaceted nature of the space where there's easily a
dozen, if not more, different fields of expertise that kind of overlap and almost nobody is
an expert in more than one or two fields.
So you really have to diversify the people that you're listening to as well if you want
to get as much comprehensive knowledge and as much of a broad understanding of what's
happening in the space.
Yeah, so true.
I came in, I guess, six years ago now into the Bitcoin rabbit hole and somehow evolved
into a critic of DeFi on Ethereum.
I never stopped being a Bitcoiner, but most of the stuff that I talk about is related
to the stuff that's going on on Ethereum.
And the reason for that, the justification for me to do that is because that's an area
that I understand and I understand how it can be directly compared to Bitcoin.
So I feel like it's my way of educating people about Bitcoin to constantly compare all the
stuff that's happening on Ethereum to the level of trustlessness and self-sovereignty
you can achieve with Bitcoin and just constantly explain to people like you're not even close
to that with this application on Ethereum.
You're complete opposite end of the spectrum.
So it's like it's my own little way to contribute to Bitcoin now.
Bitcoin is so big that you can contribute to it by actually specializing in stuff going
on other blockchains and explaining that stuff in the context of Bitcoin.
So you're right about the specialties and sort of different ways of contributing that
I guess we couldn't have even really thought of like five, 10 years ago.
But do you?
Yeah, the flip side, of course, is that Bitcoin simply doesn't have the same breadth of functionality.
So it's sometimes funny to see people complaining about DeFi and then they tend to dismiss most
of the functionality and they're like, well, we could do it on Bitcoin.
We're like, yeah, sure.
Maybe if you spend a few years writing some novel software and coming up with a lot of
new tradeoffs.
But DeFi exists for a reason.
There's demand from certain people for that.
I don't have to agree with it.
Most of it to me seems to be like sophisticated forms of gambling.
And so it doesn't interest me.
But there's no denying that there's demand for it. Do you?
Are you happy with the existing state of Bitcoin?
Like are there things that you would have liked to have seen happen by now that haven't
happened despite your your pushes and stuff like that?
Oh, absolutely.
I do not think that Bitcoin is anywhere near complete.
So this is another, I think, point of friction between some people in the community and myself
and really a lot of the developers.
I started talking about ossification earlier this year because I've seen more of a push
for it, especially after some of the inscription drama.
But you know, I'm a engineer.
I see Bitcoin as programmable money, even though compared to most of the other protocols
out there, it is much more restrictive in how you can do the scripting and the various
interactions with it.
But there's so much left to be done on the scaling side of things on the privacy side,
even on the security side, there have been some proposals that I think could greatly
enhance the available security models to self custody and really to any custody.
So I do want to continue to see changes and improvements at the base layer.
Of course, this will get this gets controversial with some people, but I especially think we
should be prioritizing changes at the base layer that can supercharge second layer solutions.
And a lot of people, especially non technical people tend to hand wave away making changes
to the base layer and they say, oh, we don't need to ever make any changes to the base
layer because you can do everything at the second layer.
And while that may technically be true with enough time, effort and creativity, it can
also get really hacky.
One of the real examples of that that I point out to people is actually lightning.
The original lightning white paper actually proposed several different paths by which
lightning as a protocol could be developed.
And the optimal paths required several soft forks to happen to the base layer.
And thankfully they did because if they had not, then lightning would have been an even
more complex and kludgy protocol and I think would not be able to offer quite the same
level of guarantees as it does in its current form.
So there are protocols, changes out there that if implemented could improve lightning
even more, could improve other second layers like drive chains.
I want to see as much innovation, especially with second layers as possible because I do
believe that innovation will happen much faster at second layers.
But right now I think we're kind of ham strong with how difficult it is to even create these
other second layers.
What do you think second layers are going to are going to do for Bitcoin that it can't
do now?
Are you thinking about cheaper transactions, faster transactions, or are you thinking about
programmability?
Or like what in your head, what do you see is the promise there?
Well, yeah.
So when you're creating a second layer, in a way, it's kind of like creating a whole
new blockchain, a whole new protocol.
And whenever someone creates a new protocol, what are you doing?
I mean, you're creating a new game.
You're creating a new set of rules by which anyone who agrees with and decides to play
that game can now interact.
So the possibilities are really only limited by our imagination and our ability to experiment
and find what works and what doesn't.
Obviously, that means there will be failures and setbacks.
That's the only way that you can really move forward meaningfully.
So yes, scaling privacy, even DeFi like applications at second layers.
The missing link, though, is the ability to easily create these second layers in such
a way that they are actually tied to Bitcoin in a trustless fashion.
One of the missing kind of holy grails of Bitcoin development is the trustless two-way peg.
This was first originally envisioned in, I think, the 2014 side chains whitepaper and
has never materialized.
And I think the really the best proposal that we have for that right now is drive chains.
Drive chains themselves are somewhat controversial, but the folks behind them have been developing
them for quite a few years now.
So we'll see how that goes.
But I especially I want to see us be able to actually attain that vision of people being
able to spool up side chains that are not simply a multi-signature federation for the
actual funds being pegged in and out.
Right like RSK is, which is the only one I'm aware of.
But I'm sure there's others.
RSK and Liquid and I think there may be a couple of others that are even smaller and less adopted.
Okay.
I guess with layer 2s, you know, my experience with the Ethereum ecosystem has been pretty
negative as far as and this actually goes into a topic I wanted to talk to you about,
which is what can we what is the most we can really expect from people from normal users
with regard to the research they're going to do, you know, and with with Ethereum's
programmability and with the ease of which you can spin up a centralized layer 2 on Ethereum,
which they all are by the way, like 100% of the layer 2s on Ethereum are centralized to
the point where a single multi-sig can basically make any kind of upgrade or bring the whole
thing down.
And they're primarily funded by like Silicon Valley VCs and they've been created not for
purposes of enhancing liberty or freedom or self sovereignty, but for the purposes of
generating a profit and an exit for those VCs and the founders.
You know, so like why why should we think that it would go differently with Bitcoin
and just the subtext to this too is that with Ethereum those layer 2s have attracted a huge
percentage of the transactions that would have occurred on the layer 1.
Obviously the layer 1 got super expensive, etc, etc.
But people I found are perfectly willing to trade away the decentralization that brought
them into the space if they're going to save money and it's going to make their life easier.
Like they almost revert back to what they were before, you know, and I feel like with
Bitcoin there's a strong chance that that could happen with Bitcoin layer 2s as well.
Like what's your experience been with this?
Well, yeah, I mean that is the permissionless nature of these protocols.
We should expect that if the sidechain technology continues to improve that there will be excellent
sidechains from a liberty perspective and there will be equally terrible sidechains
and probably even some outright scams and Ponzi schemes and who knows what.
So I think at the really high level from a security liberty perspective, if we get those
permissionless two-way peg sidechains out there, then that at least means that there
will be some sort of escape patch where people can get their money out if it looks like something's
going wrong.
But this is still pretty theoretical area of exploration since we haven't actually seen
this type of technology deployed with real money.
Yeah, now I hear you with like it's still theoretical and it would require a lot of
layer one work to make it happen.
Do you have like I guess part of my issue and my struggle is that I go back and forth
on whether I have faith in the long term that this space won't just suffer the tyranny of
the majority.
And I feel like the more people that come into the space, the higher percentage of people
that don't care as much about all the stuff that we tend to care about, you know, and
I think that we're seeing it already with the way regulation is forming and the way
that government is never going to look at crypto from the point of view of freedom.
Like it's going to look at it from the point of view of what can we control?
You know, what can we do to protect this guy over here who's never even heard of crypto
and keep him from losing all of his money in it?
And it just seems to me that it's almost like a losing battle to try to convince more people
that this is the path forward, you know, as opposed to like hardening Bitcoin's defenses
against their inevitable like tyranny against it, you know, when they decide it's evil.
So do you think that encouraging like I guess I guess what you just said is the way like
the permissionless peg, you know, and having a trustless way to to move Bitcoin to move
and in quotes, Bitcoin to and from a layer two is the way to sort of begin that journey.
But long term, what do you think?
Yeah, I mean, if we want to step back, take the 10,000 foot view of all of this, I would
actually draw a kind of parallel between your government and and what you're describing.
I think we see similar things happen at the sort of civilization level, where it does
seem like there is due to incentives and human nature over years, decades, generations, societies,
groups, organizations tend to collapse towards tyranny and ultimately towards a sort of failure
state and, you know, this same thing with empires, right, as they they grow big enough
that they end up creating all of these systemic weaknesses where ultimately they can't sustain
themselves.
So you know, perhaps this is a terrible metaphor or whatever, but I actually I look at it kind
of from a like constitutional perspective of like, you know, look at the United States.
One of the greatest things that the United States ever did was with its founding documents.
And the reason for that was because the founding documents actually went to great links to
limit the power of the government.
And you know, over the period of centuries, many, many generations, of course, that has
been degraded in a variety of different ways.
And I think that is somewhat expected.
But if we hadn't had those original protections, I think the degradation would have happened
far faster.
So I kind of see a similar type of game theoretical issue with Bitcoin and these other protocols,
where you need to start out with the absolute strongest foundation that protects the individual users.
And you know, we can speculate as to whether or not that will be maintained over the long run.
But if you don't at least start out from there, you know, you're already in a bad position.
So you know, this is why I think it's so important to have that fundamental ability for an individual
user of like a layer two technology to be able to move their funds out of that layer
without having to ask permission, without having to have gatekeepers scattered all throughout
the ecosystem of the technologies that are being built around this.
Now, obviously, a lot of these technologies will have gatekeepers and there's incentives
for people to build their systems in that fashion.
And so from that perspective, you know, we will see centralization and various weaknesses
sort of pervade many corners of the ecosystem.
You know, this is what I've been doing for almost a decade now is fighting against the
encroaching convenience of custodians and people leaving all of their money with trusted
third parties.
And you know, I figure if nobody is fighting against that, then that will degrade the system
as a whole faster and faster.
So you know, I'm not terribly optimistic about it.
You know, I think it's one of those things both with security and privacy, where the
vast majority of people don't care about it until it's too late.
And the only way that we can meaningfully fight against it is for the people like myself
who do care about it to use our resources to try to make security, privacy, other aspects
that are incredibly important to liberty, make that as convenient as possible so that
hopefully at least a larger portion of people who come along will end up choosing something
that puts them into a better position where they're less likely to get screwed in one
way or the other.
But ultimately, a lot of people are going to get burned.
And that's kind of I think the nature of the game.
Yeah, we're seeing way too many good examples of what happens when when people are forced
to choose between liberty and freedom or like a comfortable life of free of persecution.
You know, I feel like with the whole, you know, the past three years with with COVID
and everything and that opened my eyes up so much with regard to how quickly principles
can get compromised when somebody is afraid.
You know, ultimately, fear is the real more than guns, more than tanks, more than bombs.
Fear is the real weapon that a government uses against its own people.
And fear was utilized the past few years to coerce people into going against what they
believe and what they like their own virtues, you know, the stuff that makes them unique.
And I think that the last few years really are the ones that convinced me that in the
long term, Bitcoin personal belief, feel free, I want to hear your thoughts on this.
In the long term, I don't think that this type of technology is going to take over the
world, you know, as far as everybody's going to be using it, everybody's going to be valuing
it, we're going to live in a place in a world where everybody's, you know, understands what
it what it means to be financially free from fiat, etc, etc.
I just I don't see it happening, maybe over 1000 or 5000 years, but like, at least in
the near term, you know, it's going to be a small percentage of the world that actually gets it.
And it's almost like we have to now put that shell up around us to keep all the other the
other 95% of the world away from, you know, attacking these virtues and attacking these
principles.
And that's, I think I'm more on the pessimistic side and more like almost dystopian side of this.
But what were you on that?
Yeah, there's so many examples that we could look at.
You know, obviously, you look at like, Fang, right, the sort of Facebook, Apple, Google,
the tech giants that have managed to create such amazing levels of functionality and utility
and convenience for people that they've really hoovered up huge swaths of people's data.
And people are more than happy to hand that over.
There are a few, you know, glimmering points of hope, you know, I think a really good example
is signal, for example, I think, you know, signal has gotten a mass level of adoption.
And they've actually been able to put a huge number of people into a really sound set of
privacy for their communications channels.
And that I bet that I bet most people who use signal don't even really understand how
it's protecting them.
And that's great.
Like that's how you get mass adoption of privacy and freedom technology is you just offer a
level of convenience where it's like interacting with any other app.
It's just so happens that under the hood, it's protecting you.
So you know, that's what I think we need to be going after, you know, that type of model
where we're offering really the same type of interface that people are used to for dealing
with, you know, perhaps their banking applications, their Paypal's and Venmo's or whatever.
It's just so happens that under the hood, it's doing all this much more complex, you
know, self sovereign crypto stuff.
But of course, that means it has to work and it has to be highly reliable.
And if something does go wrong, they need to be able to reach out and get help from someone.
You know, that's one of the other big missing aspects, especially in the sort of free open
source software space is that there often tends to be no support line or it's like a
community volunteer level of support, which is going to turn a lot of people off.
So you know, I think that we can see that there are paths there that are available.
It's just that they are the path less taken and it's the harder, more difficult path.
Yeah, with the, you know, with the adoption into commercial ventures like PayPal, etc.
and to see that running on crypto rails goes back to the whole problem that decentralization
is by its nature, it's less efficient, it's more expensive, it's messier than centralized
tech, right?
Which you can run on a server and you don't have to worry about all the open source obligations
and stuff like that.
So for a commercial venture, like a PayPal or Facebook or any of these guys to adopt
a decentralized infrastructure would be like betraying their shareholders almost, right?
Because it's like you're not choosing the most efficient path forward for the company.
You're putting principle ahead of profit in that case.
And that never happens for a reason, right?
Because of capitalism.
So you know, and we're seeing that with Ethereum.
We're seeing that with the layer twos.
It's like, why should we add these layers of decentralization when we can just keep it centralized?
People are still going to use it.
It's going to be better for our bottom line.
It's going to cost us less to run.
So we're already seeing that.
So it's like wherever there is commercial venture capital or other types of investment
going on, you're almost guaranteed to see mutations of the tech and you're almost guaranteed
to see like untenable centralization.
And I just don't, I haven't seen any variations from that.
And I don't think we ever will because like I said, it would be a betrayal to the company
itself, like to spend more money than you need to in order to accomplish this goal.
So yeah, I mean, what do you think about, one area I get concerned about is with the
way that Bitcoin is influenced by companies who do that kind of stuff.
You know, and I like, there's plenty of funding coming into Bitcoin development from companies
that have shown that they're willing to sacrifice on decentralization in order to have a profitable
company, like exchanges, like custodians, like, et cetera.
And I know you've, you worked at BitGo, right?
Yeah.
So like, do you think that longer term, that type of influence that they have over, over
development and when I say influence over development, I'm talking about specifically
funding developers, like paying rent and food for Bitcoin developers.
Do you think that long term that Bitcoin could start to make sacrifices in order to achieve
commercial goals for those types of companies?
No, not really.
I mean, I couldn't tell you the figures off the top of my head, but I suspect that a far
greater portion of developer funding is actually being funneled through nonprofits.
I donate a fair amount myself to several different initiatives, charities that, you know, they
basically run grant programs.
If anything, I would say the sort of commercial business side of things, hiring developers
or paying for grants is pretty miniscule and it's been underwhelming for the past decade even.
I would suspect there were actually more developers that were being employed back in like 2015
by some of these companies than there are today, but that's just sort of anecdotally
off the top of my head.
As the ecosystem grows, we also, we see more people donating to these charities, these
grant programs and it kind of fluctuates back and forth with the market cycles, of course,
but from what I've been hearing from a lot of the developers, one of the bigger problems
is just curating talent, getting new people interested, getting people to do code review.
It's the review process that's really more of a pain than the actual writing of code
because of course we want to be incredibly careful and conservative about any changes
that go into widely adopted Bitcoin software.
So I'm really not concerned from a governance perspective in the foreseeable future, but
my long-term concern has more to do with what we were talking about earlier is just the
incentives of convenience versus security and sovereignty and whatnot.
Once again, what I've been fighting against for so long, if we do get real mainstream
adoption and the vast majority of that adoption just happens through exchanges and custodians,
they get onboarded through those companies and then they never withdraw their money because
the default is to just stick with the custodian, that's what worries me in the long term.
If the custodians end up holding significant or vast majority of the actual coins, that's
when some of the incentives around governance may start to break down and that's what worries
me more.
So we had during the scaling debates, thankfully a very active community of people that run
their own nodes and voice their opinions and basically a large economic power, which you
could argue may be more important than the node aspect, but there were some future markets
that were running before any of the scaling debate forks happened that basically showed
that 90% of the people who cared about this stuff were going to dump all their coins on
the big block forks and that's basically what we saw actually happen.
So it's really an activism thing and kind of like what you were saying, as mainstream
folks come into the system, they're going to bring all of their mainstream legacy perspectives
around how things work and that's what could be the bigger danger of basically people coming
in and believing that democracy is how things should happen because obviously we're not
building democratic systems here, at least from a governance perspective.
It's inevitable, right?
It's like it's going to happen.
It's just a matter of time, but like I want to go back to something you said because you
were talking about how with the custodians holding more coins, more Bitcoin, they have
more power in the debate.
Why does that happen because this is not a proof of stake system obviously.
So like what gives them that power?
You're just talking about like political power or what kind of power is it?
It's systemic risk that happens as a result of the decisions that the custodians can make.
So I'm not a lawyer, but if I recall from some of the examples, I think like one example
if I recall correctly that happened with the grayscale trust is I think that they have
some clauses in there and I think that a number of other custodians have similar clauses that
basically say that if there is a fork, we the custodian get to choose what the real
fork is and we reserve the right to like sell those coins or to not even let you access those fork coins.
I think this came up again recently with the BlackRock ETF maybe and some phrasing that was in there.
And so the short version is centralization and putting a lot of power into a small number
of hands where these companies and often just like a handful of people at these companies
now get to make decisions on behalf of potentially millions of people.
I don't know if that just came through, but I'm in a hotel and they just decided because
it's like we're doing a podcast.
So of course they're going to get on the fire alarm speaker at the exact moment.
That's a massive concern and you're right, it did come up with the BlackRock ETF recently
and it's another one of these things that I almost wonder with everything we've been
talking about and the fact that we really can't rely on the majority to make rational
decisions when it comes to financial self sovereignty.
So like isn't it inevitable that custodians are going to pick up more and more of a share
of the Bitcoin and that they will have that political sway over development?
And even if like there's this, it just always seems to come back to this small group of
pirates at the end of the day defending some fork of Bitcoin that manages to stay true
to the principles we talk about and we believe in right now.
But that always in my head is the smaller portion versus the corporate government friendly
centralized to a certain extent, maybe even proof of stake Bitcoin fork that will please
all of the BlackRock's and all of the central banks of the world in the long term.
And one good example of what freaks me out about this entire thing is I feel like we
might have already seen this kind of influence with regards to privacy on Bitcoin.
Why don't we have privacy on layer one except for the fact that it would mean that Bitcoin
wouldn't be useful to custodians?
Like is that the main reason that you think we don't have privacy today?
I mean, I think that the main reason we don't have strong cryptographic privacy is that
the solutions that are out there tend to break the auditability of the supply.
So the way that I've looked at it is that there are many different priorities and valuable
attributes of Bitcoin that are generally agreed upon and the ability to easily audit the money
supply is one of the top few of those.
And privacy is much, much further down on the sort of value attributes.
So any type of privacy enhancing technology that breaks that ability I think is a non-starter.
So you don't think Bitcoin will ever see layer one privacy?
You're thinking layer two, like optional privacy in the future maybe based on what you said
earlier, right?
Not to put words in your mouth, but that's what I'm gathering.
I don't think that we will see it implement any of the type of cryptographic privacy solutions
that some other coins have implemented to date, but that doesn't mean that there's no
way to improve the privacy.
For example, if I recall correctly, things like the Anyprevout proposal where you can
essentially have massive shared input transactions.
One of the cool things about that is that can really supercharge lightning channel construction.
So you can essentially have L2, by which I mean ELTOO, which I think is a block stream
project, much more massively scalable lightning nodes.
But I think that that can also supercharge Bitcoin mixing, if I recall correctly.
So there are ways to take some of the existing technologies we have, like lightning and coin
mixing, and make them even better.
And then you could sort of quibble over whether or not that is strong enough privacy or not.
But I don't advocate coin mixing in general because I think, A, it doesn't really scale.
It can get very expensive if you're doing it a lot because of the volatility of on-chain fees.
And B, it's easy to do a bunch of coin mixing and still shoot yourself in the foot if you're
not really careful about your UTXO management.
And I think that UTXO management is not something that is ever going to be a mainstream adoption
level of thing.
That needs to be completely abstracted away from the average user.
That should really be a power user type of functionality.
So it doesn't mean, though, that it's not possible for us to continue improving coin
mixing technology and improve some of the underlying functionality that is currently
limiting what can be done with coin mixing.
But then what are the other options for staying private on Bitcoin when you are forced, for
the most part, unless you go to great lengths, you're forced to identify yourself to the
government to get permission to buy Bitcoin in the first place.
And then with tools like Chainalysis and TRM Labs and all these other guys out there that
are highly financially incentivized to keep tabs on us and to track us down when needed,
what hope does a Bitcoiner have to achieve privacy and get uncucked, I guess, I don't
know, on-chain from the government in that case?
Well, I think you touched on it, which is the fact that a large portion, last I checked
it was around half, it may still be majority, but very large portion of transactions are
to and from exchanges.
And of course, these centralized exchanges are the choke points.
They're the ones that have regulatory pressure and compliance and are often working with
the Chainalysis companies in various fashions.
I think the way around that is that we need to break this onboarding offboarding cycle.
We need actual peer-to-peer circular economy where you're not interacting or we don't have
everybody interacting with a handful of choke points, but rather we're actually engaging
in meaningful direct peer-to-peer transactions, which means that buying Bitcoin, I think optimally,
buying and selling Bitcoin should not even really be a thing.
We should be earning Bitcoin.
We should be paying Bitcoin for goods and services.
That's one of the ways to, I guess, indirectly improve our privacy is just by simply not
routing all of our transactions through a handful of entities that can surveil us.
Yeah.
It seems like it's trending in the other direction though with the talk and the planning with
CBDC, right?
It's almost becoming like a buzzword now, CBDC, but for me, it's becoming a general
catch-all phrase for digital, highly trackable fiat money that is printed directly from a
central bank into your own cryptographic or otherwise wallet.
Anybody who knows me knows, I see it as inevitable at this point.
I see a lot of this stuff as inevitable.
I'm not sure if that's just because I'm a gloomy-gus type pessimist or if it's based
on just the way that humans are and the way that humans have always been and the trend
that we've seen with our own country over the past 250 years, right?
We're now betraying the very, the majority is happy to betray the rules, the consensus
mechanism that was set up for us here.
Even though it's the reason that we're here, the reason that we have this beautiful system
that we have today, the reason we have the freedom we have today is because of the Constitution
of the United States, which basically is the Bitcoin layer one of the United States.
Fast forward to now and we see people that can't even tell you what the First Amendment
actually is or can't even tell you what Article 1 says.
It's like they have no idea even where the capitals of their state are.
So it's-
Yeah, well, it's been really perverted, right?
Even though there's a lot of protections from the government, for example, spying on its
citizens, they managed to find workarounds.
So now what we have instead is we have corporate surveillance and then the government just
enters into agreements with the corporations for data sharing so that they're not actually
surveilling people directly and it's quote unquote legal to do that.
It's also cryptography is a double edged sword.
There's two different ways at a really high level to use cryptography.
One of them is to actually encrypt data and make it private so that only the intended
recipient can even decipher the data.
The flip side of it though is actually tracking and basically using public keys as identifiers
so that you can then tell who is doing what because your activities are cryptographically
signed and say, okay, public key X was the one that initiated this particular thing.
And so I think we should expect that governments and authorities will be more than happy to
leverage that latter half of functionality to their own benefit to basically empower
themselves and their own surveillance capabilities.
Yeah.
Have you been following this WorldCoin story?
How can you not?
Yeah, there's so much wrong with that.
And unfortunately they have a lot of capital so I think they're going to be around for a while.
Yeah, to me it's another one of those breadcrumbs as far as what the future is going to hold.
Because I think that somebody put it perfectly that it's not proof of work, not proof of
it's proof of stupidity of the people who are ultimately walking up to this device letting
it scan their biometrics in exchange for a few dollars worth of some token that they
have no idea what it is.
They'll probably have to dox to an exchange in order to even sell it for five bucks or
whatever it's worth.
But the biggest issue with this with COVID with just a lot of stuff we've seen lately
is that people lack the ability to think rationally.
They weren't taught how to think.
They weren't taught how to apply logic to these types of situations and they weren't
taught to value human rights as much as they think that they do.
It's like the people who often scream the loudest about human rights are the people
who least understand what they actually are.
That they are about being free to make your own decisions, being left alone, being able
to think independently.
So WorldCoin, it is what it is.
I don't think it's going to succeed.
It's gimmicky.
It's like a toe in the water almost for these guys to see what they can get away with, I think.
But it's a test.
It's a predictor, I think, for what's around the corner, not just for WorldCoin, not just
for Ethereum, not just for Sam Altman or anything like that, but for Bitcoin too, I think.
I think that we need to look at stuff like this and we need to apply it to the future
of Bitcoin and think about the attack vectors and think about how unbelievably ignorant
it sounds mean.
It sounds like I'm being a jerk.
But the more of the stuff I see, the more you have to acknowledge the reality in front
of your face.
Most people don't know how to think.
So it's like when they're confronted with defend Bitcoin or get $3 worth of McDonald's
vouchers in exchange for your fingerprints, they're going to pick the McDonald's vouchers.
So am I being too pessimistic, am I being too negative on the majority?
No.
So what's novel about WorldCoin?
They have the hardware that's somewhat novel.
They have some zero-knowledge functionality that's novel.
But what's not novel, what has been done many times before, is airdrops.
And I think it should be quite clear from now that simply giving money away to people
or giving tokens away, people don't value it.
Like when you give them something for free, they ascribe basically no value to it.
So I think it's incredibly overoptimistic to believe that you can bootstrap a monetary
system by airdropping a bunch of tokens to people, regardless of the other security and
privacy attributes around how you're doing the airdrop.
Yeah, that makes sense.
It's true.
It's interesting to watch.
But yeah, most people get it.
If they can get a few bucks for it, they'll just sell it.
It's not going to become like a big global phenomenon of any sort.
Famous last words, watch, we'll replay this in five years and WorldCoin will be the dominant
financial system of the world.
What do you think about, I'm taking a right turn a little bit, about the options for Bitcoiners
to be self-sovereign with their custody right now?
Do you think that the hardware wallet system scene that we see right now, do you think
it's adequate?
Because the more that I watch it and the more that I watch the decisions that are being
made and the more that I see the corporations making corporate decisions as opposed to user
based decisions, the more I wonder if we're going the wrong direction with regard to the
options that we have as normal people.
And I know you just wrote a blog post or you just shared a blog post recently about burying
your metal engraved seed words in your back somewhere in the woods.
That's obviously an option for the most dedicated people, but for the average sort of person
who's in the space, do you feel like we have adequate options for them right now?
Well this is a whole can of worms.
I have an interesting perspective because of what Cossett does.
We build a distributed key self-custody service and software where we integrate with a number
of different hardware vendors.
And we do that because we believe that multi-vendor, multi-sig, aka having multiple keys on multiple
different types of dedicated hardware is how you eliminate single points of failure that
could happen at any given company.
So we have to realize every company is a single point of failure.
And so that means if you have a piece of dedicated hardware, then there can always be some sort
of supply chain or insider attack or who knows what, even malicious firmware that bypasses
internal systems or even that is created as a result of regulatory pressure, who knows?
The result is that if you want to be protected from any one of these companies, you don't
want to put all your money, all your eggs into one basket so to speak.
We should not be trusting companies in this space.
You should not even be trusting Casa, which is why we architect our solutions so that
even if Casa were to somehow become malicious or were to disappear from the face of the
earth, our users would not lose their money because they hold all but one of their keys.
They hold the spending threshold of keys and Casa doesn't have the ability to unilaterally
block their transactions or create transaction without their approval.
So the roundabout thing of what I'm getting around to here is that one of Casa's internal
engineering big points of friction, and this is by design, is the fact that we do not control
these hardware devices that our users are making use of to actually manage and store
and use their private key material.
And so the result of that is that these various companies, they tend to focus on developing
their own full stack solution, by which I mean an example with Ledger is Ledger has
of course Ledger Live and they put a lot of time and effort into improving the experience
and monetizing functionality within Ledger Live and of course they probably want all
of the people who buy a Ledger device to just be using Ledger Live rather than other wallet
software that might integrate with Ledger.
And so the incentives are a little out of whack here in the sense that sometimes they
make changes that break stuff because they I think just aren't thinking about the fact
that they're not just building hardware for themselves and their own ecosystem, they really
need to be thinking of themselves as platforms that other developers are building on.
So it can be challenging for sure, but once again this all comes back to the sort of convenience
and security trade-offs.
Casa did not choose the easiest path.
It would have been so much easier from an engineering perspective if Casa didn't integrate
with hardware devices and we just had all of our users keep their keys basically on
their phones managed by our software which we could have a lot more control over.
But we did choose the harder path and I think that it's worth it because I can sleep easier
at night knowing that even if something got totally screwed up with Casa that our users
would not lose their money.
Yeah I tend to look at these things from a lot of unique I guess perspectives or from
these perspectives that there's more attack vectors than just like making off with the
money and a lot of them have to do with the whether it's KYC or other forms of requiring
like checking users against a blacklist or like even Casa requires KYC right?
No.
No?
Oh sorry my bad.
I thought you had to have identity proven for somebody before you could hold a key for them.
No some of our competitors require KYC but this is actually one of the big differentiators
between us and some of the other multi-sig services out there that aren't just free software.
So once again this is it's trade-offs it would probably be easier from us from some perspectives
if we required KYC from our users but we don't want to have to protect that information.
It's almost as toxic and radioactive as trying to hold on to private keys.
Well yeah yeah I mean it is and you know like Ledger Recover anybody who uses that solution
is going to have to KYC to Ledger and so Ledger is going to know who they are have all their
information have their Bitcoin balances at least as far as their Ledger goes.
So that's the kind of stuff where I mean that in that particular situation I think that
they admitted that they could even be coerced into taking somebody's Bitcoin right because
they basically are going to have the keys.
So it's like stuff like that you know another litmus test for you know it's proof of in
this case I don't know if it's proof of stupidity or proof of misplaced trust you know because
you're you're placing your trust in a few guys that run Ledger with your Bitcoin stash.
Do you understand that do you understand the implications of that maybe not you know so
it might be a very naive thing.
Casa sounds like it's taking the more noble path at the expense of profit like you just
said so you know maybe you're already a company that that's disproving you know the my pessimism
a little bit at least.
How do you justify how do you justify that like when you guys are sitting down looking
at the numbers and you know you know I'm sure you have investors and you have to go back
and be like explain that you guys made the most prudent decisions for the business.
How do we know that when Casa or if Casa faces a time where it's crunched for money and you
might have to lay people off and maybe you've already had these times tell me but like you
know those are the times that really most companies start to buckle on their principles
like why won't that happen to Casa.
Yeah and we have had layoffs before we actually came very close to the brink I think back
in 2019 or so and that was when we shuttered the node product because it was just hemorrhaging
money for us and you know we laid off everybody that was working on that product.
I think part of it is the fact that we have intentionally hamstrung ourselves and what
we can do is that the temptation might be there but there's we're literally limited
into what we can do in terms of our customers and you know potentially screwing with them.
So you know I think a lot of people would say oh we've already compromised on our principles
by adding support for Ethereum and so on and so forth and you know for there's plenty of
reasons why I wish that we were able to just stick to Bitcoin but you know we do have that
profit motivation of wanting to improve our revenues and profit margins and basically
meet the demands of our customers because we know that if we don't then we could potentially
lose them to other competitors and we know that we have lost a decent amount of business
to custodians because we don't have as wide of an offering as a lot of custodians do and
so there are a number of people out there who if they have very broad range of assets
they want to keep them all in one place and so you know they are looking for convenience
and so this I really do consider custodians to be our biggest competitor.
They have this huge edge this advantage on the convenience that they're able to offer
and if we can't get at least most of the way there on the convenience then a lot of people
are going to shoot themselves in the foot and choose the convenience over security.
So what is Casa going to do over the long run?
We're going to continue to explore our options of essentially what services we are able to
provide people while remaining a software service and not a regulated financial institution.
The vast majority of our competitors are regulated financial institutions.
That gives them a whole lot more leverage in the things that they can do.
Of course a lot of risk as well that comes along with that.
So I guess you could say that we're trying to take a much less risky path for our customers
and it may be more risky for us as a business because we are essentially hamstrung from
a number of different decisions that we can make.
Do you think Casa is the best solution period for a retail just a Bitcoin holder?
To me I can't get my head out of the mindset that the best way to protect my own freedom,
to protect my own freedom to move, to transact, to be self-sovereign at least maximally if
not entirely but as much as I can be in this world is to have complete control and to not
have identity attached in any way and to be the guy out there burying shit in the dirt.
To me that's the ultimate freedom.
As soon as you start involving any other third parties you start to make tradeoffs.
That's how I feel.
Do you feel the same way?
Do you feel like Casa is the optimal tradeoff point?
That's what I'm going for.
If someone wants to attain the maximum level of privacy and security in Bitcoin, whatever
crypto assets they're dealing with, then they basically need to do everything on their own
and this has always been possible but it's a much higher bar.
You have to climb a pretty steep mountain of knowledge to understand all of the tradeoffs
of all of the decisions that you need to make when you are creating and maintaining your
custody.
It's not impossible.
It just takes a lot of time and effort.
So what we're going for at Casa is we're not trying to capture that segment of the market,
the people who are willing and able to do that all themselves.
What we're trying to capture is more of the people who are more mainstream, less technical
or less, they just have more time constraints and that would probably be choosing a custodial
solution due to the convenience.
So our value proposition is we can give you the level of support and actually a much better
level of support than you're probably going to be able to get with a custodian and we
can do that in such a way that you maintain control over your funds and you're not actually
trusting us.
So it's trying to bridge this gap between doing everything yourself versus having a
third party do everything for you.
Yeah, I hear you.
It seems like there's these multiple camps out there these days about like there's people
that say seed phrases are too complicated, normal people will never get it.
It's okay to use a custodian until you've figured things out and then you can go from
there.
And I always come back with the mindset that you know what, my point of view on this is
if you are not willing to put in the research and the time and understand what this asset
is and what it's capable of and be able to self custody confidently, then you probably
shouldn't be here at all because how does somebody holding Bitcoin on a custodian benefit
the decentralized universe here?
It doesn't.
It hurts it actually.
The only thing it does is it helps the price potentially.
You know, that's arguable too.
We were doing a lot better before futures markets came in, right?
But at least as far as pace of growth of the asset, but yeah, so it's a big debate.
We're running low on time.
But you know, it's sort of my take on it is always that and it seems kind of brutal and
seems kind of like not so compassionate.
But at the same time, I think that people are capable of doing it.
People are capable of learning and they're capable of sinking their teeth in.
And the ones that aren't the ones that don't want to the ones that that just aren't doing
it can't be dragged along.
We can't force them into it unless there's like a Trojan horse like you said before.
But it seems like you've got your eye on the right target, which is people who've already
decided yes, I want this level.
I want to self custody.
I just one step away from I mean, you're still self custodying with Casa but you're one step
away from the you know, the complete the complete version of that I guess it's one way of saying
like the the version of it where you're the one in complete 100% control your with Casa
maybe or you're just at 99.
It's the wrong way of putting it because you're still in control.
I get it.
It's a multi SIG.
You have the keys.
It's hard to talk about the security model once you get into a sort of hybrid key situation.
It gets really the lines start to blur and they're actually going to blur a lot more
in the coming years because I think with some of the advances in Bitcoin scripting that
we're seeing start to come out, we're going to start to see people creating security models
where you know, you may have full self custody during normal conditions that but then you
may also defined other conditions like inheritance, you know, basically timeout conditions in
the future where a flip a switch will flip and the ability for other people to access
those funds may start to come into play and and it may not be as simple as saying okay,
you know, if a few years go by, then just let you know, entity X access it, but we could
very easily get into situations where we have kind of multi institution custody setup where
you may say, you know, if my wallet is inactive for many years, then a spending threshold
of keys between semi semi trusted institutions, X, Y and Z may be able to come together to
you know, spend the funds from this and you know, those will probably be you know, KYC
type of institutions that have lists of beneficiaries and other people who should be able to you
know, lay claim on the funds and whatnot, but it's definitely going to get more complicated
and difficult to talk about, but I also I look at this whole thing from a technology
adoption lifecycle perspective of, you know, I remember my family and the like 90s and
early 2000s being extreme laggards to adopt the internet and email and stuff like that,
but you know, decades go by, then the technology and the interfaces continue to improve and
and eventually it becomes a network effect such that they they go from instead of being
the majority of people who haven't adopted the technology, you become the outsider where
everybody except you is using the technology and it's and it's basically a sort of peer
or social pressure incentive of you're missing out if you don't use it.
True, true, but if the if the internet from you know, the early 90s to today, if that
same trajectory is followed by Bitcoin, I think we're kind of screwed, right?
As far as like the centralization of it, as far as the vulnerabilities everywhere, the
tracking, the surveillance, the regulation, we have to we have to do better than we did
with the internet, I think, like so but I hear you, but it's kind of also what I fear
is that people get sucked into the wrong version of it.
You know, and yeah, yeah, you know, that's one of the things I've been talking about
for the past year is actually looking at various internet protocols and how they have become
extremely centralized over time.
My favorite is email.
You know, email is mass adopted used by billions of people every day, but it's actually a monster
of a protocol compared to what it was in the 70s, 80s and 90s.
And it's not really possible to actually be a sovereign email user anymore.
The thing that we call email is literally just a handful of gatekeepers that are talking
to each other on our behalf.
Yeah, that's a great example.
I just got I'm a proton mail user and I just got an email from them recently advising like
why it's you basically can't run your own email server anymore.
Like you just can't you can't receive email to it.
You know, you have to be a custodian of email or you have to deal with one in order to even
use it anymore.
And it's a great example.
Email is, you know, a great parallel, a great comparison for Bitcoin as an open protocol
that got centralized over time.
We just have to that's that's the thing, man.
We just have to fight and make sure that people understand why Bitcoin can't go in the same
direction.
I did a forked email like 10 20 years ago, right?
We've done it differently.
But anyway, now this is great, man.
I have to have you come back sometime because I like I have a whole list of stuff that I
wanted to get to with you.
But I was way too ambitious, especially with like Twitter stuff with Noster and stuff like
that.
Oh, yeah, sure.
That's a whole separate convo.
But thanks for being here.
I really appreciate you.
You bet.
Thanks for having me.