BTC vs ETH: Which is Better Money?

Transcript

hey bankless nation today we are having a special episode a debate about bitcoin and ether the infamous debate which one is money what is sound money which one is more sound money and joining me co-moderating this debate is dennis porter who i've actually done one of these debates with before so this is actually round two of a uh eth versus bitcoin ultra sound money debate dennis are you ready to get started with this yeah i'm ready thank you for having me on david i really appreciate it i had a really great time last debate that we went back and forth it was mostly civil for the most part so it was a good back and forth we were able to discuss our points it was more of a general bitcoin versus ethereum type of uh conversation but this one

looks like we're going to be focusing a lot on sound money aspect of bitcoin versus ethereum so i'm looking forward to having it we'll be joined by a couple of great ones as well absolutely yeah and so where as last debate it was just me versus dennis and then eventually we tapped in some people from the audience we are bringing in uh some technical people as well so i'm tapping in justin drake and then dennis you want to intro who you are have brought along for your teammate yeah i brought along manip ali he's the founder of stax uh he's building on bitcoin is uh what they're working on trying to bring smart contracts nfts uh you name it all the fun stuff that you ethereum folks say can only be done on ethereum he's trying to bridge that gap with stacks so really interested to have him on but also the

reason why i bought him on mostly for his technical skills technical savvy similar to drake really understands the you know the framework of how these technologies work all right well without further ado i think we should go ahead and get right into the conversation about bitcoin versus ether which is more money and so we'll get right there after a moment to talk about some of these fantastic sponsors that make the show possible arbitrary is an ethereum scaling solution that is going to completely change how we use defy if you've been using ethereum for the past 12 months you've probably noticed the high gas fees and the slow confirmation times that have been plaguing defy too many people want to use ethereum and it doesn't have enough capacity for all of us that's where arbitrarum comes in arbitrary is a layer two to ethereum which means arbitrary can increase

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alright guys and we are back to get into this conversation about bitcoin and ether what is more money uh so we have two new guests on the show today you guys just met dennis but we are also joined by muneeb ali and justin drake uh munib you want to tell us a little bit about yourself and your background and who you are of course thanks for having me uh so i'm a neb uh my background is mostly distributed systems um i did a phd in computer science at princeton and then got into bitcoin in around 2013 and uh many of you might know me mostly from the bitcoin community but a little known fact that i was actually part of the genesis sale of ethereum and i have been involved in the ethereum community

uh for example was part of the siege round of open c and a bunch of other things like that fantastic thanks for that that color munib uh if you are a frequent bankless listener you probably know who justin drake is but if you are new to bankless justin uh tell us a little bit about yourself who you are where you come from and what you do in the world of crypto sure so um i'm justin drake from the afm foundation i mostly work on a set of upgrades to ethereum which we used to call ethereum 2.0 and that includes proof of stake and sharding i guess my background is technology i studied mathematics i was a fpga programmer in the past live um pyramid space so i know a thing or two about about bitcoin as well and dennis i know we talked a little bit

about you in the intro but also want to tell us a little bit about yourself and your background and how you came to be in the world of bitcoin yeah i jumped into the world of bitcoin 2017 tried to go all in on mining uh but that was a lost endeavor eventually i decided to kind of hunker down for a couple years do my due diligence study this asset study this market uh i'm a bitcoin only kind of guy some would call me a maximalist i prefer to go by bitcoin only but uh now i've jumped fully all in on the world of content creation so i started a podcast called smart people [ __ ] and i also do another show called the update where i regularly update my listeners on what's going on on the space also a very uh avid and consistent contributor to twitter spaces

where you do some of the better rooms also involved politically as well so helping candidates like erica rhodes in california's 30th district try to take down the most anti-bitcoin uh congressman in office right now fantastic thank you for that dennis and for anyone tuning in to bankless for the first time i'm david hoffman co-host of bank list where we are big proponents as ether as money decentralized finance and overall living a bankless life and promoting tools that helps one live a bankless life and with that out of the way gentlemen i think we need to start this conversation by uh setting some foundations and the whole point of that this conversation is figuring out which one of these assets is more money but first we need to figure out what

money is and importantly what is sound money so dennis in your opinion what do you think sound money is i'll keep it real brief and short and simple here i let's start with what money is money is a tool we discovered it 10 000 years ago it's what helped us form societies we use it for storing value transferring value and measuring value for me sound money is money that is not prone to sudden changes appreciation or depreciation and purchasing power over the long term so pretty short and sweet has three uses storing transferring um and uh measuring value and then as sound

money uh it maintains its value doesn't go up or down appreciation or depreciation rapidly in the short term or long term obviously we'll get a little bit more into that as we continue but just keep it simple for now justin how about your definition of money and sound money what is sound money to you right so for me money is basically an asset which has monetary premium monetary premium being this this magic meme energy economic energy that provides this asset more value than the base utility and the classic example in my mind is gold right gold has this industrial utility it's using every single iphone but if we were to try and value gold

purely on utilitarian terms it would be worth maybe you know a trillion dollars but it turns out that it's worth it more like 10 trillion dollars and so this this extra value is monetary premium um partly because it's used as money and so it gains this premium in terms of what is sound money um for me it's kind of the the ability to simply to accrue and maintain this this monetary premium and so basically there's a there's a space component and a time component this the space component is how how much monetary premium can it accrue how big can it become and the time component is how well can it retain this monetary premium over time

i love that answer as well muneeb tell us about your opinions of money and sound money what what properties are required to produce sound money yeah i think in my mind uh money uh differs from sound money quite drastically like in the sense that money would focus more on the medium of exchange part like anything that you can use on a day-to-day basis like for example if you're traveling you land in a new country you pick up the local currency there and then you spend it right like you don't you don't think about that currency as like a long-term store of value the minute you were to think about that currency as a long-term store of value you would actually evaluate it very differently so i think in terms of as soon as you

start talking about sound money i think you start looking more into the long-term store of value and potentially the unit of account right so if i'm if i'm holding sound money for over let's say a very long time like a decade or something uh then i i want to make sure that you know how will other things get priced against this asset so that's that's kind of like the difference in my mind so one concept that i use internally to not have this confusion about money and sound money is i i use the term currency instead of money right because what is currency comes from the word current is basically money that flows and so really i think it's it's important to

distinguish maybe for this conversation currency and you even said the word currency money and money which i guess for this conversation will be sound money so i don't think either of us either two parties the bitcoin or the eth party is interested in their money being currency i think we both are okay with it being currency but really what we're going after here is the sound money property uh and ultimately this is basically like which assets number is going to go up the most uh more or less over time is if you kind of really bake down the things like which which one holds its value and accrues and captures its value over time the most does anyone have any problems with that differentiation i mean just to be clear there though sound money when

you are looking at the definition of it uh it doesn't necessarily have to go up in value over time it can also go down in value over time as long as it's very slow and incremental over time so if you're looking at the actual definition um yes we would all want our sound money to go up over time obviously but the true definition uh is a stable money not necessarily a money that always goes up in value okay all right so i think that's a very historical definition and i think the notion of money is is all around shelling points and these selling points change as technology progresses over time and so what might have been you know a reasonable definition of sound money in the past you know you can list a bunch of properties

if you know you are able to innovate and come up with properties that transcend these old properties now then suddenly you've redefined the notion of money and part of the reason is because there's this comparative dynamic or even competitive dynamic um and you know you can look at it for example with with with gold and bitcoin right um it's possible that bitcoin will defraune gold and gold will no longer be considered sound money you know maybe because it doesn't have properties such as being digital um and so really it's important to look at these shelling points and properties in the context of time and innovation i think so differently there's a

gresham's law in economics where called bad money drives out good and i think that's what justin drake is saying where well bitcoin and gold they have really similar properties but like what one do you think is going to drive out the other and i think maybe gresham's law is basically saying well money collapses converges down to sound money over time i think it's important to know this there too that um it doesn't make it not sound money any longer i think just that in over history humans coalesce around the soundest money so gold didn't stop being sound money it's just that bitcoin is much sounder than gold and just like how gold store stole monetary premium away from silver bitcoin will still monetary premium away

from gold so um just a little bit of nuance there i don't think we necessarily disagree yeah i'll share my mental model here like uh in terms of when you mention the numbers going up far like i think interestingly uh like currency the solved problem right so like it like there's nothing kind of like new there we already have currencies and we use them on a daily basis but sound money interestingly is not a solved problem in today's world and uh whichever solution you look at you know look at bitcoin or eth i think both are in their discovery phase right now and in the discovery phase you're likely going to go up in value because their market sizes are potentially much larger than the market market size today right and once once you actually reach a

stable point then it will be interesting to see that the the sound money aspect does it retain value go up in value or actually slowly lose value from overtime okay i feel like that is now adequately defined so unless anyone wants any final statements about the definition of sound money i think we can go ahead and get into the differences of monetary properties of bitcoin and ether sound good all right so since uh bitcoin came first in history i think bitcoiners get to go first on this one uh dennis munib what about the properties of bitcoin make it the most sound money meaning you want to go or me i think you can go first okay yeah for me the attributes that

make bitcoin sound money that protect its ability to be sound money are the fact that its issuance is extremely stable and highly predictable bitcoin has a hard supply cap so that's that cap is set in stone at 21 million can never go up can never go down obviously people could burn their bitcoin make it even more scarce uh it's also very extremely difficult to create it requires a large amount of energy labor theory of value kind of kicks in here in this place but most important to me the reason why i believe that bitcoin is the most sound money is not just because

it is extremely stable very difficult or nearly impossible theoretically to corrupt or manipulate by governments or those in power but because these components themselves cannot be changed so it's very stable highly predictable can't be changed bitcoin has a hard supply cap can't be changed it's very difficult to create and that actually goes up in difficulty over time which increases its value and makes it more sound so the biggest part for me when you're looking at sound money is does it have the attributes that you and i will probably agree on but the one thing that i think is the most important is removing human control

or the human ability to manipulate the issuance or the supply cap of that money at any at in any given time money before uh i bring in justin here do you want to add anything on to that yeah see my my lens is a little bit more technical like in the sense that uh for me the the the fact that there's proof of work uh i'm like involved here actually adds to the fact that uh it is it is sound money like in the sense that uh you know back in the day people would actually do some work to dig up gold and that actually adds an element of scarcity here right uh and i think i think that that is a fundamental component of the the proof

of work and i would say uh secondly uh when it's easy to define you know some sort of new cryptocurrency and basically say that it has a hard uh cap i think that's relatively simple to do i think what's what's like much more interesting here is uh the community that has emerged over the last decade around bitcoin and how they have uh basically inherited this this value and they're kind of like the defendants of the the 21 million cap and it i think i think it's the uh it's the value added by the users of the network and the community of the network and the last part there would be that bitcoin as a network was really designed from day one uh to be a global network

uh where meaning that anyone around the world with you know a normal laptop computer could actually open up their laptop and independently verify that this is the correct state and i have the right number of balances so i think it's a combination of these things like proof of work with global access along with a community that is going to basically die on the hill of flight you would never be able to change the change supply i think that's interesting beneath that you're adding in the community behind uh one of bitcoin's defense layers because uh i've frequently got into bait about like whether or not bitcoin has a social contract or not and many many bitcoiners uh will say that bitcoin doesn't rely on

humans at all it actually relies on math and math alone that's one of the properties about bitcoin but are are you saying that there's actually a community human involvement that also puts up a shield around bitcoin and makes it immutable i think basically what i've noticed is bitcoin makes it extremely hard to make changes at the consensus level uh so the threshold making any changes to the consensus level is extremely high like the number of miners required the number of scrutiny required for any even small changes and that that sometimes gets gets criticized as well that bitcoin doesn't evolve doesn't change that rapidly and i think the community uh where they play a role and i think this was very apparent in the uh and kind of like the block size wars uh

where the community was basically it was at one point even the big companies and exchanges were on one side uh but it was the average users who basically said we were not going to let this change pass through we just outright reject it so i i don't think that they have the property of coming together to define a change but they're just very very good at rejecting changes and basically saying that we will always fall back to the base case to make no change here justin has anything that dennis or muneeb said raise a flag in your mind about the soundness of money yes um so i think the main red flag is basically the the security aspect of bitcoin um i

i just don't see the long-term security aspect of bitcoin i think it's it's a broken design to be completely honest um i think part of the reason i think it's a completely broken design from a security standpoint is because it's lin it's security lindy resets every four years so every four years um you know we're we're asking the question can bitcoin be secured on smaller issuance and in that sense you can kind of think of satoshi as kind of this uh this degen blockchain designer kind of trying to see how far he can push down the security of bitcoin until eventually it kind of breaks um and so it's kind of like slowly boiling the frog

um over several decades um and kind of seeing uh if and when it breaks um i guess the the answer that bitcoiners would put forward here is that uh bitcoin will be secured by by transaction fees um i mean we were to discuss that you know transaction fees is kind of grade b fuel for a number of reasons one of them is that it's very volatile it's also can be stolen but even if we remove kind of these issues if we just look at the quantitative aspect of transaction fees today transaction fees on bitcoin are about two percent um of of the issue and so like 50 times less and

if you compare it to other systems like ethereum it's also 50 times less and basically you can ask yourself why is that and i think the answer is basically that bitcoin provides very little transactional utility the utility of bitcoin is in the huddling is in the not moving you buy bitcoin you put in a cold wallet you hold it for two decades and then you know you sell it and so that's two transactions over over two to two decades um and so basically bitcoin has in a way cannibalized its security you know plan by not adopting you know a virtual machine that allows for for for programmability and but then you know a bitcoin such as

media might come in and say hey i i have stacks and i will provide programmability and i will provide you know scalability you know through this this sidechain but the problem with side chains is that they leach transaction fees um so if you have a transaction on stacks that transactional utility is going to be captured by the stacks network it's not going to be captured by by bitcoin but then you might say hey hold on in order to have transactions on stacks we need to have you know deposits and withdrawals to and from stacks um and you know those would go through bitcoin and so you'd be tr you know paying fees on bitcoin but that's that's also not the case in the

long term if you have a very successful side chain all the deposits and withdrawals and all the bridging will happen natively with that blockchain like one very easy example is an exchange right an exchange can just hold a lot of of wrapped bitcoin on on on stacks and basically when someone buys bitcoin stacks it just goes directly to that user internally to the stacks and so um really the the model of scalability and programmability for bitcoin is inconsistent with it with its security and then once you don't have security you've lost you've lost everything you know and one of the things that you've lost in particular um most likely is is your scarcity like the whole you know meme and narrative of having

this 21 million cap is is an illusion right it might hold true in the short term but really what bitcoin is are doing is that they're trading off short short-term predictability um so they're trading off long long term predictively for short-term predictability so in the short term we can understand this this monetary schedule very very well but at some point it becomes unsustainable and something must change in the long term i want to get neeb to jump in on the stack stuff but there was one thing at the very beginning that uh you had said that i thought was interesting that i'd like to address but maniebel i think addressed the majority of what you just said but in the very beginning you were talking about issuance and supply issuance um well the

difference between i think really ethereum and bitcoin which is a very important distinction here is issuance versus a supply schedule there's no issuance rate on bitcoin it's purely just a supply schedule and in 2140 when it is finished there will be no more supply issued with ethereum the problem i see when you decide to say well we need to have an issuance rate that we can manipulate or change you that's when you introduce the question of how much is enough how much issuance is enough for minimum viable security and unfortunately when you start asking that question the only person who can answer it is a human being and then thus being a human being coming into the situation it requires human control and human manipulation

over the monetary supply over the monetary schedule and so that's why i prefer a supply schedule um when you know when you say that uh it's only dependent on fees yeah that that is the future that bitcoiners see i'm so bullish on the price of bitcoin that i do believe that fees and they have over time if you look at it there's charts out there you can look up i can't post any here like i normally do on twitter spaces i can post some charts up top if you send me a link i can trim yeah there are charts that show the uh the fees are over time predicted to become the dominant reward when mining but i would love for um obviously justin i'm sure you probably had something to say back to that but i think manip should address the stacks yeah i think that's a that's a that's a

very uh well-known type of criticism for uh bitcoin's supply uh and like how would how would the incentives work once the bitcoins run out right and i think the way the way to think about this is that first of all let's separate out proof of work uh from the incentives form uh so proof of work will keep functioning right like that thing is there as long as there are incentives for miners to mine they will keep doing the work and at some difficulty level and they will they will still secure that uh interestingly i think you can look at the phase during which the based rewards are coming out as almost like a bootstrapping phase for bitcoin right and i think the biggest difference between you know my mental view and

justin's mental mental model here is that i actually don't look at bitcoin as a transaction network at all so it doesn't matter to me how many transactions bitcoin is doing i look at bitcoin as a settlement layer right and that's that's literally how stacks is uh defined as well so it's actually not not a side chain like we call it a layer 1.5 and it has cross layer consensus between bitcoin and stacks meaning that the consensus transactions are literally happening with bitcoin so the stacks miners are heavily incentivized to pay very high transaction fees because they want to mine a block so if the incentives on stacks go up incentives on the bitcoin side also go up and those incentives are not coinbase reports they are actually transaction

fees so these people like if stax is valuable stacks has a you know 3.5 billion dollar market gap right now very small and then the grand scheme of things but if stax is successful and there are more incentives there that actually directly results in more transaction fees very high transaction fees because these people are heavily competing with each other and that's the settlement use case and i see uh bitcoin as mostly as a settlement player and i think that given the limited block space of bitcoin people will be willing to pay insanely higher transaction fees to put any data on on the chain and so so i'm actually like not worried about uh the incentive mechanism for for work in the long term justin you have anything you want to say

to that yeah i mean i i think the most interesting point is on the the settlement layer but i'm happy to also reply to dennis but um i mean i'm i'm very curious to to to know basically um how much is stax paying like the way the way that uh in in the firm land we have shared security is basically through roll-ups where basically these these roll-ups pay for putting data on on the shards on the fm blockchain and this is exactly the words you use pay for putting data on the blockchain now my understanding is that bitcoin is not roll-up friendly so you can't have um you can't have this model instead you might have a

a a different model and my question to you is basically um if you have twice as many transactions on stacks does it mean that you bring twice as much data on the bitcoin blockchain my guess is that you're going to say the answer is no like there's going to be every single block you know there's at most a constant amount of block space that's going to be consumed and that's going to be orthogonal to the transactional utility that that stack is providing yeah so that's that's that's not not how it works and basically let me clarify that roll up quite a little bit so i think the only difference between roll-ups uh on the ethereum side and roll-ups roll-up type systems on the bitcoin side is the

computational power right so bitcoin does not have a full tiering complete programming language but it does have bitcoin script and you could do limited type of computations there we don't even do that right so we mostly are automatically publishing hashes on the bitcoin site but this is actually cross consensus meaning that uh part of the part of your application is literally running on the bitcoin site i'll give you an example of a bitcoin lending application so the bitcoin lending application has your bitcoin on the bitcoin main chain if you're lending your bitcoin you're actually paying a bitcoin transaction fee to send out your bitcoin your collateral in in a stable coin could be in a smart contract on the stack side right so you i think the

fundamental disagreement again between the bitcoin ethereum camps is this idea that you need a full tiering complete language at the base layer uh in our world we're like you don't need the full theorem complete language at the base layer you can still build applications without having the full tiering complete language okay so i mean the keyword that you said here was hash right and not data and there's a very different distinction between a hash of the data and the data right hash is constant size yes but ever it depends on it it does depend on the it's the order of applications not order of something else so it's order of usage how many users how many applications are but let's even forget about hashes at the at the end of the day

we're talking about a very scarce resource which is the block space i think you and i would agree that the block space can't grow infinitely so the block space in ethereum is is scarce block space and bitcoin is scarce and at some point the transaction fees is really how much are people willing to pay to write anything doesn't matter if it's a hash doesn't matter if it's something else if they're willing to pay to write to a scarce resource and that's where the value of the transaction fee is coming from it does matter because if you're making one single checkpoint every single block for example then you're putting you just need you know one transaction per block and that's a constant amount and so there's this there won't be any necessarily a competitive dynamic there is your is your argument that bitcoin

block space will not be scarce the people won't be no the demand for the for the for the block space won't be that large because it's only one hash or one transaction per block so i will disagree on two points a it's not one hash per block like that's not how stacks works it's it's a big of miners the number of miners plus the application okay so it's a so big of minors plus the big goal of applications that are doing the cross chain consensus meaning part of their data is literally on the bitcoin side and secondly i would say that uh i am willing to take the bet that the block space in bitcoin is going to be insanely valuable by the time the coinbase rewards actually run out

so let's go back to that at that point because i keep my uh i can't get my head around how bitcoin's block space becomes insanely valuable while also uh munim you said that bitcoin is a settlement network not a transactional network right it's not it's not a visa it's not a mastercard it's just where bitcoins come to to settle which seems to be in alignment with what justin was saying where the main use case for btc is holding it's for saving your wealth you can use bitcoin without actually ever making a transaction on the network for years if not decades in theory satoshi has used bitcoin without actually making a transaction on on it ever since 2009. um and so where do you think all this demand for bitcoin

block space which is the way that the block says blocks chain sustains its own security where do you think this demand comes from yeah i think i have a great example that actually answers your question and justin's critique as well uh so recently bitcoin nft started taking off so every single nft has its data the hash stored on bitcoin and every single transfer uh also results in information right so if you just look at nft market so again it's a big o of nft's here not a big o of the we're going to need you guys to define big o because that goes over my head so big o is basically it's a uh let me let me try to simplify so when

you're looking at a function what is the input that is going to grow that is the main vector that is going to help grow something right so if something is dependent on the number of miners then let's say if miners go from 10 to 100 the the the resulting function is going to grow based on that right so let's say if some something is dependent on the on the block uh the number of blocks but not the transactions so it doesn't matter if you do 10 transactions or a thousand transactions it's only going to do like one hash per block because it's it's it's based on the loss not on the transaction right so in in this example in nft's example i think it's a perfect one because then the data on bitcoin is growing

based on the number of nfts not based on the stacks blocks right okay and and so in in that sense i think that that example basically clarifies it that why would bitcoins block space be valuable because if bitcoin nfts are taking off then people are paying a thing for them but also real just real quickly too i think you know we're looking far into the future here when you're talking about the uh the supply schedule being complete and they're being you know the final 21 million bitcoin uh the world in our eyes is fully on a bitcoin standard everybody is using it i think a lot of us see the uh the block space on bitcoin it probably won't be used by the average

person or the average user it'll be used by very large institutions banks for trade global trade where they will want to see finality on very large transactions and so far into the future when you know all of us are dead because that's how far away it is when the reward runs out not a single person on the planet today will probably be alive unless they live for i mean they guess i could live for 120 years but that space will be used by the very very large institutions global trade and they will most definitely be able to keep the value of that block space up okay so i want to return to uh one of the the original question which is um

we started talking about ethan bitcoin as sound money based on the sustainability of of the chain uh and so uh dennis and many of you guys just gave some cases as to why there will be block space demand which will generate the fee market required to sustain bitcoin um uh but i would contend that the growing fee market of bitcoin actually needs to increase at a rate that's commensurate to the actual growing and value of btc because it's one thing to have dollar denominated transaction fees be sustainable but i don't think we want to secure our chains based on the value of the dollar because the value of the dollar is fleeting so when in a bitcoin denominated world the value of the

bitcoin blockchain the security uh budget needs to be sufficiently large in bitcoin terms and i think even with the decreasing fee budget in in bitcoin terms the growing dollar value doesn't grow at a rate fast enough for uh to maintain security when the value of a bitcoin is growing way faster than the value of a dollar does that all make sense i think i think it makes sense like what you're trying to say but my i think my answer uh is pretty simple there like i look at bitcoin's security budget to be something where uh it is it needs to be so high that even a state actor would find it very hard to attack the network so when people talk about difficulty the bitcoin difficulty is going down like

recently for example bitcoin difficulty went down when miners moved out to china i wasn't worried about it all at all because on an absolute scale the difficulty level is so high that the bitcoin network is secure right so what we're talking about is really i think we can put aside like proof of work we can just look at the incentives available for the miners and are the incentives resulting in a high enough difficulty level that a state actor would find it very hard to actually come in and attack the people right so i think that value that number given like how how early we are in crypto right now and that difficulty level is already so high um i think 20 years from now 30 years from now maintaining that level of difficulty uh

would it wouldn't be an issue in my view another thing here too i'd really like justin did you want to give final comments there because i um since we're co-moderating uh i think it would be good to also kind of flip this now and try to move the other direction but i think justin you should get the final comments here but to start to move towards uh is why is ethereum sound money you know what's your argument about about that uh you know because obviously we could go back and forth all day on on bitcoin here but i would like to kind of hear what your guys's points are for why ethereum is sound money and then uh obviously get the back and forth but justin final comments on on what uh manip just said yeah so munib just talked about you know resistance to to to state level actors

um i think that's an illusion um basically you can try and quantify the security and um you can talk about basically economic security like how how much economic resources are securing a particular blockchain and when you look at at bitcoin it's relatively you know straightforward what you do is you take the the hash rate which is about 150 million tera hashes per second and then you ask yourself how much does it cost to manufacture and deploy one tera hash per second now my my rough guess is that it's roughly 50 but you know some bitcoiners will say you know maybe it's like a hundred dollars but i don't think any reasonable bitcoiner will tell you that it's above 100 um and so basically we're looking

at roughly 15 billion dollars of economic security and in the grand scheme of things that's peanuts right like if you look at the security budget for example of you know of the u.s it's you know like 750 billion dollars per year um you know for for for its army um and now you know maybe there's a good segue into why ethereum is is is sound money um is you can you can start looking at you know the economic security of ethereum and it turns out it's several times larger than than bitcoin and for experiments even easier to to see to what the economic security is is you just take the the number of eve tokens which are currently staked multiplied by

the the price of each uh token um and uh you get roughly 32 billion dollars so even today um it's it's it's it's you know two to four times larger economic security uh versus versus bitcoin and i still believe that 32 billion dollars is is too small right we need to have a trillion dollars of economic security and i see a road map with ethereum to achieve that you know partly because we have this guaranteed issuance but i just don't see it for bitcoin in the context of this exponentially decreasing issuance and just to ground the listeners so far the reason why we've been talking about transaction fees and

transaction volume inside of blockchains in security is that all of these things uh relate to the soundness of the money because it's it's relates to its ability to hold value over time so when blockchains can be secure over time the money of the blockchain can also hold its value over time just wanted to to make sure that we had the listeners grounded on that yeah that's a fair point to make just so that people kind of understand where we're coming from we moved away from this the aspects of money to being just purely security focused so i'm sure we won't need to cover security too much when it comes to the conversation around why ethereum is sound money so let's go and do that with you and david and justin why um do you believe that ether is the most

sound money well two the first yeah to elaborate on what justin said i think the proof-of-stake consensus mechanism is the most efficient consensus mechanism possible proof of stake collapses down the cost of presiding providing security down to the absolute minimum a computer connected internet uh compute internet connected computer excuse me uh and which most everyone already has uh and then after that what's left is capital and really when you think about it all uh consensus mechanisms all security mechanisms are just a bit of computing power an internet connection and then something for that individual to lose if they do something wrong and capital is the most efficient form of that right if

they have a bunch of capital at stake they have a significant incentive to not lie to the blockchain which is what makes the blockchain secure proof of work has the same dynamic there is computers with computational resources the bitcoin computers are really really big computers with a lot of computational resources and then they also represent capital as well roughly one-third of proof-of-work staking or validation comes from the fact that the cost of operating a mining farm is one-third computer hardware which kind of is your stake it's kind of like proof-of-stake with extra steps but the collapsing of security down to proof of stake allows for really really efficient security and what this means

is when you have efficient security is that it actually costs very little to secure your blockchain and when it costs very little to secure your blockchain you have to you don't have to issue as much money to pay for security and so because because the cost of security is really really efficient so you have very very little issuance to secure a very large market cap of economic activity which goes and lends itself to the property of sound money if you have a global crypto economic system that is secured by the most efficient consensus mechanism possible which i believe is proof of stake then you have the least amount of issuance possible which retains the value of the supply of

the currency by issuing the least while being able to secure the system so proof of stake is one of the properties that makes ether very very sound money yeah let me let me ask a couple of questions there so so i think there are two aspects of google stake that i generally have concerns about and by the way uh just to just to clarify i think proof of stake can work for certain types of applications where the stakes aren't that high but we're talking about building a global reserve currency and you know people's livelihoods are dependent on this and this is the kind of the base layer system upon which everything else is dependent on so the stakes are very very high over here so i think the the the

issue in my mind with proof of stake is kind of like twofolds the first one is if you go back to the beginning of this podcast i was talking about that can a normal person a normal normal user of the internet just on their laptop independently verify that is this the correct version of the blockchain or not right so so that you can't do with proof of stake because of the bootstrapping problem uh and we will we can we can debate that but i think this is this is almost like a proven theorem in computer computer science that you have a bootstrapping problem for mistake you have to trust certain nodes to be able to boot up you can't boot up on on your own i i think justin wants to say something over here so i'll

let him go no go ahead um i mean are you talking about executivity yeah so i can i can i can i can define the problem very concretely right so let's say i'm i'm a user i'm sitting somewhere in japan and somebody gives me like five different copies of the bitcoin blockchain uh i don't have to talk to anyone to independently verify which version should i go for wait if i'm the same user sitting in japan someone gives me five copies of a proof of state blockchain i don't know what to do like i have no idea how to verify which copy is the correct one yeah so this this is something that's been like talked about at nauseam um and basically

um you you can you can argue that bitcoin as well has weak subjectivity in in pretty much the exact same way um basically the problem is that you know if you if for some reason you're a caveman and you've been disconnected from the internet for for very long amount of time you know years and you and and you come out of your cave and you you you run your your your bitcoin clients then you know you'll be able to sync to the head i mean that that's just not true in practice you know one reason for example is that um you need to be downloading the latest version of of the software you know to have all the security patches to be able to to run the latest consensus rules and

and verify them and so in the process of downloading this latest client you unless you're gonna be verifying you know if your caveman is very sophisticated and he's gonna verify every single line of code which no one does they're gonna be trusting basically this that source of where you've you you've downloaded the the software another aspect of weak subjectivity which exists in bitcoin is basically the the net the peer-to-peer networking uh bootstrap nodes so when you connect to to the network basically there's a set of ip addresses um which is which you're going to query the very first time you um you you run your software and if for some reason or another these ip

addresses are compromised then they can just give you a version of the world which is just not the true version and so they can fool you into believing that some some chain is the longest chain when actually it's not and so weak subjectivity is just a fact of life for both bitcoin and ethereum i i absolutely disagree here because i think the core invention behind blockchains is that you can trust the state of the blockchain independently right if you take away that core property like the rest of the problems that you're describing those are all known computer science problems with really good solutions like how do you verify

software downloads how do you verify that you're connecting to the the right peers and and can verify that you're downloading the data chunks uh accordingly like these things have existed even before blockchains right like these these things have been there for like 20 years or something like that the only new thing that blockchains are adding is that you can independently verify that this is the correct version of the blockchain if you are throwing away that property then you start entering the land of like why are you using a blockchain just like start trusting other people for for for running some sort of a consensus system to be clear you don't have to trust people if you stay offline a small enough period of time and you know you

talk about verifying like the the you know where you download the software from i'm imagining you talking about signatures so basically if you're going to download bitcoin core you're going to be verifying i don't know peter waller's signature or whatever and but you know here you're trusting peter waller you know that and it's it's the exact same thing with subjectivity the way that you bootstrap from wiki week's objectivity is that you you have whatever trust assumption you want to make and then they will give you some sort of state of a checkpoint of the state and then you can take it from there but again this this this checkpointing mechanism is only required if you're a caveman which most people are not and if you are cavemen then the same problem applies to bitcoin i think this

this problem is much deeper than that right because it's first of all it's not about capabilities but in in the ethos of decentralization a normal user should be able to self-verify that is this the correct copy or not so you're basically breaking the number one ethos of decentralization that a normal user cannot self-verify you always have to trust somebody else to be able to then verify that okay i can only verify if i trust the initial state and then i can verify the straight from there like let me know no it's not just the initial state it's the software as well like are you as a normal user going to read every single line of code and compile from source and run the executable we can get into how to verify that you have the right software there

are many ways of actually doing that like people people have been solving that problem for ages that's not a unique thing to bitcoin like you're you're conflating uh how do you verify that you got the correct copy of the software with verifying a blockchain like you well can we all agree that it's important to verify that the blockchain state is correct or not or be able to independently verify that blockchain state is correct then why don't you even use a blockchain then you just you just trust whatever is running on the other side of your computer when you have a state machine you have the state but you also have the state transition function and that is going to be your your code and you can't just dissociate the two and just verify the state without you know verifying the

state transition function you need to verify it so let me let me let me pause the same problem in a different way because of bitcoin's proof of work let's say there is an attacker that wants to fool you and is trying to create multiple invalid versions of the history every single fork actually requires an insane amount of work to be done so the attacker is limited in how many blockchain histories the attacker can actually produce to even present to you whereas in proof-of-stake i can give you a million different copies of the blockchain and you wouldn't be able to tell which one is the correct one because it requires me just signatures to create a million different copies and a million different

histories of a proof of stakeholders no because um in the context of bitcoin you can have you know if you're attacking the networking layer with these bootstrap nodes you can have an eclipse attack and basically you can censor every single you know chain that that has done a lot of work and so the ch even just a small amount of work is enough to fool and same thing for the code you can have consensus rules which just fork off because they consider invalid change you know legitimate change would have done a lot of work and then therefore you're falling back to these insecure chains which have done almost no work sorry sorry let's say let me make it more concrete let's say i want to make a change that goes 30 days back i would need to do 30 days of work to be able to

create that separate version of the change right real quick though um can we could you do one this last comment here and then justin and we should probably get back to proof of stake just like we should move on yeah yeah but like manipu and then justin one more sure so i think uh what i'm saying is let's make an attack very concrete that let's say i'm an attacker i want to change the history of the blockchain 30 days back so in proof of work i'll have to do 30 days of work to be able to even try to fool somebody that this is not the correct version of blockchain right that's that's the core thing in a proof of stake system i can give you 10 million different copies that have each have a different version 30 days back without doing any work that's that's the

part of the part of the argument the work argument doesn't hold because you can have rules which disqualify chains which have done a lot of work and so you could have a chain for example which where the difficulty kind of decreases you know in in such a way that or you know a chain with very few blocks for example um [Music] once you once you mess around with the state transition function you you can't validate state that's like a fundamental premise some of the things that i'd like to go back to because just in regards to some of the points that david was bringing up some of my core issues around

um proof of stake which might be really to be honest my biggest issue is moving from proof of work to proof of stake i think it's been pretty well shown that ethereum has had a very difficult time doing that and that i've heard you know i keep hearing over and over again that's going to happen i think that's kind of a separate argument that a lot of bitcoiners try to make um the one that i really would like to attack is this idea that proof of stake um is a better model because it will incentivize saving okay yeah you know i could i can i could see that but my problem i'll actually pitch why proof of stake is a better model in a different way yeah let me finish this one and then you can you can pitch it in another way as well

but some of the biggest issues that i see with proof of stake is it it does kind of incentivize i would i would say incentivizes hoarding in a similar way that bitcoin does but the problem is that it incentivizes hoarding with the people that are minting the eath so those that are creating the are incentivized to hold on to it the difference between proof of stake and proof of work is the miners have an economic cost and they are incentivized to distribute the bitcoin that they are creating but what ends up happening is it's harder to disperse and you have this large consolidation of supply in the hands of the wealthiest people potentially on the network which really inevitably when you look past in the past in the history of money the incentive to debase manipulate or

corrupt a monetary supply or issuance is always happens when there is a heavy amount of people holding on to a large amount of that supply because there is an incentive to manipulate or debase the currency um so and this is the real big problem that comes down to is there will be a time when uh the human control over the ethereum issuance will lead to debasement and manipulation in my opinion the other part is again this this transferring from proof of work to proof of stake i'm not sure it's i'm not sure it's possible it feels like it's like open-heart surgery while flying a rocket ship hasn't been done yet seems like a lot of other protocols don't have too much of a problem with uh being on proof of stake but i think from the very beginning you

can go all the way back and see that this has been a very big issue for ethereum and and when you were talking about this minimum viable security minimum viable issuance you know it's it's great in in theory but uh you know it's kind of a problem also in a sense that you have been taking from the miners over time you went from five eth to 40 to three eth and then also now also again with eip 1559 you are taking away the fees from these miners these are your you know paid security guards that you guys have been having on your team and they've kind of been getting screwed over by you when you decide to move from proof of work to proof of stake i see a real issue here because these people that you have you know essentially been screwing over for the last several years are not

going to be incentivized to protect the chain for two reasons one you've been screwing them over but two the other one is that you're going to be dropping the difficulty bomb and that is going to ruin the chain that they are protecting well i don't know about you but if you've ever been uh have ever had employees i don't ever warn my employees that i'm going to fire them three or six months in advance tends to lead to instances of them colluding to steal from me you know right usually what you do is you fire someone you walk them out the door that's not going to be the case from proof of work to proof of stake i i really do see uh you know the mev getting kind of out of control i think you'll get uh uh you'll have time banded attacks that kind of get out of control

and it could be a very turbulent time ahead for ethereum as it moves to proof of stake justin i have the things i want to say but do you want to take this one first sure so many things have been said i mean one of them is you know execution risk and you know part of it is just you know having software without bugs that works but there's also the the risk that miners will somehow revolt and and and and attack the system and you know the if we if we zoom out on the topic of at hand which is which is money and monetary premium um you know you can start looking at at a whole list of shelling points right um and

really like in my in my mind this there's two types of selling points there's kind of these these short-term competitive shouting points and then there's the really important long-term competitive shelling points which are based on network effects now the two really important ones in my opinion in terms of the long the long term ones is one security of the blockchain and two scarcity of of of the asset of of the token now it is true that bitcoin and and and in that ca and in these long term categories i i i truly believe that that ethereum is kind of orders of magnitude ahead of bitcoin and and as such bitcoin has lost the the long-term game um but if we look at the these these short-term ones you know there's a whole

list of them so you know you can look for example at finance financialization right so the notion that bitcoin you know has an etf now you know that makes it more money than bitcoin than ethereum i yes yes i would agree but you know these are very very short-term things that basically have a lifetime associate with it it's a shelling point which will which will disappear um and actually if you if you take a historical perspective in financialization specifically like the time scale just keeps on on decreasing so you know bitcoin came six years ahead of of of ethereum in terms of the of the genesis and then you can ask for example when you know how much an advantage did bitcoin have for grayscale well it turns

out there was three years kind of grayscale had the bitcoin products three years before ethereum and then you can ask yourself what about futures well it turns out that's that's half of that again uh you know bitcoin had had futures one year and a half before before ethereum and you can have the same thing for for for etfs they wouldn't be surprised if it was also half of the of the previous thing and execution risk is the exact same mindset it's kind of this short-term myopic mindset of short-term selling points and the reason is that execution risk well guess what it disappears once we've executed and the same thing for attack risk you know it just disappears once there's no more miners once proof of work has been

removed so maybe you're right you know maybe there will be issues but it's very short-term thinking in my opinion another thing that was a point that was brought up is on distribution and this this is a a misconception that somehow uh ethereum proof of stake is not distributive proof and the reason is very simple is because when you um you stake if and you receive the rewards that counts as income in in all jurisdictions pretty much and income has income tax associated with it and that's let's say roughly 50 and so you have this natural kind of forcing function to sell your ether you need to sell 50 of it and so that is a

very similar distribution mechanism to to to bitcoin bitcoin you need to sell your bitcoin because you need to pay for electricity bills and hardware bills well it turns out that in the case of ethereum you need to pay your income tax bills for governments for your issuance yeah for the record i actually uh i think there's a better argument than uh the income tax being a forced distribution uh although it is worth noting that that is actually blanketed across the world the the the distribution aspect of proof of stake comes from the nature that proof of stake has made it trivial to become a validator to the chain which meaning and so dennis we talked about this last time we debated the bitcoin

and ethereum have both the same problem of we have this money and when you have money you have a money printer somewhere the bitcoin protocol can print money if it wanted to the way that bitcoiners and bitcoin has solved this is that it's just capped like just uh just capped that just killed it just like no kill the money printer destroy it take a hammer to it it's gone and that's what bitcoin is like no no issuance for anyone no one gets anything ethereum does something different it says issuance for everyone and all you need to do is bring your computer and capital because everything is involved with capital uh and so by collapsing the cost of validating the chain if the ethereum solves the the senior edge problem of like all right we

have this money printer what do we do with it by spreading it out to the maximum number of people and by doing that you also receive maximum decentralization and maximum security so whereas bitcoin just eliminates senior age ethereum tries and finds a way to spread it out to the maximum number of people by reducing the cost of providing security to the absolute minimum to my my question for uh his money is i was actually a bit surprised when i started even seeing the meme because for the longest time i kept hearing that heath has gas for small contracts which actually made a ton of sense to me right like it deserves a lot of credit for uh basically inventing and and smart contracts and then getting some of

the early applications there and so in my mind it was always a smart contract platform and then it has competition there and three years ago you know everybody would laugh at when somebody would say no these other platforms are going to build build better faster uh smart contract systems and then they're going to get traction but i think fast forward to like 2021 and that's happening right so the solana's of the world the avalanches of the world i would even argue even to some extent stacks of the world they are getting all these applications and ethereum is kind of like losing at home ground like this is the main thing material is supposed to do and i just don't understand why is the theorem even trying to pick a fight with a blockchain that has a that has

just one use case it is a single purpose use case the only thing it is trying to do is to be the best money layer for the planet right so i like help explain to me how does those two use cases uh differ from each other like what type of technology do you need to build to be a really good smart contract platform and what type of technologies do you need to build for being a really good money layer and which fight are you are you trying to pick so one of the realizations i guess for me is that it's impossible to be you know an outstanding smart contract platform without the monetary premium number the premium the premium area and it's necessary for two reasons the first one is that it's it's

necessary for security right and the whole product of the blockchain the block space that we're selling is all about settlement guarantees aka security um and in order to achieve this you know resistance against state actors we just need tons and tons of of of monetary premium like what right now we have 32 billion dollars of economic security it's it's too small by you know a couple of orders of magnitude um so we we we must grow that if we're going to build a a platform which is resistant to to to world war three another reason why it's required is because we need trustless um economic bandwidth right the

defy is sorry the small contracts in many many cases are are interesting because they manipulate value and and you know you enter the world of finance and in the world of finance you need collateral and when when you want to build these these trustless and decentralized applications you want to minimize the number of assumptions that you're making so at the minimum you're taking on the assumption that the firm is secure right that's kind of like the the basic assumption but you don't want to be making additional assumptions so so like the most natural way forward to not take on assumptions is to just reuse the native money which is if as your collateral as your economic bandwidth if you try and do something

else for example you try and use wrapped bitcoin then now suddenly you're trusting bitco um and and that that's very and now you you know your weakest link is is bitco which which which is not satisfactory um but it it it it turns out that kind of security and and scarcity are are mutually beneficial um the more you know um security that we have the more transactional utility that we have the more fee burner that we have the more monetary premium that we have which gives us more economic security which gives us more utility and so it's really a foolish game to try and

detangle and disassociate the notion of security and utility and monetary premium and money so said differently the way that you presented this is that like uh you know ethereum pick a lane like are you money or are you a smart contract platform and i would actually turn that around on you and just kind of which is going to be reframing exactly what justin drake just said where he says you need economic activity to drive scarcity actually i think bitcoin needs to do some more defy stuff and also the whole eth killer phenomenon needs to do some more bitcoin things it's not ethereum that needs to pick a lane it's bitcoin that needs to generate internal native finance and then also the eath killers need to actually become decentralized so

they can have the monetary premium so it's actually the opposite ends of the spectrum that need to come and do both because it's both that gives you both the decentralization and security that allows you to be money while also generating the internal native financial economy that drives blunt demand for block space which generates scarcity into the l1 asset yeah so i can i can give you the bitcoin model right so the bitcoin model is that bitcoin is the decentralized money layer then you have a smart contract layer like stacks stacks is purely a gas asset never trying to be money will never be money because it literally depends on bitcoin for its existence it can't exist without bitcoin and there's a separation between

what is money what is the store value and what is the gas asset and then they can they can interact with each other and and you know you can even use the system that way but then extending that argument like do you guys then also believe that every other smart contract platform or forget about smart contract platforms like solana look at you know polygon so you know polygon recently had more daily active addresses than ethereum so with that type of network activity happening the does matic becomes money and would start kind of competing with ethereum would solana will become money and avalanche will become money are we all in that game because my model of the world was very simplistic like bitcoin is money let's just bring smart contracts to it there

are a bunch of other smart contract platforms as well but this argument seems to say that everything is trying to be money in my opinion everything that is an l1 token is trying to be a global sovereign non store value asset yeah i agree and i think this is actually part of the reason why i believe that that stacks is kind of you know a little dubious in the sense that one of the things that that stacks is is is claiming is that it has is inheriting the security of of bitcoin but i don't know how how to do such a thing like my my guess is that if you know more than 50 or more than some threshold

of the stx tokens are controlled by an attacker then that attacker can just you know do all sorts of bad things like censorship and maybe even break uh that's not not how stacks work stacks not a proof of state system there are separate miners that use bitcoin we we don't need to get into it but that's not our tax credit right but you do have an honesty assumption in addition to the honesty assumption that bitcoin has uh so parts of the applications basically think of them as cross chain right so part of your application is literally just running on bitcoin as the lending application you're you're just doing bitcoin transactions to lend your bitcoin and part of the application is running on the stack side uh so your collateral for example is a smart contract on stacks

and then that is settling those those that data is settling on bitcoin and there are miners involved that are running on the bitcoin side it's it's not it's not proof of stake i know that's the world you guys come from but we can we can get into it separately right but let's let's remove the like the the programmability aspect for now and just just think of stacks as just like a side chain that provides a bit more throughput like are you claiming that stacks has solved bitcoin scalability um in the trusted fashion and it has exactly the same security model it it helps like how lightning holds right so lightning can scale payments and then you're doing settlements on that one so stacks is the programming

layer it has smart contracts so you can do it a lot more smart contract activity that is eventually settling uh on on the bitcoin chain and then then you have the cross chain connections between them so you can build applications that basically are running on both okay now my understanding is that there's this this proof of transaction aspect where basically i haven't looked into it too much because i don't completely understand the documentation but basically what i what i understand is happening is that there's money bitcoin specifically which is being sent to various stx holders presumably um and as an attacker if i'm willing to j i have a lot of bitcoin and i'm just

willing to spend and give a lot of bitcoin to these stx holders then presumably i have some amount of control and if i'm willing to spend more than what the others are doing then i can start doing bad things like censorship or you know reverting bad chains or stuff like that yeah so the weird think about that is a stax follows the proof-of-work type of security model um but instead of it's burning electricity you're actually consuming bitcoin so you you're so that's where the security budget is coming from uh but that's that's like specific to how kind of like stacks functions my main argument is that separating the money there and letting the money there be the money

there and building basically contracts around it is is one model uh and i actually disagree that i don't think like if you talk to people at solana or avalanche and other places like i don't think they would say that they're trying to do money like they would argue that they're they're not trying to do money they're trying to build you know decentralized computing platforms that are valuable for different reasons than than decentralized money is valuable i think if they think don't think that they're trying to be money they're making a mistake like maybe they don't know that but again if you commit to being an l1 you commit to trying to fight for monetary premium and monip you're saying that stax is secured in a very similar way to proof of work except that the work is spending this this bitcoin

um and so basically that probably means that that that stax has you know orders of magnitude maybe 10x or 100x less security than bitcoin simply because you know the expenditure of electricity on bitcoin is just so much larger than the expenditure of of bitcoin for stacks and as such if stax doesn't compete for monetary premium it just won't have the security and then it just will be relevant yeah so i think stacks does has less security budget right now than bitcoin but the design is very very interesting where all of the fork histories of stacks are secured by bitcoin literally so you benefit from the security of bitcoin because bitcoin is securing all fork histories uh on stacks but here's

the interesting thing even if i take your argument that stacks is less secure than bitcoin let's say somebody attacks stacks the core argument of keeping your money there separate is that nothing happens with bitcoin right and and securing the money layer in my view is the most important thing once the world gets decentralized money there can be many smart contract platforms there can be many type of different applications that are that are filtered see that's actually something that i think a lot of ethereums might agree with we just separate our stacks differently and so you called you called a solana and all these other eth killers as like computing environments or you know smart contract platforms and the way that i would phrase that is that these are uh execution optimized block chains and then they are optimized

blockchains that have sacrificed decentralization in order to increase scale in the ethereum world and really this is just a neutral technology rollups are the same thing they are execution optimized networks except and that they have a sacrifice decentralization to be layer twos on ethereum preserving the money layer which is the asset transfer layer of ethereum which is uh contrary to a lot of what bitcoiners say actually a very simple l1 like it's generally pretty simple as far as it goes maybe proof-of-stake gets a little bit complex but in the grand scheme of things you have all these compartmentalized financial application layers these roll-ups where it's very very performant and then you can tap into the very very

secure l1 of ethereum and this goes back to what i was saying earlier where ethereum's trying to do it all it's trying to have a decentralized layer one which has a very significant monetary premium that is highly secure and then it's designed to have highly executable layer twos that can conduct all the financial activity and so it literally gets the best of both worlds and it captures all of the money all the value of decentralized finance using the roll-ups and then it injects it into the security layer of the layer one yeah so can i can i can i give the ethereum people some unsolicited design advice like i think i've tried doing that back in like 2016 2017 when i effectively said you know don't try to

do sharding you won't be able to do it try to work on l tools um and i'm pretty sure justin has spent like years and years so i don't want to discourage him for doing that but charting turned out to be a pretty pretty hard problem i would say that if i was involved with ethereum today i would actually not try to move to proof of stake uh you actually have a fairly secure network with proof of work right now you actually have like a bunch of traction and usage and and and l2s are are working like arbitrarium is coming online that's actually a pretty solid solid solution if i was designing ethereum today i would stick with proof of work i would actually try to limit even further the types of activity that can happen on the

l1 maybe you just want to do uh roll-ups maybe you just want to do fraud proofs at the l1 but discourage applications to be built at basically try to minimize your l1 layer instead of like keeping it very complex so any types of applications are being built and don't try to do sharding don't don't don't try to move to google stake and then you have a serious shot at becoming a money layer because you inherit all of the properties that the the arguments that i was making like why a proof of approval work system is actually uh better because it actually has security defined outside of the system we didn't get into this that much because what what's happening with proven stake is you're trying to define security within the system everything is pointing to

each other right you need you need you need a referee that is actually sitting outside of the system that when things go south someone can actually step in and be like here is how you define security because one of the first things that's going to happen if something goes south within the system is how would you then recover from it right like i can give you an example uh all these blockchain systems are bft systems let's say for some reason you know a bunch of exchanges get compromised and close to 33 percent of your staking power uh is now not not not uh not cooperating with the consensus system you will stop making forward progress right that's this wouldn't happen in in other types of design so i think like

defining the security of the system outside of the system itself is actually the critical critical difference here there are also other some other problems as well um i would like to kind of get your you and david and justin's answers on here but a lot of times the argument from the ethereum community is that it's economically infeasible to attack the proof-of-stake network but when you take into consideration this aspect of slashing which could be one way to help make it more economically feasible you could also target large holders of ethereum you could buy wallets off of

off network so there's no transaction there's people are unaware of the movement of those coins to other holders but you also have this issue with these derivative companies that have been formulating so like the lido protocol i think they've captured like a very large majority of the staking in a very short amount of time because they give ethereum holders this token in exchange for stake to you through negative token yeah on their on their protocol and so it leads to this really kind of perilous situation where the supply is becoming and the uh and the staking is becoming very very centralized in a very short small amount of hands combined with you know the idea that if

someone has a large majority of the staking power or control they could intentionally get into a situation where they try to slash themselves and also slash their competitors leading to a situation where they again have a larger control or percentage of the network so i'd like to kind of hear what you guys have to say about uh the ability to kind of supply hijack the network and the staking protocols first off uh laid out is a decentralized taking as a service protocol uh it's a dow half of uh lido i would say is distributed rather than centralized but relatively centralized and the other half is completely decentralized the people that are the aspect that's decentralized is that people come in and

submit their ether to the validator network it gets bonded to the beacon chain and it also gets spread out amongst i think like 11 validators meanwhile they're also working on this thing called shared secret validation which is basically like splitting up the keys to a validator allowing the actual validating network to also become decentralized and so it's not it's not a corporation in the same way that coinbase is and so when i see ether going into lido i'm actually seeing it becoming a part part of the decentralized like staking network that lido is offering and this is actually a model that a lot of ethereum teams applications are actually expanding upon rocketpool also comes to mind where yes the ether is actually being

owned by a central contract address but that contract address is represented by a very large number of people both validators and eth suppliers so it's actually not not accurate to say like all this ether and this one address is centralized sure but a lot of the governance tokens are being controlled by you know a very small amount of hit people which does have an impact on the centralization of that supply i mean it also leads to this issue with the costliness of money which is a very important aspect going back to sound money and when you are able to essentially give your ethereum to them and you get a one for one token back it completely eliminates the costliness of production because you can be a part of the staking

and you can be a part of the issuance without any cost to yourself whatsoever just you have anything you want to say yeah so one of the things you said dennis is that we're claiming um it's impossible to attack the network with proof of stake no that's that's not the claim right the claim is is the exact opposite is that with proof of stake just like with proof of work you can attack the network but there is a cost and that cost is is measured in terms of economic security and right now it's on the order of 32 billion dollars that's my point though is that it's cheaper than that because of the fact that you can get away with slashing your competitors you can buy no no have to buy 32 billion dollars worth of

eth sure um but slashing is is is kind of the opposite of the way you portray it it's like you're talking about slashing like other people but that's not how it works the way that slashing works is that it slashes bad actors if you make a provably bad action on the network you know you make a double vote for example you're voting for two inconsistent things at the same point in time it's a cryptographic event and slashing is is a recovery process it's when an attack happens if and when it happens and it is possible it happens all the bad actors who are provably bad to just get removed and so you're left with the the good actors um and so slashing is precisely what makes it difficult to attack the network in a

repeated fashion and this is a key differentiator with bitcoin when you look at an attack you can look at it as a as a one-shot game or you can look at it as a repeated game in the case of bitcoin if somehow you manage to accrue 51 of the hash power then you can attack bitcoin over and over and over again um so for example you can just continuously censor it and not produce any blocks and so there's there isn't this recovery mechanism in the context of proof of stake if an attack happens sure it can happen one time but then we're going to slash you okay maybe it happens a second time but then will slash you again and guess what every time there's a slashing event

it becomes harder and harder to pull off the attack because there's just less and left in in circulation and also this is what munib was talking about about external security versus internal security where justin drake is saying that if the ethereum actually derives its security by not by removing this what vittel calls this bond camping attack of proof of work which has external security bitcoin can't delete asics because they're external but ethereum can delete its own ether because it is internal and so it gives it a an extra layer of defense when it comes to attack i would i would i would push back on that right so uh think of it this way let's say that someone is able to get to up to 51

on bitcoin at that point it's open warfare right like anyone can go try to get more hash power and you're not fighting you're not fighting publicly to to gain more hash power and the way bitcoin nakamura consensus works is uh everything is probabilistic finality you can actually go back in time fork from another place and the system has self recovery baked in right whereas in proof of state you have actually removed one of the actors which is the external miner now everything is internal and once someone actually gains access to let's say a massive hack happens like kraken gets taken down coinbase gets taken down or something like that once someone has more than 33 percent of each you're

toast you can never be able to make forward progress no it's the opposite if kraken or coinbase gets compromised they will they will get slashed and so they will get removed i mean if they abuse their power and and and and and and attack the the the system so so you're saying that in terms of yours in terms of like the like 33 percent of economic power on the network and they will start losing their heat and then what if the attack is bigger uh what if what if now if we were talking about 51 attack on bitcoin what what if somebody has 51 percent of economic majority power but can they do anything on the network now because they're they're the majority no

well if they start abusing the power they'll get slashed that's kind of the the truth who's going to slash them they're the majority of that one built into the network well it depends there's this okay we're getting technical here but there's kind of two types of slashing like one type of slashing is like the cryptographically provable slashing like you you made a double vote you know you tried for example to finalize two inconsistent checkpoints this is automatic slashing it happens you know by by the network there's an another more subtle type of searching where as a majority actor you can for example do censorship and here basically the the the resolution is so social slashing so the fm community can see okay well

there's this one actor it's clearly compromised it's clearly attacking the network because it's censoring all these blocks the good news is that we can identify this actor we can see that you know the owners of pub keys x x y and z are not producing blocks for example they're censoring the network we're going to go ahead and socially slash them which is you know a hard fork but it's a very similar process where at the end of the day the attacker loses um i think i think this this this is this really highlights the difference in the two school of thoughts like in the bitcoin camp there is no concept of a social hard fork right that i am going to remove the economic i'm going to remove bitcoin

from somebody's wallet or i'm going to change i'm going to roll back the uh the state of the blockchain activated folks those rights when when have when they have when have they happened they can happen is the point the point is that they can't happen i think so that's that i think that's i'm pointing to the difference right people can pick which camp speaks to them more i think on the ethereum side it is acceptable like like with the dao fork to roll back history or to take away tokens from one wallet address and give it give it to some other address and the bitcoin world that's completely unacceptable cannot cannot be tolerated by another community wait you know that you have bitcoin as

wearing you you you know user activated software qasf hats and you know you're like saying that it's completely unacceptable i think is a mischaracterization and also it hasn't happened on ethereum and like the two networks are on power here like it's it can happen in both cases and let me give you one example sorry sorry i think people will get confused here i want to compare a user activated soft fork to the dow pack right there is a huge this like night and day type of a difference here the user activated soft fork is not changing the balances of anybody is not rolling back any transactions okay it is it it but it there's no way it would it wouldn't be a soft fork at that point it would be a hard fork at that point no it

would be a soft fork you can you can freeze funds so let's let's assume for example that a quantum attacker comes in and steals ten percent of of the supply this is the exact same situation as the dow the dow is basically one attacker being in control of uh an outstanding number of coins let's say 10 or 15 percent would you know would the bitcoin community say okay yeah that's fine you can we'll have just one at one attack literally they would literally say that and it would never roll back okay but at the minimum they would have the option to do a user-activated fork to freeze those funds and effectively destroy them it will not fly into the controller it will literally not fly over the

controller that's a subjective argument not a technical one let's just make it a historic historical argument has never happened in the bitcoin history has happened in ethereum's history so that's just a historical fact yeah to me it's just a very weak argument because the dow hack happened in 2016 which is five years ago out of six ethereum ethereum's lifetime of six years and there's also been a very significant number of proposed hard forks and proposed eips that did something like this for like fund recovery famously i think eip999 to get the parity funds back and and many many other eips which never really make it to the surface of the conversation just because they get denied and so like yeah ethereum had is

like mulligan but also at the same time there's a lot of things that ethereum has denied from proposals from the community that like bitcoiners just don't hear about and kind of really illustrate the the new level of immunity immutability that ethereum has has achieved right so i think let's let's take for example eip1559 right so here's the here's the paradox of that as a economic policy i actually think it's a much better economic policy than the previous one right so i think i agree with you that it's an upgrade as a bitcoiner i also know that that would not have happened on bitcoin right and i think this is where the fork on the road is that and and we don't know like what is going to win in the future

but i think it's important to differentiate the two paths the path on the ethereum side is that you're willing to have social consensus around monetary policy and then change the monetary policy bitcoin is saying that there's no concept of social consensus around these things this is all proof of work and that's it that is that is a social consensus by the way mike that gets back to like this like i think was the ultimate point and um our last debate between me and david which was that in order for something to truly be sound money it needs to not be able to be messed with or tinkered with um by human beings because throughout history we've had 10 000

years of history to prove that any time you leave the door open for human beings to come in and change the monetary supply or the issuance they will and have always done that and so i think that it's very much the difference between the ethereum camp and the bitcoin camp is that you guys kind of think like okay well as long as we as a community are okay with these changes that's that's okay uh but there will come a time in my opinion eventually it could be 10 years down the road 20 years down the road who knows could be beyond our lifetimes but the fact that you leave that door open for human tinker ability to the monetary supply and issuance is ultimately uh leaving the door open to corruption of

the monetary supply itself like i asked you the question i said you know if the dollar became deflationary today right like they just they finally raise rates they stop printing money they go full-blown deflationary with the currents they start burning it does that make the dollar sound money and i think your answer was was no because you the door is open to tinker ability and uh i said that the door is still open for tinker ability with ethereum and that was kind of like my whole argument i'm curious if you kind of had a something to say to that to the effect of that since our last debate yeah and i i think the video aspect of this will actually help out here um

uh so like bitcoin it has maximized for immutability more than anything else and i think bitcoiners don't really appreciate the fact that ethereum is actually the the door is more open than it is with bitcoins although i will say there is no such thing as perfect immutability the bitcoin it's always a spectrum of how open the door is the bitcoin door isn't completely shut it's open just a smidge and the ethereum doors open a decently more amount than bitcoin and then we have the dollar which like the door is like all the way open right and so it's it's it's actually really hard to get changes into ethereum like we don't implement that many changes and the changes that we do implement have like hundreds and hundreds of like highly technical eyes

on them and those people that are putting the eyes on the changes have thousands and thousands of eyes on those people and so in stark contrast to this whole like 12 old white dudes behind a closed door ethereum is like done on open forums in open in the court of public opinion and never actually really can do anything that's against the community and so you know there is a door that while it is a door that is open it's done in a very transparent way with the social commitment of eventually we are pushing that door more and more closed every step we can while we work on integrating all the technological upgrades that we can while we have this time of flexibly updating blockchains two things you said real

quick there money one sec i just want to say two things um you said that ethereum you know closing the door it doesn't change very often but you guys hard fork like every three weeks four weeks it feels like at this point maybe even less it's once roughly once every two years and the things going into those uh hard forks are just very very small and the court of a public opinion you know again this is the court of public opinion it's it's human control and you may have made the human control aspect of your money more decentralized than the dollar we can 100 agree on that i think the dollar is the ultimate [ __ ] coin but um when it comes down to it you've left that door open and there will come a time in my opinion in the future for a majority of people

to get into a position where they can make changes to their benefit that don't benefit all the users i think most of the changes that you and you said this last time every change that we've made so far has benefited the users of ethereum but that doesn't mean that that will always hold true also i would say that the community as a whole is i think it's interesting that you don't include the miners in there because as i said earlier you've went from five to four to three and now you're burning the fees and you've so you have hurt people in your community it's just interesting that you don't see the miners as part of your community i wanna i wanna add some things that i think this is also a very fundamental point that when you're talking about making changes or even the need to make a lot

of changes versus not making changes that's where um conflating the smart contract platform with money actually hurts ethereum in my view because there will be more changes required to upgrade a smart contract platform right like maybe you could even argue that a proof-of-stake system is a good uh upgrade for a smart contract platform or maybe at least in my view it is not a good upgrade uh if you want to be money right so i think because those two things are conflated at the at the ethereum base there uh something like solana which in my view is just trying to be a smart contract platform can actually hard fork or upgrade their stakes are very different from a money layer and if in

the case of bitcoin where bitcoin's money there is separate and stacks the smart contract uh platform layer is separate stacks can actually hard fork more and just optimize for whatever functionality the developers are looking for without ever changing the the money there this is also true with rollups this is the same pattern there exactly which which goes back to my recommendation that you can even right now try to stick with proof of work try to actually minimize the ethereum based layer instead of making it more complex and just do most of the most of the computation in roll-ups and how tools i know justin is itching to say something but though and dennis you said you said and uh money just said something that i think aligns here is like uh you guys are uh kicking out the proof of work minors uh just stick with

proof of work under proof of stake the users and the transactors and the security validators of ethereum are all the same people and so it's fundamentally more about aligning incentives where proof-of-work minors are really mercenaries they have to be profit-driven they have to sell the asset and they represent a a a two-tiered society that wraps around a chain it's the people that have the ability to mine the chain and the people that have the that can only buy the asset from the miners right you have the it's the same thing as like the the money printer paradigm that we exist there's two classes of citizens there's people that can access the newly freshly issued coin and then there's the rest of the world

right with proof of stake we actually collapse all parts of ethereum into you are all are you an nft trader are you a defy speculator are you just interested in the protocol well all three of those people can all be ethereum validators under proof of sake and it's it's not that we're like kicking miners out the door dennis actually miners have been uh we've been noticing the accumulation of ether by minors leading up to the suspected timing of the merge and so miners are actually going to very elegantly morph from proof of work miners to proof of stake validators preserving their business model justin you want to say anything i know you were issuing to add something yeah i just have a few a few thoughts

i guess on on the whole um you know changing the rules aspect i think um one of them is on on time scales i i very much disagree that it's easy to change ethereum and it is changing regularly and just to give a few examples you know proof of stake has been part of the plan since before genesis and so it will basically take seven years to deploy proof of stake you know another year from today plus the the six that uh ethereum has had eip1559 these have been ideas that have existed or have originated from five years ago it took five years to get eip15f9 and one topic which you know you know i joined the film foundation four years ago and the one thing i was working on was shouting and shouting is

going to take 10 years from start to finish um and when you compare that you know to changes with with bitcoin is actually you know we're more conservative than bitcoin in a sense if you look at you know segwit and tap roots these don't take ten years you know to to to go with deploy uh they take you know significantly less another thing that was you know brought up is kind of the the good ideas versus bad ideas like you know it's not about making a change in of itself it's about what changes are being made and i think ethereum has an excellent filtering mechanism at play and it's kind of the honest minority assumption kind of thing if there is a bad idea it just takes one single actor to blow the whistle and and show that

this is a bad idea and basically you know convince the eve holders who are incentivized to bring in only good incentive only good changes to come in and so because of this honest minority aspect of changes i think you know bitcoin has fundamentally kind of handicapped itself because it's it's given away the the innovation um innovation which is very safe because of this honest minority aspect another thing that i want to bring forward is that eventual ossification for ethereum is inevitable it will happen it will be fully ossified just like bitcoin and this goes back to you know my short-term thinking versus long-term selling points

the fact that we are changing right now is like all myopic it's all noise it's all short-term noise and the reason why we eventually need to ossify is because as the the total value locked on the firm you know increases as there's more and more activity it just becomes harder and harder to change and the reason is that we have to make these these backwards compatible changes and our level of paranoia and conservatism kind of scales with the amount at stake and so at some point we're kind of trapped in our success where we can no longer move and will be fully fully ossified um in a very similar to fashion to bitcoin unless there's some sort of like external looming threat which is some sort of

forcing function for us to take emergency action and one of these forcing functions could be quantum computing for example which forces us to upgrade our cryptography and then the final point that i want to bring forward and and this is something that bitcoin is always sweep under the rug is that the fact that the the monetary supply is fully programmatic is an illusion right the door every single four years kind of grows and grows and grows and grows and eventually this you know because bitcoin will be unsustainable from a security perspective something has to change and it turns out that the easiest thing to change is just to remove the 21 million cap and just have this cons continuous kind of tail issuance to to secure the

the the the blockchain mini do you want to jump in there no i would just say the same thing but that's that's a very big assumption to say that uh that bitcoin would be not secure given given there are discussions we've had about bitcoin being a supplement layer and miners don't care if their incentives are coming from transactions or from fine special groups yeah you know it's interesting too because you do say that um ethereum um or bitcoin gave up innovation but there are some other ways that bitcoin is innovating and that's in the world outside of bitcoin itself i think that it's pretty well understood at this point that the mining hardware that's being used the chip production that's occurring

is all is all innovations that are occurring because of the desire to find more efficient ways to mine bitcoin because of the having that is programmatic miners are forced to upgrade their hardware it's also incentivizing renewable energy throughout the planet and i personally believe that you'll have a a a very big um period of time where the mining and the renewable energy production in this country and across the world will grow dramatically uh because of the impact of proof of work and because of the impact of mining itself and i think that also when you look at what's going on in the community there's tons of work being played into things like stacks things like liquid to

enable bitcoin to do all the different things that ethereum claims it can do and and something was said earlier too as far as smart contracts nfts all of these things were created on bitcoin they were first invented on bitcoin itself um but we haven't found a reason or a need to change the uh the protocol in order to enable those functions to occur happy to let them occur over on ethereum until all of it eventually comes back to bitcoin i think the closing statements that i will say is that there is a the gap between bitcoiners and aetherians is much larger than what's uh is perceived to be much larger than what's actually true uh i actually i i joke with eric connor a lot that you know ethereans and bitcoiners they actually value have the same values they

just believe in fundamentally different executions um we believe in the immutability of money we believe in decentralized the world of decentralizing finance away from uh the powers that be into the hands of the people and it's really more about the execution about how we actually get that done and so while there appears to be many many differences between these two camps uh i think we all have to be reminded that um we're all in the same industry we're fighting for very similar things and at least we're not a centralized blockchain yeah i mean that's ultimately right man screw the fed so i can i can i can plus one that actually sometimes i joke that the difference between uh the bitcoin model and the ethereum model is actually one layer of indirection all we are saying is that keep the base layer simple build the

complexity in a different layer which is kind of like happening that the l2 is anyway right and that's that's really the only technical difference that that i'm talking this is literally what stack says on on just any closing statements from you no no really i mean i i do want to kind of echo this you know we're all going to make it in the sense that the industry as as a whole is obviously going to make it um and i you know it i i think that we you know we were all going to make it in the sense that it's very very likely that uh you know we're all going to be able to accrue money to a premium and be successful i think it's just a matter of orders of magnitude um

and i think uh you know ethereum is in the position you know to to just win in terms of these orders of magnitude uh aspect of well dennis munib justin thank you for coming on and hashing out one of my favorite subjects versus bitcoin as money which inevitably these debates always go and find their own paths forward and i think this one was no exception so thank you guys for joining us on this bank list live stream david having us on yeah dennis you want to give a quick shout out where people can find out more about your content that you do and where you live in the twitter sphere yeah find me dennis porter on twitter if you search that you'll find me easily but if you want the handle it's dennis underscore porter underscore i spend a

lot of time there i do a ton of spaces in and out of there pretty frequently i also have my podcast so i do smart people [ __ ] uh that's where you're gonna find my channel and then also i have another show under that uh channel called the update where i regularly update listeners on just kind of what's going on in the bitcoin space broadly but also i try to bring on experts like on chain or technical analysis mining i also have a as i've said before the very beginning i do have some experience in politics and i kind of try to make that a framework for what i do as we all know the crypto tax reporting amendment was a big problem and so you know even though we fight on a lot of things there are some things that we all fight uh you know mutual

enemy and that is the you know the governments around the world that are trying to screw us over and trying to suppress so i look forward to uh continuing to fight politically here in the united states and uh yeah if you uh want to dm me and my dms are always open on twitter thanks dennis muneeb where can people find you in the the world outside of this live stream yes so i'm uh simply at manieb on twitter that's my first name m-u-n-e-b and i spend all my time working on stacks which is a smart contracts for bitcoin so if you want if you're interested in locking up capital and earning a pure bitcoin yield on the main bitcoin chain uh you can try out some of the smart contracts there or recently i think there's bitcoin culture being

represented in bitcoin nfts through stacks as well so if you if you want to collect some uh bitcoin native nfds that describe the culture aspect of bitcoin you can you can check out some of the new marketplaces that are coming up on stacks fantastic and justin where can people find more about what you're up to and where you live in the twitter world sure yeah um i'm drake f justin on twitter but you can also dm me on telegram i'm justin drake there or you can send me an email justin to film the vlog and then also you can check out his website ultrasound.money all right thanks everyone for coming here and uh pow wowing about one of my favorite subjects cheers take care

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