What is going on everybody what is going on it's ya boi Nye and welcome to another episode
of what is crypto the podcast where we talk a little bit about bitcoin cryptocurrency
and the future of our financial systems just a disclaimer guys this is not financial advice
i am not a financial advisor we are not here to give you any financial advice this is specifically
for entertainment and education purposes only finally guys if you want to ask a question
specifically to me as the host or any of the guests you can go over to our facebook group
and you can drop a question in the facebook group you can learn more about the facebook group as
well as our patreon and other information hubs that we have for what is crypto at whatiscrypto.com
today i've got a really special guest on the line i have Jameson lopp Jameson is a bitcoin engineer
and he's also the chief technology officer of the crypto startup casa Jameson is also very notable
for his decision to live off grid which is really cool it's been written about in the new york times
and other places today Jameson and i are sitting down to talk about bitcoin we are giving you the
101 on what bitcoin is including the origin story of satoshi and how the bitcoin white paper came
into existence we talk a little bit more about who we think satoshi is why bitcoin was created
and specifically why it's important and how it works all right guys let's listen to what Jameson
has to say awesome Jameson thank you again for so much for coming on can you uh just give us a
little introduction of yourself what is your name and and your title sure my name is Jameson lopp
my title is cto of casa awesome man and uh how would you describe yourself oh that's a tricky
one but i think i'll have to go with uh what my my goal in life is these days which is i am someone
who is technical and is trying to use my technical abilities to improve the privacy and freedom of
people around the world what is bitcoin to you can you tell a little bit about the history the origins
satoshi etc yeah i mean bitcoin is this experiment this grand open project that is trying to be
i guess the optimal form of money it's very broad from a philosophical standpoint because
it has many different aspects to it and this results in people arguing about all kinds of
different parts of how it actually operates i mean it involves everything from game theory
to cryptography to computer networking to economic and monetary theory and it's very hard to talk
about comprehensively simply because it's at the intersection of all of these things i started out
looking at bitcoin as a technology and over the years i've come to believe that it's actually
this like cultural paradigm shift in thinking and completely different form of governance that seems
to be a lot more interesting than just the technology the technology is just something
that allows us to to operate this completely new system that's very hard to define but uh you know
it's over 10 years old now and it just appeared out of nowhere on the cypherpunk mailing list
by this anonymous individual or possibly group of people that call themselves satoshi nakamoto
and they basically said hey we've found a way to solve this famous problem in computer science
which is the byzantine generals problem and that problem basically says you know if you have a group
of actors that is distributed and they're trying to coordinate plans to attack a city how are they
able to do that if their communication between each other could get corrupted by basically bad
actors or enemies that are trying to to screw up their ability to coordinate the attack and this
also ended up solving a fundamental problem within distributed financial systems which is how do you
prevent somebody from spending the same money twice which tends to be pretty easy to do if you're
talking about digital money because you can basically copy and paste data very quickly very
easily so satoshi basically created this protocol that it put together a lot of other building blocks
from a technological standpoint that had existed for a while but satoshi put them together in a
way that had never been done before and created this new peer-to-peer network that was able to
withstand various attacks and basically secured itself by having each actor on the network
validate all of the data and by having other actors on the network expend a provable amount
of energy that would then make it very expensive for anyone to try to roll back the history of
what had happened on the network and who do you think this satoshi person is or was or the group
of satoshi yeah at this point given that satoshi has managed to disappear and remain silent and
never be found for i think nearly eight years now it seems more and more likely that satoshi
may have passed away otherwise satoshi is probably one person because i mean you know the more people
that you have involved in something the more difficult it is to keep a secret and the best
way to keep a secret is if everybody involved is no longer alive you know it was probably
someone or some people who were early cypher punks but not necessarily i tell people that as far
as i know it's just as plausible that satoshi could be a random you know teenager in asia
who just stumbled upon some of these technologies you know it could even be if you want to go more
far out there it could be a advanced artificial intelligence from the future that came back and
basically invented a new monetary system that it could use to enrich itself in the future who knows
the the only thing that we really know is that it seems like satoshi has not been interested
in actually making use of the billions of dollars that has essentially enriched them from those
early blocks that they mined and you know that is a level of restraint that i believe has never been
seen before and it's you know it's so hard to believe that someone who is still alive would
be able to exhibit that level of restraint unless perhaps they are so afraid of the consequences
that trying to spend that money would reveal their identity and make them a target of some
very powerful people and there's a lot of actors in the space some that are very popular in terms
of having a lot of attention and others that are not that come forth and claim to be satoshi for
people that are listening to this for the first time and hearing about bitcoin for the first time
what warning would you give people for some of the other actors out there that make this claim
you have to understand that it would be incredibly simple for the real satoshi to provide hard
cryptographic evidence that is publicly verifiable there are some people for example charlie lee the
creator of litecoin actually provided proof that you know he created the genesis block by
you know signing messages cryptographically with the private keys that were related to the coin
base of the genesis block if we assume that satoshi didn't lose their keys which i think is
a actually a pretty good assumption because uh satoshi actually had quotes where they said you
know you should never delete a wallet you should never delete private keys then it stands to reason
that the real satoshi would be able to retrieve those keys and sign you know arbitrary challenges
to essentially prove in real time that they are the the creator of the system so the the various
the various people who have come out and claimed to be satoshi have provided no such cryptographic
evidence and at least one of them has actually provided invalid obviously fraudulent and fake to
cryptographic evidence on multiple occasions so there's really no reason to believe that anyone
to this day who has claimed to be satoshi is actually being honest
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it basically states in in the opening paragraphs that one of the fundamental problems with the
financial system is that it currently relies upon a lot of trusted third parties it's very difficult
outside of using something like cash or gold you know physical objects it's very difficult to engage
in true peer-to-peer commerce where you're sending money directly to the counterparty without it
being routed through some third party if not multiple third parties and the problem with
these third parties is that they can arbitrarily decide to screw with your money they may decide
to censor your payments for example we have seen various payment companies that have censored
payments or donations to political organizations such as wiki leaks they may also be pressured
into not allowing you to store or send value if you have a business that is either illegal or
possibly gray area some examples of that for example i think the the cannabis industry in
certain states in the united states where it's legal at the state level but it's still illegal
at the federal level and of course the feds get to pressure all the banks and tell them they they
better not help anyone deal with business funds that are resulting from what is now legal cannabis
in those states or you know even other things like people in the sex industry which is legal
in some places but not in others it creates additional complications because these third
parties are essentially single points of failure they're choke points that can cause your your
money to become less fungible to basically become less valuable because you cannot do everything
with it that you may want to do but at a high level the way that it works is that the system
operates under the assumption that you should not trust anyone you may hear people talk about
trustlessness or there's a motto don't trust verify and this basically means that whenever
you are receiving money or whenever you are sending money on the bitcoin network there are a variety
of of different security and privacy models that you can choose from but the ultimate level of
security within bitcoin is one where you are validating yourself everything that is happening
on the network so you are running what we call a fully validating node or full node and that is
is basically some software that is automating the downloading and the relaying of blocks and
transactions on the network so that you have read and validated all of the rules of the protocol
to make sure that no one is breaking the rules and you know why would someone want to break the
rules well they might want to double spend their money they might want to fool you into thinking
they have sent you money when they actually have not there are a variety of ways that this can be
done especially if you're not running a fully validating node or you could be fooled into
thinking that you had received money that you actually have not but by operating in a system
where everyone who is running a full node and currently there is about 10 000 publicly available
full nodes and close to 100 000 we believe total full nodes many of which are private and not
reachable over the network directly but everyone who is running one of these and is essentially
having their wallet be backed by the full node they are operating in a way that they know that
no one is lying to them because they are getting data from multiple other peers on the network and
they are checking it and if you receive any data that is invalid on the network then you just throw
it away you don't have to assume that anyone is being honest to you because you're checking all
the rules and you can tell if someone is lying to you and if another node is lying to you you just
disconnect from them and don't let them send you any more information so that's a very high level
of how the the trust model works and by operating in a system where you don't have to trust anyone
it is highly inefficient from a technical standpoint but it gives you this level of
security that we've never really seen before now there's a lot of trade-offs there and you end up
with issues of privacy because you know all of the data gets sent to everybody on the network
you also end up with issues of scalability which people have been arguing about for many years
but that is kind of the the root issue is that it has created a completely new model of trust
which some people call trustless but you know there are certain assumptions that that go into
that and i have some very very long articles that go into detail about how that all works
briefly touch on mining because we're going to have a full episode about mining but how does
mining work and how does it contribute or how does it function with the bitcoin network yeah so the
the best way i think to look at mining as you know a participant on the network is it is essentially
acting as this time stamping function so you have the nodes on the network you have people who
connect their wallets to the nodes and they're creating transactions when you you create a
transaction you broadcast it to a few other peers that you're connected to and then those peers
validate the transaction if it's valid they rebroadcast it to their peers and so on and
in that way the transactions get broadcast across the network within a matter of seconds now that's
all good and well but you get into this problem where on a decentralized distributed network
there is no guarantee of ordering so it would be possible for someone to put a transaction onto
like one edge of the network and then put a competing conflicting transaction onto some
nodes on the opposite side of the network and then as they propagate across the network some
nodes think you know the first transaction is correct some nodes think the other transaction
is correct it's very hard to know what is correct if if people are screwing around with a system
like this which is fairly easy to do because there are no gatekeepers it's a permissionless
system where you can connect to any node you want and send them any data you want so how do we resolve
that well basically you have to have some sort of almost a heartbeat or time stamping type of
function that every so often it collects up the transactions and it puts them into the ledger or
in in our case the blockchain so the miners they're sitting out there on the network they're
running their own nodes they're listening and gathering transactions and they're basically
batching them up and creating these containers that are called blocks and the blocks have a
few other attributes to them one of the more interesting ones being that each block actually
points to the unique id or the hash of the previous block and due to the way that hashes work
a hash is kind of like a fingerprint of all of the data that is being sent into the hash function
you are essentially creating this linked list of blocks that go all the way back in time to the
genesis block the first one that was created by satoshi and by having them all linked together
it creates a level of auditability where you can very easily scan through all the blocks and
transaction data that ever happened and and that is what every node does as it is sinking and it's
it's not possible for an attacker to arbitrarily change any of the data in these blocks because
changing a single bit of data would then change the hash of that block in the fingerprint and that
would essentially break this link in the chain of blocks because the next block would no longer be
pointing at the same hash so that blockchain aspect of the data gives us really strong
auditability which is kind of a proof against tampering but it still doesn't make it expensive
to tamper with the way that we make it expensive for people to tamper with is that the miners are
also doing something that is called proof of work which basically means they are trying to brute
force this function that is is just trying to find a hash or an id that has a certain number
of leading zeros on it the more leading zeros there are the harder it is to find because hashes are
essentially random it's it's not possible to predict what the hash of any given data is going
to be so it's it's a little more complicated to to talk about like how proof of work is actually
calculated but suffice to say that the proof of work within bitcoin corresponds to a function
that is targeting new blocks being found approximately every 10 minutes it's not
always going to be 10 minutes because of the randomness that is involved but as long as we're
having blocks come out at fairly regular intervals then we're continuing to extend the blockchain
we're continuing to put transactions into an ordered and time stamped format where we can
have this additional level of assurance which is basically a thermodynamic guarantee that so many
you know dollars worth of energy were expended to create those blocks that we we basically know
that if we receive a transaction and it's in the block and then a certain number of blocks have
been added after that we we can know mathematically that it's highly unlikely that that transaction is
ever going to get reversed because it would require you know a a known amount of energy to be expended
and and so that's why we say that you know unconfirmed transactions on this network
should not be trusted for anything and then basically depending upon the value of how much
money you are transacting you should then wait an appropriate number of blocks before you send your
counterparty whatever the other good or service that you're exchanging is and the media talks a
lot about bitcoin being used in ransom attacks for illegal trades for drugs and even assassination
payments what other purposes does bitcoin have right so you know bitcoin is meant to be sound
money it's meant to be censorship resistant which basically means that you should be able to
to send bitcoin to anyone you want without fear of that payment being stopped much as we were
talking about some of the problems with with third-party payment processors earlier that means
that you know sound money is going to be valuable for people who are doing illegal things or for
people who are just doing things that are questionable you know they may not be illegal
but they may be considered unethical by some people just in anything that is controversial
like we said it could even be politically controversial and you know if we believe that
money is a form of speech then I think that you know free speech is something that we should be
striving for but this is a controversial idea in and of itself because if you're going to be building
building a censorship resistant financial network then it means by definition you must not be able
to stop your enemies from using that network so that means that you know even terrorists should
be able to use bitcoin because there is no gatekeeper on the network that can stop them
from doing so now that doesn't mean that anyone can get away with anything you know there will
still be plenty of you know law enforcement activity and you know law enforcement has already
been watching the bitcoin network for some time and and definitely brought down some criminals
who were using it so it does not mean that you know bitcoin makes law enforcement irrelevant
and in comparison to the us dollar and other fiat currencies how does bitcoin compare and what role
does it play in terms of the economic system of being this peer-to-peer currency or peer-to-peer
digital cash that was the initial intention of satoshi nakamoto well at a high level the
biggest difference is the fact that the the economic rules of how the supply will exist in
the future are already determined whereas you know any other currency that is issued by central banks
or nation states you have no idea what they're going to do in the future because they make the
rules and they can change them arbitrarily if we're getting beyond just the economics though
there are plenty of other issues on the scalability and privacy side where the most private form of
financial interaction right now is just cash you know handing physical cash to someone that is
definitely still true it's that it's more private to do that than to do anything you know on the
internet even with cryptocurrencies but the scalability problem is also a large issue because
it's very easy to scale computer networks if you're just having everyone go through a single point
you know you can then have that that central party basically scale up their hardware and
software on their own but when when you're trying to scale a distributed network it's a lot harder
because of the diversity of different participants and their own hardware and the fact that you can't
simply push a button and update the software you actually have to convince people to manually
upgrade their software because it's to their benefit for some reason so there's a lot of
trade-offs but i think a lot of people who are interested in bitcoin believe that the the
financial sovereignty the this new trust model and the economic reliability of the rules outweigh
some of these other issues of scalability and privacy which a lot of us are optimistic will
be solved in the long run and for really the final question to wrap it all up is bitcoin really the
future of payments or is it more of a store of value slash wealth or is it both it's very hard
to to answer questions like these because it really depends upon the perspective of of each
person in their situation so as it stands today i believe that you know bitcoin as a sovereign
store of value seems to be the predominant use case a lot of people who are bitcoin users live
in first world countries that have very good access to financial infrastructure and they
generally do not have problems making payments now there are some types of payments like we've
we've talked about you know controversial payments where people in first world countries may find
bitcoin and other crypto assets as you know preferable for those particular uses because
they're censorship resistant now it gets more interesting when we start looking at countries
that do not have good financial infrastructure or that have terrible economies you know take you know
venezuela or argentina you know possibly even russia that the people in these countries have
issues you know both with the the storing of value in their system and with with making payments so
i i believe that you know logically it makes sense that these disenfranchised people or underbanked
people have a lot more to to gain by adopting bitcoin as their preferred monetary type i think
it gets trickier because people who are in such desperate situations they they may not have the
the time and the resources to to basically learn about it and start adopting the system it may even
be difficult for them to get on boarded due to a variety of different reasons so i think there's
there's plenty of opportunity for us in general to to reach out to to those people and and try
to get them on boarded but on the on the payment side i think that is it is going to require a lot
more work which is why we're seeing things on the the second layer of the bitcoin network so be that
lightning network or various side chains which are trying to solve some of the scalability issues
there's still plenty of work to be done there i've been you know running a business that has been
shipping lightning network nodes around the world for almost a year now and it has certainly
improved a lot over the past year but we can tell that you know there's still plenty of work to be
done you're probably years and years of work to be done before it gets to the the level of usability
that's like a venmo or a paypal or what have you i love it man thank you so much for coming on
Jameson i really really appreciate it thanks for having me all right guys thank you for tuning in
to the episode about what is bitcoin and a big big thank you to Jameson for coming on the show
today i know he's a very busy guy and a lot of people want to have him on the show so i
appreciate him taking the time to come on you know i really enjoyed the way Jameson describes
what bitcoin is and tells the origin story this guy is knowledgeable about bitcoin he's been around
for a very very long time in this industry and in this space so what i want you to do today as your
dyor or your do your own research is i have a little bit of homework for you i'd like to see
you guys go on google and search for either a video or an article about bitcoin i'd like to see you
either read a full article about bitcoin or watch a full video about bitcoin at the end of reading
that article or watching that video i want you to head over to our facebook group and ask one
specific question about something you don't understand if you don't have facebook you can
head over to our twitter channel and you can tag us and ask a question about bitcoin one specific
thing you don't understand and we are going to answer those questions to the best of our abilities
finally guys it would mean a lot to us if you could leave a rating leave a review and leave
a comment on itunes and specifically subscribe on itunes as well we will catch you in the next
episode peace