Episode Transcript
[00:00:00] Speaker A: The best in Bitcoin made Audible. I am Guy Swan and this is Bitcoin Audible.
Welcome back to Bitcoin Audible. I am Guy Swan, the guy who has read more about bitcoin than anybody else. You know, we are diving into part three of GG's amazing work, which by the way, you should get a hard copy of.
And in fact, I need a signed copy. I don't think I have a signed copy of GG's book. There's a couple that I lost in the flood of the basement because I lost like five books that I have done the audiobook for that were signed like Nick Bhatia's Saifuddin's. Who else did I lose? I think Eric Yates. I think. I think I lost the seventh property, but I lost a number of them.
[00:01:08] Speaker B: But I don't think I have a.
[00:01:10] Speaker A: Signed copy of 21 Lessons. And I hadn't thought about it until I was going through the reboot here. But the link to Gigi's page, as well as to buy the book.
If you want to support Gigi and his work, I highly, highly recommend it. In fact, I'm probably going to throw him some stats after this just because it's good. It's still so good after all this time. Now, real quick, a shout out to the Human Rights foundation for supporting the show and my work. It is genuinely an honor to be working with them. And there's a huge story unfolding all across the world right now about how governments, about large corporations and banks even are grasping at deeper control over our money and surveilling everything, about how we transact the monetary and banking systems are being used to control everyone, to silence dissidents and to punish people with opposing political views. The Human Rights foundation has done some of the best work that I have seen in keeping up with everything that is going on on this front. They have the Financial Freedom Report.
[00:02:28] Speaker C: It is the best way to stay.
[00:02:30] Speaker A: On top of this and I highly recommend it for both the good news and the bad news. There's a whole bunch of CBDC stuff actually in. Well, there's been regularly a bunch of announcements about rumblings and implementations of CBDCs, but there's also a lot of good news. Talk about Bitcoin, about tools that help you get around this and how you can actually have financial sovereignty. Links and details for all of that will be in the show notes. And then speaking of financial sovereignty, if you want to hold your own keys, get yourself a jade. Plus 10% off with code guy. My third video I believe by the time this is published, my third video will be out. Got another really good video on the Jade plus on advanced setup and then also just some fun stuff on how to use it. Check those out on the YouTube rumble and socials. And then lastly for again, financial sovereignty self custodial on chain and lightning. That is intuitive and just works the Bitkit wallet and you know, kind of.
[00:03:31] Speaker B: Right there, you've got the whole stack.
[00:03:33] Speaker A: You've got all the information you need. You've got the news that's important to stay on top of. You got the hardware to separate your keys from your device and you've got the easy to use on chain and lightning wallet.
[00:03:44] Speaker C: Ba bam.
[00:03:46] Speaker A: All right, chapter three of 21 Lessons is about technology. The technology of Bitcoin and its immutability and decentralization. The significance of the discovery of Bitcoin, the disappearance of Satoshi. There's so much. There's just so much in this one. And if you haven't thought about the genesis of Bitcoin, like when Bitcoin why and how the conditions in which and when Bitcoin was created, this will be a much needed and much enjoyed refresh, I think. So easy to get lost in the whole strategic reserve and politics and Trump and Biden and choke point 2.0 and just all the crap. And forget the kind of beautiful simplicity of Bitcoin's origins of where we the humbleness of where we came from and why Bitcoin can't be copied. So with that, I will let Gigi take over. This is 21 Lessons of the Bitcoin Rabbit Hole.
[00:05:03] Speaker C: Chapter 3 Technology.
Now I'll manage better this time, she said to herself, and began by taking the little golden key and unlocking the door that led into the garden.
Golden keys, clocks which only work by chance, races to solve strange riddles, and builders that don't have faces or names. What sounds like fairy tales from wonderland is daily business in the world of Bitcoin. As we explored in chapter two, large parts of the current financial system are systematically broken. Like Alice. We can only hope to manage better this time. But thanks to a pseudonymous inventor, we have incredibly sophisticated technology to support us this time around.
Bitcoin solving problems in a radically decentralized and adversarial environment requires unique solutions. What would otherwise be trivial problems to solve are everything. But in this strange world of nodes, Bitcoin relies on strong cryptography for most solutions. At least if looked at through the lens of technology, just how strong this cryptography is will be explored in one of the following lessons, cryptography is what Bitcoin uses to remove trust in authorities. Instead of relying on centralized institutions, the system relies on the final authority of our physics.
Some grains of trust still remain, however. We will examine these grains in the second lesson of this chapter.
Lesson 15 Strength in Numbers 16 Reflections on Don't Trust Verify 17. Telling Time Takes Work 18.
Move Slowly and Don't Break Things 19. Privacy is Not Dead 20. Cypherpunks Write Code 21 Metaphors for Bitcoin's Future the last couple of lessons explore the ethos of technological development in Bitcoin, which is arguably as important as the technology itself.
Bitcoin is not the next shiny app on your phone. It is the foundation of a new economic reality, which is why Bitcoin should be treated as nuclear grade financial software. Where are we in this financial, societal, and technological revolution?
Networks and technologies of the past may serve as metaphors for Bitcoin's future, which are explored in the last lesson of this chapter. Once more, strap in and enjoy the ride. Like all exponential technologies, we are about to go parabolic.
Lesson 15 Strength in numbers let me see. 4 times 5 is 12 and 4 times 6 is 13 and 4 times 7 is 14. Oh dear, I shall never get to 20 at this rate.
Numbers are an essential part of our everyday life. Large numbers, however, aren't something most of us are too familiar with. The largest numbers we might encounter in everyday life are in the range of millions, billions, or trillions. We might read about millions of people in poverty, billions of dollars spent on bank bailouts, and trillions of national debt. Even though it's hard to make sense of these headlines, we are somewhat comfortable with the size of those numbers.
Although we might seem comfortable with billions and trillions, our intuition already starts to fail with numbers of this magnitude.
Do you have an intuition of how long you would have to wait for a million, billion or trillion seconds to pass? If you are anything like me, you are lost without actually crunching the numbers. Let's take a closer look at this example. The difference between each is an increase by three orders of magnitude. 10 to the 6th, 10 to the 9th, 10 to the 12th. Thinking about seconds is not very useful, so let's translate this into something we can wrap our head around. Ten to the sixth one million seconds ago was one and a half weeks ago.
Ten to the ninth one billion seconds ago was almost 32 years ago.
Ten to the twelfth one trillion seconds ago, Manhattan was covered under a thick layer of ice.
As soon as we enter the beyond astronomical realm of modern cryptography, our intuition fails catastrophically. Bitcoin is built around large numbers and the virtual impossibility of guessing them. These numbers are way, way larger than anything we might encounter in day to day life, many orders of magnitude larger. Understanding how large these numbers truly are is essential to understanding Bitcoin as a whole. Let's take SHA 256, one of the hash functions used in Bitcoin. As a concrete example, it is only natural to think about 256 bits as 256, which isn't a large number at all. However, the number in SHA256 is talking about orders of magnitude, something our brains are not well equipped to deal with.
While bit length is a convenient metric, the true meaning of 256 bit security is lost in translation. Similar to the millions 10 to the 6th and billions 10 to the 9th above, the number in SHA 256 is about orders of magnitude 2 to the 256th. So how strong is SHA 256 exactly?
SHA 256 is very strong. It's not like the incremental step from MD5 to SHA1. It can last several decades unless there's some massive breakthrough attack.
Satoshi Nakamoto let's spell things out. Two to the 256 equals the following 115, Quatravigantillion 792, Trivigantilian 89 Duo Vigantillion 237 um Vigantillion 316, Vigantillion 195, Novembdecillion 423, Octodecillion 570, Septindecillion 985 Sexton 8, Quindecillion 687, Quatradecillion 907, Tredecillion 853, Duodecillion 269, Undecillion 984, Decillion 665, Nonelian 640, Octillion 564, Septillion 39, Sextillion 457, Quintillion 584, Quadrillion 7,913,129,639,936 that's a lot of nonillions. Wrapping your head around this number is pretty much impossible. There is nothing in the physical universe to compare it to. It is far larger than the number of atoms in the observable universe. The human brain simply isn't made to make sense of it. One of the best visualizations of the true strength of SHA256 is the following video by Grant Sanderson. Aptly named how secure is 256bit security?
It beautifully shows how large a 256bit space is. Do yourself a favor and take the 5 minutes to watch it as all other 3 blue 1 brown videos. It is not only fascinating, but also exceptionally well made. Warning you might fall down a math rabbit hole.
Short answer Pretty secure. Bruce Schneier used the physical limits of computation to put this number into perspective. Even if we could build an optimal computer which would use any provided energy to flip bits perfectly, build a Dyson sphere around our sun and let it run for 100 billion billion years, we would still only have a 25% chance that to find a needle in a 256 bit haystack.
These numbers have nothing to do with the technology of the devices. They are the maximums that thermodynamics will allow, and they strongly imply that brute force attacks against 256 bit keys will be infeasible until computers are built from something other than matter and occupy something other than space.
Bruce Schneier it is hard to overstate the profoundness of this Strong cryptography inverts the power balance of the physical world that we are so used to.
Unbreakable things do not exist in the real world. Apply enough force and you will be able to open any door, box or treasure chest. Bitcoin's treasure chest is very different. It is secured by strong cryptography, which does not give way to brute force. And as long as the underlying mathematical assumptions hold, brute force is all we have. Granted, there is also the option of a global $5 wrench attack, but torture won't work for all Bitcoin addresses, and the cryptographic walls of Bitcoin will defeat brute force attacks even if you come at it with the force of a thousand suns. Literally. This fact and its implications were poignantly summarized in the call to cryptographic arms no amount of coercive force will ever solve a math problem.
It isn't obvious that the world had to work this way, but somehow the universe smiles on encryption. End quote. Julian Assange Nobody yet knows for sure if the universe's smile is genuine or not. It is possible that our assumptions of mathematical asymmetries is wrong and we find that P actually equals np. Or we find surprisingly quick solutions to specific problems which we currently assume to be hard. If that should be the case, cryptography as we know it will cease to exist and the implications would most likely change the world beyond recognition.
Viras in Numeris Strength in Numbers EPI Virus in Numeris is not only a catchy motto used by bitcoiners, the realization that there is an unfathomable strength to be found in numbers is a profound one. Understanding this and the inversion of existing power balances which it enables changed my view of the world and the future which lies ahead of us. One direct result of this is the fact that you don't have to ask anyone for permission to participate in Bitcoin. There is no page to sign up, no company in charge, no government agency to send application forms to. Simply generate a large number and you're pretty much good to go. The central authority of account creation is mathematics, and God only knows who is in charge of that.
Bitcoin is built by our best understanding of reality. While there are still many open problems in physics, computer science and mathematics, we are pretty sure about some things.
That there is an asymmetry between finding solutions and validating the correctness of these solutions is one such thing. That computation needs energy is another one. In other words, finding a needle in a haystack is harder than checking if the pointy thing in your hand is indeed a needle or not. And finding the needle takes work.
The vastness of Bitcoin's address space is truly mind boggling. The number of private keys even more so. It is fascinating how much of our modern world boils down to the improbability of finding a needle in an unfathomably large haystack. I am now more aware of this fact than ever.
Bitcoin taught me that there is strength in numbers.
Lesson 16 Reflections on Don't Trust, Verify now for the evidence, said the king. And then the sentence.
Bitcoin aims to replace, or at least provide an alternative to conventional currency. Conventional currency is bound to a centralized authority. No matter if we were talking about legal tender like the US dollar or modern monopoly money like Fortnite's v Bucks. In both examples, you are bound to trust the central authority to issue, manage and circulate your money. Bitcoin unties this bound and the main issue Bitcoin solves is the issue of trust.
The root problem with conventional currency is all the trust that's required to make it work. What is needed is an electronic payment system based on cryptographic proof instead of trust.
Satoshi Bitcoin solves the problem of trust by being completely decentralized, with no central server or trusted parties. Not even trusted third parties. But trusted parties, period, when there is no central authority, there simply is no one to trust. Complete decentralization is the innovation. It is the root of Bitcoin's resilience, the reason why it is still alive. Decentralization is also why we have mining nodes, hardware, wallets, and yes, the blockchain. The only thing you have to trust is that our understanding of mathematics and physics isn't totally off, and that the majority of miners act honestly, which they are incentivized to do, while the regular world operates under the assumption of trust. But verify Bitcoin operates under the assumption of don't trust verify. Satoshi made the importance of removing trust very clear in both the introduction as well as the conclusion of the Bitcoin white paper.
Conclusion we have proposed a system for electronic transactions without relying on trust.
Satoshi Note that without relying on trust is used in a very specific context. Here we are talking about trusted third parties, or in other words, other entities which you trust to produce, hold and process your money. It is assumed, for example, that you can trust your computer.
As Ken Thompson showed in his Turing Award lecture, trust is an extremely tricky thing in the computational world. When running a program, you have to trust all kinds of software and hardware which in theory could alter the program you are trying to run in a malicious way. As Thompson summarized in his reflections on Trusting Trust, the moral is obvious. You can't trust code that you did not totally create yourself.
Thompson demonstrated that even if you have access to the source code, your compiler or any other program handling program or hardware could be compromised and detecting this backdoor would be very difficult. Thus, in practice, a truly trustless system does not exist. You would have to create all your software and all of your hardware, assemblers, compilers, linkers, etc. From scratch without the aid of any external software or software aided machinery.
If you wish to make an apple pie from scratch, you must first invent the universe.
Carl Sagan the Ken Thompson hack is a particularly ingenious and hard to detect backdoor, but let's take a look at a hard to detect backdoor which works without modifying any software. Researchers found a way to compromise security critical hardware by altering the polarity of silicon impurities. Just by changing the physical properties of the stuff that computer chips are made of, they were able to compromise a cryptographically secure random number generator.
Since this change can't be seen, the backdoor can't be detected by optical inspection, which is one of the most important tamper detection mechanisms for chips like these sound scary. Well, even if you would be able to build everything from scratch, you would still have to trust the underlying mathematics. You would still have to trust that SEC P256K1 is an elliptic curve without backdoors yes, malicious backdoors can be inserted into the mathematical foundations of cryptographic functions, and arguably this has already happened at least once. There are good reasons to be paranoid, and the fact that everything from your hardware to your software to the elliptic curves used can have backdoors are some of them.
Don't trust, Verify the above examples should illustrate that trustless computing is utopic. Bitcoin is probably the one system which comes closest to this utopia, but still it is trust minimized, aiming to remove trust wherever possible. Arguably the chain of trust is never ending, since you will also have to trust that computation requires energy, that P does not equal np, and that you are actually in base reality and not imprisoned in a simulation by malicious actors.
Developers are working on tools and procedures to minimize any remaining trust even further. For example, Bitcoin developers created Gishian, which is a software distribution method to create deterministic builds. The idea is that if multiple developers are able to reproduce identical binaries, the chance of malicious tampering is reduced. Fancy backdoors aren't the only attack vector. Simple blackmail or extortion are real threats as well. As in the main protocol, decentralization is used to minimize trust.
Various efforts are being made to improve upon the chicken and egg problem of bootstrapping, which Ken Thompson's hack so brilliantly pointed out. One such effort is guix, pronounced geeks, which uses functionally declared package management leading to bit for bit reproducible builds by design. The result is that you don't have to trust any software providing servers and anymore since you can verify that the served binary was not tampered with by rebuilding it from scratch. As of this writing, a pull request is in progress to integrate geeks into the Bitcoin build process.
Luckily, Bitcoin doesn't rely on a single algorithm or piece of hardware. One effect of Bitcoin's radical decentralization is a distributed security model. Although the backdoors described above are not to be taken lightly, it is unlikely that every software wallet, every hardware wallet, every cryptographic library, every node implementation, and every compiler of every language is compromised. Possible, but highly unlikely.
Note that you can generate a private key without relying on any computational hardware or software. You can flip a coin a couple of times, although depending on your coin and tossing style this source of randomness might not be sufficiently random.
There is a reason why storage protocols like Glacier advise to use casino grade dice as one of two sources of entropy.
Bitcoin forced me to reflect on what trusting nobody actually entails. It raised my awareness of the bootstrapping problem and the implicit chain of trust in developing and running software. It also raised my awareness of the many ways in which software and hardware can be compromised. Bitcoin taught me not to trust, but to verify.
Alright, before we jump into lesson 17, let's take a moment to hit our sponsor real fast and then we will jump right back in lesson 17.
Telling time takes work.
[00:26:09] Speaker B: Dear oh dear, I shall be too.
[00:26:11] Speaker C: Late it is often said that bitcoins are mined because thousands of computers work on solving very complex mathematical problems. Certain problems are to be solved and if you compute the right answer, you produce a bitcoin. While this simplified view of bitcoin mining might be easier to convey, it does miss the point somewhat. Bitcoins aren't produced or created, and the whole ordeal is not really about solving particular math problems. Also, the math isn't particularly complex. What is complex is telling the time in a decentralized system.
As outlined in the whitepaper, the proof of work system, AKA mining, is a way to implement a distributed timestamp server.
When I first learned how bitcoin works, I also thought that proof of work is inefficient and wasteful. After a while I started to shift my perspective on bitcoin's energy consumption. It seems that proof of work is still widely misunderstood today in the year 10ab after Bitcoin.
Since the problems to be solved in proof of work are made up, many people seem to believe that it is useless work if the focus is purely on the computation. This is an understandable conclusion. But bitcoin isn't about computation, it is about independently agreeing on the order of things.
Proof of work is a system in which everyone can validate what happened and in what order it happened. This independent validation is what leads to consensus and individual agreement by multiple parties about who owns what. In a radically decentralized environment, we don't have the luxury of absolute time. Any clock would introduce a trusted third party, a central point in the system which had to be relied upon and could be attacked.
Timing is the root problem, as Grisha Trubetsky points out, and Satoshi brilliantly solved this problem by implementing a decentralized clock via a proof of work blockchain. Everyone agrees beforehand that the chain with the most cumulative work is the source of truth. It is, per definition what actually happened. This agreement is what is now known as Nakamoto consensus.
The network timestamps transactions by hashing them into an ongoing chain which serves as a proof of the sequence of events witnessed.
Satoshi Nakamoto Without a consistent way to tell the time, there is no consistent way to tell before from after. Reliable ordering is impossible. As mentioned above, Nakamoto consensus is Bitcoin's way to consistently tell the time. The system's incentive structure produces a probabilistic decentralized clock by utilizing both greed and self interest of competing participants.
[00:29:15] Speaker B: The fact that this clock is imprecise.
[00:29:17] Speaker C: Is irrelevant because the order of events is eventually unambiguous and can be verified by anyone thanks to proof of work. Both the work and the validation of the work are radically decentralized. Everyone can join and leave at will and everyone can validate everything at all times. Not only that, but everyone can validate the state of the system individually without having to rely on anyone else for validation.
Understanding proof of work takes time. It is often counterintuitive and while the rules are simple, they lead to quite complex phenomena.
For me, shifting my perspective on mining helped. Useful, not useless. Validation, not computation. Time, not blocks Bitcoin taught me that telling the time is tricky, especially if you are decentralized.
Move slowly and don't break things so the boat wounds slowly along beneath the bright summer day with its merry crew and its music of voices and laughter.
It might be a dead mantra, but move fast and break things is still how much of the tech world operates the idea that it doesn't matter if you get things right. The first time is a basic pillar of the fail early fail often mentality. Success is measured in growth, so as long as you are growing, everything is fine. If something doesn't work at first, you simply pivot and iterate. In other words, throw enough shit against the wall and see what sticks.
Bitcoin is very different. It is different by design. It is different out of necessity. As Satoshi pointed out, E Currency has been tried many times before and all previous attempts have failed because there was a head which could be cut off. The novelty of Bitcoin is that it is a beast without heads. Quote A lot of people automatically dismiss E Currency as a lost cause because of all the companies that failed since the 1990s. I hope it's obvious it was only the centrally controlled nature of those systems that doomed them.
Satoshi Nakamoto One consequence of this radical decentralization is an inherent resistance to change. Move fast and break things does not and will never work on the Bitcoin based layer. Even if it would be desirable, it wouldn't be possible without convincing everyone to to change their ways. That's distributed consensus. That's the nature of Bitcoin.
The nature of Bitcoin is such that once version point one was released, the core design was set in stone for the rest of its lifetime. End quote Satoshi Nakamoto this is one of the many paradoxical properties of Bitcoin. We all came to believe that anything which is software can be changed easily. But the nature of the beast makes changing it bloody hard.
As Hasu beautifully shows in unpacking Bitcoin's social contract, changing the rules of Bitcoin is only possible by proposing a change and consequently convincing all users of Bitcoin to adopt this change. This makes Bitcoin very resistant to change, even though it is software.
This resilience is one of the most important properties of Bitcoin. Critical software systems have to be antifragile, which is what the interplay of Bitcoin's social layer and its technical layer guarantees. Monetary systems are adversarial by nature, and as we have known for thousands of years, solid foundations are essential in an adversarial environment.
The rain came down, the floods came, and the winds blew and beat on that house, and it didn't fall, for it was founded on the rock.
Matthew 7:24 27 Arguably, in this parable of the wise and the foolish builders, Bitcoin isn't the house, it is the rock. Unchangeable, unmoving, providing the foundation for a new financial system.
Just like geologists who know that rock formations are always moving and evolving, one can see that Bitcoin is always moving and evolving as well. You just have to know where to look and how to look at it.
The introduction of pay to script hash and segregated witness are proof that Bitcoin's rules can be changed if enough users are convinced that adopting said change is to the benefit of the network. The latter enabled the development of the Lightning Network, which is one of the houses being built on Bitcoin's solid foundation. Future upgrades like Schnorr signatures will enhance efficiency and privacy as well as scripts read smart contracts which will be indistinguishable from regular transactions thanks to Taproot. Wise builders do indeed build on solid foundations.
Satoshi wasn't only a wise builder technologically, he also understood that it would be necessary to make wise decisions ideologically.
Being open source means anyone can independently review the code if it was closed source. Nobody could verify the security. I think it's essential for a program of this nature to be open source. End Quote Satoshi Nakamoto Openness is paramount to security and inherent in open source and the free software movement. As Satoshi pointed out, secure protocols and the code which implements them have to be open. There is no security through obscurity.
Another benefit is again related to decentralization. Code which can be run, studied, modified, copied and distributed freely, ensures that it is spread far and wide.
The radically decentralized nature of Bitcoin is what makes it move slowly and deliberately. A network of nodes, each run by a sovereign individual, is inherently resistant to change, malicious or not. With no way to force updates upon users, the only way to introduce changes is by slowly convincing each and every one of those individuals to adopt a change. This non central process of introducing and deploying changes is what makes the network incredibly resilient to malicious changes. It is also what makes fixing broken things more difficult than in a centralized environment, which is why everyone tries not to break things in the first place.
Bitcoin taught me that moving slowly is one of its features, not a bug Privacy is not dead.
The players all played it once without waiting for turns and quarreled all the while at the tops of their voices. And in a very few minutes the queen was in a furious passion and went stamping about and shouting off with.
[00:36:46] Speaker B: His head, off with her head.
[00:36:48] Speaker C: About once in a minute.
If pundits are to be believed, privacy has been dead since the 80s. The pseudonymous invention of Bitcoin and other events in recent history showed that this is not the case.
[00:37:03] Speaker B: Privacy is alive.
[00:37:05] Speaker C: Even though it is by no means easy to escape the surveillance state, Satoshi went through great lengths to cover up his tracks and conceal his identity. Ten years later, it is still unknown if Satoshi Nakamoto was a single person, a group of people, male, female, or a time traveling AI which bootstrapped itself.
[00:37:24] Speaker B: To take over the world.
[00:37:26] Speaker C: Conspiracy theories aside, Satoshi chose to identify himself to be a Japanese male, which is why I don't assume but respect his chosen gender and refer to him as he.
Whatever his real identity might be, Satoshi was successful in hiding it. He set an encouraging example for everyone who wishes to remain.
It is possible to have privacy online.
Encryption works properly implemented strong crypto systems are one of the few things that you can rely on. Edward Snowden Satoshi wasn't the first pseudonymous or anonymous inventor, and he won't be the last. Some have directly imitated this pseudonymous publication style like Tom Elvis Jedisser of mimblewimble fame, while others have published advanced mathematical proofs. While remaining completely anonymous is a strange new world, we are living in a world where identity is optional, contributions are accepted based on merit, and people can collaborate and transact freely. It will take some adjustment to get comfortable with these new paradigms, but I strongly believe that all of this has the potential to change the world for the better. We should all remember that privacy is a fundamental human right. And as long as people exercise and defend these rights, the battle for privacy is far from over.
Bitcoin taught me that privacy is not dead.
Cypherpunks write code I see you're trying to invent something.
[00:39:07] Speaker B: Like many great ideas, Bitcoin didn't come out of nowhere. It was made possible by utilizing and combining many innovations and discoveries in mathematics, physics, computer science and other fields.
While undoubtedly a genius, Satoshi wouldn't have been able to invent Bitcoin without the giants on whose shoulders he was standing on.
He who only wishes and hopes does not interfere actively with the course of events and with the shaping of his own destiny.
Ludwig von Mises One of these giants is Eric Hughes, one of the founders of the cypherpunk movement and the author of the Cypherpunk Manifesto. It's hard to imagine that Satoshi wasn't influenced by this manifesto.
[00:39:56] Speaker C: It speaks of many things which Bitcoin.
[00:39:58] Speaker B: Enables and utilizes, such as direct and private transactions, electronic money and cash, anonymous systems, and defending privacy with cryptography and digital signatures.
[00:40:11] Speaker C: Privacy is necessary for an open society.
[00:40:14] Speaker B: In the electronic age. Since we desire privacy, we must ensure that each party to a transaction have knowledge only of that which is directly necessary for that transaction. Therefore, privacy in an open society requires anonymous transaction systems. Until now, cash has been the primary such system. An anonymous transaction system is not a secret transaction system. We, the cypherpunks, are dedicated to building anonymous systems. We are defending our privacy with cryptography, with anonymous mail forwarding systems, with digital signatures, and with electronic money. Cypherpunks write code. End quote. Eric Hughes Cypherpunks do not find comfort in hopes and wishes. They actively interfere with the course of events and shape their own destiny. Cypherpunk's Write code Thus, in true cypherpunk fashion, Satoshi sat down and started to write code. Code which took an abstract idea and proved to the world that it actually worked. Code which planted the seed of a new economic reality.
Thanks to this code, everyone can verify that this novel system actually works. And every 10 minutes or so, Bitcoin proves to the world that it is still living.
To make sure that his innovation transcends fantasy and becomes reality, Satoshi wrote code to implement his idea before he wrote the white paper. He also made sure not to delay any release forever.
[00:41:52] Speaker C: After all, there's always going to be.
[00:41:55] Speaker B: One more thing to do.
[00:41:59] Speaker A: I had to write all the code.
[00:42:00] Speaker B: Before I could convince myself that I could solve every problem. Then I wrote the paper. Satoshi Nakamoto in today's world of endless promises and doubtful execution, an exercise in dedicated building was desperately needed. Be deliberate. Convince yourself that you can actually solve the problems and implement the solutions. We should all aim to be a bit more cypherpunk. Bitcoin taught me that cypherpunks Write Code lesson 21 metaphors for Bitcoin's Future I know something interesting is sure to happen.
In the last couple of decades, it became apparent that technological innovation does not follow a linear trend. Whether you believe in the technological singularity or not, it is undeniable that progress is exponential in many fields. Not only that, but the rate at which technologies are being adopted is accelerating, and before you know it, the bush in the local schoolyard is gone and your kids are using Snapchat instead.
Exponential curves have the tendency to slap you in the face way before you see them coming.
Bitcoin is an exponential technology built upon exponential technologies. Our world in data beautifully shows the rising speed of technological adoption starting in 1903 with the introduction of landlines. Landlines, electricity, computers, the Internet, smartphones all follow exponential trends in price, performance and adoption. Bitcoin does too.
Bitcoin has not one but multiple network effects, all of which resulting in exponential growth patterns in their respective area price users, security, developers, market share, and adoption as global money. Having survived its infancy, Bitcoin is continuing to grow every day in more aspects than one. Granted, the technology has not reached maturity yet it might be in its adolescence. But if the technology is exponential, the path from obscurity to ubiquity is short.
In his 2003 TED Talk, Jeff Bezos chose to use electricity as a metaphor for the web's future. All three phenomena electricity, the Internet, Bitcoinare enabling technologies, networks which enable other things. They are infrastructure to be built upon, foundational in nature. Electricity has been around for a while now. We take it for granted the Internet is quite a bit younger, but most people already take it for granted as well. Bitcoin is 10 years old and has entered public consciousness during the last hype cycle. Only the earliest of adopters take it for granted. As more time passes, more and more people will recognize Bitcoin as something which Simply is in 1994, the Internet was still confusing and unintuitive. Watching this old recording of the Today show makes it obvious that what feels natural and intuitive now actually wasn't back then.
Bitcoin is still confusing and alien to most, but just like the Internet is second nature for digital natives, spending and stacking sats will be second nature to the Bitcoin natives of the future.
The future is already here. It's just not evenly distributed. William Gibson In 1995, about 15% of American adults used the Internet. Historical data from the Pew Research center shows how the Internet has woven itself into all our lives. According to a consumer survey by Kaspersky Labs, 13% of respondents have used Bitcoin and its clones to pay for goods in 2018. While payments aren't the only use case of Bitcoin, it is some indication of where we are in Internet time in the early to mid-90s.
In 1997, Jeff Bezos stated in a.
[00:46:17] Speaker C: Letter to shareholders that this is day.
[00:46:20] Speaker B: One for the Internet, recognizing the great untapped potential for the Internet and by extension, his company.
Whatever day this is for Bitcoin, the vast amounts of untapped potential are clear to all but the most casual observer.
Graphic of the Internet mapped from 1982 versus 2005 source of merit Network Inc. And Barrett Lyon Opt Project Bitcoin's first node went online in 2009, after Satoshi mined the genesis block and released the software into the wild. His node wasn't alone for long. Hal Finney was one of the first people to pick up on the idea and join the network. Ten years later, as of this writing, more than 10,000 nodes are running Bitcoin. The protocol's base layer isn't the only thing growing exponentially. The Lightning Network, a second layer technology, is growing at an even faster rate. In January 2018, the Lightning Network had 40 nodes and 60 channels. In April 2019, the network grew to more than 4,000 nodes and around 40,000 channels. Keep in mind that this is still experimental technology where loss of funds can and does occur. Yet the trend is clear. Thousands of people are reckless and eager to use it.
A graphic comparing the lightning network from January 2018 to and December 2018. Source Jamison Lobb to me, having lived.
[00:48:01] Speaker C: Through the meteoric rise of the Web.
[00:48:03] Speaker B: The parallels between the Internet and Bitcoin are obvious. Both are networks, both are exponential technologies, and both enable new possibilities, new industries.
[00:48:15] Speaker C: New ways of life.
[00:48:17] Speaker B: Just like electricity was the best metaphor to understand where the Internet is heading, the Internet might be the best metaphor to understand where Bitcoin is heading. Or in the words of Andreas, bitcoin is the Internet of money. These metaphors are a great reminder that while history doesn't repeat itself, it often rhymes.
Exponential technologies are hard to grasp and often underestimated. Even though I have a great interest in such technologies, I am consistently surprised by the pace of progress and innovation. Watching the bitcoin ecosystem grow is like watching the rise of the Internet in fast forward. It is exhilarating.
My quest of trying to make sense of Bitcoin has led me down the pathways of history in more ways than one. Understanding ancient societal structures, past monies, and how communication networks evolved were all part of the journey from the hand axe to the smartphone. Technology has undoubtedly changed our world many times over.
Networked technologies are especially transformational. Writing, roads, electricity, the Internet, all of them changed the world. Bitcoin has changed mine and will continue to change the minds and hearts of those who dare to use it.
Bitcoin taught me that understanding the past is essential to understanding its future, a future which is just beginning.
Conclusion Lessons learned Begin at the beginning, the King said very gravely, and go on till you come to the end, then stop.
As mentioned in the beginning, I think that any answer to the question what have you learned from Bitcoin? Will always be incomplete. The symbiosis of what can be seen as multiple living systems, Bitcoin, the technosphere and economics is too intertwined, the topics too numerous, and things are moving too fast to ever be fully understood by a single person.
Even without understanding it fully, and even with all its quirks and seeming shortcomings, Bitcoin undoubtedly works. It keeps producing blocks roughly every 10 minutes and does so beautifully. The longer Bitcoin continues to work, the more people will opt in to use it.
It's true that things are beautiful when they work. Art is function.
Janina Broski Bitcoin is a child of the Internet. It is growing exponentially, blurring the lines between disciplines. It isn't clear, for example, where the realm of pure technology ends and where another realm begins. Even though Bitcoin requires computers to function efficiently, computer science is not sufficient to understand it. Bitcoin is not only borderless in regards to its inner workings, but also boundaryless in respect to academic disciplines.
Economics, politics, game theory, monetary history, network theory, finance, cryptography, information theory, censorship, law and regulation, human organization, psychology. All these and more are areas of expertise which might help in the quest of understanding how bitcoin works and what bitcoin is, no single invention is responsible for its success. It is the combination of multiple, previously unrelated pieces glued together by game theoretical incentives which make up the revolution that is bitcoin. The beautiful blend of many disciplines is what makes Satoshi a genius.
Like every complex system, Bitcoin has to make trade offs in terms of efficiency, cost, security, and many other properties. Just like there is no perfect solution to deriving a square from a circle, any solution to the problems which bitcoin tries to solve will always be imperfect as well.
I don't believe we shall ever have a good money again before we take the thing out of the hands of government. That is, we can't take it violently out of the hands of government. All we can do is, by some sly, roundabout way, introduce something that they can't stop.
Friedrich Hayek Bitcoin is the sly, roundabout way to reintroduce good money to the world. It does so by placing a sovereign individual behind each node. Just like DaVinci tried to solve the intractable problem of squaring a circle by placing the Vitruvian man in its center, nodes effectively remove any concept of a center, creating a system which is astonishingly antifragile and extremely hard to shut down.
Bitcoin lives and its heartbeat will probably outlast all of ours.
I hope you have enjoyed these 21 lessons. Maybe the most important lesson is that bitcoin should be examined holistically from multiple angles. If one would like to have something approximating a complete picture. Just like removing one part from a complex system destroys the whole, examining parts of bitcoin in isolation seems to taint the understanding of it. If only one person strikes blockchain from her vocabulary and replaces it with a chain of blocks, I will die a happy man.
In any case, my journey continues. I plan to venture further down into the depths of this rabbit hole and I invite you to tag along for the ride.
[00:54:34] Speaker A: And that wraps up Our refresh of 21 Lessons of the bitcoin rabbit hole. I hope you guys enjoyed this one.
I actually had a really good time listening back through this. It had been a while since I had read 21 lessons. It's amazing when you read literally thousands of pieces, like just mountains of stuff, how much, how much that I found I have internalized, but have kind of forgotten the full story of, or forgotten just how awesome, just how kind of beautiful or elegant a lot of. When you put the whole picture together, so many of those pieces or those Aha. Moments of bitcoin really are because, you know, after you've been doing something for what, 13 years, something like that, it just kind of becomes a thing that just is like, I just know it as bitcoin and as the thing that it is today. And to let the kind of miraculous nature of its creation, of the fact that it even exists at all kind of fade into the background, drowned out by the fact that it does just exist and it does just work and it is just here and kind of lose perspective because well, yeah, bitcoin just is. What are you going to do about it? Bitcoin's here. So it's good to have those reminders. Good to go back and reread, re listen and re explore the early days and the whole picture. Shout out to, well, a shout out to Gigi for amazing work as always.
Shout out to DHRF Human Rights foundation and the phenomenal work that they do over there. Check out their financial freedom report if you want to stay up on everything that's happening in the world around both about bitcoin and sovereignty, but also all the news and developments on the flip side of that coin and the stories of the people with boots on the ground fighting the good fight. And if you want some sovereignty, get yourself a Jade plus hardware wallet which you can get 10% off with code guy. My favorite setup is still and I'll let you know if it changes, but it is still Bluetooth setup on the Jade plus connected to the green wallet. And then of course you want lightning that just works. You want it to be intuitive and that is the BitKit wallet. The links and details for synonym and everything that they are building. They have some amazing tools. All of this will be available right in the show notes if you ever need it. Don't forget you can just come back to the show, go into the description and there's details and links straight to it all. And with that I'll catch you guys on the next one. I'm gonna have a guys take soon and a lot of updates. We're about to record a roundtable in a couple of days, so don't forget to subscribe.
[00:57:44] Speaker C: Share it with everybody you know.
[00:57:45] Speaker A: And until next time, take it easy, guys.
Believing you can accomplish something is a prerequisite to actually accomplishing it. If you think it's impossible, it's instantly something you can never achieve. Being irrationally optimistic is actually logically sound because nobody actually knows what's possible.
