Episode Transcript
[00:00:00] Here Ecash got reintroduced with the two open source projects, Fedimint and Cashew. In my opinion, the main reason for this revival is the following.
[00:00:13] Unlike an implementation of Ecash in the fiat world that would rely on the permissioned system to allow something like Ecash to exist, Bitcoin does not come with that limitation. The permissionless nature of Bitcoin allows for these protocols to exist and interoperate with the existing Bitcoin stack.
[00:00:36] The best in Bitcoin made Audible I am Guy Swan and this is Bitcoin. Audible what is up guys? Welcome back to Bitcoin. Audible I am Guy Swan, the guy who has read more about Bitcoin than anybody else you know and I am your professor today and we are reading an awesome piece about Ecash. This show is brought to you by Fold and if you are doing holiday shopping without taking advantage of fold gift cards or just the fold card and getting sats back on everything, you are missing a huge freaking opportunity. I'm not even kidding with just one gift card. If you're buying big chunks on Amazon, if you're traveling at all and you need an Airbnb, if you are gifting gift cards to somebody, you can get SATs back on it. Home Depot, Instacart, Best Buy, Chewy, CVS, DoorDash, IKEA, Nordstrom, Ulta, Abercrombie and Fitch. That one's 7% back right now actually. Barnes and Noble. I'm telling you, shop for gift cards on fold first before you do anything else and use your fold card for every as your main card. You will stack so much, so many sats it's ridiculous. I emptied mine like a year and a half, maybe two years ago now to start on Pear Drive. I don't think it's been a full two years. I have over $8,000. It's 8,008 million and something sats in sats back just because I use the fold card and gift cards as much as I can and you can get 20,000 sats for free just for signing up with my referral code and it's also a boost for me so check them out. It is literally a cheat code and for the people who can do it in the us I highly recommend it. And they're an awesome just bitcoin only company too. But today our read is actually by Gandalf or Gandalf21 on Noster and I think it's a really great framing for E Cash. It's something that we've talked about on the show and I've mentioned it very much aligns with something that I've talked about, but I think just the way he so very clearly frames it as what you are comparing E Cash too, because there's still a bunch of fud, or it's not even fud. There's still a bunch of what I think is the incorrect perspective to take about what Ecash is solving. And I think it just does a really good job of breaking down the comparison that we should be holding and why it matters. And also this will be a great precursor to the Spillman channel setup, the system designed by Luke Childs, which now that I think about it, I should probably just get Luke on the show so that we can dig into it. But it's a really cool protocol that I think takes the best advantage of Ecash and creates a very simple, conceptually simple and implementation simple protocol. It tries to find this happy medium between the best of privacy, the best of self custodial, of the self custodial nature, and being able to easily and quickly spend any funds and limiting the time in which the time and the amount of funds that are custodial at any moment. But I don't want to get too far into that. But I just think it's a really, really cool proposal and I think it's really important to have this framing of Ecash going into that conversation that we can dig into later. So I'll reference this episode probably a lot when we finally jump into that. Also we have the Roundtable, the next Roundtable episode very very soon and it was an awesome one. We talked all about Bitcoin reserve, we all talked about Blackrock, we talked about El Salvador, bunch of crazy stuff that happened in December. If you want the month's rundown on all the major news and drama and crazy long time bitcoiners perspective on it. That is what we made the roundtable for and I think you guys will really enjoy it. So with that it's time to get into today's read with a guy's take to follow and it's titled Ecash on Bitcoin by gandaloff21 Gandalf's thoughts on ecash E Cash systems built on top of Bitcoin have seen increasing adoption over the last couple of years. They become a polarizing topic in the bitcoin community due to their centralized and custodial nature. Like any system, Ecash comes with a lot of pros and cons when compared to other systems. They are fiercely debated in cyber and meatspace. I've been working on developing tools and software for the ECASH implementation Cashew for about two years now, I have had countless discussions with various people from different backgrounds about the topic OG bitcoiners, fiat bankers, friends and family privacy enthusiasts. As you can imagine, the flow and outcome of these discussions varied widely.
[00:05:57] Usually conversations with bitcoiners were the most interesting for me, their opinions about ECASH polarized the most, by far excluding the fiat bankers. But that's a story for another day. In this short piece I want to share some insights from the discussions I had and maybe clear up some misconceptions about ECASH on Bitcoin.
[00:06:21] What is ecash?
[00:06:24] If you still don't know what ECASH is, sorry, I won't go into much detail explaining it. I recommend reading the Wikipedia article on Ecash and then this article link in the show Notes on the Rise and Fall of Digicash, the first and maybe only ECASH company that existed. This will bring you up to speed on ECASH history. Up until Bitcoin entered the scene, Ecash was pretty much dead. From the day after Digicash went bankrupt until it recently saw its revival in two different spheres. One of these spheres is obviously the Bitcoin sphere. Here Ecash got reintroduced with the two open source projects, Fediment and Cashew. In my opinion, the main reason for this revival is the following. Unlike an implementation of ECASH in the fiat world that would rely on the permissioned system to allow something like Ecash to exist, Bitcoin does not come with that limitation. The permissionless nature of Bitcoin allows for these protocols to exist and interoperate with the existing Bitcoin stack. The second and maybe lesser known sphere is the revival of ECASH as a cbdc. Bitcoiners might get scared at the mentioning of that word. Trust me, I don't like it either. Nonetheless, privacy enthusiasts see the opportunity to steer the CBDC ship easily another direction by using an underlying technology for them that would limit targeted discrimination by the centralized authority. Something that works like Cash, but in cyberspace. E Cash. One such implementation is GNU Taylor. Another one is Project Torbjan. Usually these kinds of implementations use a cuck version of the OGE cache which where only payers are anonymous but not payees anyway. In this article we will focus on the implementation of ECASH on Bitcoin.
[00:08:24] About self Custody Bitcoin as a whole is about sovereignty and liberation. If someone else controls your money, they control you. For the first time since we've stopped using gold, Bitcoin allows us to fully take control back of our money, a money that doesn't corrode, a money whose supply cannot get inflated, and a money that cannot be easily seized. All of this is true for Bitcoin. There is only one you have to hold and use it self custodially.
[00:09:00] Using Bitcoin self custodially the problem comes in when using Bitcoin in a self custodial fashion. For Bitcoin to maintain the monetary properties mentioned above, it has to remain decentralized. This means it is hard to scale, which in turn means the use of Bitcoin tends to become more costly as usage increases. So even if we wish that everyone would use Bitcoin self custodially all the time for everything, I fear it is mostly just a dream, at least for the foreseeable future. Even with trustless second layer protocols like the Lightning network we are running into scaling issues since at the end of the day they are bound to the same on chain fee realities as barebones bitcoin transactions. For most of humanity it is financially not viable to pay even $1 transaction fees for every transaction. Second layer protocols may bring the cost down a bit, but have other requirements. For example, in Lightning you have an online assumption to make sure your channel peers aren't trying to cheat. You need to have inbound liquidity to receive payments. There are costs associated with opening or closing payment channels or rebalancing liquidity. Other upcoming second layer protocols like Ark may improve on some of these issues. It is definitely something to look forward to, but they will have their own tradeoffs most likely also cost related. The fact remains that all trustless protocols that use the bitcoin time chain for conflict resolution will will have to deal with this matter. This is the cost of trustlessness.
[00:10:44] So don't self custody, no. If you can, you should always use self custody as much as possible. Personally I use all of the tools mentioned above and I recommend that if you can you should too. But the fact is not everyone can. Many would love to take control over their financial freedom, but the threshold for them to use Bitcoin in a sovereign fashion is simply too high. So they will either remain in fiat slavery land or they will end up using Bitcoin through a custodian like Coinbase, Binance or whatever banking service they have access to. I will also mention that for some use cases, enjoying the convenience of a custodian is just very attractive. Of course this is only the case as long as the custodian plays by the book and doesn't suddenly freeze or worse run away with your deposits the right tool for the right job I don't believe that one way of using Bitcoin is better than the other. It entirely depends on which problem you are trying to solve. If the problem is storing or transferring wealth, then of course you would want to do that on chain. If on the other hand you want to send and receive frequent small to mid sized payments, you might want to get set up with a lightning channel to an lsp. Depending on how deep you want to get involved, you may even set up some infrastructure and become part of the lightning network. If you want to receive digital tips that you can later claim into self custody after they reach a certain threshold, you might opt for a custodial solution. If you require certain properties like offline, peer to peer transferability or cache like privacy, you might choose an ECASH system. It doesn't mean that if you use one you cannot use the other. You should use whatever is useful for the current problem you are trying to solve. Maybe even use multiple tools in conjunction if that makes sense.
[00:12:50] Ecash vs on chain vs L2 first of all, we have to understand that ECASH is neither a replacement for self custody nor is it a replacement for trustless second layer protocols. They are irreplaceable with something that is custodial in nature due to the simple fact that if you lose control over your money, you have lost the control over your life.
[00:13:15] So no one believes you should prioritize custodial solutions to secure your wealth. Self custody will always remain king in that regard. Custodial wallets should be thought of as a physical spending wallet that you can walk around with even through the dark alleyways where it might get robbed from you. Keep your cash in there for convenient spending, not worrying about fees, liquidity, data, footprints, channel backups, etc. Etc. These benefits obviously come at the cost of trust. They the provider doesn't rug pull your deposit.
[00:13:50] I really like the user experience of custodial services. I would never put a lot of money into any of them though because I don't trust them. Just like I wouldn't walk around with $10,000 in my physical wallet. The risk that it gets stolen is simply too great. At the same time, this risk doesn't mean that I will get rid of my physical wallet. I think having a wallet with some cash in it is super useful. I will mitigate the risk by reducing the amount I carry inside that wallet. This is the same way I think about digital money that I hold in custodial wallets, be it an E cash service or others. All things considered, it is hard to argue that self custody comes even close to the UX that a custodian can give you due to the fact that they can take care of all of the complexities mentioned above for you.
[00:14:40] So then why ecash?
[00:14:44] We now know that we are not comparing ecash with the sovereign bitcoin stack. We are comparing it instead to traditional custodial systems. This is the area ecash is trying to improve upon. So if you've chosen that the best tool to solve a problem might be a custodial solution, only then should you start to consider using eCash.
[00:15:11] It offers a more privacy preserving, less burdensome and less censorable way of offering a custody solution. It offers some neat properties like offline peer to peer transactions, programmability, delinkage from personally identifiable information, and more. Here is an example on how ecash could create a fairer environment for online consumers Online services love to offer subscriptions, but for the consumer this is mostly a trap. As a consumer I would rather pay for a service right now and be done with it. I don't want to sign up for a 10 year plan, give them my email address, my date of birth, create an account, etc. One way of doing that would be for the service provider to accept payments in ecash instead of having an account and subscription model. It would look like one. The user creates ecash by paying into the services mint hereby. It is not required to use Lightning or even bitcoin. It could be done with any other value transfer medium that the service provider accepts, cash, shitcoins, lottery tickets, whatever. 2. You use the issued ecash to retrieve services. This could be anything from video streaming to AI prompts. 3. Once you are done, you swap your remaining ecash back. In a system like this you wouldn't be tracked as a user and the service provider wouldn't be burdened with safeguarding your personal information. Just like a cash for goods transaction in a convenience store. I believe the search engine Kagi is building a system like that. According to this podcast link in the article, it has also been demoed by henut.com how it would be implemented using Cashew. Here is another example on how an event organizer can provide privacy preserving electronic payment. Rails for a conference or a festival using ecash if you have been part of organizing a conference or an event, you might have experienced this problem on Chain payments are too slow and costly. Lightning payments are too flaky. Do merchants have to set up a lightning channel? Do they have to request inbound liquidity from an lsp? Do they have to splice into the channel once they run out of liquidity? In practice, these are the realities that merchants and event organizers are faced with when they try to set up payment rails for a conference using ecash. It would look like one event organizer will run a dedicated ecash mint for the event. 2. Visitors can swap into ecash when arriving at the entrance using bitcoin, cash or whatever medium the organizer accepts. 3. The visitor can spend the ecash freely at the merchants. He enjoys good privacy. Like with cash, the online requirements are minimal so it works well in a setting where connectivity is not great. 4. At the end of the event, visitors and merchants swap their ecash back into the preferred cash, Bitcoin, etc. This would drastically reduce the complexity and requirements for merchants while improving the privacy of the visitors A bold experiment Free Banking in the digital age Most bitcoiners will run out of the room screaming if they hear the word bank. And fair enough, I don't like them either. I believe in the mantra unbank the banked after all. But the reason I do so is because today's fiat and investment banks just suck. It's the same problem as with the Internet platforms today. You the customer is not really the customer anymore, but the product you get sold and squeezed until you have nothing more to give. I believe with a sound money basis these new kinds of free banks could once again compete for customers by providing the best money services they can and not by who can scam his way to the money printer the best. Maybe this is just a pipe dream, but we all dream a little. Some dream about unlimited on chain transactions. I've had this dream before and some dream about free banks in cyberspace. In my dream these banks would use ecash to respect their users privacy, clearing up misconceptions and flawed assumptions about ecash on bitcoin not only but especially when talking with bitcoiners. There are a lot of assumptions regarding ecash on bitcoin. I want to take this opportunity to address some of those.
[00:19:56] Ecash is an attack on self custody.
[00:20:01] As we've mentioned above, Ecash is not meant to compete with self custody. It is meant to go where self custodial bitcoin cannot go be it due to on chain limitations or network or infrastructure requirements. Ecash is completely detached from bitcoin and can never compete with the trustless properties that only bitcoin can offer.
[00:20:23] Ecash mints will get rugged 100% correct every custodial solution be it multisig or not will suffer from this risk. It is part of the deal. Act accordingly. Plan for this risk when choosing to use a custodial system.
[00:20:43] Working on ecash is a distraction from what really matters since it is not self custodial.
[00:20:50] While it is true that improving self custodial bitcoin is one of the most important things our generation will have to solve, it doesn't mean that everything else becomes irrelevant. We see that today in a lot of circumstances a fully sovereign setup is just not realistic. At which point most users will revert back to custodial solutions. Having technology in place for users that face these circumstances to offer them at least some protection are worth the effort in my opinion.
[00:21:21] Ecash mints will retroactively introduce kyc.
[00:21:26] Yes, it is true that ecash mints can do that. However, what would they learn? They would learn about the amount you were holding in the mint at that time. Should you choose to withdraw. They would not be able to learn anything about your past transactions. And needless to say, at which point you should be one and done with this mint as a service provider and move to someone that respects their users. Ecash will be used to steal Bitcoin's self custodial user base.
[00:21:56] I would argue the opposite. Someone that has realized the power of self custody would never give it up willingly. On the other hand, someone that got rugged by an ecash mint will forever become a self custody maximalist Closing Thoughts I hope you enjoyed reading my take on ecash built on Bitcoin. I believe it has massive potential and creators, service providers and consumers can benefit massively from ecash's proposition. Using ecash doesn't mean you reject self custody. It means that you realize that there are more tools than just a hammer and you intend to use the tool that can best solve the problem at hand. This also means that to some the tool ecash may be useless. After all, not everyone is a carpenter. This is also fine. Use whatever you think is useful and don't let people tell you otherwise. Also, please don't take my word for it. Think for yourself Gandalf if you know you're going to be spending money on an Airbnb soon. Right now on fold you can get 5% sats back on those gift cards. They're doing tons of extra boosts right now. Home Depot is 3.5%, Instacart is 4%, CVS is 5.5%, Chewy is 6.5%, IKEA is 5%, Ulta is 8% back. This is one of the best Hacks that I have used for a very long time to save a boatload of passive sats. And if you haven't signed up for fold yet, the holiday season is the perfect time. Check them out. You can get 20,000 sats for free just for signing up with my Referral. It's at bitcoinaudible.com fold and you'll find it right in the show notes. Check them out.
[00:23:58] All right, so I really, really liked this article because this is something that I talked about in the last episode where we kind of got into ecash. But I think that Gandalf. Gandalf did a much better job of laying out exactly the framing of being extremely clear about what it is that is being made better. And I specifically used the analogy last time of Wallet of Satoshi. And what if Wallet of Satoshi had ecash and now they can't tell who is using what or who has what? Like you have privacy from the custodian. And that's something that I think Gandalf hits really good in this or really well in this piece, is that this is about fixing custodians. This is about fixing financial services. Because in the old world, when everything is permissioned and everything is a whitelisted system that just goes up the ladder to the Federal Reserve, to licensing to kyc, everything, you don't even have the option of privacy. This is why Digicash died, by the way. This I recommend. Well, this is. That's not why Digicash died, is why E Cash never happened after Digicash died. And I actually think the exact article that he linked to is one that I've done on the show. I'm like 90% sure because it was definitely from. It was definitely like a couple years after. It's gotta. It's gotta be the same one. But regardless, I will link to the episode that I did on digicash and I will link to the article if they are. If they aren't the same thing. But I'm pretty sure that it was the exact same one. So it's in Audio. The one that he references for Digicash is in Audio. That is David Chaum's company built around the ecash idea. And for those of you who don't know the history, Microsoft and Bill Gates had actually intended on putting, making ecache, or not necessarily intended, but had seriously floated the idea of installing and making ecache work at the OS level of old Windows systems. Like it was actually, there was a huge potential actually to make this part of the norm. And it's incredible to see how much standards are defined by just a few events that go one way or another. And how long it took us to basically get back around where this was actually viable again, which Ganov kind of hints at or briefly mentions in this piece, is that basically nothing has happened with it until Bitcoin, because now you actually have a permissionless network and permissionless money to build on top of. And this is something that so many people don't understand. They think that if we don't have the end all be all complete, everything decentralized, 8 billion people hold their own key solution and it scales infinitely and everything's dirt cheap and instant and perfect. That if somehow, if we don't have this magical fairyland that literally just doesn't even exist, even though we've somehow built it in as the new expectation for how Bitcoin is supposed to work, that we completely fail to realize what we do have. The fact that we have a base, a monetary base and global decentralized financial system, basically a monetary court to provide and create any and all services on top of that we want, without having to ask a bank's permission, without having to get a government's permission for it to work. It is literally the Internet of money. And I think we're going to see a ton of the same limitations and trade offs in how things develop going forward. There will be this, this industry, this community of providers and servers, just like not everybody in the world runs their own website and most of them host on, you know, some service, Amazon web Services or something. Why? Because it's largely a pain in the butt. But we are still having these technological leaps that just come with enough time in the environment and with the maturation of the infrastructure and the technology itself. And just what becomes a viable thing to even attempt, in what computation and storage makes sense in the context of what we're even inventing. And then these huge leaps come when the paradigm has shifted enough that an entire new new way of thinking about it becomes the norm. Like, just think about it from the context of like LLMs and a bunch of these machine learning and AI tools, like even the small models are 1, 2, 3 gigabytes worth of storage and requirements just as much, 2, 3 gigabytes worth of video RAM, of high speed graphics RAM in order to even compute.
[00:29:22] Like that world, that world of software and technology wasn't even feasible in 2005. Like the idea of even suggesting it as if anybody had this heart that this much space available and this much graphics processor capability like what we can do now that we have a global, decentralized, permissionless money to build on and network specifically to build on top of and to interoperate with. I've said it before, but there is no limit to what humans can innovate. It just takes time and maturation. Now going back to what Gandalf said in this piece specifically because I think we are finally getting to realize ecash and I think even in a custodial environment we're talking about something that could truly revolutionize the entire idea of financial and monetary services. I do not think it's an exaggeration to put it that way. If it weren't for Bitcoin it would still be seen as revolutionary. And I mean that in the sense of comparison. Like if, if Bitcoin had never existed. We, we don't have quote unquote digital cash. We don't have a decentralized monetary base. We have our centralized, surveilled, controlled, permissioned fiat banking system. Now imagine suddenly you have the opportunity and somehow there is actually the possibility of instituting ecash onto that system so that the users can be protected from direct surveillance from all of these services and have the optionality to use any service that they want easily and quickly in an online app environment and from anywhere in the world. That would be extraordinary. That would be like the cypherpunks, everything that everybody, anybody who is interested in Bitcoin because of what Bitcoin stood for would be fascinated and deeply interested in that technology and the institution of that as a normal thing, as the new standard. Had it not been for Bitcoin being a far more foundational and revolutionary technological innovation. It is only because Bitcoin showed us that we could actually do this entirely non custodial that we could do this on a monetary base that is entirely permissionless. We could genuinely have a new Internet of money and completely obsolete and get rid of the entire model of the old financial system. In the old monetary world that now custodial e cash is literally just custodians. That that is what has, what it has been relegated to. And I think it's really, really easy to lose that perspective. But we will still have custodians. That is the problem. If you're only trying to solve for the end all be all utopian world then you actually miss the majority and where their problems really lie. You know, I've. The more and more I've tried to onboard people and the more I've tried to teach people how to hold their own coins And I have tried to like, not just tell people what to do and make little tutorial videos, but literally one on one in person with them. There are some people that I know and I wish it wasn't the case, but that just have a massive uphill battle to dealing with that level of responsibility and to doing so in a safe manner. I do not feel comfortable telling certain people to take full self custody without my being able to help them, without one of my keys being involved. That is not at all a desire to have some sort of control or to see what they're doing or anything like that, which in most cases it's not. I can't anyway. But it has absolutely nothing to do with that. I could not want less of those things. I don't want anything to do with it. I hate the fact that I am somehow involved in this and they're dependent on me. But I know that when it comes to their familiarity and skill level, they want to be able to securely hold Bitcoin and they want to just be able to, to trust me. Because they do not have the tens of hours, maybe even hundreds of hours to figure it out. Or if they do, it's going to take a really long time to get there and they need their handheld in the meantime. Every person, no matter how old you are, no matter how mature you are in life, if you are learning something that you are totally ignorant of, that you have never done, that you do not have a strong allegory or kind of analogous system for to just apply rules or habits or thinking that you have already held to the new thing. Everyone is like an infant trying to walk. You never actually change how you learn about things. You just grow a base of patterns and habits that you can generally apply to a vast amount of things. But at the end of the day, we still learn like infants. The. The more bizarre, unfamiliar and alien the thing is that we are introduced to, the more we look like total boobs trying to deal with it, trying to work with it. And it takes a long time for us to learn the ins and outs, to learn the tricks, to learn the motion memory. Now the reason Bitcoin was generally pretty easy for me is because I have tons of analogous history. I've already been using tons of a lot of tools that are almost exactly like it. Like, I had already encrypted things with a public and private key system. I had already tried to run, you know, nodes for decentralized esque networks and things. I'd already used BitTorrent. I'd already scoured the weird corners of the Internet. It wasn't totally unfamiliar to me. There are some people who still don't even know the Internet. Their entire experience with it is through some sort of app or the most surface layer of whatever operating system they are given. And they do not know or understand their relationship to it. They do not know how to get around it. They do not know what it is doing in reference to their data, their experience, their privacy, their control, any of it. They will use custodians.
[00:36:04] That is the simple basic reality. The majority of people will use custodians for a majority of their day to day. That is not a declaration that we should not be focused on technology that allows 8 billion people to be non custodial. Not even slightly. It is not a concession, it is not giving up. It is not an accusation. It is a simple statement of fact. And if we want to solve the most problems for the largest number of people, then one problem we still should absolutely be focused on with some of our time and attention is making better custodians.
[00:36:52] Ecash is not bitcoin. It's a better custodial model and it is one that is finally possible to provide for anyone in the world, enabling them to trust any of a large group of people, trust their friends, trust someone close to them, trust a small group in their community that they actually know in the real world. It changes the dynamics of the trust model and creates an open global system for anyone to build on, for anyone to connect to anyone, for anyone to use any service that benefits them and proves themselves to be trustworthy. And then being able to do that in a federated way where you can trust a group to simply manage the service and that without a quorum, without a majority of the group basically colluding together to steal. You can trust that your bitcoin are safe or that your the balance of your sats denominated e cash is relatively safe. And then importantly, you can just use this for low value transactions. Like that model is way better. It is way better than just a custodial lightning wallet. Like that's a significant improvement. Like I don't understand people pretending that there's not a spectrum here and that we're supposed to make this leap from custodial, surveilled, completely controlled permissioned system to global decentralized. Every single transaction, whether it's a penny or a million dollars worth. Full privacy, full sovereignty, can't be controlled. No trade offs enforceable at no cost for the tiniest possible amount. World that we're just supposed to make that leap and there's nothing in between when understand the second this other option over here that we're all aiming for doesn't exist and has never existed. Bitcoin, wasn't that at the beginning? Bitcoin, isn't that now? And not a million shitcoins have even come close to solving this problem. Not 10 million shitcoins. There's probably more than that now. It literally doesn't exist. Screaming that that is the only option and that everything else is a waste is literally screaming it's old man yells at the clouds. There is no end game here. There's no like perfect solution. And in fact, as we get closer to that apparent utopia, our standards are just going to go up and we're all going to be complaining about the things that that doesn't even enable. There's no end to this. There will always be something better that we can provide or that we can build or that we can innovate on. We need to look at exactly the problems we have today and see where and how we can get one step closer to the place that we want. And it will literally take generations to teach people the motion memory, the habits, the cultural foundations to all hold their own coins. That will never happen in two years. That won't happen because we invent arc. That won't happen because we invent the perfect system. That will take decades at the least just because people, because that's how people are. We learn slow, we get used to and we have a frame for how our technology works and how we interact with it. We have habits that we build up and we learn and degrees of responsibility that we are able to take that that we learn at a very early age. And those norms are extremely difficult to break later in life. And I think the humble and serious thing to do if we're trying to solve problems is just to look at reality as it is and again, understand. I think we absolutely will get to that future. We will figure out what that core problem is. We will find the optimum of all the possible trade offs for the best possible system and we will implement it. But I kind of suspect that the more that time goes on and the more I learn about it and the more I observe how people work and how these protocols shift over time, I really kind of think it will probably end up looking like the evolution from just the Internet to the Internet. With bitcoin it took like 30 years to invent it and 45 to basically bring it into the mainstream. Bitcoin on Top of the Internet. I mean, and I kind of suspect that the thing that will literally solve the problem in such a way that it is simplistic, that it is scalable, that we can genuinely use it as a new foundational protocol for everything built on top of Bitcoin and integrated with lightning, may very well be another 15 years out and another 10 years to make it the standard. Aside from the fact that, you know, I might not be calculating for the, the speed at which it could change because of the, the new technological landscape. So maybe we can cut those times down by, you know, a third. I don't know. That's increasingly just the way I see it. And I think custodians are the problem we need to solve. And I don't think the solution for most people, I think the solution for us, for bitcoiners who know and use this technology, is total and complete self custody on a cold card or a bitbox or a tap signer, whatever it is. Granted, even a tap signer is a trade off, but there are a lot of people who can handle that. And we always want that option available to as many people as humanly possible. But I increasingly think that if we want to do the most good for the most people, it's taking huge steps to making custodians better, to fixing the problems of single points of failure in custodians. It's fixing the problems of surveillance and censorship in custodians. And fascinatingly, we actually have a technology that can basically solve those problems sitting in our lap. You cannot censor a transaction if someone can do it off chain or off network. You cannot censor it if you do not know what any individual is doing or how much they are moving. You can mitigate the trust of the custodian by splitting it up across many different people. You can automate the software and the system so that people can literally just run a computer and they don't have to treat it like a business, they can just run it like a piece of software, like they do on any machine. So literally a group, your community, a group of people that you know and trust in the real world, can run this and operate this for significant groups of people. And it can be done without anyone having any idea, any explicit purview over what all any or all of the users are actually doing with their own money.
[00:44:02] Like that's a huge leap forward. That's a massive leap forward. And this could be done on a monetary network where nobody can stop you from running software. I don't know I just, I think that's a big deal and I think a lot of people gloss over it because it's like it's custodial. It's like, well, yeah, but that's like the one thing that's like the one major complaint. Like there's, it's, it's that trade off which for small payments is perfect or it's a perfectly acceptable trade off for smaller amounts. Just like he talks about. There's a great quote in this, says quote, custodial wallets should be thought of as a physical spending wallet that you can walk around with even though the, even through the dark alleyways where it might get robbed from you. You keep your cash in there for convenient spending, not worrying about fees, liquidity, data, footprints, channel backups, etcetera, etcetera. These benefits obviously come at the cost of trust that the provider doesn't rug pull your deposit. But it allows you to scale up the different protocols based on the trust, the degree of trust that you have to put in the service or in the, the provider or in the software or the custodian or whatever it is, and the degree or the amount of value and risk that you have on the line. So it will be relative to your, your cost or your situation. So for example, in an ecash wallet I might keep 2 to $300 worth of SATs and that's basically it. Then anytime I get over that amount in any custodial setup, in fact I had my, like my swan DCA for example, I had it set to 500,000 sats which before was like $300, now it's $500. But at that point it would automatically just go to my cold storage. Then anything above that is actually a great way to do lightning. Lightning is great, a great way to do your month to month income and expenses and those sorts of things. Do smaller payments and zaps and any tiny stuff that's going to be coming in and out all the time with a custodial model or an E Cash model or something like that, which again now it's almost like ecash is the only custodial model that makes any sense because all other custodians now look insane, like just ridiculous that they don't provide the basic fundamentals, the basic features that an E Cash wallet could, or even better a fediment system. So you keep small amounts in that you keep medium amounts in lightning and you withdraw to lightning from your ecash or Fediment wallet. You have very strong privacy at both of those layers. And then for your hardcore cold storage. And anything over a value that you don't need within the month or within a two month period, you withdraw, you push to cold storage, and you hold that in a multi sig so that you can't be, you know, burglared and kidnapped into giving it up. It takes longer to access, it's much more difficult to confiscate. Like, that is a very, very strong stack. That's an incredibly powerful set of balancing features, privacy and sovereignty. Now of course, it would be magical if we could get all of the features of the entire stack in the exact same degree of sovereignty as our cold storage in multisig. It would literally be the holy grail of monetary and payment networks. So if you hear about that, or if you find it, or you discover it, or you design it, please let me and everyone else know. But until you do, complaining about the things that are actually giving us those benefits in tandem, like we're not supposed to have to deal with a protocol stack and somehow it's all just supposed to be handed to us without any work or thinking about it, just doesn't seem really productive to me. And no, your favorite shitcoin doesn't solve it, it just trades something else off that is probably more important. Almost every shitcoin I have ever even slightly looked into has such a vast trade off of the whole sovereignty actually secure and sound monetary aspect, which makes the, the addition or the ability to have privacy almost arbitrary. And it almost invariably doesn't scale, no matter how much they advertise that it does because they put it on some controlled computer and they virtualized a bunch of other machines and it worked really, really well. When they were all connected with the serial bus directly to each other, it did 1 gigabyte blocks really well. Tell me you've never dealt with decentralized global networks without telling me. Practically every shitcoin, altcoin, whatever you want to call them that I know that actually appears to have any of those qualities, only do so because they have the same number of users that bitcoin did in 2012, 2013, which bitcoin easily had all of those properties back then as well. And yes, that included privacy, because there weren't, there weren't KYC entries and exits one block one step away from every single UTXO at any place in the chain. It was just tons of people mining. It was faucets, it was, you name it. It was just like there was so much moving that had nothing to do with KYC exchanges until about the 2013 era and Mount Gox and their blow up and everything, that's when everything kind of started to shift. But it was literally a factor or a consequence of the growth. It was a consequence of it actually succeeding and becoming used by large amounts of people. There is no if you have been misled, and I do not, I do not mean this in accusatory sense, so I'm not like trying to crap on anybody. But if you're in the crypto space and you have been misled, you have been told that your crypto coin or this token or something does scale infinitely and it can work to the whole world and it can be super decentralized and it can be perfectly private and it is the real, quote unquote, decentralized digital cash that nobody can control. And there are no trade offs. And you only have seen it operate with the 10,000 or 50,000 people that actually use it. Right now you are being lied to. 99.9999% chance you are being lied to. You're being sold something that just looks like it will scale because it works great when there's very few people using it. But a network that is decentralized at 50,000 people is not going to be the same amount decentralized when it has a billion people. And it is not going to have any of the same characteristics if it does not make extremely difficult trade offs. Anyway. Didn't even mean to go down that tangent, but I just, I just really like ecash and it's so cool to see ecash come back.
[00:51:17] And I know it's custodial. You know, I don't, I'm not, I'm not uninterested in making custodians better because I know that we have them, we've had them for as long as I have been in bitcoin. There are people who have just used custodians. I wish it weren't the case, but it is Gandalf's quote. We now know that we are not comparing ecash with the sovereign bitcoin stack. We are comparing it instead to traditional custodial systems. This is the area ecash is trying to improve upon. So if you've chosen that the best tool to solve a problem might be a custodial solution, only then should you start to consider using ecash. End quote. I think that's the best way to put it. I really like that framing is that when you're trying to solve a problem and you figure out that the tool that you need to solve that problem Is basically needs to be custodial or it would best to have it be custodial. And that would give you the best user experience or whatever it is. Then never settle for less than ecash.
[00:52:29] Like, ecash should now be the standard for custodians. And if we are building something worse than that, if we should. If we are building something that's easier to censor and easier to surveil, we should demand that it be ecash. And I think that would be a great leap forward.
[00:52:47] Anyway, I think I gotta record the roundtable. Yeah, we're all getting together in like 20 minutes. Okay. I'm gonna go ahead and close this up so I can get prepped. Got to get all the details together and get, get looking good. Get looking good. For the show. We got mechanic Steve, my brother and myself coming back. This will probably be released next week, sometime right around Christmas to wrap up December, wrap up the year with guys Roundtable. This will be number five. So check that out. Don't forget to check out the links. Don't forget to check out fold. Shout out to Gandalf Gandlaf for writing this piece.
[00:53:28] I think clarifying that framing is.
[00:53:32] It's just really important. I don't know. Everybody's just looking for something to complain about. And I just think this is a really, really awesome improvement over what we have largely been stuck with. And I think it can actually solve something.
[00:53:46] But that many people have ignored or tried to hand wave away by trying to solve. You know, it's like. It's like never giving you a tool to get over the next hill because you know, you're focused on scaling Mount Everest. It's like, I realize that the Mount Everest problem is more exciting and we always need people solving and focused on the Mount Everest problem, but the majority of the people in the world just need to get over the next hill.
[00:54:16] So anyway, that's my thoughts on it. I really appreciate the article. A shout out to him and I'll have the Noster Pub, the impub in the show notes as well as the link to the note with this article. So you guys can zap. So you guys can follow. Definitely shoot sats. If you enjoyed this read. If you like the perspective, please zap Gandalaf. It'd be cool to know that more people got this article. And for the people who appreciated it, this is the beauty of Nostr is value for value. You can boost on fountain, you can stream sats. I will be zapping this article myself. In fact, I think I already did. But all Those links and details are right in the show notes so you can check it out. And of course check out fold gift cards sats back on gift cards right now for holidays are crazy. You must take advantage of it. And 20,000 sats for free just for signing up for my referral with my referral. If you've listened to this show for any length of time and you caught any of this episode, you should know right where to find it with that I am Guy Swan. I am out. This is Bitcoin audible and until next time, everybody. Take it easy guys.
[00:55:45] One person's craziness is another person's reality.
[00:55:50] Tim Burton.
