EB110 – James D’Angelo: Satoshi's Big Mistake And The Centralization Of Bitcoin

Transcript

[Music] this episode of epicenter Bitcoin is brought to you by hide.me protect yourself against hackers and Safeguard your identity online with a first class VPN go to hide. me/ epicenter and sign up for a free account today and by shapeshift with no account or sign up required it's the easiest way to buy and sell gems counterparty Monero Dash and other leading cryptocurrencies go to shapeshift.io to instantly convert your alt coins and to discover the future of cryptocurrency exchanges hi welcome to epicenter

Bitcoin the show which talks about the Technologies projects and startups driving decentralization and the global cryptocurrency Revolution my name is Sebastian gu and my name is Brian Fabian crane we're here today with James D'Angelo he's probably many of you have seen his video he has started the the world Bitcoin Network and he has these these great explainer videos where he like goes from like Bitcoin one to one to like how to make paper wallets to some other really interesting videos and so we're super happy to have him on we recently got into like he showed us a video on on Twitter and we watched it it was about sort of the future of Bitcoin centralization and you know felt like let's have him on and and dive into this a little bit more in depth so thanks so

much for joining us today James yeah thanks for having me I'm big fan of uh you two guys especially uh very good interviewers it's nice to see the technical knowledge behind the interviewing yeah thanks so much well uh mutually our you know our our admiration for your work I mean we will certainly have links to to some of your videos and your YouTube channel in the show notes for for those who've never seen them but you know you are quite popular I think we I just saw before you have like 600,000 views in total on on YouTube so I think probably you know a fair percentage of listeners definitely will will be familiar yeah and for me in fact I think when I first got into Bitcoin um it's quite quite possible that I think

one of your videos was some of the first that that I watched to to learn about how things worked and everything so definitely played a role in in my education about Bitcoin in the early days that's awesome well thanks so with that how how did you get started with both with Bitcoin and then with doing these the video show um yeah it's an interesting question I think I answer that in kind of this random I was asked to speak at the Texas Bitcoin conference in I think it's late 2013 and at the last minute they come up to me it's a speaker cancel can you talk I'm like I've never spoken live before about anything um yo go for it we like your videos and so I basically just told

my story I was fairly nervous especially since there was this guy who hated me in the audience ready to ask me questions I won't name names but we got into this I heckled him during his talk which you can probably find um but uh so I moved here in uh late 2012 with my wife from Uganda i' been living in Europe and I'm not the biggest fan of living in Boston or the United States I just get really bored um most of my work that I do I can do from anywhere so I got very excited by this strange thing I was reading about called Bitcoin and I had ended up buying some before I had any idea what I was buying I was just so excited to just be able to buy some strange commodity

asset I have no idea what it was but I was reading it I just buying it talking to my friend in Austria who's uh an economist and he hated Bitcoin oh you shouldn't buy it's the most stupid thing you could do da d d da and I kept buying more my brother was the first one to actually read me the Wikipedia page he's like you want to know anything about what you've just bought I'm like yeah this is cool right the price has been going up right and you know I bought it at like 69 and it had already gone up to 100 and I was like whoa this is great right and um so uh he starts reading to me about it and I just don't understand a thing and you know but it that I found that kind of appealing um and so I I I felt like when

I began to understand it that it was part of a movement there was something going on here that was really cool that was providing excitement I actually really liked it most because it allowed me to be scared right I was able to invest in this really risky thing and just party with that right I didn't have to go to Vegas or whatever I could really just risk my money um and I have some big gripes with the SEC because the SEC in 1934 after the big stock market crash limited the ability for small timers to invest and so now we always hear about the same big investors all the time and I'm sick as hell of hearing about them right I wanted to invest in a lot of companies way back in the day but I couldn't right so they get to look

like they're Geniuses I get to look like I'm just an idiot and here I was with this chance to buy Bitcoin so I was buying like crazy I just sold a song uh to to Chevy and I was putting all my money into it um and it was terrifying you know there was one day when coinbase went down I think all the exchanges went down I turned on my wife I'm like I think I just lost everything um you know sorry so I I I really enjoyed the fear aspect of it um but there was also the I got the sense it was part of a movement so I I actually woke up one morning and I was like you know I want to piss on the wall here I want to be part of this movement let everybody know that I'm part of this movement so I decided to

just make videos and so I made these really cheesy videos of me announcing the news I might still have a couple of them you guys said I had 600,000 videos but I've deleted almost all my initial videos um because they're so cheesy I'm wearing this suit I I set up the stage age like I look like I'm in a news news organization um and I'm basically saying oh Silk Road just got arrested called you know and and people were clicking on it for the news as I think there's a guy with a funny hat and glasses that still does that well you know he gets he gets a little more philosophy in he we started around the same time and we have a close Bond because of that um Thomas Thomas and I just hung in California he's a

great great individual um and uh so yeah that's how I got started and I really the videos were me teaching myself so as soon as I knew something I would put it in a video I wish I still had that same energy because I I feel like now I'm way Beyond where my videos are at and I haven't caught up um maybe because now I have higher standards people look at me more critique me more so it takes longer to make each video you guys probably understand some of that the real real energy you put in to putting out good content um yeah definitely I think people have uh a very limited understanding of the amount of

work that goes into producing content and I mean not only just the research and finding guests and you know producing the content but also like the technical part of it and like oh God sometimes Google Hangouts just screws up and we can't put it out or we can't put out the video or something like that but yeah so it it is challenging but you know what you were saying regarding uh regarding educating yourself uh we talk to other people that do content uh like uh like ading and others and and same thing for us like when we first started doing this podcast especially for me because I just really like I started doing this podcast because I had heard about Bitcoin and I wanted to learn about it and um it was really just yeah

to learn about it and to produce the content as you were learning and and um yeah I think a lot of people were in the same boat yeah and and and there's something to be said you know I've got a four-year-old son right and here my YouTube videos are dated and it's like if this does become a movement I'll be able to at least say I did something cool in my life to my son you know or he'll be able to look back so it's weird that that strange human desire to piss on the wall and uh you know let the other dogs come and sniff was there and then then it really became I I really really really have fallen in love with Bitcoin and the and the philosophy and technology that that sits under it and invested an inordinate amount of time thinking about

it um so it is it is as many people have said it's a it's a very fun Rabbit Hole to dive in yeah absolutely so so you you mentioned prly we were we were wondering before like oh what what is actually your main occupation and and so we you mentioned that you saw some songs before can you can you share anything about that uh well I mean yeah I mean my my background is technology so I get into everything based on technology so I built this some early audio Hardware you know we're talking 1990 1980s I'm fiddling around with building audio hardware and I was getting really sick of my job at Nasa and I just did this

interview with apple and I hated the job that they offered me at Apple and I had this audio hardware and I had some money in my pocket from the NASA I wasn't spending anything so I just picked up and moved to Philadelphia and started buying to my neighbors the hot dog vendors Etc that I'm a music producer and at that time man you'd get rappers flying through the window if you produce music you know now everybody has Garage Band on the computer but back then no one had beats so I started producing beats and next thing you know rappers are coming in five months later we're signed to Sony our very first calls from this like German guy is like oh we want you to tour in Germany I was like yeah maybe next year he's like no we're going to get you here now you know and boom

some big contract came in and you know my first soldout show is in Berlin we look through the curtains my my rapping partner literally has like a heart attack or something he's spazzing out on the floor he's so nervous and we start drinking beer before the show and the curtains open and you know I'm a rapper I guess um so uh yeah then the first show I played in the United States was Central Park you know I was like wow this is uh strange stuff um so it was it was again very similar to bitcoin right it was this brand new thing it was this brand new technology being applied to this old thing which is music right so you you're

bringing the technology in and and Reinventing how music can be made and I've always really enjoyed that when the technology comes in and and disrupts right so it really disrupt the music industry cool and are you involved with any other Bitcoin or blockchain startups or anything like that any any projects on the horizon and things that you like to work on no I mean I I don't know I I have I I do a bunch of sort of Counseling and Advising so I do a lot of like high-powered free lunches um I've never charged people have offered me money I do some Consulting for companies that want Bitcoin explained to them so Banks Etc

um I it's not a very active part of my life so it when I when the invite comes and if it fits in my schedule I I jump at the chance but I don't have a site I don't publish it at all um but I also I I don't know if you know I won this big contest at MIT and it's it's a big contest in the United States for the it's called the MIT climate collab and that was using the blockchain technology to solve what I consider a solution for climate change um and then this year I was very very proud of I I released a very simple Global identity platform and and so these are things that that uh I think about and sort of launch on

my own they're both open source anybody could use them and in fact I do get calls about both of them whether people can use them like go ahead do whatever you want you know the adoption factor I think is an issue right now because most people don't understand what the hell it is but uh I think the ideas both stand up to scrutiny and so I build I build my own just basically open- Source Solutions can can you tell a bit more about this about this climate uh thing and this identity platform yeah so I'm I I travel a lot when I travel the world I'm it's almost always climate I I'm I I wake up at night scared about climate change I'm just one of those guys

there's people who like going to immediately turn off the video right now because oh my God climate change isn't real whatever um I don't care if it's real or not you can say what you want I think it's an interesting problem um and it's it it deals with this problem of of the commons right so if you're familiar if you like in the Mediterranean Sea you have big fishing problems right you have 24 countries around the Mediterranean Sea and how do you broker it's such that fish stay in the sea and fishermen still can make a paycheck well if you've ever gone scuba diving in the Mediterranean Sea you realize it hasn't been brokered very well there isn't a single animal alive in the Mediterranean right now at least

when I when I was swimming there last and that's because it's a Commons right it isn't run by one government organization and same with the atmosphere so it's it's considered a Commons and one of the traditional ways to solve a Commons is to distribute ownership in such a way that people consid is fair so my idea was what if we just assigned everybody on Earth an equal share of carbon emissions and then companies would have to pay for it and it relied heavily on Smart contracts um so the smart contracts would broker uh fees paid between say a company that volunteers to come in like a Whole Foods a company that's looking to to claim that they want to do

something good for the environment well that now they could prove it right if you walk in Whole Foods right now and they have you see this poster we support climate change initiatives or this Kenyon farmer is work working for you or whatever do you believe it when you see the poster probably not but what if you could immediately click on there see the blockchain transaction going to that Kenyan farmer have people go to the farm in Kenya and see that that guy's received it the blockchain transparency allows for some very bold statements that can be made and provable and I was just basically applying that same concept to this common problem of the climate and uh yeah I just got a big call from folks in Vancouver trying to develop it last week

um so I just went through the idea again with them um so this and it all relies on bitcoin and you you also mentioned an identity platform you tell us about that yeah so again I have a video on both of these I'd say my snow caps climate change one was me still figuring out the idea so it's kind of a long confusing one whereas I think the identity one I do very well um and I actually give you the code there to build the identity but again uh even with bitcoiners one of the big problems with identity is that it exposes you to the networks it exposes who you are you don't have control over your identity and it turns out that everything from voting especially in in developing countries voting is very

difficult because identity is very difficult in the United States and Europe we kind of have reliable identity run by a very strong government but the reason I'm speaking to you guys today the reason you guys value my attention and I value your attention is we both have identity established the reason we might hire Andreas Antonopoulos or Peter Todd or Gavin andreon is because we have their identities if you're in the developing country and you have no identity that you can sell it's very hard for you to bootstrap yourself so in a refugee situation or something having zero identity is very expensive in India there's India works very hard

and identity because they can't hand out government handouts so the government wants to install some welfare program but the people at the end of the chain have no identity so how do you know that the money ever reached them and so the need for a uh identity scheme is important um and it's pretty easy to do I could take Sebastian's picture right now with my little jpeg screen and I could hash that photo and I could put that on the blockchain okay now what does that mean it means now we have this photo of Sebastian that's timestamped now I can go to anyone who wants to be an identity provider and

they could send a tiny transaction to that photo that photo doesn't have to be online he could email that to them or whatever and he can now get it authorized as as as an identity thing so you know these get complex and I don't want to lose too much time with that but it's very simple and it works I'd say perfectly are you familiar with identify we had uh uh Tim Tim Pastor on last week and he's working on this platform called identify that uh well allows you to put proofs of your identity in a blockchain then you have this world this this web of trust Network where people vet uh what you put in this transaction which is protected by your private key and which essentially allows you to create

identities that are validated by different sources right and and all identity schemes I think he's absolutely correct when he says your identity has to be validated by someone so identity is social there is nothing about identity that will ever be perfectly digital because it's very hard to pass blood online and do a DNA test so it really has to be social and I Rely a lot on the face the the thing that I really hate about all identity schemes is you can with with a private key based or a password based you could lose your identity someone could steal your identity if I get your private key well what can I do now does that have access to funds can I now spend it um are we

relying on a private key which is knowledge that's a knowledge-based Identity or we relying on recognition so in my view the photo would be the private key because as you know if I hash the photo it becomes a private key now you would make that private key actually public and the only person that can use that private key in a transaction would be someone whose face matched the photo and you could put a million photos online you could do every angle of yourself you could do location based identity the beauty of this is even if you forget your name even if you get mugged beat up and

intimidated you cannot lose your identity it's impossible to steal it so with with a system I mean we don't have to go into detail of this but with the system like identifi what the premise is that if someone if something someone takes your private key or you lose it then you simply create an well well then you would you would ask your web of trust to um basically unv validate that that piece of identity so the people so you know to to to say essentially that you're not in control of that piece of identity anymore so people wouldn't trust it and then like this is this is the new you know this is my new key over here right it's very interesting system but yeah

but but that sounds that essentially is the problem though is when you have to ask your web a trust now how do you prove that you're you you can be civil attacked like crazy right how do you now establish without a private key that's functioning that you're you and when you really need your identity you've now lost it okay so you're going to a border crossing or you're about to be arrested in a refugee situation the last thing you want is your identity compromised for even five seconds okay and because those 5 Seconds might be the crucial 5 Seconds do you want to have to turn around and try and get your web trust authent authenticates authenticate you and the beautiful thing about having your photo be the private

key is you can go to a border crossing where no one has internet or electricity as long as you have working cell phones and you can prove your identity prove it okay so you don't need that web a trust at all so we're talking anytime there's an extreme situation your identity is still yours and and that's that's why I think it's a fundamental change to uh ownership based identity right I can establish private keys and passwords I mean what's more stupid do you guys have this in Europe where you forget your password on your bank and they ask you your mother's maiden name like

yeah what what is that that is not identity that is Bank grade my friend what it well but what it is is actually underlying that is an enormous government protection right because if you start lying about that stuff you're going to get arrested okay that's a the ability to do shitty security is available in the first world okay in in the developed world the ability to do shitty security where you reclaim your password by saying your mother's madeen name is not available when you don't have strong police protection right it's the police threat that you're stealing the identity that allows them to do shitty identity really shitty like felet passwords with one

number at the end I mean give me a break I could have programmed through that in 1982 um so what if you can make an identity that can't be stolen and that's what I was developing and my experiences in Uganda definitely were behind that yeah I think that's it's a really interesting problem I mean one of the one of the things one of the ideas coming out of cryptocurrencies that I am most excited about is the of a sort of universal basic income and there of course identity is fundamental oh yes yes it's an awesome idea yeah yeah and where what's the end row to that you exactly know the end row to that

identity if you don't identity this is identity is the the one thing that is the key here yeah Thomas pay doesn't help you unless you have identity right you know um you know because that's I think he was the one who introduced the idea of universal uh basic income so identi I and and strangely it we'll we'll talk about it later but it's really key to think that identity is really the End Road to thousands of problems so if my climate change solution Works It's The End Road even if other people's climate change It's The End Road welfare governance voting Universal basic income identity right it just it's a essential um to so many problems let's take a short break and

talk about hi. me H me is a VPN provider and if you don't know yet why you should need a VPN provider let us help you I'm sure you like me and when all the crazy Revelations came out during the Snowden time uh of all the the spying that is being done by the NSA and other government agencies you were shocked and you said not with me not with my own rights now the way government agencies can spy on you there's many of them but the most easiest way is by simply going to your ISP and getting all your traffic capturing all your traffic and the VPN can protect you from that it can give you a secure tunnel from your computer to any of the exit nodes all over the

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on your phone your tablet your computer at work your personal computer and just be completely protected all the time and of course high. me accepts Bitcoin so we'd like to thank high. me for their support of epicenter Bitcoin so let's let's move on to bitcoin so you mentioned before when you know when you heard about Bitcoin you got so fascinated and then you had this Fascination also for the philosophy the ideas behind it what was it about those ideas that you found so fascinating I I I would say really I just loved well I I mean let's be honest we're all still understanding this philosophy right we're learning it every day so I love the fact that it's new so it's new philosophy right it makes us question what money is it makes us

question what centralization is it makes us question almost everything um it we we question how we can work together as humans and so I guess I really love the fact that it's all exciting and new it's it's 2009 since philosophy um it just by changing some simple things like the ability to have a decentralized consensus timestamp database right it sounds ridiculously simple right oh that yeah okay I I agree that that transaction happened at that time it's never been done before it's never been unalterable before and think of how

terrible it is too right if I get a picture of my ex girlfriend naked and posted on the blockchain what's she going to do to take that down zero it's the most terrifyingly I mean you could think you for all the beauty that we think of Bitcoin think of all the terrible things you could do with it right that alone is just terrifying right she can't do anything to take that out and there's no one she could sue for all the very same reasons that it works as a currency it works as something that can be very indelibly painful and the world just like you know the fact that we have cameras everywhere now is just going to have to get used to it because this won't be uninvented this this

concept when you kind of think back to or or even today you know when you think of both the concept of Bitcoin as well as you know cryptocurrency blockchain smart cont all all of those things that sort of are tied to it you know when you think ahead I don't know your most optimistic or pessimistic but this you know sort of vision off the future of like what role do you see that playing in the world at some point um and what role would you like it to play well I yeah I I I'm a big big fan of vck buer and and especially I ethereum I'm neither here nor there on

um but he has been really for me a huge thought leader on these ideas of government and where things like this could really replace a lot of loopholes for corruption um and you know again the identity and and climate change and the ability for ugandans to interact and transact as equal citizens of This Global world that as you what you just mentioned you know Universal basic income um these are dreams right these are beautiful beautiful dreams um and I think they far outweigh any of the negatives that I've seen uh but every

technology has positives and negatives so I I I see these dreams and I see them functioning and I understand the tech behind it really it's we're waiting for the world to catch up um to agree that that dream is worthwhile yeah that I think that is true right that's at some point people will will start seeing some of these applications you know actually working and and there there will be a shift of thinking that will happen that will be incredibly radical right it's it's still still some ways off I mean in a way we have this little bubble where you know we see this very different future and then the rest

of the world is just like what is this weird Bitcoin thing what is this weird stuff you guys are focusing on uh but at some point they you know just it will all start unraveling I think and that that will be uh and I hate to harp on the name but I think the name is a big stumbling block right when you hear coin in it you just think currency and it's been built around this idea of currency and I think it's all fine and good that it provides a currency and I think the currency is a killer app but when I started doing my series million killer apps I was trying to figure out myself how many beautiful wonderful applications there were and I just it inside of a week I was like there's too many to count so I did the

first episode thinking I would do two and then I did the second one I'm like oh my god there I could do five more of these um of these killer ridiculously beautiful applications uh for for this technology and and the nice thing is when I did the first video most people were saying well there is no killer app and I I would say maybe my videos change that I don't hear that as much anymore right right now it's like which killer app will come first or which of these applications might but yeah you're right I think Bitcoin can be a bit of a stumbling B and and a barrier I mean when I meet people now you know who know I do you know something with that it's almost

always one of the first questions is you know what's the price of Bitcoin how is and it it's just I I also think that actually Bitcoin as a currency is a killer app it's awesome but it's just one tiny tiny part of all the things that are possible and even even with Bitcoin as a currency you know to reduce it to price is just sort of misses the point but even even with uh we can talk about this perhaps bit later but the shift of attention from Bitcoin to blockchain in the media and startups and everything we've talked about this before um even with this shift even when you're talking about

blockchain you still have to enter the conversation with Bitcoin just this L this this uh at lunch this afternoon uh uh someone asked me you know what what I was working on and then I'm talking about stratum and you know we we're Building blockchain Solutions and well what's the blockchain well you have to explain Bitcoin to them before you can get into the blockchain so personally I find that challenging and I'd like to be able to find a way especially when with regards to just blockchain technology to explain it without having to talk about the currency yeah and and it's a bit like saying well you know here's an engine and we're just going to ignore fuel um you know it it you can't pull things apart so

conveniently um all engines that we ever make will require something that drives it and uh it is the driving force behind all of it I noticed that I I was a big fan of counterparty I I loved that they were kind of competing with ethereum and they basically been pulled off of all the um the Reddit the Reddit moders moderators take counterparty off because it developed its own little currency inside of counterparty but counterparty is still essentially based on bitcoin right it it's built on top of it it's built you can't use counterparty without using Bitcoin and it's not even clear if the moderators understand the the real

idiocy of that right if counterparty does well Bitcoin does well it's in separable um and I think they just were smoking their ethereum crack there being afraid that it was a competitive blockchain and it it's really not it's built you have to have it so um it's an essential ingredient today's magic word is noses n o s s head over to let's talk bitcoin.com to sign in enter the magic word and claim your part of the listener award [Music] well with that let's let's dive into one

of the topics that you have thought a lot about which is the the aspect of of centralization or or decentralization and the whole conversation around that and of course it's a conversation that I don't know how often we've talked about it but it's it's just so Central to all of this and it's yeah the decentralization is so essential um so to get started with that how do you think about decentralization and what what do you think we should focus on like what's a good metric to even say Bitcoin is for example decentralized or not decentralized well yeah I mean I I think we're jumping in almost at the deep end

but I'll I'll try and roll with that um bitcoin's number number one proposal the number one thing that it's offering that's different is a decentralized consensus that is its selling point if you don't have that there is absolutely nothing um the fact that you get a currency out of that is really wonderful right so you have a decentralized consensus so all these different miners are we don't know where they are are coming to agreement that the transaction action took place if it was centralized in any way someone could show up at that

centralized area point a gun to their head and say reverse that transaction for that coffee I just bought the whole beauty of it is we don't know where that person is who just validated that transaction now there's other beautiful things we incentivize that person to to mine that transaction and all that but really if if there's only one value proposal that bitcoin's offered to the world that's changed the game the novelty of Bitcoin is decentralized consensus so if we prioritize at all away from that we are prioritizing away from Bitcoin we are prioritizing away from the ability to maintain a currency the moment transactions are reversed by

any centralized Authority the price which everyone seems to care about goes to zero so Bitcoin as a framework dies um now we could all think of really tragic places to have that centralization take place so say for example all of a sudden all the centralization was taking place by some corrupt dictator uh in some corrupt country and he owned all the mining I would suspect that most people would stop calling Bitcoin a decentralized consensus and they would all be bailing out pretty quickly so centralization and decentralization

are the main ingredients if if you talk Bitcoin you have to talk those those terms very clearly the trouble is we have built mining in such a way that it's Anonymous so if I wanted today to go out and buy some M mining hardware and jump on the network without a name I can well if I wanted today to go out and buy half of all the mining hardware and jump on the network I can that is a choice that I make and I make alone whereas with coinbase or a mining pool you're socially tied into your the people you're serving so if I

join a mining pool I am only part of other people joining and if the mining pool starts acting badly we all grab our hardware and we point it at another mining pool or if coinbase starts acting badly they're are centralized institutions we take our money out and we go to Circle or we just run paper wallets the mining Hardware is our choice anybody who wants to can choose to jump in and anybody who wants to own as much as they want can so that's the dangerous everyone talks about mining pools gash doio I was bored to death with that whole gash doio cuz I'm like like they're going to lose

all their customers tomorrow if they go beyond 51% and that's pretty much what happened um you know the the whole idea of coinbase people are worried about coinbase it just bores me I I'm not concerned about that the community is too active and too passionate to let that happen the trouble is in 2013 I don't know did you guys mine ever were you ever mining no in 2013 meet five minutes on my CPU but yeah and at the meetups everybody mined my nephew who was 11 mined you wouldn't mind why wouldn't you mine it was just too fun right you buy the little USB thing in you slap it in and you've got big okay I

did have one of those actually oh you did have one of those did you did you actually make anything yeah um but it was like $20 as a joke it wasn't like to actually you know right right and and even the price of those was varying dramatically right people didn't even know how to speculate on those because of the new as6 coming out and I remember selling them for way more than I bought them um so I made more money selling the hardware than actually mining um but nobody mines now I don't know anyone who mines sure people mine but the the percent of people has gone terribly low and we now have people claiming that greater than 50% I've

heard as high as 70% of the minors are in China um and the Chinese are probably hate hearing this why you guys always pick on the Chinese you know we're we're okay right but the Chinese have a very different government they have a very powerful leader they have single individuals centralized people who can make very quick and Powerful decisions as we saw during the Olympics in Beijing where you can move entire communities of people um to put up a racetrack so so we we have at this point today put most of our mining under a very strong

Government Can we measure decentralization no do we have a pretty good idea that it's being centralized dramatically yes the fact that we can't measure it I would say is a big problem for people who like to think that we're following science and math the fact that we know that it's centralizing and Central izing underneath someone who's made even in the last few weeks some very powerful xingping has made some very powerful censorship Maneuvers in his country just in the past few weeks The Economist just did an article on it um here's a guy who doesn't care about Bitcoin right now he doesn't probably might not even know what it is but what happens if Taiwan tomorrow decides to adopt Bitcoin as a national currency

well XI Shing ping will be very curious about what's going on what happens if bitcoin's suddenly being used for gambling in maau or or or other areas what happens if it's used for any sort of remittances in and out that that really matter to China I'm sure some of it happens now but it's not at any reasonable percentage then you have someone who a can control all the mining I'm sure he can find all the big miners they're public they're they're fairly well known at this point um but he could follow them probably just by some simple sleuthing of electricity and he can control them so today we are we Face a very strong centralization risk that we can't change we can't Point

our miners away from them because those are the very Hardware is actually there and they are as you mentioned before Brian they also do a lot of the chip processing I'd be surprised if any Asic was manufactured in the US maybe a couple um but I I'd suspect that all the asex are being manufactured in China as well yeah know I I agree that's it's one of the things that's also that's the scary aspect of that too is you can do all sorts of Maneuvers with saying okay we're going to do this change to the Bitcoin protocol or that change to bitcoin protocol are we going to make a bigger block size or a smaller block

size it really doesn't touch that aspect at all I mean it's it one can try right but it's really hard because this is this is very deeply ingrained in the economics of Bitcoin so if you want to change that you really have to fundamentally change something about the sort of Economics of how Bitcoin works and that's just extremely hard so it's it's almost a problem that's yeah how can it be solved it's not so clear to me right you have this what is it segregated witness you have lots of proposals to to lower the requirements for mining by a factor of two a factor of 10 Etc does that mean suddenly 10 times as many individuals are going to

be jumping in and starting to mine maybe though I doubt it what it really means is you're basically providing a 10 times incentive for current miners to maintain what they're doing or invest more so we've we've actually made it 10 times less expensive for them to do what they're doing um and so they will make a who knows what a much bigger return on investment um so I certainly know of segregated witness and all these things I'm not going to PL out my USB Asic and start mining again right that's just ridiculous we're at gajillion pah hates right now um I would have to reinvest and buy new hardware um so I don't see

that day the the the dream day that everyone's talking about from Gavin Peter Todd on down is that we're going to somehow write the technology such that it's going to be 2013 again when you go to the Meetup and everyone's talking about Mining and I don't think anything based on history of economies of scale suggests that that's going to happen so that's it's a dream it's a it's a pipe dream it's it's a false dream yeah I mean one could imagine some things right so let's say because the the issue is you have some centralization pressures right so first of all there the the latency thing with mining makes it a lot more attractive to be a big Miner right you

have you have a clear advantage in terms of you know your block doesn't get orphaned so so that's a problem but if we for example talked about Bitcoin NG that would solve that right so you you could do that and that would at least solve the lency problem and then of course you still have the thing with the the hardware and um you know the the cost of hardware and the economies scale there but you know if if you did do a proof of work uh algorithm where you know you can't really build an Asic for it or it's really inefficient to build an Asic for it but everybody has sort of a you know spare resource to use like you know spare computational Cycles then you know those economics

could actually change to make it just economically unattractive to to build build A6 and build big mining Farms um so it's it's possible it's of course would One require huge changes to bitcoin which isn't going to happen I mean if you can't even agree on barely anything this just absolutely zero possibility of of that happening um and you know then you also start having other vulnerabilities maybe with botnets and stuff I don't know if that's so much of a concern probably not well I I'd say it's a very real concern um so that's the big fear right keep in

mind that when Bitcoin grew it grew without Predators right it it was growing in this very beautiful space because no one saw any value in it and so it it was able to grow up without all this attention and and and massive hackers and and so Bots botn Nets are are the argument right now for coming up with an Asic resistant uh algorithm the there's e everything that we're talking about is is some leads to some problem um so if you come up with a brand new Asic of course economies of scale even

if you're just mining on your chips there's economies of scale there there's huge economies of scale mining all together as opposed to having to broadcast your networks Etc so you we we we'd love to think that you know those housan days of 2011 can be created by some Hardware or software thing that we're going to go and kind of recreate that environment but that environment will never be recreated right because the Innocence that existed there um was essential to the growth of Bitcoin um certainly if you went back in time and it was 2009 or 2010 you'd be mining like a maniac um and looking to centralize as much as possible um if it

no one at that point was thinking that right so Gavin's throwing out his Bitcoins he's giving them out on his Bitcoin faucet people are paying $10,000 10,000 Bitcoins for a pizza it's a bit like playing with Monopoly money the only reason no one turns around and starts printing really beautiful copies of your Monopoly money is because there's no value in it but as soon as those things take off well you've incentive I people to to be corrupt and so that transition happened in 2012 um so it's a very very different environment and you know I hate to say it but Satoshi made a massive massive Mistake by assuming that decentralization can happen via hardware

and again if we look at centralization as the key ingredient of what Bitcoin is he's made a m massive and fundamental mistake in his development of Bitcoin and it's just something that's happening slowly as as as the miners are pooling and moving together and I I saw the scaling Bitcoin I I think even one of them said you know 85% of all Bitcoin mining is sitting here at this panel right now I was like that's freaking terrifying right that's the last thing I want to hear um and they're all sitting there and what if they make one little deal between themselves right uh and all of a sudden 85% is walking out in one

guy's pocket um so again the only thing we're offering is decentralization and the only thing we're not talking about is decentralization the only thing we're not concerned about everyone's concerned about anonymity you know [ __ ] anonymity um it's the second ingredient right it it you know we really have to be careful about that our show today is brought to you by your friends at shapeshift shapes shift is the fast and easy way to trade altcoins and they now Support over 50 of the most popular altcoins that you all know and love when you want to trade all coins you can do this the hard way which means creating an account and an exchange uh

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Store uh you can download that there and when you do that it's going to do two things it's going to first of all it's going to add a fox to your home screen and that going to make your phone a lot nicer and it's also going to give you the ability to trade altcoins wherever you are that that is change we can believe in uh so we would like to thank shap Shi for their support of eps in Bitcoin you said the mistake Satoshi made was that he assumed that you get decentralization through Hardware I mean there's this famous quote in in the white paper right one CPU one vote I know beautiful that's the dream right right that's the dream right and right

now we're sitting here in massive vote buying Scandal of all time right yeah it didn't quite work out that way um I've got three CPUs in my house I have zero votes [Music] um then let's let's get right to that question what should Satoshi have done differently well again it's how do you define decentralization right decentralization just between the three of us exists we all have very different dreams for what we want for Bitcoin but if our three computers were mining Bitcoin there's no decentralization between our computers they're all mining it the exact same way

so if I buy your two computers and leave them connected to your IP addresses and I'm able to control control them remotely I've centralized the mining even though it looks decentralized but if I'm arguing with Brian and Sebastian about how we should mine transactions we'll never centralize we'll always disagree so the difference here is decentralization can only be measured by humans the number of humans if the number of humans drops decentralization drops period who cares how many CPUs or asex or nodes exist that means nothing what I care

about is how many people own those nodes right so counting nodes is like you're just sitting there wanking off right you're you're telling yourself that it's decentralized it's just not okay that that's no evidence of decentralization at all I could go on AWS right now Amazon Cloud and build a billion nodes for an hour right and and and do some massive mining right it'll cost me a ton and I'll look as decentralized as you want to be trouble is I'm just me and I really do want to reverse the price I paid for that coffee you know an hour ago and so what then in in that case how so you mentioned uh

people it's important to know how many people are Behind These miners these mining Rigs and you did an interesting video called nodes versus noses where um you argue that you know there should be one nose behind every node uh one physical person uh how how can we achieve that then it seems difficult to without if we compromise anony on unless we want to compromise on anonymity um it seems unlikely that we'll be able to achieve a situation where we have you many nodes and as many people behind those nodes as possible yeah I I I think difficult is a very good word and I think idealistic is

another very good word right we we've gone through 2009 to 2014 sort of thinking we could have our cake and eat it too right and we've never really looked at the problem Square in its face it's really easy when you're beginning a system to think you can have all the design constraints but you know Tesla right now is going to be faced with competition from Porsche and I I think they're going to see their profit margin shrink and they're going to have to change some of their dreams of how they build cars as competition comes in we're seeing the same thing in Bitcoin where we're going to have to sacrifice some of our design constraints to maintain the things that are essential to us and certainly if we see centralization of

Hardware which is already happened today we have to take that very very seriously we have to stop you know Gavin Andre and saying 8 megabyte blocks at the risk of centralization or 20 megabyte blocks at the risk of centralization that's the most dangerous thing you can say on earth right because we're already very centralized today whatever day it is December 18th 2015 right we're we're centralized now anything that moves up I'm like when Peter Todd started saying I might be in for smaller blocks I was like yeah let's kick this can down the road for a little bit let's keep it as decentralized as possible I don't care about how much people are

paying per transaction because it keeps the dream alive people are like oh transactions should be cheap yeah that's a great design constraint yeah a minor should be anonymous yeah that's great too yeah it should be decentralized yeah that's essential that's not great That's essential you don't have that you have nothing yeah yeah I mean my thinking on that is I agree with you it is very centralized already Bitcoin is way too centralized right it should be much much more decentralized it's just that like we are here with one megabyte right so if you say we're going to stay here with one megabyte I don't think that decentralization is going to increase

right it's it's going to you going to continue going towards more centralization if you're going to go 8 megabyte is it going to be you know substantially different I not so sure all right but let's just check your first assumption there you said if we stay at one megabyte decentralization or centralization um might not change the truth is we can't measure it right that's because we aren't counting individuals and we know we really do in our gut know that it's being centralized even if we stick at one megabyte right so it's currently centralizing it might be at a logarithmic or exponential pace which is my guess that it's going going that fast um so we don't know even if we

just said let's do everything we can to avoid increasing any form of centralization and stick at one megabyte I would say that's still dangerous I would still say that's we're playing we're rolling dice here and we're rolling the dice very aggressively against our only design Criterion that really matters so yeah I I think we're safe today I don't think xingping is really to make a move yet but please don't call the Network trustless anymore because now I'm trusting the fact that he doesn't want to make a move I mean forget forget this idea that we're protected by math bitcoin's a social institution right when you tell

me you're protected by rubber gloves or condoms I go it all depends on how you use it and how much people want to attack your girlfriend could snip off your condom in two seconds right your condom doesn't protect you if you put your condom on your head it doesn't protect you either same with rubber gloves same with math if if you're not careful of how you're being attacked math doesn't protect you at all it's there's no honey badger here there's no this will work if we don't organize we have to organize period all right and and if we don't organize and start measuring and Counting decentralization we're just letting it centralized because it is currently happening it's like the tide it's coming in

so yeah I I I'm strong on that because I feel strong on that but go ahead where you were going with the eight megabytes or whatever well actually let's not talk about that because I think we we've talked about that a lot I think it's it's more interesting to talk a little about the the more um the bigger picture here so you know we talked about you you called Satoshi having made a mistake what should we have done differently um it's one thing to see a problem it's another to offer like a a solution that works um I I think he's a genius I think the dream he's offered us is the most

beautiful dream I've bumped into in my life but he did make a mistake the one I think you said it best the one GPU one vote has been compromised dramatically um and he's nowhere close to that being correct right if you say he's made a mistake that I mean he definitely made a mistaken statement there like the statement turned out to be very wrong no question about that and that is a super significant thing that happened there no question about that but if you say you know he made a mistake sort of implies that well he could have done something better right so he he could have made some different design choic that stage that you know maybe wouldn't have led to the situation

we currently are in um I I hear you I I hear what you're saying I'm not always so sure that I can be that confident right it's it's one thing to say someone made a mistake when they're designing a spacecraft to go to light speed um and it's another to come up with the solution to make sure you go to light speed it's not clear that a decentralized consensus is anything still but a dream today um so we have it it's working so far but you know the the tur on Thanksgiving morning said everything's working so far um and and then the farmer comes in after treating it so nicely all its life and hacks off its head um everything's working so far is a

terrible measure of a system and it was what was yelled at me when I first presented this idea in The Green Room of a conference by someone who's working heavily on scaling Bitcoin right it's working so far don't mess with it and I'm like that's a strange measure of a system um and and you can see people who are very invested in scaling being um very invested in making sure that Bitcoin is scaled through Hardware or software because they're building these projects now if my aium is correct and as I say an axiom can be torn aunder by just one tiny little fact so all I need is one little fact to prove it's not if if my

aim's correct which is that decentralization and anonymity are incompatible so you can't have you can't prove one uh you can't prove both you can only establish one or the other so if you are looking for decentralization then you really do need to sacrifice the anonymity of minors and I would say a lot of the minors are sacrificed currently we we know who they are but that's not what I'm talking about is the ability to choose their identity in some way as well right so say xingping was mining everything and and we knew knew who he was so identity doesn't help us there it just terrifies us um we would have to come up with some way to to

choose them to vote or elect them now this is where every Bitcoin is probably going to want to shoot me and I might have to watch my head is we really have to understand that it's now a social network that we're building and the only way to build it would be maybe to look at some systems that have kind of sucked which have been you know Congress of the United States or or something like that where we actually vote for a percentage of minors now I I could see leaving 49% of the network as proof of work but anything over that I think is you're asking for a disaster um you know wait can you explain that what do

you mean with 49% of their network is proof of work well I I don't I don't look at the Technologies as I said as much as I should like is there a way to alternate between an identity-based minor and uh proof of work in such a way that that we're convinced that it's working correctly I'm not so sure that's this those aren't easy problems at all and even the the whole idea of so let me just go backwards for what I propose in my video is say for example today we just added one person that we knew had no real mining gear into the netor so we we just chose Andreas Antonopoulos to mine one tenth of all

trans all all blocks so every tenth block he comes along and mines it there's some real powerful Beauty there right he can take all the free transactions and mine them he's not doing proof of work he doesn't need an Asic he does it on his phone right does all the transactions a billion transactions he mins them and then the very next block you'd hand back to proof of work of course it would take him a little bit longer to go through and validate those transactions and they mine forward the beauty is he's not invested in mining Hardware so we've suddenly decentralized the incentive structure of mining just by adding one individual who we kind of know and trust I would sleep

so much better at night if you Brian and you Sebastian and five other random Bitcoin people from Reddit were involved in this process because I know you guys don't have a ton of well I don't know but I would assume you don't have mining Hardware which is better than knowing that all the mining Hardware is controlled by people who own it um but of course the problem with that is that you don't really know I mean I could have a ton of mining Hardware I could have financial interest in correct in mining company shares for example like I correct absolutely 100% correct you with with the US Congress with any group group of Representatives

you run into all kinds of corruption and bastards and [ __ ] and it all sucks but is it the best thing we've got and I'm just saying if we want to maintain a decentralized consensus we have to figure out some way to be decentralized and that's humanly decentralized if I had one representative from each district on Earth mining randomly I would sleep a billion times better than those guys all sitting on the panel in China um waiting for XI Shing ping to decide whether he wants to go to war with Bitcoin and transact by the way the

be there's two other huge advantages say say we do this right and no one's ever going to want to do this because I I probably sound like I'm on crack right now but say we do this scaling goes to near Infinity right away because you don't need proof of work because it's broken um and and you have a Bitcoin governance thing now where all these people these delegated miners can actually vote in a way that we would trust a little bit better than just having the miners Vote or the core dev's Vote or or the exchanges vote I mean really what you are talking about is a proof of stake system right no no no not at all these none of these people need to have stake I don't think proof of

stake proof of stake like proof of work suffers from some issues may or may not be solvable I'm talking about proof of NOS um proof of identity proof of reputation um right right but you have to I mean who is going to choose those people exactly exactly that's these are all the choices that why would I offer a solution right how are we going to vote for these people well you am I going to be able to vot with your private key right right and then you have a proof of stakes sort of thing thing where you know all of a sudden Roger ve gets all the votes um or or Satoshi gets half votes there's certainly a lot of things

wrong with that system of course maybe even better would be if we had the identity system we could say just every human can vote right like just vote on who gets to that would be preferable to Roger having whatever 500,000 votes and and and I agree with the latter as opposed to the also because um uh proof of stake everything I've seen about it leads to some intrinsic problems as well um it it until we accept that there's a social construct problem here you know we're we're we're playing games I mean there's a bit of a high school mentality of Bitcoin as you you probably seen you know it's like yeah honey badger yeah honey badger right and it's like is anyone really measuring

decentralization when when someone says decentralized consensus has anyone ever provided data there's been no data on that period right we have no data on that so we're all playing games because we've taking over some World economy and it's worth you know5 billion dollar whatever it's worth but I think there's something much more beautiful here I I'm very passionate about Bitcoin and and you know talking about this is obviously no fun for me either I didn't like thinking of it you know I told my wife when I spoke at the conference I go this might be my last Bitcoin conference because I'll be shot um it it didn't make me happy um but it's a

reality that it needs to be considered and measured so I'm not going to say the solution is vote for a thousand people though I think that's probably the way that might that's the way in my mind right now that makes the most sense I would say the solution needs to be thought about by some people who are a lot smarter than me um but we are now aware of the problem but if the solution is a thousand people we've solved a lot of Bitcoin problems right there you know we can scale to Visa levels tomorrow um so there's some nice Silver Lining there's no way to scale using any of the scaling Solutions unless maybe

lightning and network you know but then I don't know you know I look at lightning Network a little bit like party you're building something above and beyond I mean I agree with you on some points but I I I guess there's sort of two sides right I think on the one hand this is sort of a a actual idea it's like sort of a Half Baked idea that has in terms of a lot of details that you sort of you know gloss over and oh yeah you're you're absolutely right about that it's it's not even a tenth baked right right I think think when you when you think about a you know a truly decentralized

you know resilient currency because or distributed system you know whatever it is used for whether currency or smart contracts or whatnot it's pretty clear to me right now you know Bitcoin uh you know it sort of works as advertised more or less I mean at least it it's not being uh even though it's not particularly decentralized it's not being abused because you know we would sort of see that um but it's not resilient I think you totally pointed that out correctly right you could have the Chinese government go in there and take over or I think there's just a variety of points you could have those 85% that were there sitting on the same table uh and having you know dinner together in some private

room afterwards uh come up with all kinds of schemes and of course if you know let's say the US government or some government said like okay well we have a problem with this Bitcoin thing well you know they know those guys right that were like announced they're 85% and I mean right US Government doesn't have a very hard time taking people out right so that would be uh you know there's no way they could uh protect themselves so it's it's not resilient it's like clearly not resilient and if there is a strong interest to sort of go after Bitcoin you know PE organizations could governments could right um so if so you obviously would need to decentralize it and then I think you do need to deal

with the economic problems right these economic in incentives that are there for centralization and I think those are just they will always be there why do we have Anti-Trust laws I mean people who made bread in their houses all the time people used to make beer in their houses all the time everything on Earth has been centralized the big article came out recently oh YouTube videos all the most watched ones are now corporations right we we thought we had this big decentralized thing but you know half the views now are are are big companies centralization happens in everything in Europe you have antitrust laws why do we set up laws to prevent monopolies because they always happen for

everything so you have them in Korea you have them in Japan you have them in the United States there's some of our most serious laws and the rule number two is to prevent complete control by one entity in in 1860 in the United States Jay Gould is his name tried to Corner gold gold he tried to Corner gold right and he got very close if he wasn't like kind of wrecked by how the president reacted he was going to Corner gold I'll repeat gold people were using gold back then all right we have laws to prevent that right for very very important

reasons because economies of scale dictate no matter what what you do someone doing a lot of it is going to do it better and so you're going to be asked out imagine in 2013 if we had a panel of all the minors like what Coliseum are you going to put them in what 10 coliseums right and and you can see that picture very very differently so then is it is it inevitable then I mean just look at the internet look at the you know internet hosting it's controlled by AWS Amazon and you know a hand a handful of other companies that everybody know the infrastructure that's how it works exactly and everybody seems to be you know somewhat comfortable with that I mean look at DNS and all these other systems right because the number one

design Criterion of AWS isn't decentralization the number one design criteria is to provide internet hosting correct all right yeah remember that Bitcoin is doing something no one's ever done where the number one design constraint is decentralization and the only parallels that we have of that are democratic governments there's nothing else in history that you're going to find that requires decentralization of some form the very reason that we we establish ID in Europe is so that you can vote so we can decentralize the decision-making process on those transactions because don't get me wrong what is Europe it's basically a big company that's Distributing billions and billions of dollars and that's being

decided upon by a decentralized group of people now some of them might come up with some other model but I just can't even see it if I am correct cor that noses matter then we need to put noses into the system and right now Bitcoin has loved claiming that math is protecting us so all I'm saying is we we people love to go oh it's like the internet in the early days [ __ ] it's like uh Linux [ __ ] right Linux you could break off your own chain you could develop comfortably on it you could run Linux beautifully on your company if you do that with Bitcoin it's not Bitcoin right it's it's another currency and and you can never reintegrate them later you can't just you can't spoon them together so that that one just one last sentence

so that one design Criterion decentralized makes it something that's never existed before is the implication of what you're saying now that this will only be ever achievable when we have figured out identity so we can say you know you James you have one vote h not more than one vote and you know you can vote on you know for example who are those Representatives well I I hear you yes if we want it so what is the definition of maximumly decentralized that's very easy to Define it's 7.3 billion individual people voting right that is maximum

that's you can't get more decentralized until we discover people on mars or Jupiter right so every individual would have a vote we don't need Maxim L decentralized I would be very comfortable with knowing all times that we've got around a thousand differently incentivized people okay and there the identity then relies on identifying a thousand people in some form or fashion I'd be very happy identifying people from Skype conversations I'd be very happy identifying them from their public personas and public presence even though I've never met them um and indeed that's that works pretty well in a number of places um so right now we're moving towards

minimally decentralized and yeah AWS is a great comparison right Google and Microsoft are competing but that's that's works for them it doesn't work at all for currency James thanks so much for coming on this has been uh it's been interesting I think we are we are sort of at end of the show although I'm sure we could keep going for a very long time with with this discussion and and I'm sure I'm sure in some way we are continuing this discussion and hope hopefully you you will do so in your videos we will do so here and perhaps we will do so again once in the same context here um yeah so thanks so much for taking the time andk so much for for

the work you're doing yeah great great work you guys are doing as well really big fan hope to continue whatever whichever conversations yeah so of course for a listener we will have links to to his videos to his YouTube channel and to his uh appearances as a 1990s rapper as well in the show notes um and so yeah thanks so much for listening so EPS Bitcoin is part of the LTB Network so of course you can find our show and you can also find lots of other great shows on let bitcoin.com and uh we put out episodes every Monday so you can of course subscribe to it on you know on your podcast app or you can also watch the

videos on YouTube that's on youtube.com/ Center BTC and yeah if you're a loyal listener we're still doing the the T-shirt t-shirt contest basically leave us review Send us an email and uh you know we'll send you t-shirt and um it's not really contest anymore it's just like yeah it's give us a review and you know it's a misnomer it's not a contest those are nice t-shirts you guys have mediums yeah yeah yeah we'll get you one oh I'm I'm going to work on that absolutely but you got to leave us a review though on iTunes I will oh I have but I I will leave okay then we then we'll send to

teacher okay well thanks so much and yeah we'll be back next week bye guys great meeting [Music] y'all