{ "episodeId": "SLP358", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "lili": { "name": "Lili", "role": "guest", "tag": "LILI" } }, "segments": [ { "speaker": "stephan", "time": "00:06", "start": 6.14, "text": "Hi, you're listening to Stephan Livera podcast, a show about Bitcoin and Austrian economics. Today we're talking about Bitcoin privacy for beginners, so Lili joins me to talk about this, and she's been posting a lot of Bitcoin privacy related content for some time, so I thought it was time to get an episode that is targeted and aimed for beginners to understand some of the key- Key concepts around Bitcoin privacy. So we talk about KYC coins versus non-KYC coins, what are some of the trade-offs, how do we acquire non-KYC coins, and then once we've acquired those coins, how do we actually stay private through the life cycle of using those coins? And we also talk about some other topical concepts such as Bitcoin in the context of taking donations, the Canadian trucker Bitcoin example, as well as some of the recent controversy around Wasabi and zk-snacks. This show is brought to you by Swan Bitcoin, the easy way to buy and learn about Bitcoin. Now with Swan, there's Swan Private. This is a special service line available for high net worth investors and companies who want that one-on-one advisory service. Swan Private was launched because we talked to so many people that had issues with the major exchanges, they had their accounts locked, customer service couldn't help them, some of them couldn't onboard their entity accounts. But with Swan Private, you get expert guidance on choosing the right custody option. For your Bitcoin and you just get that additional hand-holding and guidance along the pathway. So if you're interested to sign up for this, go to swanprivate dot com. And if you're interested in borrowing against your coins and you need some fiat liquidity or if you want to earn some extra returns, you've got to check out Lend by HodlHodl. So this is a platform where you can use peer-to-peer Bitcoin-backed lending and multi-signature to do these deals, and so you can sign up in just thirty seconds. Lend and borrow stablecoins without any verification. You deal directly with other people and the users control collateral together throughout the whole deal. All the interest is paid up at the end. Now, if you have stablecoins, you can lend them out and earn high returns. This is essentially issuing an over collateralized loan with the full interest guaranteed. So with Lend at HoddleHoddle, you can lend and borrow stablecoins on your terms at your desired interest rates. So go and check it out, the website is lend dot hoddlehoddle dot com. Brains are a Bitcoin company through and through, and they are working on some of the most unique and cutting edge projects in the mining industry. They've got Brains OS Plus, this is firmware for your ASIC machine, so think of this like aftermarket or custom firmware that you can install on your ASIC miner, and the main feature is that it has auto-tuning so you can optimize your miner performance and get more hash rate for your electricity bill. So if you use Brains OS Plus and then also point your hash rate towards Slush Pool, also operated by Brains You get a zero percent pool fee, so that's a really cool benefit, and you are also helping push forward adoption of Stratum v2, which is the next generation Bitcoin mining protocol, and it's being driven forward by the team over at Brains. So that website is brains dot com, that's brains with two eyes. And now onto the show with Lily. Lily, welcome to the show." }, { "speaker": "lili", "time": "03:23", "start": 203.01, "text": "Hey Stefan, thanks for having me." }, { "speaker": "stephan", "time": "03:25", "start": 205.09, "text": "Yeah, well, it's great to chat with you, and, I know you're very focused on, Bitcoin and privacy and a bunch of these topics. so I wanted to get you on and chat about a bunch of these things, but, yeah, maybe just give us a little bit of an overview. Who are you? What, what was a little bit of your journey of, getting down this Bitcoin and Bitcoin privacy rabbit hole?" }, { "speaker": "lili", "time": "03:46", "start": 226.03, "text": "Yeah, of course. So I actually" }, { "speaker": "lili", "time": "03:52", "start": 231.69, "text": "I came in from the traditional finance space, so prior to working in Bitcoin, I was an investment banker at JP Morgan, and then I moved to, a UBS bank where I managed, client portfolios for the ultra high net worth. And while I was there, I was looking for a way to hedge my clients' equity positions. So end of 2018 comes and Jerome Powell comes on, on television, and he says, \"Uh, we're gonna raise rates, we're gonna raise rates, a quarter of a percentage point.\" Point that, spooked the market, but what really spooked the market was when he said, \"We are far from terminal, \"meaning, you know, a lot more rate hikes are planned, so get prepared. Markets, took a dive, we almost went into bear market territory. Bonds dived, paper gold, dot, like dove as well. And, you know, I, the only thing that was working was the option strategies that I had put in place in these portfolios, and the problem with that is the option strategies are very expensive. So my You know, I want you to find something else. This is working, but it's expensive and it's, taking a lot of your time. So I started doing some research and I found Bitcoin. Previously, I had experience with crypto back in twenty eighteen, like early twenty eighteen. I was, not looking at Bitcoin, I was looking at these other coins, trying to make money. Kind of got wrecked, and then I dismissed it completely. So I came across this article again, and it was talking about, you know, Bitcoin as a hedge, against inflation," }, { "speaker": "lili", "time": "05:22", "start": 322.17, "text": "the, the growth of the Bitcoin, hash rate and like how the network was so resilient. So I took that, I ran with it, I ran like stat analysis on it, and I saw that the correlation, between Bitcoin and equities at the time was point six. That makes it a great candidate for a hedge mathematically. So I, put together a presentation and I pitched this to my team. I kinda wish I could take that back 'cause I got so much backlash, for bringing it up. my boss at the time said, \" So it makes sense, but if you do this, you're gonna be a liability for us and you're gonna be a liability for the clients. I don't want you bringing this up. And then he's, I, I thought, okay, well, we could introduce it like through grayscale Bitcoin Trust. That's what, that's what was like on the market back then, we couldn't buy physical Bitcoin. He's like, I don't care, I don't wanna see this, proposal like ever again. So I tabled it and I started going down the rabbit hole from there. I" }, { "speaker": "lili", "time": "06:21", "start": 381.37, "text": "And all that. I didn't care too much about privacy at the time. I didn't really understand Bitcoin as this like freedom money. I just thought, okay, it's just another asset, it's a hedge, it's a way to protect my, my stocks, so I'm just gonna buy it. It wasn't until twenty twenty where I realized, okay, Bitcoin is money, Bitcoin is protection against like authoritarian governments. It's, it really is like the only asset that you can take custody of, and it's the only asset that is truly censorship resistant. So from there, I started going down Privacy rabbit hole, I started learning about CoinJoin. It was actually your podcast was the first Bitcoin podcast that I like ever listened to." }, { "speaker": "stephan", "time": "06:59", "start": 418.82, "text": "Oh, great." }, { "speaker": "lili", "time": "06:59", "start": 419.36, "text": "And started learning about what a node was. Yeah. So it's kind of crazy like to be on right now. But then I saw, like, okay, now I know what Bitcoin is. There's no way I can continue to buy this on a centralized exchange. Like, if, if it is what we say it is, if it is what's, what it is in the white paper, it's P2P, it's censorship resistant money" }, { "speaker": "lili", "time": "07:21", "start": 441.41, "text": "Protection if we're going through their on ramp, you know, like we're handing them our information, and even if we do take custody of it, they know, what time we bought, at what price, at what date, like the amount. It's like we're, we're exposing ourselves and we're taking this asset that's supposed to be, censorship resistant and we're dollarizing it. We're, we're putting it in, in the same category essentially as stocks and bonds. So then I was trying to find, okay, let's find out ways to buy non-KYC So I started buying non-KYC, I started looking into mining. You know, at the time, there was barely any resources out there talking about non-KYC, talking about mining. The, the only mining, talk like on mainstream was, you know, don't do it, it's not profitable, it's too hard, like, you're gonna get scammed, it's complicated. I just, like, it was so hard to break out of that, and like when I first started buying non-KYC and going down the mining rabbit hole, I actually didn't want to. a desire to do it, but I felt that it was necessary. Like once you see, like the truth and once you see what's happening around you, you kinda have to, you have to react and you just have to take that step, even if it's uncomfortable. And, and now I'm so glad I took it, 'cause seeing all the news that's coming out, I don't have to scramble to learn, you know, how to use Bitcoin privately or how to acquire it. Like I took that step a, a little bit ahead of the curve, so I'm just glad" }, { "speaker": "lili", "time": "08:50", "start": 530.33, "text": "I, I It's never too late to start caring about your privacy." }, { "speaker": "stephan", "time": "08:54", "start": 534.03, "text": "Fantastic. Well, yeah, I think that's a, a great, walkthrough there of what is-- for many people, it's a common journey, I think. eve-everyone has different views around, KYC and how, how much they're willing to tolerate it, right? And of course, I, I, I'm more in that camp of, I think, I think you, you can still have a foot in both worlds, but I understand, of course, there is the, the position" }, { "speaker": "stephan", "time": "09:21", "start": 561.31, "text": "Probably useful for, for listeners to hear that spoken out, like what are some of the trade-offs of purchasing or acquiring or mining non-KYC as opposed to KYC? So from your point of view, how would you bell out some of those differences?" }, { "speaker": "lili", "time": "09:36", "start": 575.5, "text": "Yeah, so the way I look at it is like, I think it's totally fine to have two stacks, one KYC and one non-KYC. I, I personally have two stacks. We are still like in a dollarized economy, and we still interact with the fiat system. So- I, I say like, you can use KYC Bitcoin as an investment, you can buy it as like a liquid emergency fund, like if you know you're gonna be buying a house within two years, that's a big purchase, you wanna put your money into something that will appreciate, so by the time you're ready to make that big purchase, you're inflation, you're inflation protected and like you have more money to make that purchase. So I say, okay, use KYC, Bitcoin as a liquid emergency fund, you can use it as Collateral for loans, and you can use it like on the balance sheet of your business. you're not gonna be able to use, non-KYC Bitcoin as, as loan collateral. Like usually they want records of like where it came from. There are platforms where you could potentially get a loan with non-KYC, but if you're a registered entity, like an LLC or a business, I think you have to play within the rules. You have to keep it very clean. You don't wanna give yourself a headache and a mess, you know, when it comes time to maybe we're You. So I think there's a lot of value in having a KYC stack. Non-KYC is for people who wanna transact, privately, for people who want that real protection against the government and potential like hostile regulations. It's always good to hedge yourself and have like that secret stash of money. back then it was gold, like, in your house in a safe. You know, you bought it with cash, no one knew you had it. Now we're in modern day and we have something better, so get that like non-KYC Bitcoin, in- You keep it like on a wallet in your home, and that's like your real protection just in case you have to-- you're locked out of your fiat bank accounts and you need to transact just in case you have to like flee a bad situation, just in case your country ends up in war, like I'm sure the Ukrainians didn't expect, you know, that to happen to them. So it's important to have that stash and like have that separation." }, { "speaker": "stephan", "time": "11:41", "start": 701.15, "text": "Absolutely. And so I think, I think you, you've put it quite well there that you can see a case there for, for having You're making, and so let's spell out some of those trade-offs. Like, I guess maybe let me put a few ideas out there. So as an example, in the KYC world, you're generally paying less of a premium to acquire it, and you are potentially, you might be able to purchase more than you otherwise would have, depending on which country or which city or town you're in. Right. and it might be in some ways more convenient. Now, that's, that's kind of the, the KYC side. Now, the non-KYC side, the probably the It's not on a recorded, you know, it's the institution who gave you the Kyc coins, well, that doesn't exist now, and now it's just a counterparty who knows. And so that's less potential people, it's less able to be seized by the government or requested or subpoenaed by a government or potentially even hackers, if that data were to leak, then they might know your name, they might know your address, your phone number, your email, et cetera. so I think those are a few of the different trade- So are there any others that you wanna spell out for people?" }, { "speaker": "lili", "time": "12:54", "start": 774.15, "text": "Yeah, I think that's, those are the main trade-offs, you know, like having to pay the premium. I think another thing to note is liquidation. It's harder to liquidate non-KYC Bitcoin. ideally, you wanna liquidate it the way that you got it, like through a decentralized exchange like Bisc, with another person, in a P2P market or some kind of like P2P group. Or you can even go to a Bitcoin ATM and liquidate it that way. Some ATMs go both ways, you can put in Bitcoin and get cash back. So if you're, yeah, if you're trying to make a big purchase in the future, going through that liquidation process right now unfortunately is still very complicated. You know, a lot of these decentralized exchanges, they don't have high liquidity, so you're gonna have to do multiple transactions to get back to that huge amount of fiat that you put in. Right. But I do wanna note too is, yeah, yeah, so I do want to note too about the premiums, like there are ways to, like, get around that. one of them is mining Bitcoin. So when you mine Bitcoin, you're essentially mining it, below spot, depending on your electricity rate. So you're getting non-KYC Bitcoin at a discount. you're mining it at home, so you don't have to, you know, deal with BIS, you don't have to drive and go to an ATM. Another thing too is if you're very patient, you can go on these decentralized exchanges and place your own orders." }, { "speaker": "lili", "time": "14:17", "start": 857.09, "text": "And a lot of times they will actually fill. A lot of people they just go in and take an order, but place an order, leave it there for a couple days, I guarantee you that it will fill. One thing I like to do personally too with respect to ATMs is, you can go to an ATM and you don't have to say, okay, like the limit is eight hundred dollars a day per number, there's a way to get around that. you can use something like Text Verified, and you can spin up a lot of non, non-KYC phone numbers. You" }, { "speaker": "lili", "time": "14:47", "start": 886.85, "text": "Run those transactions all in the same day, that creates that, smash buy effect that you would get, like if you went through a Coinbase or a Kraken or something like that." }, { "speaker": "stephan", "time": "14:57", "start": 897.0, "text": "Right. And so there's different ways to go about that, and depending on the different platform. So as listen, there's no huddle huddle is one of my sponsors, so that is also an option if you, post up an offer and you can then use that to trade, USD or, or, or, other, you know, other fiat basically. And so there, there And also, I think it's interesting because in some parts of the world, there is this, it's seen like this non-KYC premium, but in other parts of the world, it might be more like it's not really a KYC premium, it's more just like maker-taker premium, as in the maker is the one who is providing both sides, the bid and the ask, as in they've got their spread, and then if you're the taker, you're the person taking that offer, then you're the one paying the premium. So I think it's interesting that in different parts" }, { "speaker": "stephan", "time": "15:47", "start": 946.87, "text": "World where there's not capital gains tax, it's, it might be seen a bit more in that, in that way, so, it's just an interesting thing I've, I've noticed just in my travels around the world as well. Yeah. So bringing it back to the, I guess the mining method, I guess that's also another reason where some individuals would say, okay, look, I'm, I'm treating it like I'm taking a, a little bit of a hit in terms of the electricity cost, but I'm treating it like, okay, I'm okay with" }, { "speaker": "stephan", "time": "16:17", "start": 976.89, "text": "So I think that's probably another angle that some people are thinking about it, right?" }, { "speaker": "lili", "time": "16:21", "start": 980.53, "text": "Yeah, definitely. And it depends on their electricity costs. Like some people, they can actually mine, and make good money, like they're not losing money. But regardless, if you're holding that mined Bitcoin for at least a full cycle, like you're gonna come out and you're gonna have a lot more profits, than somebody who's stacking through a KYC exchange. I think one thing that's important to note too is if you're mining and you're in the US, you're eligible for" }, { "speaker": "lili", "time": "16:47", "start": 1006.89, "text": "Using more electricity, you go to your, electrical service provider and you ask them, say, \"I wanna increase, my electrical use, like what kind of discount can you give me?\" A lot of times they'll lower your rate per kilowatt hour, and you don't have to tell them like what you're using the electricity for, like you just, they want you to use electricity, so they will give you a discount for, stepping up that usage." }, { "speaker": "stephan", "time": "17:06", "start": 1026.41, "text": "Yeah, that's, that's a good point. I think a lot of people might not have considered. So yeah In some cases, as you said, there are certain thresholds, you might be able to stay below those thresholds. In other cases, you might be mining, in other cases, you, you might be earning. So that's like another way that you could take your existing service or product and just sell that for Bitcoin if you're able to find somebody who wants to buy it." }, { "speaker": "lili", "time": "17:34", "start": 1054.26, "text": "Yeah. I mean, what's nice too about earning is like now there's a lot of sites that you can use. Like people post jobs and say, \"I want, somebody to design a website for me, I really like is the the jobs for Bitcoin subreddit. there's also a really cool site called Freelance for Coins. So there are marketplaces that exist where you can connect with people who want to pay in Bitcoin. And a lot of times, like these people who are seeking these services or seeking to provide these services, they are in parts of the world where their currency is just not good or their job market is really shitty, so they have to find other ways to, to earn income. It's, it's really cool, like, I think everyone has a skill that they can monetize And sell for Bitcoin." }, { "speaker": "stephan", "time": "18:19", "start": 1098.63, "text": "Absolutely. And so then we've spoken a little bit about using non-KYC acquisition. What does it look like to then actually retain our privacy in our Bitcoin usage? And I know this is an area where you've done a lot of, journey, you've gone down this rabbit hole quite a bit, so I think you'll have some interesting insights to share for listeners who are maybe newer to this, this non-KYC world." }, { "speaker": "lili", "time": "18:41", "start": 1120.55, "text": "Yeah. Yeah. So the way I approach, Bitcoin privacy is it's kind of like five, five key areas. The first obviously being acquiring Bitcoin privately, number two would be like how you store your Bitcoin. you don't wanna store it, you don't wanna store huge amounts like on a hot wallet, you wanna store most of your, funds offline in like a cold storage wallet. Another thing to consider too is coin management. Like if you buy a non-KYC coin, you have KYC coins in a wallet. The last thing you wanna do is send your non-KYC coins to that wallet that has the KYC coins, because what you're doing there is You're negating all the hard work that you did to get those coins, and now they are what we call like tainted. So my thing is like, choose a wallet that has coin control and labeling. Coin control meaning you choose which UTXOs are spent in a transaction, and then labeling, you can tag the UTXOs and say, okay, I got this from mining, or this one came from ATM, this one came from Coinbase, or, or wherever. Some really good tools for that are Samurai Wallet, Blue Wallet has this, and then Sparrow Wallet, they all have coin control Another thing like people need to look at is if you really wanna transact privately, you need to use your own node. And know when you're setting up a node, there's a lot of things to consider like the cost of the node, which wallets are compatible with that node, your own technical ability, like how much do you know and how much of a technical, technological, leap do you wanna go through? And then also like the community support of that node project. For beginners, definitely I would recommend like a plug and play like node setup, something easy like you Like the Ronin Dojo Tonto plug and play or the Umbral node, they're both really great, for new people, 'cause when you're transacting, every transaction like goes through a node, and if you aren't running your own node, you're using someone else's node and you're, you're trusting them, with your privacy. Another thing to consider too is coin joining. So coin joining is basically like, you're breaking the links between that Bitcoin, that you have and its past. I think you should always, coin join if you're, Detecting, it's, if it's an innocent transaction or not, like you should be, coin joining that Bitcoin, and, you know, this can be done, like, with Samurai Wallet or with Sparrow on desktop. Another thing too to note is, it's okay, I guess, you know, to coin join without a node, but you have to understand the trade-offs, is you are sending your, your xPub information, to that, coin join, coordinator. If you wanna avoid that, you should be running, your own node" }, { "speaker": "lili", "time": "21:17", "start": 1276.99, "text": "Of Bitcoin Core, like while you're using Whirlpool and with Samurai that would be like running your own dojo, you can run a dojo, that incl- that's like included in a lot of these node packages. it's included in Umbrel, it's included in MyNode, you can run a Ronin dojo, plug and play, like that's already included. It's, it's really not like a huge like setup hurdle." }, { "speaker": "stephan", "time": "21:36", "start": 1296.06, "text": "Excellent. And so I think that's a good point for people who are new to consider is that distinction between this idea of one is holding So just for anyone who's new, could you just explain that part again, just simply? What, what, what's the holding your keys part and what's the running your own Bitcoin node part?" }, { "speaker": "lili", "time": "21:55", "start": 1315.36, "text": "Yeah, so obviously number one step for privacy is holding your own keys. Like you want to, have that Bitcoin in your possession, you don't wanna keep it, with, with a custodian or, or somebody else. And then that distinction between, you know, how much risk are you willing to tolerate if you're holding your own, keys in like a hot wallet, know to the internet and, you know, basic security says that any, software that you're running on an internet connected device is only as secure as the device itself. So you have to make sure that your actual device is, is secure and free of malware, even if that software is, you know, a strong privacy focused software, it's only as secure as the device that you are running it on. And then the other part of course is long term storage, using something like a cold wallet, holding your keys offline, so that is like away from hackers and like actually secure, because if you Working, like, you're putting in all this time to get non-KYC Bitcoin, you wanna protect it. If you're holding a lot of funds, you wanna keep those funds offline. Running a node isn't, it's more for people who like want to transact and who are transacting pretty regularly. I mean, you can run a node as a hodler to support the network, but it's not going to benefit you with respect to your privacy if you're not using it. It's just another piece of technology. So I think, you know, running a node while you're transacting is You want to verify your own transactions, you don't want to rely on somebody else, and there's actually a lot of reports too that show that chain analysis and like these bad actors, like they run nodes, and you never know like what tr-uh, what node your transaction is being passed through if you're not running your own." }, { "speaker": "stephan", "time": "23:31", "start": 1411.38, "text": "Right. And so that's an interesting point as well, because there is in the broader ecosystem, there are various elements of surveillance going on, and as you rightly pointed out, it's-- this is like a known thing where basically these chain- Balance firms would run some of the public Electrum servers, and so this would basically be the means by which people who are unsuspecting users of the network would think, \"You know, I, who-- people don't know about my transactions, but actually their server knows about it.\" And so this is like taking it to that next level. Now, to be clear for listeners who, if you're new, just understand that some software use kind of relatively safer defaults. So as an example, Sparrow has a kind of semi-trusted list of Electrum servers. Who are providing, the info there, so I think it's like Blockstream and MZ and a few, a few other people out there, but obviously, as you're saying, the idea is you might graduate up to running your own software, either your own Bitcoin Core or running your own Electrum server using the likes of, you know, Rona and Dojo or Umbrel and so on, and so I think those are a few points to think about, and then it's, it's a life cycle, isn't it? Right? Like it's not just kind So whenever you're spending those coins, you have to think about the privacy implications of that, right? And so how, how do we best maintain our privacy through the life cycle of our acquiring and spending, of coins?" }, { "speaker": "lili", "time": "24:59", "start": 1498.86, "text": "Yeah, so the best thing really is, you know, you acquire your coins, is to manage, those like UTXOs that Bitcoin, make sure that you're labeling everything, you know, where it's coming from, keeping track, like don't combine non-KYC and KYC coins in a spend, always coin join, before you're spending Spending, and what I really like too is, you know, in the Samurai wallet, for example, like there is these post mix spending tools, so that kind of make, that makes sure that you are retaining that privacy that you got from the coin join. It takes a lot of that, user error out when you're transacting, so I definitely recommend, you know, people to use those tools." }, { "speaker": "stephan", "time": "25:37", "start": 1536.95, "text": "Yeah. And so for listeners who maybe you're struggling to follow along, the idea here is that there are algorithms built in into the way that those coins are spent and in, so this al Algorithm is there in Samurai wallet and it's also there in Sparrow wallet also as an option. So as an example, there's StoneWall, and so it'll use these algorithms in a way to help obfuscate or mask your behavior on chain. And so the general principle or the general theory here is that you might, you might earn some coins and then you might run them through a coin join, through Whirlpool as an example, and then after you've done Whirlpool, then when you're going to spend, that's where you use these what's called post-mix spend tools. And The obvious or the main example, but there are other post mix tools that can be applied and used, right?" }, { "speaker": "lili", "time": "26:24", "start": 1583.9, "text": "Yeah, definitely. And I do wanna note that it's more important to go through that process for if you're spending a KYC coins versus the non-KYC coins. Like you don't wanna be spending directly out of an exchange, for example. It's important because we saw like what happens if certain transactions get flagged, certain addresses get blacklisted, like with the Canadian truckers, they were able to trade These people because what they did was they donated directly from their exchange wallet, so it made them very easy to, to track. You always want to make sure you get it into a non-custodial wallet first and coinjoin it before, sending out any KYC Bitcoin." }, { "speaker": "stephan", "time": "27:03", "start": 1622.94, "text": "Back to the show in a moment. Are you looking for an easy way to get started with Bitcoin mining? Compass Mining is the world's first and largest online marketplace for Bitcoin mining hardware, hosting, and ASIC reselling. 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They offer the Coldcard, which is my favorite Bitcoin hardware wallet, and you can use this to store your Coins offline by using the micro SD card to move that information back and forth between the calculator-sized device and your computer, the laptop or PC that you're running Sparrow or Spectre or Electrum or other wallets. Over at CoinKite, they've also got a range of other material that you can buy, such as the OpenDime or the metal seed backups for your twenty-four seed words, which is called the seed plate, and they've got a range of other bits and pieces that you can purchase to use alongside your cold- Now that site is coinkite dot com. Back to the show. Yeah, that's a great point to put. And so I think it's important for listeners to understand the difference between an account and a wallet. So accounts are what you have on an exchange, but a wallet is the one where you hold the private key, so that's like Samurai Wallet or Sparrow Wallet or using a hardware wallet. And so what you wanna do is make sure you are withdrawing out of that account on the exchange into your own wallet, and that's an important point for people to understand. And then of course, think a little bit carefully about the privacy implications of when you spend and what you're spending. And so as, as you, as you were saying, Lily, there are certain tools that we can use to retain our privacy through the life cycle of our Bitcoin use. So I think those are important points to understand, especially for new users and new Bitcoiners. so I'm curious as well, while we're here talking about the Canadian truckers, do you have any thoughts on how that went down and what? What could have been done, what-- well, firstly, did, did you, do you have any, first of all, thoughts on, you know, how that was executed and whether there are things that should have been done, to improve that?" }, { "speaker": "lili", "time": "30:29", "start": 1828.86, "text": "So with respect to actually, collecting Bitcoin donations and passing them out to the truckers, or with respect to the situation and, and what happened? Yeah, so I mean, yeah, so my first thoughts on this was this situation was a great, advertisement for Bitcoin. It highlighted the importance of, of censorship res- Resistance and being able to transact freely, but it also showed some of Bitcoin's flaws. You know, the blockchain is open and auditable for anyone to look at. Anyone with a block explorer can, you know, see where transactions are going and see what's going on. This was, this highlights the important for like strong privacy practices. A lot of people were spending their Bitcoin, from exchanges directly and sending it to the truckers, which was wrong. But I do think there should have been more education, to the truckers about like what Bitcoin is and like how they should be using it. I saw some videos, that came out from Canada and they were giving Bitcoin to truckers and they were filming them. I thought that was like a huge blunder, like that just destroys their privacy right there. I don't think it's enough to be able to say, okay, we raise all this money, we pass it out, you need to show them like how to actually use it and convert it to goods and services. Like there wasn't, I feel like that was the missing piece, like there wasn't, any education on, okay, like this is Cash out of that Bitcoin. It's a, it's a learning process, you know? Like I just, I felt like it could have been handled a lot better. I do think it was a good initiative, with respect to the people who participated, but it, the, the execution was where the problems were." }, { "speaker": "stephan", "time": "32:01", "start": 1921.42, "text": "Right, and I think it's a combination of things. So historically, there has been this line of thought or school of thought of, \"Oh, look, it's transparent, so let's, let's try to amp that up, let's em-emphasize that Around it helps that other people see there's donations going, so maybe that might help get more donations. But what's the downside? It means if everybody's donating to the same address or to the same fundraiser, it becomes very transparent unless the users know how to then coinjoin and be private after, after the fact. And in the case where it's a very public donation address and you can see exactly this is where the money went, I can understand there's, there's conflicting arguments here because on one side it's like, oh, the transparency for the donors, they should get to see Where their money went. And then the other angle is more the privacy angle, is like, no, actually, we should just not-- we should be veering away from this idea of transparency on the blockchain. Although, yes, i-if you use it wrong, it is very transparent. But we should just be veering away from that idea altogether, and we should instead be just saying, \"Look, make the donation, and let, you know, let them be private after the fact.\"" }, { "speaker": "lili", "time": "33:09", "start": 1988.63, "text": "Yeah, I definitely agree. Like, when you're collecting donations, I, I know that a static Bitcoin address is In and send money, but when you have a government that was openly hostile towards the people who are receiving the donations and was openly hostile towards the people who are actually donating, they need to find a way to collect those donations, whether that be, you know, through like a Paym, donation or a BTC Pay server to collect the donations, like they, they need to be responsible for, for collecting that on behalf of the people who are going to receive it, 'cause the last thing you want is, is doing more harm than good, where these users who receive These donations or gave these donations, they get found out, and then their fiat bank accounts, traditional bank accounts get frozen and they get locked out. There was reports of people saying they couldn't buy groceries, they couldn't put gas because they didn't have cash on hand and their accounts were frozen." }, { "speaker": "stephan", "time": "34:02", "start": 2042.48, "text": "Right. And as you rightly pointed out, it's the authorities in this case took it to a level far beyond what had have happened previously, right? We had heard of cancelings before and things like this, but this was in the past, historically, it was things Things like politically, political reasons to shut down, let's say, a, a drug business or a gun business or a porn business or something like that. Whereas in this case, it was everyday Canadians who are having their normal bank accounts and normal accounts shut down or stopped. And so the powers, the fiat, world has, taken it to another level, and I think it also means that Bitcoiners have to take it to the next level as well in terms of execution and, the ability to educate Okay, quickly and make Bitcoin practically usable for people. I believe it can be used practically, and it, it could have been, but things like static address reuse or, this sort of tr-overly transparent culture of Bitcoin usage might be holding us back. and so maybe this is a good point for you just to explain for people who don't know what is a PayNIM, and how does it work for people who want to do this kind of thing in the future." }, { "speaker": "lili", "time": "35:13", "start": 2112.85, "text": "Yeah, so a PayNIM is basically like a way to, Transact and send and receive money without address reuse, like everything is managed, like directly, and you can like add people's like pay ins and send money to them, basically like a reusable payment code. All of the stuff happens behind the scenes of like changing out the addresses and, all that. But I think it's really valuable because like some people say, \"Oh, it's like hard to like get into,\" it's, it's, it's really not when the wallet is doing it automatically. And I think that, BIP 47 or Pay and M should be integrated into every wallet, like this is just another way to reduce that, that friction for the users and giving them that privacy by default, so they don't have to be technical to actually, transact. So I think, you know, if you're, if you're new to Bitcoin, this is how you should be transacting, you should be transacting with, with Pay and Ms. That way you don't have to remember, okay, don't reuse addresses. And a lot of, charities now, they're actually taking, smaller" }, { "speaker": "lili", "time": "36:17", "start": 2176.85, "text": "Yes." }, { "speaker": "stephan", "time": "36:17", "start": 2177.31, "text": "Got it. And so in this case, if you are raising funds, whether you are in a adversarial environment and you don't want to dox the amount of donations you're receiving, or you wanna make it easy for other people to donate to you, then this is an example. Now, of course, I think the-- there are various knocks that are out there against pay-nums and this kind of thing, although I'm, I'm still supportive of them personally, and I have been for a while. I think the main knock Currently, it's just that there's not as many wallets that support it, and so from the point of view of a person who's out there asking for donations or trying to do commerce, in that example, they might see it like, \"Oh, I wanna use things that are more compa- that are more compatible with lots of wallets.\" But that said, we have, Samurai and Sparrow currently who have it, and my hope is we see more wallets, that implement this as a feature at least and put it out there for people who want it, and it You could, as an example, have a trading partner or somebody who, a-as an example, you could have an employee. You, if you, if you are paying an employee and you just have, you do it all with Paynims, every time you pay them, you can just say, \"Hey, I just made the payment to your Paynim,\" boom, you received it, and there's no, there was no need for each person or one person to give the other an address to pay into." }, { "speaker": "lili", "time": "37:37", "start": 2256.85, "text": "Yeah, no, I think there's so many, like, there's so many use cases After the trucker situation and after the situation in, in, in Russia, when we saw, you know, Coinbase was also blacklisting some of their addresses for these users, I think we'll see more of it. You know, we have to follow and, and, and innovate on what the users want and what will actually benefit them. I, I don't see like much of a reason that wallets shouldn't offer this. It's not something that is mandatory, the users can choose whether or not they wanna use P&Ms, but they should have the option." }, { "speaker": "stephan", "time": "38:12", "start": 2292.17, "text": "Got it. and Tools and techniques, even just aside from Bitcoin, do you have any tips, or, pieces of software or tools that you think people should be thinking about, they should know about?" }, { "speaker": "lili", "time": "38:28", "start": 2307.82, "text": "Yeah, so I actually like put all of my Bitcoin stuff on a, like a Bitcoin, like a privacy dedicated phone. So what I use is I use something called the Calyx OS, operating system, and with that operating system, what it does is it takes all of the, the Google, software and trackerware, on Android and it- It removes that and it keeps the, the functionality. I like to use, my Bitcoin on there because, like we mentioned earlier, yeah, the software that you use is only as secure as the device you're using it on. another thing too is when you're using a Bitcoin wallet, you wanna use a wallet that connects to Tor by default. When you connect to Tor, like all your activity is like obscured and it's, it's hidden from the, the software maker. Personally, if the wallet doesn't connect to Tor automatically, I wouldn't use it if you're a privacy conscious So something like Samurai Wallet or Sparrow Wallet, they connect to automatically, I definitely recommend, people looking into that and using it. Another thing too is if you're looking at like trying to protect your private data, only use apps that are like open source or like on the F-Droid store. So what I like to-- it's like a lot to think about, right? Like if you're taking notes, for example, in Apple Notepad, that stuff's not encrypted and people can see it. if you're like taking notes about Bitcoin, writing down an address, you want I want to put it in something like a standard notes and encrypt those notes. Another thing I like to use too is, you know, when we copy addresses to our clipboards, it gets retained there and other apps can access the clipboard and see that information. Users should clear that after like every transaction. So I use something called a clipboard cleaner, like that's exactly what it's called, and you can get it on the App Store. It's pretty simple, you open it, say, \"Okay, I want to clear the clipboard, \" and that gets cleared out. obviously," }, { "speaker": "lili", "time": "40:17", "start": 2416.53, "text": "you Go with it, I use the Foundation Passport to secure all my funds, and then for like, you want a good node package, there's a lot of good offerings out there, but I use the Ronin Dojo node to coinjoin all of my Bitcoin. That's kind of like my sovereign stack. The sovereign stack should be a really good, hot wallet that has privacy tools built in, that does connect to Tor, good supporting apps, a strong, mobile OS to keep those apps running on, a good node, and then a, a really good, Cold storage wallet. Not all cold storage is created equally. I really would discourage the use of, of cold wallets that connect directly to the computer, if you wanna be like this like privacy, power user." }, { "speaker": "stephan", "time": "41:00", "start": 2459.5, "text": "and just while we're on that topic around hardware wallets or cold, like cold, whether you're using a hardware wallet or a cold wallet, how do you, how would you advise a new coiner when they're thinking about, let's say, having a smaller amount on their spending wallet, let's say, and then, that larger amount on their hard Hardware wallet or cold storage setup, how should they think about that?" }, { "speaker": "lili", "time": "41:20", "start": 2480.29, "text": "Yeah, so the same, like you have to look at the same things that you look at, like when you're evaluating node packages, you wanna look at like the cost of the hardware, the functionality of the hardware, the ease of use of it. can you actually create encrypted backups? Like, how are you gonna back up your seed? That kind of thing. I wouldn't go for something that is, as a new user, that is extremely like technical and has a lot of friction, associated with it. Easier to use but doesn't compromise on, on their security. definitely like when you're setting up a hardware wallet, regardless of where you get it from and who's making it, like you need to test it with smaller amounts. So never just say, okay, I'm gonna send, you know, my whole stack to this hardware wallet or ninety percent of my stack in one go. You wanna test it with small amounts first, test it with small amounts, and then test your backups before like sending a lot of money. Send a small amount, test that backup, see if you can" }, { "speaker": "lili", "time": "42:17", "start": 2536.87, "text": "Good to go, and you can send like all larger amounts to that wallet. Hardware wallets are for long term storage, they're not really for like day to day spending, right? Like you, you just wanna store your, your long term funds there. So definitely like consider your technical aptitude, make sure you test your backups and like choose something that is, you know, on your level. Like don't, don't like exhaust yourself and say, okay, I want to, you know, test like all these wallets. Like make sure that the provider that you- You choose has like good support, documentation for you, like good tutorials, stuff for you to reference, and like a good community around it, because like you want that support as a new user." }, { "speaker": "stephan", "time": "42:57", "start": 2577.28, "text": "Yeah. Yeah, all good tips there. and so it, it just behooves all of us to think carefully about what we're doing, ha-- and making sure most of our stuff is in harder to access cold storage and, keeping a smaller amount in that day-to-day spending, and, you know, for some, for some people, they might have different hardware wallets One that they're keeping as their deep cold, and then one as kind of like a warm hardware wallet, and then maybe a small amount on the phone just for that day to day, or, let's say if they're going to a Bitcoin event or a conference and they wanna be able to spend and receive and, you know, get, get amongst it in that way. And I think what, another area that's quite topical at the moment is all the, well, while we're in this whole realm of privacy and what's going on with Wasabi and these whole, The company behind Wasabi Wallet. So I'm curious, Lily, do you have any, thoughts on what has gone down there? Or actually, if you could just first give a bit of an overview from your point of view, what have you seen there?" }, { "speaker": "lili", "time": "43:58", "start": 2638.16, "text": "Yeah, so there's a lot to unpack here. this new decision that they said, \"You know, we're gonna blacklist UTXOs,\" it kind of caught a lot of users by surprise. My view is the idea of blacklisting UTXOs is an attack on Bitcoin fungibility, and for people who don't like know Is like fungibility is basically like how interchangeable are the parts of, the money supply and how indistinguishable are they from each other. So basically, if you're moving to mark some coins as tainted and unusable, that, destroys fungibility because you're separating, the parts from each other. You're saying like, \"This is, this is a good piece of the money supply and this is a bad piece of the money supply.\" Like this is exactly what we're trying to avoid by using Bitcoin, we're trying to avoid censorship. So what, what Wasabi did was they said, \"Okay, we're gonna censor users in the same way that GoFundMe said we're going to censor users. You can use our service only if you're using it for this purpose.\" And I get it, like maybe they had good intentions, but the way I see it is, this is just the beginning, you know? Give them an inch and they'll take a mile. Wasabi has essentially become a, a surveillance app. And on top of that, like I'd say, you know, this is the nail in the coffin for For them, they had problems in the past, they had, problems with address reuse, like in their mixes. So when you have deterministic links in the mix, the mix can be unwound and traced back to you. Essentially, that negates all the benefits from a coin join. They had problems in that you couldn't verify the anonymity set of your mixes. That you said, like, \"Okay, I'm going to get this anonymity set of fifty, and I'm gonna pay this certain amount for it.\" there's no way to verify Verify the method of like mixing, you know, as opposed to something like Samurai Wallet, the method of calculating the anon set and like the way the mix is done, it is reproducible and verifiable. so that's, that's another red flag. Like, I just, another thing too that we were all, all wondering, like, okay, like, did, were they pressured? Did somebody send them a letter, a cease and desist, some kind of court order to tell them that they need to start blacklisting, UTXOs? The answer is clear now The answer is no. You had, the lead developer and some of their team give an interview and say, \"No, we weren't pressured by regulators, we are just preempting, potential regulation in the future.\" So you have a privacy wallet that's coming out and saying, \"Oh, we're going to, start complying with nonexistent regulation to protect the users or to protect ourselves.\" It's just, it's very messy, and I don't wanna get too much into like the drama of it and- The politics, but I do encourage everybody who wants to learn more to go, you know, you can go on Twitter, you can search Wasabi with the tag of my tag and samurai's tag and like no para's tag and see what people have been saying, you know, about the wallet for years. you can see the research reports for yourself, you can see the back and forth and, and what was said. You can search my thing was search chain analysis, search it with the names of the Wasabi developers, and you'll see that there was talk of hiring chain analysis and using these For over three years, since 2017 was the first mention of potentially hiring these firms to, to help them manage, UTXOs. So I think anyone who went out and did their research wouldn't be surprised by this decision." }, { "speaker": "stephan", "time": "47:29", "start": 2849.38, "text": "Right. And I, I think I, as in my role as well, as a podcaster and a person just talking about Bitcoin, I've copped a little bit of flack myself about, things, you know, there have been times where I've said, \"I, I, I would prefer to use Samurai Wallet,\" Of, of when I would criticize things that are, are bit, just strange behavior in, in terms of things like, address reuse and, I think architectural flaws in, in the way that the Wasabi wallet was working. Now, it remains to be seen, what happens with if there is a new coordinator and so on. I personally would, avoid, I, I'm sort of waiting to see what happens there. I've been obviously more in the samurai, user, camp myself, But I, I think it, it's a bit concerning to see the use of chain surveillance firms inside what is purportedly a privacy wallet, and it does arguably cut against the very ethos of this idea of Bitcoin as a, as a freedom money. I, I understand there are obviously, you know, no, no wallet is perfect and no person in this space is perfect, we've all got our flaws. I, I just, I'm just very confused by what's going on. I, I personally would avoid, Wasabi. myself. So, I, I think that, those are a few comments that I just wanted to share as well, just for any listeners curious on my perspective there. I guess it's hard to ascribe intention, but it, it seems a little bit like a regulatory capture play. It's almost like, let's, let's try to kowtow or let's try to sort of play along with that narrative in the hopes that, that our masters will give us, will throw us a few scraps at the table or that we won't get banned, right? A In this space, right? It's difficult to just say, \"Yeah, you should just like tell 'em now,\" but maybe there were arguably unforced errors here too, right? There were errors being made that in terms of the structuring of the business or the way it was, you know, it, it, it, it could be argued there that there were unforced errors there also along the way." }, { "speaker": "lili", "time": "49:34", "start": 2973.84, "text": "Yeah, I mean, it's really unfortunate, right? Because I place a premium on honesty, and if you go back and see, you know, how these developers were talking about privacy in the" }, { "speaker": "lili", "time": "49:47", "start": 2986.85, "text": "eighteen or nineteen, he said, \"Chain analysis. \" He tagged all the firms. He said, \"You are my enemy, and I will end you. \" Two days ago, he came out, same guy, and he said, \"Well, we're not censoring, this is curation. We're curating which users we serve, and that's the right of every entrepreneur, which is a true statement, right? But it's the complete opposite of what he was, showing himself to be, somebody who is a champion of privacy, who is a champion of anti-censorship" }, { "speaker": "lili", "time": "50:17", "start": 3016.85, "text": "And that you're going to face friction, if something like what you're building is truly going to, decentralize power and give its users the ability to transact privately and outside of the state's control, you're gonna face friction. Like people are gonna come, they're gonna come after you. And I think you had a great point when you said maybe the structure of the company was a poor structure. I mean, they have a, they have a headquarters, right? They have a headquarters that's in one location. A lot of these, devs are doxxed, so known, so that creates, some vulnerability on their part, but really like they had no, no court order, no cease and desist telling them that they need to, preempt, regulation. my guess is maybe this is a play to like try to get ahead of other coinjoin providers, try to get ahead of their compa-comp-competition in the regulatory space and say, okay, we're gonna start doing this, they're gonna go and lobby, governments for more, regulation on coinjoin to try and- Kind of like get ahead of their competitors. This is something that is very common in the mining space. You know, Core Scientific has put out a lot of statements saying that, you know, they're pro-ESG and they're taking all these steps, they're taking these steps that they weren't asked to take, and I think part of that is they're preempting the future of regulation. They wanna be, ahead of the curb. I think that's very short-sighted thinking. I think people are going to challenge this regulation, and at the end of the day, right, code is Code can't be regulated, within borders. It lives in cyberspace, and that is outside the jurisdiction of any government." }, { "speaker": "stephan", "time": "51:54", "start": 3113.84, "text": "So yeah, I think it will remain to be seen, how much that gets respected, of course. of course, I, I, wish we could live in a world of, fully, you know, the, the cyberpunk, I guess, what, some part of that vision. but I think a lot of, states around the world will see it like, \"No Border is inside our jurisdiction, and so as long as you're in this, inside this jurisdiction, and, so that's not me supporting that, obviously, I'm just neutrally speaking about that's, that's the, the world we're in. So I think we will see that, and I think it'll be interesting, like that argument back and forth about e-even in the ESG aspect, the mining ESG aspect of it, how much of that is merely communication, as opposed to how much of that is actually lobby, as in arguing for regulation in the A cocoon around, let's say, the large players in the industry, which you, you could sort of arguably say is happening, with some of the chain surveillance firms that are trying to ingratiate themselves into the government and say, \"Look, look, mister politician or mister regulator, I will help you keep, keep the crypto streets clean.\" That's, that's sort of the, the message that we're getting, from these entities. so, fro- I guess closing up then, If you've got any thoughts for listeners out there, what should they be thinking about from a privacy point of view and what kinds of things are you looking forward to seeing in the privacy space?" }, { "speaker": "lili", "time": "53:29", "start": 3208.74, "text": "Yeah, so, I mean, just to summarize everything we talked about, definitely, you need to consider, you know, how you're acquiring your Bitcoin, how you're storing it, and then how you're spending it from a privacy standpoint. this isn't to say like, don't think that you have this like KYC Bitcoin and it's, it's, Like a worthless thing, because that's not really true, but I do think that it's okay to take those steps and acquire a non-KYC coin. you can start very small, you can start like by going to a Bitcoin ATM and, and getting some from there. you can look up some tutorials and like go through BIS and, and try that out. But I say like you need to be very intentional about, you know, how you're buying and storing your Bitcoin, especially in the current environment. Like we can't just say, you know, stack sets and we're gonna That's simply not really true. The way that we win, with Bitcoin is through creating a circular economy and through buying Bitcoin privately. That's how we can mitigate a lot of this, regulatory risk." }, { "speaker": "stephan", "time": "54:28", "start": 3267.72, "text": "Alright, so Lili, where can, anyone who wants to find you online, where can they find you?" }, { "speaker": "lili", "time": "54:32", "start": 3271.5, "text": "Yeah, so I'm very active on Twitter. You can find me at marketsbylili is my handle. If you need anything, DM me. My DMs are always open. Happy to send anyone like any resources or, or tips on, on Bitcoin privacy." }, { "speaker": "stephan", "time": "54:47", "start": 3286.89, "text": "If you know someone who would benefit from hearing about Bitcoin privacy techniques, make sure you share this episode with them and the show notes are available at stephanlivera dot com slash three five eight. Thanks for listening, and I will see you in the citadels." } ] }