{ "episodeId": "SLP616", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "steve_lee": { "name": "Steve Lee", "role": "guest", "tag": "STEVE" }, "lyn_alden": { "name": "Lyn Alden", "role": "guest", "tag": "LYN" }, "guest_3": { "name": "Guest 3", "role": "guest", "tag": "GUEST" } }, "segments": [ { "speaker": "stephan", "time": "00:11", "start": 11.11, "text": "Hi everyone, and welcome back to Stephan Livera podcast brought to you by Bold. Listeners in the US can find it over at getbold.io. Now, I'm rejoining today by Steve Lee of Spiral and Lyn Alden. We're gonna be talking about their new paper analyzing Bitcoin consensus risks in protocol upgrades. So first of all, welcome back to the show, Steve and Lyn. Thanks for having us. Great. So, yeah, I had a great-- I had a look through this and I thought it was really cool. Let's start with, what was your, what was your goal with all this? Why, like, why write this?" }, { "speaker": "steve_lee", "time": "00:44", "start": 43.62, "text": "thanks for having us. And our, I think our motivation for this project, And by the way, I'm, I'm calling it a project, not a paper, just because I, I think it's- Okay. Cool. C-cuz we, we want this to be a long-lasting, ongoing project that lots of people contribute to, as opposed to like a one-off paper. but obviously it, that a paper is produced, or was produced. our motivation for it is Just observing how Bitcoin consensus works, it's extremely complicated. There isn't no magic formula, and what we produced isn't like a final answer either. But I think it's really important to understand Bitcoin consensus, because, there's a lot of different views in Bitcoin. Some people are very conservative, all the way to the extreme of not wanting to change Bitcoin at all. Other people are more progressive and wanna improve, you know, add features and improve the functionality of, of, of Bitcoin at the, the base layer, and then other people are somewhere in between. So lots of different philosophies. there's not one clear right or wrong philosophy within that spectrum. but- Wherever you fall in that spectrum, I think this project should matter to you or be meaningful, because if you don't wanna see Bitcoin change, it's really important to understand how to ensure that. It's not like magic that it just doesn't change. There's a lot of dynamics and variables involved, so it's good to understand what those are. If you do want to change Bitcoin, it's good to understand what are all the forces of nature at work here, that, that would need to fall in line to support a change." }, { "speaker": "lyn_alden", "time": "02:25", "start": 144.7, "text": "From my perspective, I think, you know, from an, from an investment perspective, obviously analyzing risks around the network are an important part of an investment perspective, and this paper touches on both technical and economic aspects, so it's kind of a multidiscipline, project or, or just overall, anything about Bitcoin is kind of always a combination of, of technical, and, economic elements. And I think one of the, my interest in it was kind of challenging my own complacency because w- I think we, we lack- In our mind, how Bitcoin works, and that model probably has to gradually update, over time as the, the, just the, the network broadens and the, some of the constituents change somewhat. So for example, the way that Bitcoin updated when Satoshi was still around in two thousand and nine is different from how it updated, say, in twenty seventeen, and we kinda wanted to go back to first principles or just blank sheet of paper and say, \"What does Bitcoin look like now compared to how it might look like?\" Like in, in 2017, how might it look in the future and how might changes be a little bit different or have risks that we haven't considered, based on prior experience?" }, { "speaker": "stephan", "time": "03:35", "start": 215.24, "text": "Yeah, that's such an important point because I think I, even for me, like when I was a total noob coming in in 2013 and, you know, I was running Bitcoin QT, but I had no idea, like, you know, what the node was doing. I just thought, \"Oh, okay, this is what you, you run this Bitcoin QT thing, right?\" This is before it was called Bitcoin Core. and then I think there was in earlier days there was a lot of confusion about Like, are you running a Bitcoin node or are you running a miner? And, you know, maybe in early days, they weren't necessarily seen as separate things, whereas now, they very much are seen as separate things, aren't they?" }, { "speaker": "guest_3", "time": "04:11", "start": 250.93, "text": "Exactly." }, { "speaker": "steve_lee", "time": "04:12", "start": 251.99, "text": "They are. and, and just to build on what Lyn said, Bitcoin is changing over time. I mean, obviously some, I mean, some aspects of Bitcoin don't change at all, but in terms of the growth of Bitcoin, is undeniable, just the number of people that- own Bitcoin that are involved in Bitcoin, Bitcoin businesses, the price, the hash rate, you pick any metric, it's ten x, it ten x is about every four, four years. so with all that growth, it ju- it just changes the dyan- the dynamics of how do we prevent Bitcoin from changing or If we, the broader community, want to see a feature or, or a change or like a, a, a bug fixes, like Stephan, I've been on the show to talk about great consensus cleanup before, as have others, you know, whatever change we'd want, like It's just a different environment today to either keep Bitcoin from changing or to change Bitcoin versus, twenty, twenty thirteen or, or other eras. So just updating everyone's knowledge on that is important. Another, another motivation for me was that earlier this year, I started seeing rumblings about, you know, covenant changes and cert-- and then, and then not only like from developers, but certain like media influencers. Like really starting to, to, you know, wanna activate certain changes. And that just got me thinking back, it was the first time since like 2017 that I was sensing like drama on the horizon, around a, a, you know, a fork or a contentious change. So I just started thinking back to like 2017 and, and the, the, the different forks then and, and game theories and different stakeholders involved and how they acted, and I realized that I was really rusty in my knowledge, I hadn't thought about it for seven years, and I'm like, \"Oh, there's probably a lot of people who are in Bitcoin then who are rusty in their knowledge.\" that's one thing. And two, then I realized probably 95% of people in the Bitcoin weren't even around then. So they, not only are they not rusty, they never even had that experience that we had then. so they're, they're probably really ignorant about such things 'cause they just don't come across it in their daily business or life or Bitcoin life. and so I-- so I really felt like it was an important conversation to have within the space, and that, that was a motivation and genesis for this project as well." }, { "speaker": "stephan", "time": "06:46", "start": 406.23, "text": "Great. So let's try to nail it down a little bit when we're talking about what exactly is changing. Maybe you guys wanna spell out what exactly we're talking about in terms of technical aspects of consen-consensus, like what does it mean? Because I guess some people might be thinking of it in a very loose kind of social consensus sense, but that's not necessarily what's meant in a technical sense. Could you guys explain that?" }, { "speaker": "steve_lee", "time": "07:12", "start": 431.88, "text": "Sure, I'll, I'll start. the, yeah, I mean, in some ways, consensus is very simple and straightforward and objective, and that's when it comes to the software code and the rules. Like there, there are just a set of rules around what is a valid transaction. Like if I wanna send Bitcoin to Stephan, like how do I do that? What does the structure that transaction look like? And there's just a bunch of rules that you need to meet. Like a basic rule is we can't make a Bitcoin out of thin air. Like I can't have one Bitcoin and then send two to Stefan and just specify that. I mean, I can write a transaction that states that, but it would be considered invalid and rejected by the rules that are codified in software. also in a blo- the rules of a block, a set of transactions has to meet certain rules. So those rules, you can study, I mean, they're-- it's actually quite detailed and nuanced and, and tricky and stuff, but the-- but they're all objective, you can study them, understand all of them, and it's just written in software. So that's literally what the consensus rules are. So anyone running Bitcoin software on a computer, follows those rules, and then when they're, broadcasting a trans- Relaying a transaction or a block, and then they-- that software receives those, they just check every transaction and block to make sure they meet those rules. Now, in that simple explanation though, there's an assumption there that everyone's running the same rules on their computers So, w-w-one common question I get from people new to Bitcoin is like, \"Are you, you know, you say that it's a fixed supply of twenty-one million or certain characteristics, you can't, like, counterfeit Bitcoin?\" But how do you prevent that from changing? Like the, like the, the Bitcoin 101 question is like, \"Well, can't you just change the software?\" And yes, you can change the software. So I can change the software running on my computer to a different set of rules. And, and that, that's when it starts getting much more complex, because, y-y-you know, yes, I can change the rules on my computer, and but if they're not compatible with- Anyone else that I'm connected to, well then I'm gonna be, you know, split off into my own, my own network. So yes, I have the power and the self sovereignty to, to do that, but if no one else follows along, I might find myself on an, on an island. and, and, and that's what the, with this paper, and I, I think, you know, Lyn will help us go through the different stakeholder categories we describe in the paper, but that's where it gets really complex into, you know, what prevents- Certain like powers and entities and stakeholders from going their own way or changing the rules, and, and if, if there is like broad support for changing the rules, how do you actually get that done in a safe fashion that doesn't risk the, the network?" }, { "speaker": "stephan", "time": "10:06", "start": 606.04, "text": "Yeah. So, I guess let me just sort of summarize a few of the key points there, because if you're a newer listener and, you know, we're kind of, we're kind of going into a bull cycle now, so maybe there's a lot of new people listening, right? So you may not have node, you may just be using a Bitcoin wallet, and in that case, somebody else is actually kind of doing this, running the node for you, and so that may-- that might mean the person who's running the infrastructure for your hardware wallet, like if you have a Ledger and it's calling out to Ledger's server, in a sense, you've delegated your node running to Ledger, as in that example, or if you are, you know, using an Electrum server-based wallet, like, to you, the wallet just looks like it just works, but actually in the background it's calling" }, { "speaker": "stephan", "time": "10:50", "start": 649.57, "text": "Exchange, or you may have, you know, bought Bitcoin in an ETF and this kind of thing. So again, you've kind of delegated your, let's say, your node running to that person. but the kind of bottom line, what we're trying to get to here is, in Bitcoin, there are transactions, they go into blocks, and they form a blockchain, and the point is, we wanna be on the same chain. So that's kind of the ultimate kind of deciding thing. And so we talk about this idea of the heaviest chain or the valid chain with the most accumulated proof Those are some of those aspects. Maybe you guys would like to comment on what are some of the kinds of changes, that we're talking about here?" }, { "speaker": "lyn_alden", "time": "11:30", "start": 689.58, "text": "Some of the changes in the past or debates around changes in the past were around things like block size, either literal block size, which can be a hard fork, or, things like pulling the signature portion out of the block and therefore indirectly expanding block size via a soft fork. so that, that, that, that's been one of the contentious ones in the past and to still some extent in the present because of the existence of different, hard fork coins and ongoing discussion around that. the latest one is mainly- Around the, expressivity, or flexibility of Bitcoin scripting. So how complex of a transaction can you make? one of the trade-offs that Bitcoin has historically made versus other cryptocurrencies is that it keeps the rule set relatively simple, which reduces the attack surface, reduces, a number of other, chal- things that can happen, and is, is, is simpler consensus to maintain, but in exchange you have less flexible, options compared to what- What some more programmable, cryptocurrencies have, and there are, there are currently different views on what is the optimal point there. Is there low-hanging fruit that you can add to make the scripting more flexible, but still just as safe, or roughly as safe? or would any changes at all, be, be damaging in ways that we can't fully predict? So that's, that's probably the current one that, that people should be very familiar with is how, how much flexibility we want, and to put that in tangible terms, there are certain changes that can make- Make, newer types of, of layer twos, or other scaling methods, that, become more robust if those changes are made compared to if those changes aren't made. Again, in, in exchange for any sort of trade-off that might come from that." }, { "speaker": "steve_lee", "time": "13:15", "start": 795.4, "text": "Real quick, I just wanted to point out one thing about this project too. it's really important to us for this project that it, it's not like picking sides. And, again, there's like different philosophies on change. Like, there's ossifiers who don't wanna change, there's people who wanna change a lot, there's Team Slow and Steady, there's all these different-- This project doesn't Take a position on that? It, it, it, it, it, it, it tries to be neutral with respect to that. And then secondly, this project isn't trying to become a blueprint for how to change Bitcoin or- You, you know, the definition of how consensus should work, it's not intending to do that. I personally think that would, that's unhealthy, that, that almost like creates an attack vector if you codify it and it becomes the way to keep, you know, to, to manage or govern rules. That's not the intent of this project. It's just trying to observe, The different powers and dynamics within the space and, and, well, one thing I've heard Lyn say is like, \"You know, knowledge is power,\" so we're trying to increase the knowledge of people within Bitcoin, and I really believe that. I, I, I feel like if, Every person, every stakeholder, every person in Bitcoin, whatever your role is, if you're empowered with knowledge about this, you're gonna make the best decision for yourself or your business, and that's going to lead to a strong network, I believe. Whereas if ninety-nine percent of people in Bitcoin are ignorant with respect to a lot of this stuff, that's more, more dangerous environment in which they could be tricked or fooled or, or just like misled or, or unaware of what's happening underneath them with respect to, either not fixing critical bugs that need to be fixed or changes being slipped in that really aren't healthy for, for Bitcoin." }, { "speaker": "stephan", "time": "15:01", "start": 901.4, "text": "Right. Yeah. And I was gonna ask that actually as well about, whether this document should be seen as descriptive or prescriptive, but as you've answered, it's descriptive. It's not, it's not intended as a, \"Go through this guide if you wanna change Bitcoin.\" It's not, it's not like that. And there would be many Bitcoin community members who might react to that in a negative way because they might see that like, \"Whoa You know, create an attack here or help people push through a change that they, that they don't want. And I think there's perhaps a-- let's say there's a healthy skepticism applied to people who are trying to change Bitcoin, and I think that's, that's for a good reason. People should be skeptical. so, you know, there is perhaps a, a bar or a threshold that has to be beaten in order for a change to actually occur, especially nowadays, whereas I think probably all of us would agree that in earlier years of Bitcoin- And change has happened, you know, much more rapidly and with a lot less, let's say, oversight and, supervision and, let's say, agreement from the different stakeholders in the, let's say, Bitcoin, user base, let's say. but you, that's probably a good spot here to, you know, Steve, you mentioned, Lyn focused on the stakeholders, so maybe let's, let's talk a little bit about that. Who are the players involved?" }, { "speaker": "lyn_alden", "time": "16:19", "start": 978.88, "text": "Great. So the way that Bitcoin, consensus changes happen or don't happen is, is kind of a mix of these different stakeholder groups, and basically the different sources of power or incentive, different, different types of users of the network. And we wanted to ca-categorize our view of what they are. Again, as Steve mentioned, this is a starting point of a document, so any, anything is changeable. but our initial set includes six stakeholder groups, and that number could have been different. We could-- it could have been four, it could have Different, you, you could, potentially combine stakeholder groups or you can separate out stakeholder groups to be more, detailed. And the way that we decided on this is to base it on two main metrics, which is that each stakeholder group has a certain type of power that they can use, and a certain incentive, for which they might use that power. And there's, there's multiple powers and there's multiple incentives per stakeholder group. and so whether, whether or not two groups were effectively the same stakeholder group, we came down to Do they have a, either a different power set or a different, incentive set to use that power? Because if they're technically different groups, but they're effectively the same in terms of powers and incentive, then by all intents and purposes, they'd be a very similar and, stakeholder group. So we have-- we, we defined it as six. one of them is economic nodes. So that's any node that has a significant, volume or throughput. so not all nodes are equally impactful on the network. Someone running their own node but barely ever Transactions is on one side of the spectrum versus, you know, economic nodes of major exchanges, major brokerages, major, you know, payment processors. Those are all, impactful for defining, at least in the high volume areas of the network, what software are they running? and, and how are they-- you know, how do they define consensus? What, what transactions do they consider valid? That's obviously very important. another one is investors. So anyone who holds Bitcoin obviously has Has, a considerable amount of power, that they can, they can sell coins, especially if there's a hard fork, they can sell coins. and then there's miners, which as you pointed out, used to be quite similar, to, to running a node, there wasn't really this distinction that we have today, but over time those, those functions broke out. And so miners, they have the power to, you know- Define what, what they wanna put into a block as long as it meets the existing rule set. and they technically have the power to do a, soft fork on their own because the, that, that more limited transaction type, is still compatible with the existing node rule set. But then, I think w- one of the tact vectors we'll get to later can talk about what happens if miners adopt a change that economic nodes are slow to adopt. and then there's media influencers, which, which would include yourself and others, myself too, basically anyone who has a significant audience, and that therefore they, they can, influence people one way or another, to, to at least some, some, you know, measurable degree or some, some significant degree, because that can be part of, you know, either educating other groups or rallying other groups or, or in, in some ways, kind of pushing back on a change or having to- Voting for a change in many cases, and many people in the network, fill multiple stakeholder groups, so it's not just like everybody just has one. Like someone might be an investor that holds Bitcoin and that also minds it, or they can hold Bitcoin in scale and they have a significant audience, or they hold Bitcoin and they develop it. There's, there's generally speaking, people are often gonna fall, fall into, you know, one or more camps. for the last two, we, we split two different- types of developers. So on, on for the fifth stakeholder group, we have, protocol developers. So those are maintainers and core contributors that are, that are working on underlying Bitcoin itself, what is consensus, how do nodes talk to each other. a lot of what they do isn't even changes, it's, it's just updates, it's, it's bug fixes, it's optimizations, things that don't really touch core consensus, but they keep the software functioning as operating system change over time and as, different, different- bugs and issues are identified. And then the last group is like application developers, so that could be someone making a new wallet or making, you know, some sort of new feature on a, on a new layer two or something like that. and the reason we separated those two types of developers is that their powers and incentives, despite both at the end of the day writing code, they have, they have somewhat different powers and, incentives. So for example, core maintainers, you know, their, their power is, you know, merging changes or, or not merging. Changes and then nodes can decide to run that software or not. their incentives tend to be more toward maintenance, conservatism, keeping, like, like safety, keeping the system running is kind of the, the, the top priority for a lot of them. Whereas when you look at application developers, the, the power's different, 'cause you're, you're making a product or a service that in some way, you know, builds on top of or contributes to Bitcoin, and your incentive tends to be a little bit more toward, probably wanting more features if possible, that the more, the more features you have to work with, the, the larger kind of product space or design space that you have. And of course, people in different stakeholder groups are all individuals and they can have different preferences, and sometimes you can even, even have an incentive that goes against maybe some of your own stakeholder, outcomes. but that's generally how we define these groups. And, and as one tangible example, there's very different levels of power between, say, Hard forks and soft forks when it comes to these stakeholder groups. So for example, in the event of a hard fork, inveter-investors are overwhelmingly powerful. They can, they, they can sell, the coin that they don't like in an existing hard fork, and then they can use that to buy more of the fork they do like. Whereas in a soft fork scenario, there's not a lot of immediate options that investors have if, you know, a soft fork starts to gain consensus or fail to gain consensus and they're on the opposite side of that view, they can only act indirectly at first through maybe funding developers or funding, you know, audience, you know, input, things like that. and, and instead, you have, you know, economic nodes and developers and miners that they tend to have more of that, upfront power if there's any sort of soft fork or, or contentious soft fork." }, { "speaker": "stephan", "time": "22:58", "start": 1378.37, "text": "Back to the show in a moment. This show brought to you by CoinKites dot com, the creators of the best Bitcoin hardware security devices such as the Coldcard Mark IV and the new Coldcard Q. 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You can use Trezor, Ledger or cold card hardware wallets to spin up a Bold Vault in just a few minutes, and the Bold Vault is the only collaborative custody vault available with zero monthly fees. They're also offering zero fees on your first ten thousand dollars of Bitcoin buys and twenty five dollars of free Bitcoin when you buy a hundred dollars of Bitcoin or more. Try Bold today and upgrade your stacking experience over at getbold dot io. And now Back to the show. Yeah, it's a really interesting, I guess, one of the classic, memes is my friend Bitstein has this kind of, you know, the Mexican standoff sort of meme, and so there's kind of a, a sense that people are checking each other and looking at each other and saying, \"Is this, you know, are we, are we doing this? Or no, we're not doing that?\" and, you also in the document spell out this concept of state of mind. So, maybe you guys" }, { "speaker": "steve_lee", "time": "25:41", "start": 1540.82, "text": "Yeah, I'll take that. I think the observation there is that, like a presumption that most people in Bitcoin are in what we call state of mind, I think it's four, which is unaware or lack of awareness. I, I suspect if we surveyed, you know, all, Bitcoiners, the, the vast majority could not name like the eight covenant proposals that are being developed right now. you know, if, if we- If we take Stephan Livera audience, it would be higher 'cause you cover this stuff, but if you look at the broad Bitcoin space, most aren't on Twitter and, and don't listen to podcasts and stuff like that. They're, they're completely unaware. Even if you look at businesses, I think if, if you look at like business owners, miners, exchanges, different types of Bitcoin businesses, they've probably heard that there's some rumblings about covenant proposals. an even smaller percentage would be aware of the great consensus cleanup despite, you know, thanks for having various folks. Works on, on to like spread the word there, but it's still limited knowledge. So state of mind, it, you know, ranges from being, aware of a change and being very, very supportive of it, like the two-- there, there's like both supportive and so supportive that you're a champion, you're willing to spend time, money, energy to make that happen. the, the opposite of that is that you, you'll, you know, you're so against something that you'll spend time, energy, money to prevent Prevent it and spread the word why we shouldn't do it. both of those also, you can have supporters and detractors who have that position, but they, it's just not, it's not as important to them to spend time, energy, money. And then the, the other positions aren't aware, which I already mentioned. And then there's like aware but sort of apathetic, like don't, don't really care. Yes, I'm aware of that. It could go either way. I don't really care. Like, you know, so those different states Change, because as Lyn pointed out earlier, i-in the case of a soft fork, investors have far less power than in the case of a hard, like if there's a hard, if there's a hard fork and there literally is a chain split with two, two coins That all of a sudden it becomes a, a top priority for investors to figure out what to do, right? Because the default position is to hold both coins, and that, you know, so if you take no action, you hold both coins, it's, it's arguably the conservative choice if you're sort of not really- aware of the situation and don't really feel comfortable betting on one or the other. But it's a huge opportunity for investors. If you really feel like fork A is the future and the one you wanna get behind and you want-- the one you think others are gonna get behind, it's an amazing opportunity to double your, double your stack, for, for, for free, taking that risk. So in that situation, investors naturally become very aware. But in the case of a soft fork like for example, with Taproot, how many investors were really knee-deep in Taproot and the specifics and like really had a strong feeling one way or the other? I suspect very little knowledge of Taproot They might just sort of check in to see, is there controversy? Are there any developers I respect who are like, you know, thumbs down on it, and if so, why? But if they don't see that, if it gets merged into Bitcoin Core, and the Bitcoin Core project has a long history of being very secure, you know, security conscious, like conservative with changes, so if they, if they approve and it gets into Core, I think most investors are like, \"Alright, like, like it's not gonna ruin my investment, it's not gonna ruin the network.\" but yeah, we-- so we define these dates in mind though, because it-- we think there is value for everyone involved to level up their awareness sooner in the process than later. Like a, like a, a, a sit-situation I think is, unhealthy, If there's a precedent set for making changes to Bitcoin too, too rapidly, and through soft forks, and investors aren't sort of like unaware, you know, and it just, and it, it happens in like a few years later, I, I doubt like if one change, like a Taproot change goes in, investors aren't gonna dump their coins, it doesn't really change your thesis, but what if- A dozen of those types of changes get into Bitcoin in, in a few years, there might be some threshold where investors are like, \"This isn't the conservative, stable cryptocurrency that I-- that was part of my thesis.\" And then all of a sudden it's like, \"I'm gonna reduce my allocation, or I'm just gonna get out because it feels too reckless.\" I think we, we don't wanna get to that, that spot, and obviously given the pace of consensus change Since 2017, we've only had one. We're not see- observing that today, but what in, in a few minutes we'll walk through a scenario of a, a po-potential way a change could occur, which if it happened and then it became a precedent, I could see a future where there's a lot more rapid changes." }, { "speaker": "stephan", "time": "30:50", "start": 1850.07, "text": "Interesting, okay. so, yeah, so, I mean, let's talk a little bit about that. I think one other thing that, I guess, I'm thinking back to 2017, right, as an example, you know, there was kind of this big, obviously it was the big fight about the block size, and that was probably the biggest, most, you know, contentious one. there was a lot of contention about who would get which chain, right? Or who would get the ticker, right? It was like, who would get BTC and who would be And there was also this kind of aspect of people arguing about to what extent does a service provider, an exchange, a custodian Or an app speak for their users, because that was also another thing as well, because people were, you know, as you said, not everybody knew about it, and then there were people trying to find out, okay, what exactly do I need to know about this thing, and how do I choose which side I'm on, and, you know, all these elements, they, they sort of blended in together, and, you know, while I, I, you know, I appreciate this, you know, this project you guys are doing," }, { "speaker": "stephan", "time": "31:57", "start": 1916.64, "text": "I think it'll, you know, They weren't sort of well-known, things in the market or kind of broadly known, and it might be sort of a further subdivision or some aspect of that, yeah. So" }, { "speaker": "lyn_alden", "time": "32:13", "start": 1932.79, "text": "and that's, and that's why we, that's why we make the project a living document, a living, ongoing thing that can change, because this is, this is like our initial snapshot in time, ha-having put energy and resources into this, it's like, okay, here's our initial draft, here's our snapshot, and then, you know, it can- Accepting, contributions and, and maintainers, to over time update the document in ways that, you know, could be better than, than how we started it, or even if we have an accurate snapshot of what it looks like now, it could look very different in, in five or ten years. and so it's a changeable document. And, you know, i-i-in the, in the, in the paper itself, when we go over the, the powers and incentives for those different stakeholder groups, like one of the ones you mentioned is, is the Bitcoin, what is BTC versus what is the fork? and that's one of the powers that, that economic nodes, have, is that when you go, go to a major exchange, they can choose to say, okay, this is the software running, and this is the one we're gonna label Bitcoin, and this is the one that we're not going to. of course, media influencers can do something similar, a little bit less powerful, but they, a-and mass can, can affect that perception. but that, that's the exact type of power" }, { "speaker": "lyn_alden", "time": "33:28", "start": 2007.62, "text": "that, that" }, { "speaker": "stephan", "time": "33:31", "start": 2011.29, "text": "Yeah, that's great. And Steve, you, you mentioned, you had a scenario you wanted to run through or if you have a comment, obviously. Yes. Yeah." }, { "speaker": "steve_lee", "time": "33:38", "start": 2017.57, "text": "Let's, yeah, I'll run through that. And, and yeah, the current state of the BKP project, we do go through a history of, of SegWit, but we, like, for example, there's currently no, description of, of Taproot's activation. And Taproot itself wasn't a controversial change, but the activation had a little bit of controversy, and then, Controversial, like there's definitely a segment of like respected developers and people in Bitcoin who feel that that was a mistake. So I think, you know, a, a great addition to the BCAP project would be to add that history, and as well as, I mean, you know, a complete database would be analyzing every single change and how it occurred and what lessons might be drawn from that. That's how we can learn from history, but I totally agree the future, I mean, one thing we've learned about activation is that every time it's different. So I think we should absolutely expect-- so we can learn from all those, but we should absolutely expect the next change, if there is one, to be different. and so the Bcap project right now does cover one particular scenario, I'll describe it in a minute, but it's just, i-it's, it's a, it's an extreme risky scenario. I mean, I'll caveat it that way, but it, it was important to us to describe As a lesson for how a soft fork can be dangerous, and just so that we all are become aware of it, I suspect most people in Bitcoin haven't thought through this. so I'll walk through that, but there's many other future scenarios that would be great for other people to contribute to this project and add as well. yeah, so let's walk through the, the scenario that we did describe. This is a scenario set up with the following observations. historically, all consensus changes to Bitcoin that have occurred Have been merged into the Bitcoin Core project, 100% of them. And for, I, I suspect most of your audience already knows this, but Bitcoin Core project, it's, it, it doesn't define Bitcoin. It's one implementation of Bitcoin. There's many implementations of Bitcoin, but it has like 99% of market share on the network, so it has tremendous power because basically everyone, runs Bitcoin Core software. So if there's a consensus change merged into Bitcoin- Bitcoin Core, and it's not causing lots of controversy. the, you know, the, the default action is just to upgrade the Bitcoin Core software as people do every year, every couple years, every three years. Every, every actor has, you know, economic actor, node runner, has some kind of You know, operational plan when, how and when they upgrade their software, but the default action is to run Bitcoin Core and upgrade whatever your update plan is. And if you're not against the consensus change that was merged, such as Taproot, the natural action is just to update that and then you're, then you're enforcing and supporting Taproot. however, in the past few years, or so, sorry, another historical observation is that most consensus changes were created and developed by Bitcoin core maintainers or Bitcoin co-active Bitcoin core project members. And that has shifted the past few years to where, you know, as Bitcoin's gotten bigger, there's a lot of talented developers outside that they don't contribute to the Bitcoin Core project, but they really wanna see a change in Bitcoin that they think is improves Bitcoin and improves functionality, and they've gone ahead and done the work to spec it out, write the code, write the tests, and, and these different proposals are in different states. Some are like very mature and advanced state, others are more of idea stage. but those, those concepts are coming outside of Bitcoin Core developers. It's unclear at this point in time, whether and how and when Bitcoin Core contributors will prioritize looking at, one or any of these change proposals And until they do, it's not gonna get merged into co- into Bitcoin Core. I mean, obviously, they, it needs to be prioritized by some subset of Bitcoin Core contributors and reviewed, and there needs to be consensus there, and then it'll be merged into core. That's just one, one little part of getting a change into Bitcoin historically. it should be noted that there's no obligation by any Bitcoin core contributor to do that. They're volunteers, they get to choose how they spend their time. There's no obligation that any individual on the project has to prioritize this. Secondly, anyone can be a Bitcoin core contributor. There's no application process. It's not like a group of elite people. I mean, the people that do it are awesome, but you don't have to be in, in elite to do it. any of us could Contribute. Obviously, you need to have coding skill set, but anyone can contribute, so there, I think that's a really important, aspect as well. But because we don't know if anyone contributing to the Bitcoin Core project will prioritize this, I've heard from some developers who are champions of, some of these change proposals that they'll, you know, they'll sub-build or support an alternative client that has that consensus change. And we've seen this in the past. Like back in twenty sixteen era, there was like Bitcoin, you know, XT and what unlimited and two, two different ones. A bunch of different clients that were built and supported. And of course, twenty seventeen, there was like the Segwit2x, you know, patch to Bitcoin Core, and then even in, in twenty twenty-one with Taproot, someone built a Taproot, the different activation client, and then like with CTV, Jeremy, and I, I think, or I, I forget if Jeremy authored it or if other developers that were really wanting to see CTV built an activation client for that. so there's a history of building activation clients, they've never been successful, never really gotten much traction at all. but anyway, that, that, that- That still is p-- potential today. I think it should be noted that it's really important to have that option. Like, even if you hate the idea of alternative clients and think it's dangerous And I'll get to why it, it can be dangerous. it's really important to have that option because otherwise, we would literally be beholden to like the five maintainers on Bitcoin Core, five people. not-- we wouldn't be beholden to them, Adding changes that we don't like, but the opposite. Like if the, let's just say hypothetically, everyone in Bitcoin wanted change X, whatever that is. But those five people who have the power to press a button and merge into core, you know, refuse to like prioritize it or they don't agree or for whatever reason they don't merge it, if we literally couldn't run or, you know, support the i-concept of an alternative client, we'd be stuck. That's not a healthy position. So I think it's really important that the Bitcoin network has that option, and we do have that option. Having said that, gaining adoption of an alternative client is a very, very steep hill to climb. And now let's get into the scenario, which can be dangerous, 'cause if, be-- because it's so difficult to get that adoption, if you get limited adoption to that, you can create a fragile network. Let's imagine a scenario where an alternative client with a consensus change is created it's, it's adopted by, you know, a handful of champions and supporters, but, but me-meaningfully, it's adopted by a few services that have, that have been built that depend on that consensus change to offer their product that they wanna sell to customers. and let's say like a few exchanges adopted as well, 'cause they see, you know, ability to make more money through whatever these new features are. and then- Importantly, let's say that miners, the majority hash rate, is convinced to upgrade to this alternative client with the consensus change and start mining blocks with that soft fork. and that's, that's the big hurdle here. But having said that, as we've discussed on this show before, Stefan, mining is very centralized right now, and like, you talk to three CEOs from three pools, and you're at ninety-five, so around ninety-five percent of hash rate. So it's a tall order, but you can imagine coming up with a business, proposition that appeals to three people running businesses, and they might do it Especially if they're under the impression that that change isn't con-controversial and that there is consensus. which is another thing we should-- we, we can maybe talk about with this project. We, we try to identify like, how do we even know what? how to measure consensus and how do we even know if there's consensus? You-- it's very, I've definitely observed people live in their own bubbles, and so the people they talk to maybe think that, \"Yes, of course everyone wants this change,\" or another bubble is like, \"Of course no one, no one, like only this fringe group wants that change.\" And I, you know, I have friends in both camps right now on certain changes, and they strongly believe either like it's fringe or it's obvious, right? So if, three CEOs think it's obvious that there's consensus, and they see a good business proposition, let's say that miners adopt that change. and again, it's soft fork, so they can do so, and, and on day one it doesn't break the network Because the whole network will happily accept those blocks. Now, the s- let's, in this scenario, let's say a small portion of the network, adopts, it starts enforcing these new rules, and they create a product based on it. and let's say it's like a new decentralized exchange, or, you know, because, let's say the change- does make Bitcoin more expressive, so you can do smarter, smart contracts, you can do cooler, fancier things, and like a gambling casino is created. my worry is that customers of that are gonna flock to that Because we've seen it before on other, other chains, and they're not gonna care about the risk that the fact the rest of the network isn't enforcing these rules. They probably won't be aware of it, they won't care. They're in it to make money quickly. They're not in-- this set of customers in this example aren't like trying to huddle forever, they're trying to make a quick buck. So let's say they start using this service even though the rest of the network isn't enforcing the rules, there could be a lot of money locked up into Bitcoin scripts that utilizes this new" }, { "speaker": "guest_3", "time": "44:15", "start": 2655.06, "text": "functionality, the, the new rules. What that does is create a bounty And it's a bounty because if miners unwind" }, { "speaker": "steve_lee", "time": "44:26", "start": 2666.06, "text": "that change," }, { "speaker": "stephan", "time": "44:28", "start": 2668.18, "text": "I see, yeah." }, { "speaker": "steve_lee", "time": "44:29", "start": 2669.06, "text": "Those transactions look like anyone can spend to the rest of the network. So any of us could just broadcast a transaction that spends, let's say like a billion dollars is locked up in, of Bitcoin in these transactions. Any of us could broadcast a transaction that takes as input all the transactions that are using this new functionality and just pay ourselves, and then g-get, let's say it's like two billion, I'll keep a billion for myself and give a billion to the miners. That creates a huge incentive for the miners to roll back that change, 'cause as that bounty grows, and whoever broadcasts-- and of course, the miners could broadcast the transaction themselves as well and just pay themselves that bounty. In fact, that's probably what, what would actually happen. Yeah. and, and so that's a very fragile, brittle network. And what happens if they do that? well, let's say in this, in this scenario, ninety-five percent of the economic nodes are, are not enforcing those new rules, they, they would happily accept the new blocks that are-- they would accept this bounty claim. But it would create a chain split because the, the nodes that are, enforcing the new rules, they would, they would reject, and then it would fork. And then we'd have two coins. We'd have a chain split, we'd have two coins, there'd obviously be insane drama. One camp would be like, \"They stole billions of dollars,\" the other camp would be like, \"You're using rules that the rest of us didn't agree to. There's no theft here.\"" }, { "speaker": "stephan", "time": "45:52", "start": 2752.4, "text": "Yeah, yeah." }, { "speaker": "steve_lee", "time": "45:53", "start": 2753.1, "text": "You, you brought, you know, this transaction was valid, and, you know Like flock in and decide like which fork is valuable," }, { "speaker": "stephan", "time": "46:04", "start": 2764.43, "text": "which is the true chain, and then, yeah, which is the true chain." }, { "speaker": "steve_lee", "time": "46:07", "start": 2767.3, "text": "And I've spoken with people about this scenario, and I've heard from credible people on both sides, one group thinks for sure That the legacy rules would be respected by, like, by investors and they, they wouldn't go with this, the, the, the new set of rules that were partially activated. Of the o-- another group of people feel Justice equally strongly that inv- that is less- that is less risky to upgrade" }, { "speaker": "stephan", "time": "46:32", "start": 2792.1, "text": "and so on, yeah. That" }, { "speaker": "steve_lee", "time": "46:33", "start": 2793.44, "text": "theft and it's actually less risky to upgrade and but what's crazy then is like, what is Bitcoin Core doing this? Does the Bitcoin Core project then merge these rules changes because of this chaos or some people want it? Anyway, what we definitely know, I think, at that point, is there's price discovery on the two forks, and that is a huge determining factor in what is Bitcoin. and so another part of our analysis in this project that is one of the most exciting takeaways in my mind Is it not only investors have like tremendous power at that point, but we broke down segments of investors and self custody individuals are disproportionately powerful at that point. And I think I find that super liberating and, and positive for the future of Bitcoin. And the reason why we think they have disproportionate power is that because they control their own keys, so they, they have direct access, self sovereign access to both coins. And they are able to, b-because they're, they're independent, they can unilaterally act on the ownership of those coins, and they can choose to sell one fork and double down the other fork. Any investor in theory can do that. However, you know, there's concern by some folks in Bitcoin about the power of institutions and does BlackRock, are they gonna take over Bitcoin? But think about BlackRock and Fidelity's of the world. In this situation, they are far more likely to be very conservative, and they're not gonna-- like, I, I, I really can't imagine them dumping one fork and doubling down on the other when it's still unclear which fork is going to win. They're gonna have massive legal ramifications. There's many people involved, 'cause they're not the owner or the key controller. Coinbase controls the keys. BlackRock and" }, { "speaker": "stephan", "time": "48:25", "start": 2905.06, "text": "the un- Underlying ETF customers are the actual, you know, shareholders" }, { "speaker": "steve_lee", "time": "48:28", "start": 2908.18, "text": "are the owners, and then they're just, this heavily regulated guardian. So, so I really don't think they're gonna like get into the game of price discovery. They're just gonna hold both, let the dust settle, sit" }, { "speaker": "stephan", "time": "48:40", "start": 2919.69, "text": "and wait, yeah. Sit and wait. Yeah, interesting scenario. You know," }, { "speaker": "lyn_alden", "time": "48:43", "start": 2923.11, "text": "and that's one thing we, we, and for the project, we, we had it reviewed by a number of different of these stakeholder groups, so economic nodes, major ETFs, i-invest A lot of them we were able to list and acknowledge them, other ones we weren't able to, to list, but we, we reached out as, you know, pretty broadly and pretty, pretty high level. And, you know, we had legal experts look at it, we had all, all sorts of different input. And that is one of the complicating factors is that there, there are some entities that we judge to be able to move practically instantly, and there are other entities that they have a var-- a variety of extra people that have to make the decision or extra, the stakes are very high" }, { "speaker": "lyn_alden", "time": "49:26", "start": 2966.36, "text": "and, and through all sorts of means like that, and I think that's a, that's actually one of the really relevant, findings." }, { "speaker": "stephan", "time": "49:32", "start": 2972.34, "text": "This show brought to you by Mempool dot space, the world's leading Bitcoin visualizer, and now they've got an accelerator program. So if you have a transaction that you sent at a fee that was too low to get confirmed, now you can fix this at, with the Mempool accelerator. The way it works, you can go and search your transaction, scroll down, click accelerator, and you don't need an account, you can pay" }, { "speaker": "stephan", "time": "49:55", "start": 2995.26, "text": "process of being accelerated, and then after a few minutes, it's confirmed. And so this is a great way to help you out if you are stuck, and this can happen where maybe your wallet doesn't have RBF or CPFP, or it might help you in situations where it's impractical to go and re-sign. So for example, multi-sig with keys in different locations. And thirdly, even in some lightning scenarios, perhaps a forced close, you might not be able to use RBF, and so in this case, the mempool accelerator can help you out. So keep it in mind Base slash accelerator. And now back to the show. Yeah, and I mean, this whole scenario, it reminds me as well, like I know even developers now when they're talking about and proposing soft forks, one concern they talk about, which I mentioned, is this concept of, is it confiscatory, right? Are there By making this change, are you screwing over people who might have locked their coins in a certain way that now you're effectively shutting them out of accessing those coins again, right? And this kind of like, this scenario is kind of that, but kind of in reverse almost, that it would have happened, that you could argue it is a confiscatory effect even if it wasn't intended to be that way. and so I guess, yeah, I mean, bottom line, I guess in this, you know, both in that scenario and just in general, it's hope-- you know, it's Clear about how this works and sort of know how to defend their own rights, right? Now, you know, the first class citizen is, you know, you run your own Bitcoin node, you hold your own Bitcoin keys, and then you at least choose which chain you're on and you know which rules you're on. But at the same time, I mean, to the point you, you guys were, making as well about, the stakeholders and what power they have. It's one thing to be running your own Bitcoin node and hold your own keys, but what if your chain that you chose isn't the majority chain, right? Like what if you chose poorly, so to speak, and, you know, you chose B-Cash and everyone else went on, you know, or you chose B2X and everyone else chose B1X. Well, you're still not-- I mean, yeah, you're sovereign over your coins, but you're on the wrong side." }, { "speaker": "steve_lee", "time": "51:56", "start": 3116.22, "text": "That's, I, I think the notion that like the average user who's just running the node and isn't actually sending or receiving payments, that like the rules they choose, that they have some kind of power with that, I think that's not really the case. But, right? But I think as an individual who maybe isn't like extremely wealthy in Bitcoin or powerful, like the, the way they can affect things, they can express their opinion and voice, they, they can have a, a, a voice, and, the, a large collection Action of people with a strong view and, and, and raising their voice can be impactful. I think we did see that in twenty seventeen. Like that, my own takeaway on UASF is like, sure, if a bunch of clubs run a certain set of rules or software, I, I actually, that alone, I don't think is very impactful, but them saying they're willing to do it and articulating why, can be impactful and, and, and then can be amplified with media influencers and really change the narrative for it For, for Bitcoin." }, { "speaker": "stephan", "time": "52:58", "start": 3177.52, "text": "Yeah. And I think the most" }, { "speaker": "steve_lee", "time": "52:58", "start": 3178.4, "text": "powerful thing that I learned is the, the, the self custody investors, where, where they do, like either collectively or even whales, their ability to- Swiftly take action and choose a side in a fork, whether it's a futures market or there actually has been a chain split and you're betting on one or the other fork, that is incredibly powerful. And I guess, I, I, yeah, I tend to think that self-custody holders Sort of by definition, probably get the ethos of Bitcoin better than someone who bought BlackRock's ETF or BlackRock themselves, 'cause if you g- it just, you've gone through a lot of, you've gone through a journey if you're gonna start self-custodying. And so I feel heartened that those are the kind of people who are ultimately going to decide the fate of Bitcoin in, in the case of drama over BlackRock. So I think that's good. And," }, { "speaker": "stephan", "time": "53:55", "start": 3234.91, "text": "and in many cases, people-- there may be people who hold both, right? There may be people who have self custody coins, but in their retirement account, they're using these ETFs or something or MicroStrategy or something else, you know? So it, it's kind of, as you say, you can be-- you can wear many hats, right? You might be a hodler and also a miner and also a developer who is also kind of influential as a voice, you know? You could sort of-- you could be wearing multiple hats in Will play out. I think one other area that'd be interesting to discuss, and I know, again, this is a very rapidly changing area, is around activation itself, right? Because there have been different methods employed, there, and there's also an element, I guess this is debatable, but even thinking back to twenty seventeen, there's kind of an argument of like, it's kind of like, you know, the classic game of chicken, right? People are sort of saying, \"I'm driving this way, and you better, you better, you better drop, you better Over, 'cause I'm not stopping, kind of thing. There's kind of an element of this game of chicken to an extent, and there are different methods of signaling activation, and as we s- mentioned, as you sp- as you said, Speedy trial, which was used for the twenty twenty one activation of Taproot, is Let's say controversial amongst some users and amongst some developers, it's seen as, \"No, that was actually, the right approach.\" so maybe you guys could explain some of your thoughts on the different methods of activation, and yeah, we can take it from there." }, { "speaker": "steve_lee", "time": "55:29", "start": 3329.11, "text": "Sure. I, yeah, I mean, another controversial one is, BIP eight. I know a lot of developers think that there's really no advantages of BIP eight over, over BIP nine and there's some dangers with it, but, you know, other, other, like the proposer of BIP eight and some developers are, are big advocates for it as well. And I think I saw a tweet yesterday someone's come up with activation parameters for Ellen, Hans, or one of the, one of the change proposals with activation parameters, which, I didn't look at all the details, but I, I think they were aggressive. they're, they're, they're, they're almost certainly gonna be controversial because, I, I think it includes like a flag day, you know, for-for-forcing the issue even if- Minor hash rate doesn't follow suit. so I, I mean, I personally don't have a strong position over like, oh, this, this activation method is like clearly the best and we should always follow it. I don't think an, such an activation method exists yet, and that's probably why in the past, literally every change I think has followed a different activation method. We're still sort of learning, and we-- and it's, it's so infrequent to do this that we don't have a lot of, experiments to learn from. but yeah, yeah. So I don't know if I have much more to say about activation o- other than, like, yeah." }, { "speaker": "lyn_alden", "time": "56:50", "start": 3410.24, "text": "And that's the, that's the complicated aspect that people disagree over what changes should be made, and then also how to make those changes. And like Steve point out, the changes happen so frequently that what worked in one era might not be the right answer for the next era, or, or just even if it is right, it just might be a different, solution just because the sample size is so small. And a tangential, observation we've made is that one of the powers of influencers is not only can they, potentially change, per- Concep- consensus itself, like they could advocate for change or against change and therefore change people's minds. But another, another thing they can do is shape how people perceive consensus to be. because Steve mentioned earlier that people can get, can be in their own bubbles and they could think that a consensus change is, is very popular, or they could be in a camp that thinks it's not very popular, and it's actually hard to know for sure how objective you're being when you're assessing the field and seeing what, what percentage of major stakeholders seem to be on board with this change or And one of the things that some, some deceptive influencers could do, I wouldn't con-con-consider this a very honest tactic, but one of the things that is, that is doable, is to basically purposely make a change seem more, supported than it really is. or, in theory the opposite, where you, where something is actually popular and you're, you're trying to downplay how popular that really is, because a lot of kind of like, with, with Taproot, for example, a lot of people didn't really know much about Taproot, So they say, okay, I, it seems like there's, I, I'm, I'm on board then. and so any sort of change like that, you can, you can, you can get people on the majority side that might otherwise not know it very well, just by making them think that they're on the majority side, and then they start, that becomes kind of self-precising. and I, I can imagine, especially in a world with like AI bots or something like that, you could have You know, you could throw a turf" }, { "speaker": "stephan", "time": "58:44", "start": 3524.34, "text": "campaigns to kind of make it look more popular or not less popular. Exactly. Look, every," }, { "speaker": "lyn_alden", "time": "58:48", "start": 3528.28, "text": "everybody's in favor of this change, and you get a lot of people genuine on it, but then you also have a lot of bots, and, that-- there's kind of some interesting game theory around if we imagine what would a snare look like where a controversial alternative client was launched, with some degree of grassroots support, but then how do you measure how, how actually supported is it, compared to the status quo?" }, { "speaker": "stephan", "time": "59:11", "start": 3550.67, "text": "Yeah, fascinating. And I think you're right. I mean, this has existed for some time, this concept of whether something is being astroturfed, right? Like historically, just bots, and now in the AI era, maybe that's easier to maybe for people to kind of spin up like NIM accounts, whether that's on X or on Nostr, and fake support for or hate or dislike of a particular proposal. I guess to an extent, we've seen people try to use this kind of web of trust kind of idea to sort of say, \"Oh, okay.\" Okay, this, this and that well-known person, they like this change, they like CTV or some other, whatever change. And so I guess there's an element of that. So reputation does, you know, play into it a bit, so there's that. I, I think one area that is a common area of confusion that I would love if you guys could maybe give us your take on this. Why is Bitcoin not a minor democracy?" }, { "speaker": "guest_3", "time": "01:00:10", "start": 3610.94, "text": "well, let's first, understand what you mean by minor democracy," }, { "speaker": "steve_lee", "time": "01:00:15", "start": 3615.12, "text": "meaning A hash rate or a hash is a vote." }, { "speaker": "stephan", "time": "01:00:20", "start": 3620.64, "text": "Yes. That's what" }, { "speaker": "steve_lee", "time": "01:00:21", "start": 3621.04, "text": "you mean by that?" }, { "speaker": "stephan", "time": "01:00:21", "start": 3621.88, "text": "Right, because this is a common confusion, right? People have this idea that, \"Oh, see, the miners could just push through any change as long as they all, quote-unquote, vote for that change.\" That's" }, { "speaker": "steve_lee", "time": "01:00:29", "start": 3629.63, "text": "easy, that's easy to answer. so it's, well, actually the scenario, the, the, the hypothetical scenario we discussed previously is one answer. So you can imagine, let's say a hundred percent hash rate votes or decides to enforce some new rule set. if, if the, if none of the economic nodes upgrade and enforce those rules, then, yes, I mean, and let's assume it's a soft fork, so it's a compat-- you know, backward compatible change. So yes, the miners unilaterally can do that and produce blocks, and there could be transactions within those blocks that support the new rules, but it gets into this very dangerous situation, this bounty situation, that we described before, and if it's even more extreme than as defined before If zero percent economic nodes support the new rules, or, or, or like one, like just one does, and like, let's say a bunch of money is locked up in, into, into scripts using the new rules, the, the miners would almost, would unabashedly like claim the bounty, 'cause there's like almost no downside risk, and they just- Take that money. so you have to have enforcement of changes by economic nodes to actually have a longevity around a change, a secure change. It's a must-have. And then, as we pointed out as well Ultimately, investors have the most power out of all these stakeholder groups. I think there's no, no denying that. whether it be, I mean, we went through the fork scenario where, you know, the price action and, and deter-determining the price of fork A versus fork B is You know, the almost the full deciding factor on what is Bitcoin, but even, without forks, if investors become, you know, feel disenfranchised or just, Bitcoin's no longer what they invested in their thesis and they sell, if, if our ninety thousand dollar Bitcoin order today goes to nine thousand or nine hundred dollars, sure there might be some people around still like talking about peer-to-peer money, but it would at minimum be a devastating impact on the industry for like a- decade or more, setting, setting us way back, if not like the death knell. So investors are, are, are ultimately, I think, all powerful. so yeah, I think there's no question, miners have power, play an important role, but are definitely not all powerful." }, { "speaker": "stephan", "time": "01:02:58", "start": 3778.37, "text": "Yeah. And so, and thus" }, { "speaker": "steve_lee", "time": "01:03:00", "start": 3780.17, "text": "don't have votes. Like, no one should think of this as a democracy or a voting system. In fact, read the paper, read the B- the B- Cap project to understand how complex it is, and the powers and incentives from all six of these stakeholder groups and see how each of them have unique powers that are meaningful, but none of-- no one has like unilateral power. The only one you could argue, I think, that has overwhelming power is investors, but I think it's too, Simplistic to just define things as, \"Investors decide everything,\" because of the timescale. Like, where in the life cycle of a change or where in the life cycle of Bitcoin do investors in-- assert their power? It's not like each and every day, and because of that, it's more complex as described in Bitcoin." }, { "speaker": "lyn_alden", "time": "01:03:49", "start": 3829.45, "text": "Yeah, they could be all powerful too late, and so even their own interests are impaired now because they, they wanted Bitcoin to be a certain way, soft work changes that they had little direct influence over. Or they ultimately can then decide to sell or reduce their position next to the project, but even they might not end up being happy in the snare because they're like, \"I, I wanted old Bitcoin, and that's impaired now, and it's really hard to rebuild network effects and, and, you know, regain, a, a prior consensus state.\" So that, that's where I think that even investors as powerful as they are, it's not as though whatever they want could potentially happen. There's a number of other stakeholder groups that could do things before they have have a chance to act that even themselves aren't happy with the outcome that comes from it." }, { "speaker": "stephan", "time": "01:04:35", "start": 3875.36, "text": "Yeah, and it's interesting because, I recall this is like a big argument in the twenty sixteen, seventeen days where there was sort of People trying to argue that the miners could decide what was going on, or maybe it was also confusion, right? People were sort of under-- taking what sh-- what was, what should have been understood as miners signaling readiness for, \"Miners are, quote unquote, voting for that change, and they can decide unilaterally,\" which is obviously not the case. And I think the other element people were saying in those days was also that the hodlers or the investors, they can just sit and wait, whereas miners have to-- they have ongoing costs, right? They're paying electricity, they're paying You know, they're, they're trying to maintain their operations. And so in that sense, the investors who really wanted a particular-- wanted it to go a certain way, they, they were the ones who ultimately were able to decide, though as you say, Steve, they're not kind of-- they can't just decide everything on their own, but they kind of have arguably the most power, and so, yeah, it's really interesting that you sort of see all these different dynamics. Some of this is, I guess, you're trying to codify the kind of unwritten rules Or kind of codify the understanding a little bit more in terms of how these different dynamics, play out. so, I guess, When it comes to, how things are going, you know, in the future, do you, do you guys have any thoughts on what that might look like or, what elements of this may change?" }, { "speaker": "steve_lee", "time": "01:06:09", "start": 3969.04, "text": "well, it's a, well, first of all, I hope like a goal of this project is to create more awareness of this and just leveling up people's understanding, so hopefully we're successful in that. a-and a-and again, I think, you know, knowledge is power. The more people in Bitcoin that understand these things, we're gonna get better collective decision making. I, I just, this doesn't directly answer your question, but I, I, I should, let, let the audience know, Lyn and I weren't the only two people involved in this. a gentleman named Ren, he goes by Ren, he was crucial to this project. He did most of the writing of, of the project, so, he's been really wonderful to work with. He, he, he told us that, like, a lesson that he had. He has a lot of experience in other cryptocurrency ecosystems, and he has a much- Deeper appreciation for proof of work over proof of stake after working on this, project, and a deeper appreciation for how changes are made and not made on Bitcoin compared to other, 'cause other ecosystems, it's, they're way more centralized. It's way easier to make changes, and I think other ecosystems view that as a positive thing, like, we're, you know, we're pro-- like, it's, we're staying up to date with the latest technology, and like, Bitcoin's slow, dead, boring, it's behind. but I think people in Bitcoin- Bitcoin appreciate that conservatism, and he just had a much-- b-because of it's so complicated, the, the, how Bitcoin quote governance, works, how do we keep things consen-consensus that, I, I, I think anyone who reads this, hopefully that's the takeaway they have as well. yeah, as far as what to expect to change, I think, we need to monitor each of these stakeholder, stakeholder groups, how do they, how does their, how does each grow over time, and do their powers grow disproportionately? I'm not too worried about that, but if, you know, that would be something to, to monitor. Again, we don't know how future changes, if, if and when they'll occur, how they'll be activated, observing that would be important as well." }, { "speaker": "lyn_alden", "time": "01:08:16", "start": 4096.13, "text": "Yeah, a lot of my, a lot of my takeaways were positive. the observation, because one of the, one of the big concerns I get in, in interviews or, or from readers is, is it a problem if more and more Bitcoin end up in exchanges or corporate treasuries? Does that, does that centralize the network in some way? And so, and one of our assessments is, because they, in the event of a hard fork, they are more likely to sell slow, they diminish their power even if they have a fairly substantial number of coins. Obviously, there are certain" }, { "speaker": "lyn_alden", "time": "01:08:45", "start": 4125.87, "text": "In too few hands, but that not all hands have the same speed and impact, which I think is heartening. And then two, it just kind of showed how difficult it is and how much kind of consensus you really need, to successfully launch an alternative consensus client, and that the status quo generally geared towards the existing situation, it would, it would take a pretty overwhelming, maybe even more overwhelming than I initially expected, level of change. Because of the risks involved and because of the details involved, in, in a change of that sort. so I think that I came reviewing the network as maybe even more robust than I already thought it was, and I already had a, a high opinion of the network, as a, as a, you know, long-term semi-long-term holder and, and, investor and, and analyzer for it, but it's actually in many ways stronger than I expected, and a lot of these game theory components, I think, fall on, thankfully, the right side of stability. but for those edge cases, as unlikely as some of them may be, that's why we wanted to explore them, because if anything, that, that could reduce the possibility that these kind of messy, contentious changes happen due to entities that weren't even aware of what some of the risks are. So you can't eliminate the fact that there are contentious opinions that are different, and, and again, the paper doesn't, the, the, the project doesn't take a side for or against any given change, but the, the, the biggest tragedy would be some sort of negative impact Through ignorance, that, that, that certain stakeholder groups weren't even aware of things that they could have done to reduce that from happening. So hopefully the project does some small way of mitigating those, those tail risks." }, { "speaker": "stephan", "time": "01:10:29", "start": 4229.67, "text": "Yeah. a-and I am aware, I mean, I think Steve, you're probably closer to this than I am, but, as I understand, even in, in the world of Bitcoin Core, there's an, there's an effort to try to have the consensus engine, let's say, separated. And so maybe that's one example, maybe in the future, if that were to happen, then maybe that might open the pathway for more alternative clients in the future. What do you think?" }, { "speaker": "steve_lee", "time": "01:10:53", "start": 4253.25, "text": "Yes and no. yeah, Spiral Funds, Sebastian years, he is making really good progress, so I think it's a very positive change if Bitcoin Core can actually become Bitcoin Core, meaning the core software that is the most essential to the health of the network and functioning of the network is, is separated from like the, like Bitcoin QT and, and the, and the w- the GUI while the CLI, while separating that is, just good software engineering. And as you said, it does, it, it allows for more alternative clients without taking the risk of not using Satoshi's original code in the consensus, consensus engine. I think it's good and healthy for the network, but with respect to what we talked about with consensus change, even if-- even with that kernel from Core and then an alternative client built on that, if that Project add the consensus change. Still most of the barriers exist. I, I think it would, I guess it would reduce the barriers to adoption a little bit, because if I'm running a multi-million dollar business And I've had really good luck, or not luck, but good, a good, experience with Bitcoin Core. It's been secure, hasn't lost me any money. and then I'm lo-- but, but, but I do want this consensus change, I'm in support of it, but it's only in this alternative client. If that alternative client is, you know, if it's based on this kernel, I guess that would make me feel comfortable. Having said that, though, most alternative clients where the goal is simply to add a consensus change They're gonna fork Bitcoin Core, so it's gonna be all the same software. The risk there that you need to contemplate, and our project does go through like a set of questions that any business owner or node runner should walk through just to make sure that they have a comprehensive decision, is like, who's gonna maintain that project going forward? Are they credible developers? What's their track record? Are they gonna be around in three years? Are they security conscious? Are they conservative with change? changes or do they match what I want out of the developers for a project? You'd have all those same questions with an alternative client based on Bitcoin Core kernel as well." }, { "speaker": "lyn_alden", "time": "01:13:11", "start": 4391.31, "text": "Yeah, one, one quick observation I would make is that, so I, I'm supportive of that, that project to, separate the kernel, and, and, you know, modularize, aspects of that. it, but I have heard from some people in the more conservative side of, of the change spectrum that are very influential, some, some entities there that they Do have that concern that if it's, that if it's modularized, that they'd be more concerned around the rise of alternative clients and either intended or unintended chain splits that happen from that. So I don't, you know, it's not a, not a view that I particularly hold, but it is something that I've heard articulated from, from some people we might know." }, { "speaker": "stephan", "time": "01:13:48", "start": 4428.41, "text": "Yeah. Okay. Well, really interesting stuff. I will obviously put the links, in there, and as you guys said, this is a, this is a living document. but yeah Maybe it would be good to have it like, as like a little mini booklet or a novel or a little thing like that to kind of give it to people. Maybe you'd have to update it, maybe it'd be like, \"This is the twenty twenty-four version, and, you know, there's future updated versions.\" That could be cool. yeah, any final thoughts, before we close up?" }, { "speaker": "steve_lee", "time": "01:14:16", "start": 4456.71, "text": "Yeah, just building what you just said, yeah, again, it's an open source project. It's, it's the, the beginning, not the end. So we very much" }, { "speaker": "steve_lee", "time": "01:14:30", "start": 4470.38, "text": "Please engage. You can file a GitHub issue. if you really wanna engage, you can make the change yourself, make, you know, open up a pull request, and there'll be a community waiting there to review it. You know, we, we, we intend to be active in that community, and, we're, we're very, you know, motivated to, to, to keep improving this, this project." }, { "speaker": "stephan", "time": "01:14:49", "start": 4489.95, "text": "Fantastic. Well, that's, that's it. I think I'll, I'll make sure the links are in the show notes for the project" }, { "speaker": "stephan", "time": "01:15:00", "start": 4500.18, "text": "Bitcoin consensus risks in protocol upgrades. So yeah, Steve and Lyn, thanks for joining me today." }, { "speaker": "lyn_alden", "time": "01:15:06", "start": 4506.09, "text": "Thanks for having us." } ] }