good evening everyone thank you for coming welcome it's really a pleasure to be back here at plug-and-play Silicon Valley I believe this is my fourth or fifth presentation for this particular meetup which keeps getting bigger and bigger every time every time I come more members how many of you RSVP'd for this Meetup okay a few people just showed up I have some some good news and some bad news some good news is if you just showed up you're welcome state the bad news is that I drew names from the RSVP list to give out ten copies of my new book the internet oh you brought it okay refunds and returns so at the end of the show I'll give out ten copies if you're not particularly interested or you already have a copy just let me know and I'll just call the next name in the lot if you're not here you can't get the book so please stay until the end even if it's very boring okay so how many people here have been fantastic and how many people do not get have a good point and the difference is the people to try to raise their hand okay great the four or five people who raised their hand who said they don't yet have a Bitcoin remember the faces of the people who do have Bitcoin and do not leave here tonight without getting them to give you some free Bitcoin and if they want I will the whole point of this is to help you install the wallet receive a small amounts of Bitcoin so you can do some transactions and try it out for yourselves and it's always fun the first night you'll experience it action will be memorable alright the topic of today's talk is proof work and the monuments of immutability I want to talk specifically about immutability and what that means is this you era of digital currencies what it means to have a digital system that is unchanging our muse ability as a tricky concept first of all because it doesn't really exist right everything changes there is no thing in nature that is forever unchangeable the universe itself the vacuum particles everything changes nothing is immutable so mutability is really more of a philosophical idea but we use it in practical terms so what do we mean when we say immutable in practical terms the way I like to think of it is if you have a scale of something that's very easy to change all the way to the hardest thing you could possibly find to change the most unchangeable thing the thing that is most difficult to change immutability is that side of the scale right so for practical purposes we'll define an utility in any sense to be the maximum of that scale of how hard it is to change something and on January 30 2009 that scale expanded significantly and a new maximum was defined a new maximum in terms of what it means to be immutable for a digital system nothing is as immutable as Bitcoin so Bitcoin defines the end of that scale at the moment and so it redefines the term you now that has some interesting implications including thoughts he can't call the things to the left of that immutable you can't call them immutable ish you can't call them kinda immutable right if you to polish is like pregnant ish right it only makes sense has the maximum value not the maximum minus 1 so it eautiful 1 once it's redefined the things below it can't be called immutable anymore and so why is bit quite a beautiful what gives the Bitcoin blockchain the characteristics of immutability what is it that makes it unchangeable and the first answer that most people go for is the blockchain the blockchain makes Bitcoin mutable because every block depends on its predecessor creating an unbreakable chain back to the Genesis block and therefore if you change something it would be noticed therefore it's unchangeable and that is the wrong answer because it's not really the blockchain that gives bed quite as immutability and that's a really important nuance to understand the blockchain makes sure that you can't change something without anyone noticing and as security we call that tamper evidence meaning that if you change it it is evident you cannot temper it without evidence of your temper temper evidence but there's a highest standard in security what we call tamper proof temper proof is something that cannot be tampered with not just fully visible if it's tampered with but cannot be tampered with immutable and the characteristic the use Bitcoin it's tamper proof capability is not the blockchain it's proof of proof-of-work is what makes Bitcoin fundamentally immutable and that is a really important concept to understand because a lot of people are throwing around words like blockchain and claiming that these things are immutable even though they don't have a proof-of-work consensus algorithm or any kind of consensus algorithm that gives them the mutability at best they offer a tamper evidence meaning someone will notice but they are not unchangeable this distinction is going to become historically important now you may think historically important that's a pretty heavy term why is it going to be historically important because if Bitcoin continues to work the way it's working today we are introducing a new concept which is a form of digital history that is forever and if that history last 10 years that's impressive if it lasts a hundred that's astonishing if it lasts of us a thousand years it becomes an enduring monument of immutability an edifice of immutability a system of forever in history unshakeable history and that is truly a monument of our civilization and we have to consider the possibility that that will happen I use the word monuments and I want to expand a tiny bit on that to talk about proof of work proof work was not invented by Satoshi Nakamoto you can see evidence of proof of work systems throughout human civilization there is some big pointy proof of work in Cairo the pyramids there is some big stone proof of work in Paris the Cathedral of Notre Dom in fact proof of work is something that our civilization does quite often let's think about that for a second the pyramids serve two purposes the minor purpose is as a religious half artifact and two for the king but even more interesting purpose is a declaration to every civilization and every human that sees it behold this is the measure of the Egyptian civilization this is what we can build this is proof of work you cannot build this on the Jeep you cannot build this in a norm in a civilization that doesn't have abundant resources you cannot build this unless you can feed twenty thousand people to not do anything but this you cannot build this unless you can guard it with soldiers you cannot build this unless you commit resources for decades or centuries this cannot be built cheap and the pyramids stand today as a testament of proof of work for the Egyptian civilization and anyone without even understanding what this thing is riding up in the desert on a camel going over that hill and seeing a stone monument that's a few hundred feet in the air looks at that it goes Wow and while it was an expression of believing the proof of work right because they immediately and intuitively understands something crates built that and there is no cheap way to do it the Cathedral of Notre Dom is the same thing marshalling thousands of stone masons over hundreds of years to build a monument to the church a monument of religion that made people send in such awe that they could only even give it divine origin they could but believe that only a religious order would do something like that it says before to the church what we can do that kind of open expenditure of resources to make a point this proof of work and we see this again and again in civilization but until now we've only seen it in local environments for a specific country organization or civilization bitcoin is the first planetary scale digital monuments of proof of work and to those who come later we will be able to say behold this monuments of immutability built over decades marvel at its function as well as its elegance because it has function unlike the pyramids and the cathedrals it serves a purpose a practical purpose and that practical purpose is to become a record of history for ever to become the definitive and authoritative source of cannot be modified the record of truth that cannot lie and once the transaction is embedded into the blockchain the Bitcoin blockchain and secured by proof of work it becomes incredibly difficult to change this is a thing that most people don't understand so let's break it down a tiny bit and look at some of the behind it but Andrea's what if 51% of the miners decide to change it what if there's a consensus attack what if a well-funded government invests heavily in hashing equipments in order to go back and change the blockchain so one of the interesting things you have to understand is the difference between changing the and changing the future the consensus on where the Basset is determines the future of the blockchain if you have a majority of the hashing power on the Bitcoin blockchain you can decide what gets recorded in the future but you can't so easily change the past and the reason you can't change the past is because every node out there is going to still validate every block and is going to demand proof of work that block still has the carry proof of work and there is only one way that proof of work can be generated you have to commit energy resources to a particular block when you read all these articles in the media and they say about how wasteful bitcoin is because bitcoin is created by burning energy they are completely missing the point mining doesn't work to create Bitcoin that is not the purpose of mining mining is not used to create Bitcoin that is a side-effect and the way I can prove to you in society fact is that one day there will be no Bitcoin no new Bitcoin guess what there will still be mining even after the last Satoshi is mined mining continues it's must continue because its purpose is not to create Bitcoin its purpose is to provide security its purpose is to provide validation of all of the transactions and blocks according to the consensus rules it that is the purpose climbing and generating bitcoin is the side effect that serves as the mechanism of reward that creates game theory incentives to make sure that the validation is done right once you understand that and you realize what we're paying for is security it changes the perspective slightly but it's much deeper than that you see a lot of different consensus algorithms have been proposed through the snake is one of them and many of these algorithms use with a native asset to stake into the mining algorithm into the consensus algorithm meaning I'm going to commit X amount of my currency invalidating the next block and if I fail to validate it correctly I lose that currency right but if I validate it correctly I gain a small fee and here's the news proof of work is also proof of steak but proof of steak is not also proof of work let me explain that to you for a second because this is a really important point when miners commits to a specific block they're creating a candidate block they're stuffing in all of your transactions into that block after carefully validating them and then they take that block and they commit to it by hashing against it by doing the proof of work mining algorithm essentially what they're doing is they're saying I'm going to stake a thousand dollars worth of electricity or ten thousand dollars worth of electricity behind the security work I have done and if I haven't done it right I lose my electricity stake so proof of work is proof of stake because what you're staking is the energy investments commit behind the specific block that you're saying I have validated correctly and to prove that I have validated correctly I am speaking an enormous amount of electricity behind that electricity in the cost money but it's different from proof of steak algorithms in other currencies other digital currencies and the reason is the water staking is not a native asset is not something that is intrinsic to the chain whose value and future is determined by the chain what you're seeking is something extrinsic to the system you're staking energy you're staking something that has universal value on this planet the value of the currency tomorrow may be nothing in which case the value of the stake you made is nothing but the value of the electricity today tomorrow and into the foreseeable future is something and that means that when you're staking electricity you're staking something that has values throughout our planet proof-of-work is a lot deeper than we initially realize let's take questions at the end so what if the miners decide to do a 51% attack to rewrite the past there instead of starting from the current block and changing the rules into the future they can start from a previous block and mine for and if they have 51% of the hashing power they will eventually reach the current block in the minority chain and exceed it they will win the race eventually so then the question is how long do they have to sustain it let's take a simple scenario let's say we want to go back and change history three weeks ago mr.
Leakes doesn't seem like a long time in Bitcoin it's an eternity every day 500 megawatts of electricity are used continuously to feed the mining process it's just a ballpark figure it might be more it might be less right now excuse out as a ballpark figure 500 megawatts in 24 hours is 12 gigawatts of electricity 12 Pico watt hours of electricity expended per day 12 gigawatt hours of electricity over 30 days is 360 people watt hours of electricity over 12 months that's 3.6 terawatt hours of electricity in a year 3.6 terawatt hours of electricity is a lot of electricity but it's only a lot of electricity if you take it all the ones if you take it on a daily basis on a 500 megawatts basis running forward it's enough to keep the Bitcoin network secure but here's the thing if you try to go change Bitcoin it starts adding up pretty fast you go back three weeks with 51% of the hashing power how long will it take to refine the blocks of the last release any one six weeks yeah not quite some interesting things happen in between the first week of blocks will take you two weeks to bind and then a two weeks you're going to have a difficulty change which is going to drop your difficulty and then it's going to take another two weeks to bind the next two weeks applause so you're going to end up approximately at four weeks thrown to mine three weeks worth of blocks here's the problem the other side didn't stop mining right at 49% how long does it take them to mine so by the time you get to where you were when you stopped mining the majority of chain and you try to rewrite the history they've also mines at least two weeks ahead if they got the difficulty change – they've mined even further so now you have to mind a bit more to overtake them meanwhile the miners who are doing this exercise are earning nothing presumably they're part of the same hashing power that mined the first night around presumably they already had 51% of the power when they were mining the first time around and now that they're trying to remind the last three weeks of blocks well they've already banked the rewards but they backed them on the other chain which they're making invalid so now they're gonna get rewards on the new chain but only if they give up the rewards that they banked on the other chain which means effectively they're gonna spend three to four weeks at 500 megawatts mining for free meanwhile what happens on the other chain on the minority chain you're a 49% miner and you're now binding a minority chain it's gonna be hard first two weeks it's gonna be slow you're going to be doing blocks every 20 minutes but you're sure if the mining capacity just doubled which means your profitability just doubled so you're getting more reward for the same amount of mining and if that chain still has value you're making quite a bit of money because you now have a bigger market share in fact the more people abandon the chain the more profitable it is for the minority and all that you have to do is be off 2% all you have to do is persuade 2% of the people who are mining for nothing to come mine on the chain where remaining for double rewards how hard is that going to be which means that actually sustaining a 51% attack for four weeks is really hard now of course that means you've probably only do it if you had 75% to 80% if their him started with 19 at some point they went as low as 70 percent on the majority chain when they did therefore that's a pretty big drop so you have these economic incentives that make it very difficult now please notice I've been talking about three weeks Bitcoin is seven years old what if you wanted to change a transaction that was last year or a year and a half ago well now the math is really against you because it's going to take you almost a year to overtake that chain during which time you have to sustain that attack and not lose anyone from your group otherwise you never overtake it and then you make even less money so now you've minded twice and gotten zero reward on both sides right and this is the point that we really need to understand about block chains there is something inherently interesting about the fact that you can show someone a number and they can calculate from that number how many joules of electricity you consumes to create that number and it is absolutely unfortunate that number is in itself proof that you have done the work that is an incredible artifact for a digital system the fact that by presenting a number to a system that has never seen the history of the blockchain that may have joined later that may be seeing a false history of the blockchain but you show it's a block that has proof in it and you show that know that number and they know it's real and they know it took that much work to produce that number there is no way to fake it for a digital system that's as close to real as it gets this is a monument of immutability builds block by block and these blocks are now towering into the sky four hundred and twenty thousand of them containing a cumulative amount of work that is absolutely gobsmacked and it cannot be changed or forged without not only the other person knowing it has been changed but without you actually expending the energy all over again there is no shortcut and that is the difference between tamper evident and tamper proof you could disconnect from the blockchain today not look at it for three years come back three years later I can present you a single number and say do you believe this is an actual block from the blockchain and you would be able to say with complete confidence yes the amount of work evidenced by this block could not have been produced any other way than if during the entire time I was gone you were expending energy at the predicted rate and you came up with this artifact I only need to see the pin at all to know that it's a real blockchain only the last block what number and I know how much work has gone into it's cumulative Li because it tends to have ever-increasing work the longest difficulty chain wins Bitcoin is not just simply an in system of accounting it is the first digital artifact that provides forever history that provides true digital immutability there is no other system the provides digital immutability at that level it is a planetary scale thermodynamically guaranteed self-evident system of immutability planetary scale because in order to do it you need to marshal resources that only exist in the planetary scale effort thermodynamically guaranteed because you can calculate the exact amount of energy it took to create it and there is no shortcut information theory tells us that to flip that many bits takes this many joules and there is no way to do it otherwise self-evident because the number that is produced as proof of work tells you exactly how much work has been done cumulative Li and it really is a monument now then the interesting question arises can we really afford this is this a waste of energy there is no thing on the planet that produces a digital record that is self-evidently immutable at this scale nothing it is the only platform on which you can embed data that would be guaranteed and usable within a few blocks thousand blocks after you put data in there's no going back that data is not going to change okay maybe if you put it in and it's only three blocks old maybe can change six blocks old 144 oh this is getting tough and that's a day a week old dun dun it's part of permanent history our ancestor is said this is as good as written in stone our grandchildren will say it is as good as written on the blockchain because it is the new standard of immutability and it is globally accessible any application can leverage that capability other currencies other chains smart contracts they can all jump points against the Bitcoin blockchain and as long as we continue to build the monument their little inscription like a piece of graffiti axed into the base stones of the pyramids will be there potentially for centuries and they can import immutability for the low low price of a transaction fee that if you consider it immutability as a service is an astonishing application it has enormous implications for software it has enormous implications for the Internet of Things for information security for other systems of currency for systems of record title registration birth records history can be written on the blockchain for the low price of a transaction fee and it may well be there for a very long time but as long as it's there it cannot be changed everyone can validate it that is not a waste of electricity that is the first practical application of digital immutability and it is expensive but it's expensive because it's giving us something on a planetary scale and we only need one really and it's probably too expensive to build – and that just means that the network effect is even more awesome because we already have one and it's doing quite well that one can support all of the other applications the other applications could do much more lightweight proof of stake but if they really want immutability non-stem provenance tamper-proof they need to subscribe to a service on the Bitcoin blockchain they need to record their data on the Bitcoin block if your banking consortium and you are signing transactions and distributed ledger technology by taking turns what is the cost of fabricating the past what is the cost of rewriting history of saying WikiLeaks never received any of your phone any of your funds any of your donations we reverse all of those transactions what is the cost of that thermodynamically nothing in unchain money doesn't matter we created the Unchained money we can create more of it as long as there is no proof of work behind it the cost of rewriting a ledger like that is zero and if you can you will and if you can you'll be coerced to and if you can when you get the subpoena you must and so these block chains are not immutable these block chains are mutable as hell they're fickle block chains to go to the other side of the scale they're transient they're meaningless they have no weight of history behind them they are whatever the last signer says they are they have no weight this year we're at war with Oceania next year we may always have been at war with this East Asia history is written by the victors not on the Bitcoin blockchain we don't do 1984 of the Bitcoin blockchain history is written by the expenditure of real world energy and there is no cheap way to forge that history thank you Lawrence hemlock yes thank you so much for coming thank you sorry I'm holding too many things Frank Friedman there right hi uncle valerian I've heard of you you're standing behind the camera thank you hilarious copy oh my go T's I finally John Bolton you know winner chicken dinner Darwin Ling Darwin didn't make it tonight as you're watching this video should I come Alex Park also didn't make it oh well Levi stroke he wound Kang is that you oh no is pitbull here you will know fold the up nope oh there this random number generator worked we love happy tree Nguyen okay oh so mean I know you're here congratulations Meredith is Finkelstein Jake tardo choppas will username wheelman of the beat up robert reichter Kim you signed off is Kim on the beat up congratulations alright two more two more I'm running out of names fast follows through a dumpling zone Collin Belton yeah oh thank you very much : wrong just wrong wrong congratulations and the last book Jeff flowers we already have a comma Thank You Daniel Fagen Ryan Charles alright for this book giveaway I would like to thank Scott Robinson of London flag he's the organizer of this meeting he made all of this possible and he also sponsored my expenses to come here and I ended up not using as much of the money for the expenses and so I used the remainder of his sponsorship money to bring these ten books today so please thank Scott Robinson he couldn't be here today alright now let's do Q&A that's a good question suppose that solar energy advances with its efficiency and you can capture a lot of the solar energy would that make proof-of-work unworkable because the marginal cost of the solar energy is zero well yes and no mostly no even if you have really efficient solar energy you have to consider three factors in that the first one is that you pay for the solar panels so you have capital cost right the second is you pay for the mining equipment and so you have or capital cost right yes but at the same but at the same time you're competing against people who are going to apply more and more capital but the third one the most important one is that presumes you have basically no opportunity cost meaning that there is no other use of the energy could go to other than mining meaning that either you so far exceeded the demand for electricity that you have all of this excess capacity right the problem is at that point we've solved the energy problem of the world and at that point if proof of work is the one thing that doesn't work you've gone to a Star Trek universe where money doesn't exist right if you solved the fundamental issue of energy scarcity on this planet completely solve it for the marginal cost to go to zero you have to have zero opportunity cost which means that you can generate abundant energy anywhere anytime and always have excess capacity you you solved much bigger problems I hope we get there then we need someone as brilliant as Satoshi Nakamoto to come up with a new proof of work algorithm I would suggest you don't it's works so pseudo who is an asymmetric algorithm meaning that if you make the pseudo group a little bigger it still can be verified relatively quickly as to whether it's correct if you make it billions and billions of millions of times bigger then it gets really really hard and you could make it too so that you only have to do it on paper with pencil with human beings so that would be a perfect way literally proof of world algorithm just like the slaves of Egypt who built the pyramids salts you don't go harder yes well it equalizes everybody so then it's about access to minors access to Internet capacity access to the storage to put the blockchain on there's no cost you're limited by two thousand watts per square meter which is the maximum energy you can get on the surface which means bugging in space actually that's not a joke there are many reasons why mining in space yeah okay so so let me paraphrase of it so if I say proof-of-work is not a waste what if proof of state achieves fair approximation at the level of security without that cost would it then not eclipse proof of work and the difference and I think that's what I was trying to emphasize today is that you could use it to make sure that the security of the transaction is going forward is correct the proof of State and not give you robust immutability and the reason it cannot give you robust immutability is because what you are staking is the currency that's on the network and you have control of the network right you can issue more of that you can do many things to violate the loss that you suffered whereas if you outside you can't get back you could change the future but not the past you could do denial of service yes both systems are susceptible to service if you get the majority of the consensus mechanism I would argue that getting a majority of the capital is a lot easier than getting a majority of the manufacturing facility and sources of electricity that are widely distributed and controlling those then getting a majority of the capital in fact theoretically you might find I don't know just to say random think a bug in a smart contract and steal just to say a random number 14% of all of the currency in circulation and if you had a proof of stake system you're 46 percent for your goal sorry 36 percent of your goal so that's the problem the problem of using something that is intrinsically native to the blockchain is that I cannot simply steal the mining equipment that is out there right it's tangible so and I can simply access these enormous amounts of energy overnight these take a long time to marshal these energy contracts which makes it more robust to that kind of interference how much more is that security differential worth it I don't know I don't know if that is enough I think it is I think this is a unique platform with a unique set of application characteristics and utility as a service that is not only worth spending that amounts of electricity but which will create a monuments to immutability now that means the purpose sake is also good and they can both coexist in the market whether they compete for resources for slightly different applications there will be applications that require robust historical immutability guaranteed by thermodynamic cost and there will be applications that don't need that and those applications may not mean the footwork algorithm I think there are plenty of applications that do need that and now that we have that we're going to invent a lot more applications that need that that we didn't know about before and I think that's where it gets really interesting what can you do when you have an immutable historical record that you couldn't do before haven't thought of doing before that you can now yes they mutability can really be transferred to any external system because any system can simply encode a digital fingerprint and embed it in the POC chain by paying the fee there's a function forth called off return that simply creates digital fingerprints and timestamps it's in the Box chain so that means that other things can anchor themselves and checkpoint themselves at different blocks leaving little trails behind that you can say at that time this was the fingerprint that was embedded and that is guaranteed because it can't change proof of payment could be part of another blockchain I'm not sure what you mean by proof of payments exactly so is this another consensus algorithm or is this proof that you paid the transaction fee that's part of the consensus algorithm if you're thinking that you paid sufficient transaction fee which may have been zero at the time but most likely wasn't so you have to still follow the rules to get into the line that puts you on the you have to create properly for transactions base efficient fee and follow they properly propagate those across the network and then you have a good chance of getting into the block yes perf of capacity is interesting and I think there's a couple of interesting different approaches to this another ability with burst point I know there are some things that are for example this intensive so that for example you have to perfect storage I guess you might call it there's various forms and proof of resource that use different tangible resources so memory footprint you can create the consensus algorithm that's in order to validate and to prove you have to produce randomly selected data elements from an enormous data corpus which may be terabytes in size and the only way to have that is either to store that enormous corpus or to buy the specific data elements from someone who does store that data purpose you could do things with bandwidth free and other resources perhaps I'm interested in seeing all of those and most of those are hybrid proof-of-work systems yes so in many cases these algorithms are hybrid algorithms and we're going to see a lot more come out yes hypothetically a well-funded say government or like some consortium whose objective wasn't necessary to get like to get benefit financial benefit from it but to actually inhibit its existence or whatever would that be a concern I would argue that that is already happening I mean you know little big point is currently poking the hundred trillion dollar banking industry going aim we want that so yes well-funded opponents the best funded opponents we have the greatest so if they use some kind of internal consensus attack to attack a big point and to support its ability to develop new blocks essentially a denial of service attack that would be a very interesting scenario first of all it would be noticed pretty quickly and second it would immediately leads to creating countermeasures and when something attacks you and you develop countermeasures that's a form of immunity and through immunity you have a form of evolution which means the Bitcoin will evolve resistance to that kind of attack and then it will get attacked again it will evolve resistance to that kind of attack and it is being attacked today and it is evolving resistance not to those kinds of attacks yet but when they come and will evolve resistance to those two why because it is a massively decentralized system with a lot of independent actors who are guiding its evolution towards protecting the system against these kinds of attacks so it's going to evolve much faster than a biological system and it's going to evolve immunity meaning that what the well-funded opponent is actually doing is dreaming Bitcoin on how to win right there inoculating it against those attacks and whatever doesn't kill it only makes it stronger so that's not the way you want to go after it essential by system I don't know that there are naked ways to go after a decentralized system but I know that will backfire badly yes I mean personally I love Bitcoin but I'm not comfortable with this yeah so this question is about supporting the other 4 billion or the other 6 billion depending on how you count and what is the issue is exchanges are very centralized their custodial which means they hold bit point for people and that represents a significant risk for Bitcoin users not Bitcoin itself but certainly pick one users who couldn't lose their money we don't have too many perfect solutions right now there are a few small-scale decentralized systems bit square for example is one it's still in beta it's still very small-scale there are some more decentralized systems local bitcoins right which allow you to do person-to-person cash transactions and the one thing that cash has that similar to Bitcoin is that it can be verified upon presentation it doesn't depend on any counterparty you hold it you own it right so exchanging cash for Bitcoin is the most secure way to get Bitcoin but actually the best way to get Bitcoin is not to buy the best way to get Bitcoin is to earn it by the expenditure of your labor so dedicate through labor to Bitcoin and you achieve two goals at the same time one you're earning Bitcoin from the people who can pay you in Bitcoin and two you have removed your labor from the machinery of the state which was using your labor to build bombs that's my personal philosophy so two birds one stone I've been on the good side about the bad side yes an update on alternative currencies well this is a minefield for me that's fantastic if I say your name of a show if I don't say anything am I have a Bitcoin show either way I'm gonna get threats about Twitter go all right ripple is still out there it's being used I think I'm out of the banking consortiums are kind of interested in Bitcoin because it's a more centralized more controlled version of Ripple so ripple still there litecoin is still on a third fourth buying market capitalization I think probably fourth now that the theorem classic has climbed so it's there it's definitely there there's a few other interesting ones that are doing a variety of things and I get a lot of slack when I mentioned them I get a Polish back but I don't mention them in the area which is the second market capitalization system out there which isn't really a currency it's a system of programmable smart contracts that are very flexible I'm extremely interested in that as with Bitcoin I don't see it as an investment and you shouldn't play around with high-risk assets like that because you will get burnt and less your heart experience there's a couple of others which are really interesting – again I'm not recommending for investments just giving you some information – is a system that has a very interesting decentralized governance model and an interesting privacy model Manero which is a descendant of the crypto note system and Manero is a very high privacy system and recently it emerged in the space is zero cash which is a currency built on zero knowledge proof to provide extremely robust cryptographically secure on an enmity all of these kind of floats around in a constellation around Bitcoin and they're all interchangeable for Bitcoin one of the things that's happened in the currency markets and the digital currency markets that is really interesting I have no fiduciary moments in this I'm just interested as a user is shape shift shape shift thought I know is the website that allows you to do kind of instantaneous exchanges between currency pairs without even setting up an account you just say I want to change this to this and it says okay well whatever you send here will get exchanged and go there so you set up a little piping you say I want to exchange Bitcoin to fed coin and and so then it says okay give me your fed coin address you put it in say give me an address for the refunds of your Bitcoin if something goes okay here's a Bitcoin address if you send Bitcoin to this we will send you the equivalent amounts of fed coin to your address quick easy you can swap between two currencies interestingly enough what that means is that you can treat all of these currencies as they couldn't in fungible to each other you can basically get in and out of any of them including Bitcoin and go back and forth very easily just for a single purchase and some websites include shape-shift so that you can pay in any of hundreds artsy's and it will just convert it into say Bitcoin in the back for your payment so that's interesting it's opened up a lot more possibility making a lot easier for more of these alternative currencies to experiment and develop features and maybe some of them will be wildly successful let's hope I'm not a big point maximalist I don't believe that Bitcoin should be the only channel will be the only chain that exists I think it will probably be the dominant chain in a parabolic distribution it will have 60 to 80 percent of the market share and then there'll be a long tail of 10 currencies behind it of different uses and different values and I like many of them okay cue the Twitter threats that's thanks yes so the question was based on the incentives that exist in the network what happens when to reward for senior age for generation of influence drops to zero and the only reward is fees well miners keep mining and will the network fees be reasonable first of all just to give you some perspective this happens gradually between now and 21:41 by that time people on Mars will have to decide if they want to go into mining with their solar panels so who knows I like I hesitate to make predictions for Bitcoin three months out you're asking me to make some 136 years out so I'll try the one thing to realize is this happens very very gradually and it happens in an environment where the reliance on senior it drops while presumably the number of transactions and activity Rises which means the transaction fees rise and what it should do if you open it in the graph is it should do kind of a curve X right so fees go up reward goes down and he's go up and up because these are getting more expensive but because you have more and more transactions paying more or less the same fee or less so if you imagine a block today which has twelve and a half bitcoins in it and let's say a tenth of a bit and fees so it's a hundred and twenty to one ratio in favor of the senior HP's now let's construct a block in 21:41 what's the minimum reward what Satoshi right okay now let's say this block has ten thousand transactions just pull the number out of my head probably have more but let's say ten thousand transactions and what's the minimum fee they can pay one Satoshi right so if you just had the minimum issuance and the minimum fees you'd have ten thousand satoshis and fees and one Satoshi and seniors so now the ratio of seniors to fees went from 120 to one to one to ten thousand and this didn't happen overnight this happened over 140 years in a gradual curve somewhere there there's a crossover point that crossover point is the day it's one to one we're now miners know that for the future they're going to focus more on fees and that happens way before you get to 21:41 so I'm not worried because it's not going to be a surprise this is the same kind of question that happened with the having what will happen when the happening happens well we we see this coming four years in advance everyone's prepared for it this is part of living in the deterministic currency is we don't have to wait until the Friday spokesperson from the Federal Reserve open committee meeting to come out and tell us what our interest rate is mining doesn't stop will the fees be the same as Visa if they are we have failed badly because quite honestly the fees already for many transactions most transactions that are above like five dollars are lower than Visa and we're getting better at optimization if we introduce things like lightning Network and other layer 2 technologies we increase the block size and do all of the other optimization and scaling things we can do visa we can do much more than visa and we can do it cheaper so I don't think we're going to have any problems there's the capacity issue for Bitcoin will be a problem all the time but it would be a problem that we will manage in a way that is not fatal and gradually make it better and better so failing to scale gracefully for 25 years that's the goal yes I mean there are interest rate markets for big you don't see them that often simply because a lot of these markets are over-the-counter but if you're in the mining industry and you're going to have a steady stream of Bitcoin that you don't know what its value is going to be and you have a good point now you may want to have various contracts futures contracts to protect yourself against volatility and out of these features contracts what emerges is various forms of interest payments yes that would be well there are actually some investment funds that invest funds that are in Bitcoin in two companies directly in Bitcoin and presumably generate returns in Bitcoin these investment vehicles pay some kind of rate of return and therefore those represent interest rates future value of money doesn't change if you change the currency is to exist as an economic concept nothing changes but we don't have get is the mechanism to carefully and quickly discover the correct market price for the future value of money in this economy yet you'll see that mature I mean if you remember in the beginning of Bitcoin we didn't have a market mechanism to discover what the price of big point was how much do you want for two pizzas I don't know ten thousand Bitcoin each sure that was March 2010 yes that's impossible to answer I can't even answer that I hear out if I fast forward five years my voice will sound very funny but other than that I can't tell you anything else what applications will be built on top of Bitcoin what applications Boeing build on top of the Syrian my general attitude is this the designers of these systems do not get to decide what niche their system will fit in they may have an idea about where they want it to fit in but inevitably the market decides what applications are best suited for each one of these systems and it may be very different from what the designers have had in mind the designers of the Internet's were creating a network to survive a strategic nuclear attack against key routing elements in the network and to maintain connectivity of no affair sites cat videos was not part of the brief and yet we are 1 billion instantly accessible indexed cat videos with artificial intelligence software that might to find which ones are cat videos so what they built it for what it ended up being not exactly a match I predict that we will be building captain applications yes so what's happening with the interface between Bitcoin and traditional financial system and why are there not more ETS is only one of the moments that has come into existence assuming you mean gbtc and is trading at a significant premium and what happens why how do they be more well it's because the coin is sufficiently alien that it can't be swallowed by the traditional financial system they really have no idea how to handle it it doesn't conform to any of the expectations the entire financial system is an edifice of counteracting controls counterparties risk management layers and checks and balances all of which assume custody and oversight and control of which Bitcoin expresses none so how do you take something that is this alien and put it in this type of environment this is exactly like asking it's the early 1900s and the automobile is out why are not more Pony Express routes being replaced by automobiles there's no roads and they've built a series of stations that have lots of hay which can't used for the automobiles so everything they have doesn't work with what is new and that is basically the issue the coin is quite capable of having an ETF ETFs are quite incapable of encompassing Bitcoin into the current regulatory system at the moment they're finding it very difficult to swallow and that is a feature it's not a buck I hope they chew on all right next question let's take the maybe tour yes happy to do pictures afterwards all the books about that were given out by random taken from the RSVP list I apologize the book is available on amazon.com as paperback Kindle has ereader but also on kiddo unlimited for free on Kindle lending library if you remember of Prime for free on open plus are for Bitcoin and you could buy it for Bitcoin using / Scott ioin is currently available in about 40 countries thank you okay – or who hasn't asked the question let's try again yes no it's to repeat the question I mentioned layer technology so if Bitcoin is layer 1 or layers here two wiki's it's layer 0 and layer 1 is lightning Network watts layer 2 have I thought about other players it's really difficult to see how the layers involve and what the interfaces between the layers are and which functions end up in which layers and keep in mind there will be more than one stack above IB there were multiple transmission controlling stacks including the OSI layer and the look IP there are multiple stacks underneath that most people never see so software-defined networking and before that fiber networks etc etc so it's impossible to know exactly how it's going to play out what I can tell you is the protocols and not film automatically we're not going to do everything in a single layer that doesn't make sense from an architecture perspective that doesn't mean we don't scale Bitcoin we will scale paper but we will scale it so the layers above it's scale even further not because we want to do everything in a single layer it doesn't make sense to do everything the single layer it doesn't work yes last question I thought the core team there they seem to be really gung-ho on going with the off chain skill and solution at least for prioritizing that first so much so that I would call it you already recently got say we should not change Bitcoin to accommodate more users and that's one of the things that they were talking about in the IRC so as so if it will come with likes the decide with soft working and we're also criticized notably like by other people like Jeff barczyk of the risk now are in care about going with the more complicated solution so how he compared well as the Tom's Anders flex cut proposal of you know taking a hard work approach and how like cores won't map be wrong I mean this would take an hour to answer and more importantly I don't think why I think it matters at all to any of the parties involved or shouldn't the this debates about big blocks and small blocks and how we scale Bitcoin first of all I don't think it's accurate to say the core is focused on the not scaling the core layer it's as you said it's a prioritization issue which one gets prioritized first now I have I have a nuanced opinion on this which pisses off everybody because if you're if you haven't you wants the pinyon then you're sitting on the fence and both sides can throw eggs at you for not taking a side and I'm not going to take a side because I think that both sides have merits and and really the question is a matter of prioritization and sequencing and conservativism versus a more aggressive approach to scaling from time to time I opinion has changed as I've seen data more recently two days after the etherium fork I thought whoa that one's extremely well a clear 95 5% splits technologically executed beautifully this is going to put a lot of pressure on core to come up with a similar solution for Bitcoin I was wrong I was very wrong because a week later actually two weeks later we discovered that even though technologically the fork work politically it failed and something you ended up with a 70/30 split and that was a disaster because there was not enough provision in the software to deal with replay attacks it cost a lot of exchange of some money I think there's a people from point base in here who may have you know suffered some losses because of that because of the replay attacks I know other exchanges that too or I heard that other exchanges did so yeah after that's my opinion was revised you know and I think at Bitcoin politically a hard work is a hell of a lot more difficult and will cause a deeper schism so I don't think it's as easy as one team is right the other team is wrong I think we're going to have to let this roadmap play out and for the time being it seems that the majority of the participants in the system are continuing to put their trust in core as long as the core continues to deliver on their road map to a certain approximation I'm not worried because I think in the long term what we're going to do is we're going to scale in a second player and we're going to scale the poor layer with a block size increase and we're going to do network optimizations and and and the scaling options are not either/or there and and and and you just have to decide which comes first I think a lot of this drama is unnecessary and honestly in terms of segregated witness software versus hard fork I think soft work is a better way to go I do I think we're going to get a cleaner and quicker than a hard work I think a hard work given the current political situation of Bitcoin is way too dangerous even if it was something that everybody agreed on like segment which I don't think you need to get that agree with so that's probably a very nuanced answer about a very nuanced question that I'm sorry if I didn't give you more of a direct answer I don't think there is a simple black-and-white answer to that problem all right thank you all for coming thank you to our hosts for plugging play I'm going to hang out here chat with everyone virtually we're out of pizzas I don't expect everybody to stay for very long if you want your book signed I'll be happy to do that over the next ten minutes if you want to take photographs I would like to do that after I found the book signing and thank you so much for coming tonight thank you
