Shitcoin Insider #006 - Proof of What?

[00:00:00] Speaker A: Proof of stake versus proof of work. What does it all mean? This is episode six of ShitCoin Insider. Proof of what? Bitcoin maximalists trying to make sense of the sea of shitcoins. This is shitcoin Insider. Foreign. What is up guys? Welcome back to the show everybody. It has been far, far too long since we have gotten together for an episode of Shitcoin Insider. Thank you for joining us. I am Guy Swan, host of Bitcoin Audible and we have our insider returning to the show today and we are going to talk all about proof of work versus proof of stake. Isn't isn't proof of work super wasteful? Isn't proof of stake somehow this cost free alternative that just obviously is equally secure? Or is there something fundamentally wrong with this comparison? What the hell does it mean? That is today's show. A quick note that when we recorded this, the infrastructure bill that had the language about crypto was literally. This was like the day that. That was like a huge, big stink over that weekend and it had not passed yet. But after days of arguing and revisions and trying to get better language put into the bill and a revision that the quote unquote warring parties actually could agree on, literally none of it mattered. It, it passed as is with the original language in the bill. Just a magical example of the stupidity of politics. What a fucking clown show. We get into it briefly at the beginning of this episode just as a caveat. So we did not know how it was going to unfold, but now we do. But that is all. And now it is time for episode six of ShitCoin Insider. But you were talking about the infrastructure bill and I didn't want to miss this because. Because I think this is, this is at least kind of a sharp topic right now. I mean it hasn't even been voted in yet. Like we're still, we're still sitting on the fence here. But you were saying that this is specifically. You think this is the shitcoin lobby that is basically putting this pressure right now? [00:02:36] Speaker B: Absolutely. It's the shitcoin lobby, Coin center. They are a lot of big money in the shitcoin world that actually can spend that money in Washington. And we know that's what Washington is. Washington is lobbyists, you know, pushing their agenda and they're paid. And that's. And then that's the politician job. They are, you know, fishing for who can pay them the most. And right now the shitcoin lobby, the things that I'm hearing the senators say on the floor in Congress are coming right out of shitcoin lobbyist books, we have the one that everybody's championing as like our person watching right now, Senator Lummis, she's on the floor talking about how we need to change. So to back up a little bit. Lots happened in the last two days and by the time we hear this, like this will all be meaningless because something will have happened. And this is like the per day minutiae of what's going on per hour in some cases. But we had an original infrastructure bill which included language that was very broad that said that anybody effectuating the transfer of other people's money, I'm not, I'm paraphrasing here, actually transfer other people's money for consideration, could be defined as a broker, have to register racing as a broker and it's a tax bill. And ultimately this is like reporting, broker reporting, which, you know, brings revenue for the government. But broker reporting generally is very burdensome. There are a lot of things they have to do. Like for example, they have to know who they're doing business with and they have to have your information. And so the concern here is that language is so broad that it may capture a lot of people who traditionally were not seen as brokers and force them into being a broker. And in crypto with defi platforms or NFT platforms or decentralized exchange, it's basically impossible to know who you're working with, who you're dealing with. So that would in some cases make some of these things, I don't know, either illegal or just impossible to run. And there's a lot of like nuance here. If you talk to lawyers about like, you know, if it makes it too impossible, is it unforceable or whatever, that's a whole different thing. Either way, people were afraid because they felt like this language was so broad they could use it to as a weapon against a lot of the kind of activity that's happening now, especially the shitcoin industry. And so the first amendment that came out, which had a lot of help from Coin center, which is a shitcoin funded lobby, and other shitcoin adjacent groups, added language that would exclude any kind of validation of blocks, or not even, I don't know, they use word blocks. Sorry, I don't have it pulled in front of me right now. But it would exclude validation generally. So validators and stakers, it would exclude harbor wallets, which is good things. The hardware devices that store your private key. And the big one, their big piece that I think they spent a lot of money and were Very excited about to have this in a bill. It would create the. Or it would protect or exempt the developer of a digital asset or their underlying protocol. Now, that language right there would cover most of DeFi, NFTs, DEXES, all that stuff. Creating tokens, ICOs, any stuff you want to do. [00:05:55] Speaker A: Creating your own celebrity token and just selling it. [00:05:58] Speaker B: Yeah, digital assets. Imagine a law going in, an infrastructure bill. It's a big bill. Developing digital assets and their protocols, that's huge. That would, in my opinion, open up a whole new level of legitimacy for this token creation and defi platform creation. It's not a coincidence that was there and we had. And at first I was supported it because it specifically carved out miners. There was a concern that miners might be brokers, and also there was concern that developers might be seen as a broker. And it carves them out pretty broadly by saying, like digital. Developing digital assets or their protocols. That would protect basically anything to do with developing on a crypto thing. Not just tokens like bitcoin core. But as I had more time to think about it, and also there was another minute that came out later, but as I had more time to think about it, I realized that, well, if you're a bitcoin core developer, you're not actually effectuating the transfer of other people's value for consideration. Consideration means getting paid like you're not getting paid. And it has some language in there about them being a customer too, by the way, which is relevant because of some other law that they've passed that essentially is trying to target like Nexus and things. So they would have to be like your customer specifically. Well, for you to be a broker. [00:07:25] Speaker A: So you think in this context, like the idea of trying to make Bitcoin or lightning developers liable for this, you think the language does not make that. [00:07:33] Speaker B: I think first and foremost, I don't think that they are trying to get those people, I think though, so maybe we can step back a little. What they're trying to do, and they are not necessarily good people, and I don't agree with them necessarily, but what they want to do, the government, which right now is like Janet Yellen and others, they want to do something about what they see as a massive threat, an actual more practical massive threat. And we talk about bitcoin being like a threat to the dollar and that's. And it is, but it's like one of those, like boiling frog types of threats. They're not going to really know or maybe even care by the time bitcoin has taken over the dollar they all may be like bitcoin whales. So like that's what, that's their best interest to do that. So they may be fine with that. But what defi kind of is doing right now and NFTs, while I don't think that'll be long lived, it's like providing entire like alternative markets. And if you think they care, maybe they actually do care. Sometimes people don't think they care. Why would they care about the fact that they're all scams? So like. But I think like, you know, in general I think they probably do care that they're all scams. I don't think this is all like some kind of meta political game where they got to protect the system. I think there is a degree to which they actually care that retail gets fleeced by a bunch of scammers that they cannot do anything about because of this quote unquote decentralized platform stuff. And also they don't have to pay taxes. And also they get to be anonymous. And also money launderers gets to whatever the fuck they want. Like these are real concerns. Even if you delete whatever conspiracies people have about like they're gonna take power out of Wall Street. Like, I don't think they're actually threatened. Like, I don't think Wall street thinks that you guys gonna take over Wall street or any nonsense like that. But they are like threatened that they're. [00:09:25] Speaker A: I think Wall street has been playing this game for a long time. [00:09:28] Speaker B: Yeah, I think they're threatened by their like the, they're losing their ability to enforce anything, to do anything to these participants. They don't know who's doing it. So they lose control there. There's a lot of money there that they can't tax and there's a lot of scams. So like, I think they do care about those things. And so they are focused. And not just from this bill. I'm not getting it just because of this bill, but in the FinCEN bill and other bills they've been talking about for the last year. If you talk to a lot of the Washington guys and lawyers that are in crypto, like they really are talking a lot about what do we, what are we going to do about this defi stuff. We got to like find a way to enforce. And the problem that they have is in part, you know, a shitcoin dev will deploy some smart contract that gives him all this money and he makes a token and whatever and then he'll say, oh, nothing I can do. Richard Hart it's decentralized. It's decentralized. So you know, I can't help it. Like maybe those people get scammed but whoops, you know, I just, I just made it and deployed it and make all the money from it but I can't control it. So sorry, it wasn't me. And so they want to like they're trying to figure out what they can do about that. And right now, you know, they're not that smart when it comes to tech. So they're going to take a pretty like blunt weapon to do this with. And I think one of the things they're going to try to do is target those developers and try to create language that ultimately is going to target those developers. But they're not trying to target bitcoin core developers and lightning developers and others. But now the concern is, and it's a legitimate concern that well if they have this language they could still go after other people. [00:10:58] Speaker A: That's my problem, that is my problem with it is that it's so hard to define. There's no clear line to say this is decentralized or this is centralized. Like you know, like do you even can say like, like, like for instance the dao, do you call that a non custodial service? If a handful of people can basically just take and do whatever they want with the funds with you know, with a hard fork vote essentially with this. [00:11:27] Speaker B: Infrastructure bill to keep in mind too. It's not like this is not like an enforcement bill. This is not like a let's get defi bill. It just happens to have some stuff that's relevant. So they're going to fight over the small details of it. But this isn't like the bill they're going to use to fuck devs. No, they'll have, they're going to make some new bill so specific bill that's like if you're doing this shit we're going to fuck you. Like they're going to make that bill sometime probably in the next 18 months. [00:11:53] Speaker A: Yeah. And probably within the next year. I feel like, yeah, I feel like. [00:11:56] Speaker B: This is, that bill's coming. This is not that bill. Even if these amendments get passed or not. Like that is just like a side thing here. Yeah, like the real bill. It's going to be like these people who are doing these types of activities are breaking these kind of laws that is going to come. It's going to be very clear and it's not going to be some like small language about like does this cover this kind of deb or that kind. [00:12:17] Speaker A: Of my concern is that when something gets, as things get more important, like I truly, like, I absolutely believe that defi is more prevalent in their, in their minds. Like, like it's what more well known and it's more like, oh, people know that defi is a thing then lightning scam too. Sure, sure. But, but that this is far more important and this is far more in their faces than lightning is. Lightning kind of flies under the radar. I still have, I still talk to bitcoiners who don't really know what lightning. [00:12:47] Speaker B: Is and I don't think they care. Like there's a part of me and this could be naive, but there's a part of me that feels that they actually care about what the thing is. You know, we as bitcoiners like to think of all this as like, you know, everything's a threat to them because it's revolutionary technology that's going to conquer their, their systems. And that's true, but that's not how they think of that. I mean like they're not thinking like oh my God, lightning is going to conquer us. [00:13:12] Speaker A: Well, my concern is that when they get to the point, this is why I'm so against the broad language and it is, it is absolutely difficult to pinpoint, it's difficult to write language that doesn't wrap these things together. That does. There is, there are no clearly defining lines between the two, I think, and particularly with layer two and layer three on top of bitcoin. What is proof of stake in that context? What is non custodial in that context with a multi sig. You know, like it's a very, a very weird relationship. And I worry that when lightning does become very consequential and very well known with, particularly with what's going on in El Salvador, I think this is inevitable. Like lightning I think is going to really blow up. Can they use this language against it? When the people who are threatened, when the visa, when the Western unions bring out their lobby and they start playing the RIAA game against copyright and they just start throwing all the billions that they have at trying to shut this thing down, what can they define as a broker? Is my lightning node going to be effectuating transfers and am I going to be a broker? [00:14:25] Speaker B: Let me try to address this a couple things here. And one to what we were saying before, like lightning actually doesn't, you know, isn't running much of scams. So if they care about something running much scams, they don't care about lightning. If they want to stop Scamming. They don't care about lightning. If they want to stop people from creating these multi billion dollar casinos, they don't care about lightning. Now but all that aside though, can they use this language to attack lightning? If we're talking about arguing between these amendments and the infrastructure bill, none of them are saying anything that protects lighting in particular. That's so. So lightning shouldn't be the thing that causes you to support one or the other amendment or even having no amendment. Either way, even with no amendment, lightning essentially would be the same. Maybe you could try to make some kind of argument about it's a validator or it's validating transactions, but like it's not. And if we're going to like just pretend like lightning validates transactions for the sake of this language, we can also just talk about the reality, which is that you're not actually moving anybody else's money. Like you can't take the money, it's just data. Like there's money that you're moving amongst your own yourself. [00:15:33] Speaker A: But am I effectuating transfer? [00:15:37] Speaker B: But it has to be other people's money and it has to be for consideration, which you can say the fees are for consideration, but it has to be other people's. [00:15:43] Speaker A: That's funny that the argument is that I'm only moving my money to me. I could very, very seriously make that argument and essentially prove it in like from a technical perspective. But the question is, will they listen to that? [00:15:59] Speaker B: You were getting money, you didn't move, you didn't give anybody any money. [00:16:03] Speaker A: I moved money from my left hand to my right hand. [00:16:05] Speaker B: Right. [00:16:06] Speaker A: It may have enabled someone else to make a payment somewhere, but I did. [00:16:10] Speaker B: Not because there might have been. [00:16:12] Speaker A: All I essentially did was pay the person standing right next to me. [00:16:16] Speaker B: And for all you know, it was a person moving his own money as well. Like he could have been moving his money from one of his notes to another. You have no idea. Yeah, you don't even know that there was money actually. [00:16:25] Speaker A: And I can't know. I sure shit can't file a 1099 for it. [00:16:29] Speaker B: Right. So like there are arguments, good arguments and some of the same lawyers that have spoken in defense of the Lomas Bill, which I don't like have even, you know, made good arguments that they feel they could defend lightning node operators as non brokers, non money transmitters today. Now of course you could go either way. You could also try to create a case that they were. And what that's going to come down to is what they want. The fact is if they want to try to use even existing laws without this infrastructure bill to attack node operators or lightning node operators or really almost anybody they want, they can try to make a good case. [00:17:10] Speaker A: They probably can. [00:17:11] Speaker B: The government wants to do. They're going to be able to do it. Like they want to make your activity illegal. They can make your activity illegal using either existing law or they can just make new law. And realistically that's what they want. They're probably going to get it. So ultimately that's the concern. You know, it more matters there. What matters most is their intent. And right now, luckily for us, maybe this will change. It doesn't matter because ultimately like Bitcoin doesn't have to care. It doesn't care. But, but I don't think their intent from everything I'm seeing now, and maybe this will change. Their intent is not to hurt infrastructure operators, people that are just running the networks. I don't think they want to hurt those people. They want to hurt people that are essentially participating in like financial, like, like acting like exchanges, acting like people that are selling you like a financial product. Like some yield farming protocol thing where you're creating assets and then taking people's money and then giving them yield of different assets that you also created. Like that's the kind of activity they want and care about. They. Yes, for now, but also I don't like. We have no reason to expect, other than, you know, just out of caution that they would ever care about like a general network operator or whatever. And if they do want to care about that person, that person's, you know, gonna have to go outside the law because they'll win. [00:18:36] Speaker A: That's why I specifically have two of my nodes over Tor have at all times, just in case I gotta fall back. [00:18:44] Speaker B: But with regard to these amendments, none of these amendments protect lightning operators. None of them have language that would check lightning operators. Unless you want to argue maybe that a lightning operator is a validator because in the most recent one. So let me just quickly do the summary of. [00:18:57] Speaker A: I think in the context of the language, the more broad, excuse me, the less, the more broad defense language, the more broad. Like basically the Lummis amendment. I think it is the most. If there was a, a way to make a defense and there was an amendment around using their language to put lightning network with inside of it or a lightning network node operator, I think Lummis fits better, but in the same time it tries to wrap in all of defi and just shitcoin tokens in general. [00:19:31] Speaker B: If they Want to go after lining operators though, they're not going to use infrastructure building, which they're going to use other stuff they're going to use. [00:19:36] Speaker A: They'll use SEC and ftc. [00:19:40] Speaker B: Now that we have this infrastructure bill and this Lummis amendment, now we can go after lightning node operators. They'll have. They have other laws they can use. [00:19:49] Speaker A: And the idea is to take away. Is to limit their tools. Right. [00:19:54] Speaker B: And this is not going to lower the attack surface. If you could point out and say, well see, this isn't a broker. I mean, because like in that case they're probably not even accusing you of being a broker, probably accusing you of. [00:20:03] Speaker A: Something else, but accusing you of being a money transmitter. [00:20:08] Speaker B: So anyway, so my, so like, so do we want to side with. And my biggest concern though isn't even the language. It's giving the shitcoin lobby power because what we've seen. And so the, the. What I call the shitcoin amendment written by Lemus Wideman. Why Wideman? Wieden Wideman or Wyden. Yeah, Widen. [00:20:27] Speaker A: I think it's Wieden. [00:20:29] Speaker B: And there's a third. And I forget him right now because he's to me. And to me. And, and when we listen to them speaking and defending their amendment. Weidman Wyden. Sorry, Wyden was on Twitter specifically. Now so for context, more context. There was another amendment that came out by Portman Senma and another. I forget Wagner maybe Warner. Warner. I don't know. Sorry guys, they're listening to this. [00:21:00] Speaker A: Warner Warner is the, is the other amendment. I can't remember who he did it with, but Warner is the one that. [00:21:07] Speaker B: And Portman. Anyway, that amendment, which was favored by the administration and Janet Yellen, which got out as a narrative and I, part of me feels like that was maybe even like overblown by the Coin Center, COIN lobbyist groups, because that's how politics works. Like you want to make people hate your opponent's stuff and they know that bitcoin and crypto people probably will not like something supported by Yellen just out of principle. And that's actually working because a lot of my. [00:21:38] Speaker A: Yeah, that's about, that's about right. [00:21:40] Speaker B: Principle will not support anything that she supports even when the language was better for them. So the language of the first draft of that amendment, which was, you know, set to be passed and popular and supported by the White House, took out stuff about the digital asset development and about the protocol development, which is the big thing that the shitcoin lobby wants. The big huge Thing it also, the thing that I love that it did was it took out the stuff about validating transactions and it put in language about through proof of work mining specifically you're a proof of work miner. You're good. Otherwise you're not exempt here. Now that caused supporters of the LUMS bill to specifically say in the case of Wyman widen. Sorry, how's it Rob who You know. [00:22:34] Speaker A: I think it's Wyden. [00:22:36] Speaker B: Wyden here, here. [00:22:37] Speaker A: I'll just, I'll just look it up real quick. [00:22:39] Speaker B: Things. So specifically Wyden, he tweeted that proof of work was the worst crypto tech for the environment and that supporting the LUMS bill would be like giving safe harbor to essentially giving safe harbor to this wicked technology. And we don't want to do that. [00:22:58] Speaker A: This, See this is, this is my problem. And you mentioned this in your thread on Twitter. That, which, which I won't link to because you're anonymous. But that the, and I, and I totally agree with this is that bitcoiners right now are in full force defending the, the language and the. It is Widen by the way, the Widen Lummis to me bill and language that would help defend defi and shitcoins. But the second it looks like it's beneficial for bitcoin and not for shitcoins, these shitcoiners will come out with knives and they will stab bitcoin proof of work and everything about bitcoin in the back. They do not give a. And they have proven it. They have shown it over and over and over again. And it's, it's, it's embarrassing. [00:23:51] Speaker B: Like I have representing to Washington that these people have the support of the crypto community. We have as bitcoiners calling up our senators and congressmen and saying you guys need to support these people because these people are supporting crypto innovation, bitcoin innovation. Lummis got on the floor to defend the amendment yesterday and said specifically that we needed to change language from that one because it would hurt Ethereum, which would hurt innovation. She's the one that all the bitcoiners champion is like, oh, she's on our side. She's working with us. She's on the floor specifically saying and defending Ethereum of innovation needs to be protected. This is actually a scam. Like this is the thing that like maximalist or whatever people group up Maximus say, oh, you guys are just calling everything. It's going to be like, this is actually a scam. It's run by a guy who tried to Make a quantum miner and raise money for a quantum minerin. It's actually a scam. This is run by people who have already been arrested for trying to run other scammy ICOs. In the case of somebody who was, I don't want to say his name on here was called by many one of the co founders of Ethereum who has been arrested for fraud. And what's it where you are literally like putting a gun to somebody's head to get them to do what you want. He did this to extortion. Extortion, yeah, to other founders as he was doing like ICOs on top of Ethereum. Like these are the kinds of people that we're dealing with. Also we have proof that had been posted long ago when the pre sale came out by Preston Ish about that the pre mine, the original pre mine distribution was botted, very clearly botted. It wasn't even a sophisticated bot. It was thousands of orders all the same amount, all the same type, all at the same time. The took a majority of all the Ethereum pre mine. It all belongs to one entity. Okay, this is proven like unless you believe that a bunch of individuals bought at the same time same amount, I. [00:25:46] Speaker A: Wonder why they're going to proof of stake. [00:25:48] Speaker B: Hmm, I wonder why. Yeah, sure is because they have all the coins. So this is legitimately like an actual scam. It's a big deal. This needs to be like on 60 Minutes in front of all the normies. Like can you believe how huge this scam has become and how much like acceptance it's getting? But like every other scam that's ever happened, lead paint, all these other things, all these other industries which were profitable but harmful and in this case this is very profitable for a lot of people but very harmful for many as well because it's actually a scam that's benefiting a small group and there's being mostly used for things like Ponzi's and other kinds of, you know, outright like confidence schemes. This thing is now being praised on the floor thanks to lobbyists that are making billions of dollars a year on these technologies. Scamming retail and even other sophisticated investors because they don't understand the technology enough yet. Scamming them into giving them billions of dollars through these nefarious products essentially like artificial derivatives based on the backed by nothing. They don't even have scarcity like nothing. Billions of dollar industry here a lot of money for lobbyists. We have these senators that we claim are on our side supporting these actual scams calling that innovation and then others writing that same bill who are saying proof of work does not need to be supported, does not need to have, quote, unquote, safe haven, which would be the definition of safe haven in law. We're talking about like, legal. Legalese is literally to like give something a cover or like remove liability from doing it. Like, absolutely. You would want proof of work to have safe haven. [00:27:31] Speaker A: You would have to. You'd have to. It's the only real damn consensus mechanism. [00:27:35] Speaker B: And so, and so there was a bill that specifically according to the writers of the Lummis bill, would give proof of work safe haven. And all the bitcoiners were against it because, well, maybe the devs would be hurt, which I don't think they would have. And well, Janet Yellen's behind that other one. So we don't want to support that. Like, I don't care who's behind it. Look at the language. And if we do care who's behind it, I would actually rather Janet Yellen, who hasn't said shit about work as far as I know, than these guys who are saying proof of work is bad and we need to protect Ethereum innovation. Like, this is. This is. [00:28:11] Speaker A: So are you just out of curiosity, you're. You're hoping for and. Or pushing for the Warner things have changed amendment. [00:28:18] Speaker B: So the Warren Amendment. Yes. So the Warren Amendment, because of all the outcry in part by bitcoiners, Kraken and Bitcoin magazine and Lolly and everybody emailing all their customers an emergency call up and support limits. Now there was so much support limits bill that the Court Corman amendment has now been changed twice since then, at least twice since then, and maybe changed again since I've seen it because things are moving quickly now. But first it was they removed the proof of work language and they just change it to anybody who is validating transactions but not performing any other activity or service, something like that. Paraphrasing, which in many ways actually made it unintentionally more strict. Like, I see what they're trying to do. If you keep in your mind like none of this makes sense, sometimes it's hard to follow, like, why are they saying this? If you keep in your mind that they're really. They want to get defi. You keep that in your mind the whole time. All their language makes sense. So why would they say validating transactions but not performing any other activity or service? Because they're worried about like these staking pools or some kind of like defi scheme where like you, you put money in and like validates it, whatever. And then you get like money out or you get like a yield or whatever. All this stuff is like, they want to stop that. They want to stop that. But they're trying to. They're trying. They don't care about like the network infrastructure. They don't want to attack miners. They genuinely don't. They just don't know how to put that in words. Or they can say we don't want to attack miners, but they don't want those words to be used to protect casinos. Gotcha. Then that's what they're trying to figure out. [00:29:57] Speaker A: That's what you think that's what that language was for. [00:29:58] Speaker B: But then they changed it again because people thought that that wasn't good enough. And in a way it wasn't. It would make like even like, I don't like BIP 300, but it would make stuff like BIP 300 all of a sudden questionable because that's like providing another service. Like what's going on? So like it would. It just be. It's really bad language. So they changed it again. This is the last one. [00:30:16] Speaker A: I still need to do an episode on bip 300. [00:30:18] Speaker B: Yeah. [00:30:19] Speaker A: Which. [00:30:22] Speaker B: Says proof of work or proof of stake. But no, but I still kept that. But no other like services or extras language I don't have in front of me, which is still like, you know, pretty restrictive language. But at least they use the word proof work. These are privacy. But I like that one the least now because, you know, I don't mind protecting, quote unquote proof of work. I don't mind safe haven proof of work. And if people want to complain, all the, even some of my bitcoiner friends who are pretending to be like, are pretending like they just want the broadest language. Their excuse for not defending the proof of work amendment when it existed was that, oh, well, we don't want the government picking winners and losers. Well, you. I do want them picking winners and losers. If they pick bitcoin, like, I don't give a about government. I'm not like, am I libertarian? I guess. But like if they want to defend bitcoin and nothing else, I'm cool with that because they're ultimately going to do a lot of fucked up shit anyway. They want to do something that I like fine, like they can do that, I'm not going to stop them. I would support a bill that says like only bitcoin can allow. Be allowed as a crypto. And all the other is a scam like, I would support that, and people would be like, oh, but that's not freedom. Like, I wouldn't even care because it benefits me, and nothing else in general benefits me. And by benefits me, I just means it's something that I like. I like Bitcoin. So. Yeah, but it doesn't make me a hypocrite of some kind. I don't know. Because the way I see it, though, is, like, they're gonna go against me almost 100% of the time anyway. So if they ever do anything that I agree with it, I support it. But in this case, yes, we want protections for proof of work. And even the supporter of the. I do think that's critical. The support of the Lummis bill was like he said it would be too much protection from proof of work. That's a lot of reason to support it. But this is what I hate. We didn't support it. None of us supported it. No. Phone calls were like, hey, we love this proof of work language. So when it came down to it and they saw the support for Lummis, they modified it, and now it says proof of stake and proof of work. I think that's horrible, though, because if you are going to pick winners, and by the way, those same guys who are mad about them picking winners, all of a sudden, they think this proof of work and proof of stake one is good. My suspicion is that a lot of my Bitcoiner friends, even those who work as lawyers, et cetera, a lot of them are probably secretly holding bags of Ethereum because they hated the proof of work language. But now all of a sudden, they're cool with the proof of work and proof of stake language, even though that's also picking winners, because there are a lot of other protocols that are not proof of work and proof of stake. And actually, if you want to talk about innovation, innovation will come in the form probably of something other than proof of work and proof of stake. It'll be like some guy makes a new thing and wants to attempt at some other. Now you're saying nobody can make any. [00:33:06] Speaker A: Other consensus mechanism nonsense or not accept. [00:33:08] Speaker B: Proof of work proof of stake. Like, I don't support something that tries to limit everything to only proof of work proof of stake. I think that's ridiculous. Now, I would support something that says only proof of work just because it's in my best interest and we want protection, proof of work, but I don't support something that says proof of work or proof of stake. That's. Now we're unfairly Cutting off everything else, in my opinion. [00:33:29] Speaker A: But yeah, it's a messy. It's a messy shit, man. And what's funny is that, you know, in the context of validation is like neither proof of work or proof of stake validate transactions, you know? [00:33:46] Speaker B: I know. [00:33:47] Speaker A: Like, that's what's, that's what's really funny about this is that's not the process of validation. You can, you can stamp your proof of work on invalid bullshit transactions and you can, you can stake your. You can sign your proof of stake on nonsense transactions. That is not the process of validation. The process of validation is just checking it according to the rules, is a cryptographic process. It's a process of checking the signatures, checking the hashes, checking the account, like the audit history of the coin. That is the validation process. And that happens with every node. [00:34:25] Speaker B: And that's why this ultimately comes down to their ignorance. But the thing is, you can see they're trying to protect miners and they want to fuck defi. Like, you can see that's what they're trying to do. If you can look at this. [00:34:35] Speaker A: Yeah. [00:34:36] Speaker B: From like, if you're, if you've got like a good, you know, I'm the kind of person, I can usually see what somebody's trying to say, and that's why it helps. That's why I'm good at explaining things. People I understand, like, where they're at usually, and I can talk to them from where they're at. And it's clear to me where they're at is they want to protect miners, they want to protect infrastructure providers like lightning nodes, but they don't know enough about the tech to carve those people out and not protect the defi casinos that they want to destroy or that they at least want to be able to surveil, you know, and surveillance means being able to rob you with taxes. But, but in this case, you know, like, why do I support laws that say you can't punch people in the face? Because I don't. Like, I think getting them, you know, that hurts people. And I think that scams hurt people too. Some people probably disagree with me. They just like, think the free market should, you know, scam should be allowed and whatever. People will learn. I think some stuff goes too far. Like, you know, it's nice to put up to use public money to put up a rail with reflective lighting on it on the end of a cliff where people always drive off at night. Like, you know, at a certain point, like, well, maybe you should get a bigger light if you don't want to drive off the side of cliffs. It's like. Yeah, or you could spend like a little bit of money and put like some reflective lights there and people won't fall. [00:35:56] Speaker A: Well on that point. So we're talking about proof of stake and proof of work being specifically mentioned in this Warner bill. Even though it's not about validation, it's supposedly about a form of defense to change the transaction, right? It's a, it's a form of cost, supposedly. It's an attempt at creating a cost to undo the history. It's a consensus mechanism. Maybe this is a good segue to get into. Why, like what is, what is proof of stake? What is proof of work? What is proof of anything? What, what the hell, what the hell are we even talking about here in regards to making these systems work and why they work? And what is proof of stake compared to proof of work? Why is it that we want to carve out protections for proof of work and proof of stake? What does proof of stake even really get us? [00:36:57] Speaker B: Put it this way, why wouldn't we want Bitcoin to be proof of stake? Because proof of stake uses less energy. And so even if we don't care about the environment, right, Even if we don't buy into narratives about like that energy is scarce or that using too much energy is, you know, very harmful for the environment, even if whatever cost less, right? Yeah, it costs less to do. It doesn't use as much energy. It is more efficient in a number of ways, depending on what your outcome. [00:37:28] Speaker A: If you take the result as equal. Yeah, it's more if the result is equal. [00:37:35] Speaker B: And that's the key here. So obviously just to make this very simple, and in the very beginning, the result's not equal, you're not getting the same thing with the proof of work system that you get with. You're not getting the same out output with the proof of work system that you do with proof of stake system. So that's, that's the key. If you don't understand any of the other stuff that we talk about, just understand that the reason is when you have a proof of work consensus algorithm, you are getting a very strong, very expensive, very hard to create assurance of a set of events. And when you do proof stake, you're not really getting shit. So that's the, that's the simple, just in the very beginning, simple. Now from there we can explain why for those who care what proof of work does, is you have all these people that are getting together and producing work and the Reason why we have to do this, by the way. When Bitcoin was like, you know, being brainstormed. There were other types of cryptocurrencies before. There was even other things that used proof of work before, but none of them were able to, in a decentralized way, keep track of the state of a ledger in such a way that we all knew nobody could double spend, so nobody could, like, spend their same money twice. And also where we didn't have to trust anybody to hold this information for us, and also that we could verify ourselves that the people that are moving this money have access to this money or assets, which call them assets. And so Bitcoin was the first one that kind of put all these pieces together in a way that really worked and with a game theory behind it to work without kind of corruption being a factor. Even if you're the most greedy guy, most selfish guy who just wants to benefit yourself and participate in the system, really the only thing you can do is provide more work which helps the system. And so how do we. This is the problem you have to think about. What's the problem they're trying to solve? How do we then prove that somebody did work digitally in a way that is fair, that doesn't require an oracle? And an oracle is like a person that attests to things. [00:40:01] Speaker A: How do we have a bridge between a real cost and a digital representation of that cost, which we've. There has been nothing prior to proof of work. Proof of work. There was no mechanism for this. There was no way to connect something in the digital, something in the real world to something in the digital world that did not have a massive point of failure, an entry point where human error could be entered into an authority, etc. Etc. Same this. The reason. The reason paper. Paper money that was, quote, unquote, redeemable for gold was always corrupted, was always abused, is because of that, that gap between the physical digital, I mean, the physical gold and the digital unit that represented it, or the virtual unit. [00:40:42] Speaker B: Mm. So. So. Yeah, so so. So. And that's like, if anybody could think of something, it'd be huge. And it was huge because it's a big problem. Because anything you can think of, like, if you sat there and brainstormed, I guarantee you anything you think of is going to require either somebody to attest to some work that you did. You know, somebody's going to have to. You're gonna have to get somebody's opinion as to whether or not you did this thing. That fails. Because now if that person, even if it's a group of people, it's what the government is come becomes corrupt. Now your whole system fails because you have, you have avenues for corruption there. [00:41:19] Speaker A: So what you have an authority as to who's attesting and you also have. [00:41:23] Speaker B: Like the attesters themselves. So. And their own incentives, you know, maybe misaligned. So. But what Bitcoin did was found a way to do this using math. Using math. Which math doesn't care about who you are, right? Math, there's no, nobody gets to dictate to math. You know what it's going to do. Math works because of math. And so what we've done with proof of work is we've essentially taken math. [00:41:51] Speaker A: Works because of math. I'm going to use that. [00:41:53] Speaker B: Yeah. We've essentially taken these really hard to solve problems you've probably heard of like the sudoku. Bitcoin is the sudoku machine. Whatever. You take these really hard to solve problems statistically hard to solve problems. The simplest way to think of it is like rolling a dice. You roll a six side dice and you've got like a one in six chance of hitting either any of the numbers. Now hypothetically, if dice rolling were digital, you could build a system based on dice rolls. If you could prove, you know, that those dice rolls happened somehow and like if there was something you wanted to happen with a 1, 6 probability, you know, you got it there. But proof of work takes problems that are provably hard to solve. Finding these very rare strings in very, very large amongst very large amount of numbers, like gazillion likes, like order, like I don't know, it's like size of the atoms in the universe, types of. [00:42:51] Speaker A: Types of the size of potential options versus the number of valid options of options that actually fulfill the rules is the ratio is massive. [00:43:04] Speaker B: So yeah, so you know that if you find one of these solutions to one of these very hard problems, there's no like smart way to find it. The only way to find these, these very rare numbers, essentially they're not numbers, they're strings, they're hashes to just be more accurate. So the only way to find these very rare hashes is to just try gazillions of hashes over and over and over and over again. And by chance, which can be measured with statistics or probability, by chance you will find some extremely rare output. And if you find that extremely rare output, it's proof that you must have tried a fuck ton of times to get it. Yeah. [00:43:50] Speaker A: At least probabilistic probabilistically to the point. [00:43:55] Speaker B: That and, and, and get it early. And that happens sometimes, but it's okay because the way probability works is over time, it'll balance out. [00:44:02] Speaker A: Yeah, that's like saying I could roll snake eyes on my first dice roll. But that doesn't mean if I'm still requiring three snake eyes in a row or every single time I roll dice, it's, it's wanting for snake eyes. Even if I roll it the first time, I, I get snake eyes. That doesn't mean that my probability to do that again is the same as it was the first time. So I might take me, it might take me 50 rolls the second time, and then 10 rolls the third time, and then 18 rolls the fourth time, et cetera, et cetera. And then eventually, after I've done this enough times and I've got 100 snake eyes, what I've got is essentially the exact statistical probability of, of me rolling snake eyes through the averages of all my different attempts. And that's how, that's how proof of work gives some quote unquote guaranteed cost, is that, you know how many dice rolls it will take to get out this exact string. [00:45:02] Speaker B: Yeah. And so right now what we have with Bitcoin is we have a way to prove, even though I cannot see all the computation that's being done, there's a way that I can say, I can see these very rare numbers and I can verify them for myself. Essentially, it's a hash of the block. And with that I can say like, wow, this is an incredibly rare hash. I can compute how rare this hash is. And I can see it must have taken. And right now with Bitcoin, it is billions of dollars worth of computation to generate this hash at an average of 10 minutes time. You can generate rarer hashes with that much hardware, but it would take longer, Right? That's part of it. We don't have to get too deep into like, that's how Bitcoin works, period. But essentially we can prove ourselves without any third party, just with math. We can prove that the fact that these rare hashes are being found on average every 10 minutes means that there's billions of dollars worth of hardware looking for these hashes. That's very, very, very powerful. It's very, very, very meaningful. Nobody can copy paste the bitcoin code and generate blocks that have that kind of assurance without actually doing the work. You can't just like, program like a fake hash because the users can verify it. The users can. Again, there's no way to Generate those. [00:46:24] Speaker A: Hashes and the cost is real hardware. That's the key. The cat that's the key is that the cost is real and the cost is not within the system. The cost is simply proven. It's simply verified by the system. Which, which is. And maybe we should go ahead and get into proof of work. [00:46:42] Speaker B: We will, yeah. [00:46:43] Speaker A: As to, excuse me, proof of stake. As to why this is not. It's not the same relationship with proof of stake, but I might be getting. [00:46:53] Speaker B: This is a very powerful thing because it proves to us, without third parties, without a shadow of a doubt, we know work was done. It's actually proof of work. It's what it really is. It's proof that work was done. So proof of stake. Why can't proof of stake do the same thing? The problem that proof of work proponents have with proof of work is they. [00:47:11] Speaker A: See that proof of stake components. [00:47:14] Speaker B: You mean that search of the search of that rare value. They see that as a waste. They see that computation that was done as a waste of energy because it's not actually doing anything, quote unquote, other than proving that it was spent to solve this, you know, to find this, solve this puzzle. Now. So proof of stake does to, to get around that is it just says, and proof of stake could have been done, by the way, any, at any time in the past. Like, proof of stake is what we already had. That's how software worked, how the world. [00:47:49] Speaker A: Worked before, essentially how stocks work. Like, yeah, it essentially says around a. [00:47:54] Speaker B: Company, I'm going to create these tokens, I'm going to create this protocol that creates these tokens. I'm making them out of thin air. And whoever has the most of the tokens gets most of the money and most power. So, okay, that should be enough for most people to know why it's not a good idea. But we can get into it because it does have nuance here. What proof of stake is doing is saying whoever has the quote unquote money, and it's not, remember, any money, it's specifically this money that was created by this system. Whoever has this money gets to kind of be the one that says who is right and who is wrong. And also generally the way proof of stake systems are set up, the same way that mining pays you when you win the reward. That's why people spend all that work to mine is because when they win, they get paid. And so proof of stake is the same. They win by having the most of the assets from that protocol, which the creator of that protocol is going to have the most of. [00:49:02] Speaker A: Usually that's one of the big caveats that is almost never addressed is that so many of these proof of stake coins or these things that started as ICOs issued themselves all the tokens to begin with. So you're, they're saying that, oh, this means they have the highest investment. Well, what if they got that investment for free? What if they're the creators that actually printed themselves the tokens for nothing and now they're the ones who've just. What they've done is they've just created a system where they own everything and then they have dictated a consensus mechanism that says they run it because they own everything. [00:49:37] Speaker B: We can do the same with a cloud server. It's no different. We just denominated the ownership in terms of software token rather than like some permission in a database. Yeah, it's the same thing. [00:49:47] Speaker A: Like you want to design enough tokens and you have admin access. [00:49:51] Speaker B: Yeah. If you want to make a shitcoin yourself out of thin air and you, if you want to do it fair, where it's actually decentralized, where people actually run it, you do proof of work. And the reason why is because, like, that's everybody working together. No permissions, no like, authority. Nobody says, like, well, you need to use this asset that I made. Like, anybody can use their computation or even there are other consensus algorithms that exist out there that use hard drives or whatever. Like nobody can. Anybody can participate in that equally. And if you have the most work, however the work is done, then you are the winner. You get paid by the system and even the one who created it. If they want to compete and if they want to get the assets from that protocol, they also have to do the work on the same playing ground, playing fields. Everybody else. So, you know, they don't get a, they don't get a shortcut. Unless of course, they made tokens for themselves in the beginning, which many people do. But apart from that, the proof of work piece, they have to work just as hard as everybody else, the same cost as everybody else to generate the asset. Proof of stake does not show that in common at all, of course. And so if you wanted to make a system that you knew you could control, you'd make a proof of stake. If Guy and I wanted to make our own shitcoin and we wanted to control it, we didn't want it to be fair, we didn't want it to be open, we would definitely do proof of stake. It also has a lot less overhead because we don't have to worry about having any mining infrastructure. We could literally do it on our laptop, on a shitty laptop. We could, I could say, okay, half tokens for me, half tokens are for you. We now own this 5050 and you know, we could market it and then we could start selling people our tokens that we got for free and give them tiny little proportions of the governance according to how much we wanted them to have, according to how much we sold. Also with this, if you did have some, let's say like widely used and let's even say that it was more quote unquote, decentralized in terms of ownership, there would be nothing stopping somebody from literally copy pasting the entire thing. With Bitcoin you can copy paste the code, but you can't copy paste the work that proves that it's the real deal. [00:52:12] Speaker A: If you alter anything in the history or the data of that chain, all of the proof of work is simply null and void. So you have to do the proof of work again. Whereas with signatures, if all you're doing is signing, you can copy, which is what proof of stake does, is you sign. You can copy the entire chain from start to finish, change something in the middle and then just re sign all of the stuff with your, with your dominant signature from then on out and it does not cost anything. So this is something that they refer to in proof of stake in all of the cryptographic papers. Breaking down its security model is. This is called the. Oh shit. There is like a specific term, I think of it as like the mini blockchains attack is there's no real cost to creating an entirely separate and different blockchain. So not only can you produce an alternative to try to fork it, but you can produce thousands of them and. [00:53:10] Speaker B: You can produce arbitrary anything you want because it's free. There's no cost, the validation has no cost. So I could create a chain that looks like it's a million years old because it's got a million years worth of signed blocks and they're timestamped back a million years ago and they would have the timestamp on them and everything like such and such a million BC on the timestamp and you could verify for yourself the timestamp. And look, it's got a signature. You can't do that proof of work though if you did it with proof of work you could look at the amount of work done and you could say, well I could have done that much work, you know, in two weeks. So it's probably not actually a million year old. Chain. But if you look at like Bitcoin's worth of work, aliens could come from outer space that no idea what we're doing or anything about us. They could look at the bitcoin chain and they would see for themselves the work that's in it. They would see for themselves how much energy has been used to, to kind of vouch for this history of events. Not only that you can of course verify the signatures within the blocks, but like there's, it's, it's real, it's real thing. Proof of stake is just, it's just pretend. It's like, not only that, but we can get into like if you want to attack a proof of a stake network versus proof of work network, very, very, very easy. [00:54:30] Speaker A: We've seen, we've seen it, as I say we've seen this in, in action multiple times. [00:54:35] Speaker B: Steam was one of the most popular proof of stake things in its heyday. It was a massive kind of decentralized social media, basically where you had these tokens. It's like Reddit with, with tokens. And Justin sun, the guy who runs Tron, he wanted to acquire it like as a business. He bought, he bought BitTorrent, he likes to buy these, these things. And in order to buy it, he would have needed the majority of the stakers to essentially vote for him or vote for his new validators or rules. And he was able to do this without even getting a majority of the tokens. He did it simply by talking to exchanges who held. [00:55:20] Speaker A: I would say to start off with how this, how this actually got kind of got kicked off was that he purchased the Steemit foundation, the quote unquote foundation that was running Steam and basically doing all the development, everything. He purchased it and they had a 40% stake, so they already had a huge significant vote. And then they use a, it's something referred to as delegated proof of stake, which means that you can delegate who you want your signer to be on your behalf. And the other, because they knew Justin, that you know, Tron, Tron God was trying to actually take over and change. What they were doing was, you know, that he wanted to own the network, the, the rest of the DPOs, the, the rest of the signers tried to essentially undo it. They tried to evict his 40% signature from the stake, which I think kind of own the whole like just, just in a general sense you shouldn't be able to, 60% of the vote should not be able to make 40% non existent, like lock it up. Or something, which I thought was really weird in the context of what was going on in Steam. But then that's when he went to the exchanges. So lay this out, because this is just absolutely crazy. [00:56:37] Speaker B: Yeah. And so he was able to use exchanges in combination with the foundation to essentially use other people's tokens to take over control of the entire protocol. [00:56:49] Speaker A: Hobie, Binance and Poloniex, they use customer funds, they use customer Steam to stake for Tron in order to have the majority vote so that they could. It was a hostile takeover. So he did not have the stake, they didn't have the actual stake. They used other people's stake because custodians can just sign on whoever's behalf and all the power, all the power rests in the people who hold the coins. And, and they actually have, they have authority, they have authority over the history and the routes that the network takes through that. And I believe those are, those are the three exchanges predominantly. I think Binance was kind of like. [00:57:33] Speaker B: The key player last time I checked, by the way. And this is a great point, a good segue to this, the way that Ethereum 2 is going to work, you as a user, you're supposed to have 32 Ethereum minimum and run your own hardware and all this stuff, or instead of doing all that, you can just delegate your tokens to a pool which will stake on your behalf and pay you, and more so than that. And there's some great threads about this on Twitter. This is getting off to a little bit of weeds here, but there will be incentives to give your Ethereum to a pool because they will give you basically wrapped, staked Ethereum that will generate yield, but you'll still get to use it like Ethereum, you still get to spend it, play with it. So what this means is any rational actor who's not trying to be, you know, who isn't just trying to like be, do what's best for the network and is doing what's best for himself, which is what people do, is going to probably wrap his ETH or put in a pool on an exchange, and that means giving his control of his vote to somebody else. So. And even right now, the most popular E3 staking pools, last I checked, I think they were over 85% of all the eth in a single. [00:58:51] Speaker A: Holy crap. [00:58:52] Speaker B: Yeah, and it's going to be worse than that. It's going to be very, very, very concentrated. Because one, a lot of people might not have 32E, but two, even if they did, they don't want to run all the hardware and risk getting slashed. Run it in your home and you know it has a slashing mechanism. So if you don't, if you have like a hardware malfunction, you will lose your Ethereum. So you need it to be very reliable. You need to run this hardware like very well. Can't just you know, willy nilly it from your basement on a computer. So even if you had 32 ETH, you're probably going to delegate it to a company to do it for you. And even then you want to wrap it so you can get yield off of it and still be liquid. That's like the best case. But all of these things mean that we have every reason to expect the overwhelming majority, overwhelming majority of all. Ethereum is going to be controlled by a very, very, very small number of people which is going to make miner extract value worse by the way, which is where miners or in this case stakers will be able to front run and reorder other transactions in order to benefit themselves. Happens all the time on Ethereum today. It's a very big deal. It's going to be even easier to do with Ethereum 2.0. [01:00:09] Speaker A: It's a lot of how DFI is constantly attacked or hit with kind of the forced liquidations or whatever so that they can. [01:00:20] Speaker B: It is incredibly, incredibly, incredibly centralized. But not only that, incredibly, incredibly, incredibly inequitable. We're talking about going to civilizations. Since the beginning of time almost has been a struggle between the regular people that are working and the people who either make or have all the money. And those are usually the same people because they don't work and they try to tell the other guys what to do. And the workers obviously usually get fucked by that and don't think it's a very good way of doing things. So even today there are a lot of laws around trying to get money out of politics. We know that money in politics equals corruption, right? Nobody would argue, maybe some would that, you know, we want more money to be more freely allowed in politics. I mean that's how you get, that's like beeline to corruption. And that's exactly like just nakedly what proof of stake is. It says if you have the money and by the way, if you have our approved money, not any money from anywhere, but specifically our proof money that we made that we can decide if we want to give you or not. If you have this then you have control, otherwise you have no control. And if you have this you get to benefit from the, from the, from the creation of the money. Otherwise you don't get any of that. And if you have more than half of it, you will forever be the richest person. And nobody could ever stop you because you will get more than half of all the inflation forever. So nobody could ever catch up to you. [01:02:06] Speaker A: Yeah, that's the richest. [01:02:08] Speaker B: You'll be the richest. Your kids will be the richest. Their kids will be the richest forever. [01:02:12] Speaker A: That's one of the biggest things about proof of stake that I think shows exactly how inequitable and centralizing the actual effect is, is that if you have a majority of the stake, it's perpetual. If you have a majority of the work, it doesn't mean shit in six months. It means. It means absolutely nothing. You are. And even more so is that you still have to redo the work to redo even any work that you have done in the past. Whereas proof of stake is just a. Is just a flat. If I have 51%, I have 51%. It doesn't matter if I'm going 10 blocks back or I'm talking about six months from now, first versus today, it's exactly the same. And you also get 51% of the payout. So an analogy that I like to use to try to explain this, because it's a consensus mechanism. It's a consensus mechanism. It's an attempt to create a cost so that it is. It's difficult, or there is, there is a level of integrity about going backwards, about going into the history and changing things. So the analogy I like to give is that based on the nature of what integrity is trying to be created, the cost must come from outside of what is being defined. If the, if the cost is being defined within the very thing that the cost is supposed to exist in, then what you're doing is using the authority can change your reference for whether or not something was costly. So that's what proof of stake is doing. Whereas proof of work, since the cost is external, the cost is real in energy, well, then we can know in the digital sense that something, some real cost was actually put there. So the analogy is that proof of work is like a force field. It's a force field where exactly how much energy you put into it is how much energy it can defend against. So everybody in the world is running proof of work at the exact same time, and they are collectively making this force field around Bitcoin stronger and thicker and harder to get through. And even the people who are doing the proof of work cannot get back through that without redoing all of the Energy that has been put into it, including their own. It is usable in one or it is useful in one direction as a cost or as a defense mechanism. And there's no reusing it later on. They just have to redo it. And while proof of stake is saying, and it's saying that that force field protects us because as long as we validate and everything that happens is, happens within the, the proof that that force field is there, well then it means that someone has to fight through the force field in order to change anything. Proof of stake is like having the five richest guys stand around everybody with a gun and say that because they are most invested in the things that are inside the, you know, inside the perimeter, that they're not going to cheat it. But they're also the people with the gun so they can turn right around and point it to people inside. Inside the perimeter. [01:05:34] Speaker B: Yeah, and this is a, this is great segue to the next piece too, which is in proof of stake. If you did want to cheat, you don't have an additional cost with proof of work. Yeah, I want to try to cheat. Even if I'm the biggest miner, if I want to attempt to cheat, and there are only limited ways you can cheat, can only essentially like maybe reverse one of my own transactions or something that I had a signature for, which very like limits my options tremendously in what I can do. Or maybe I can try to censor somebody, but at any time anybody else could, you know, uncensored them by broadcasting their train or putting a transaction of block. But if I want to try to do one of these things, if I want to try to express some kind of control, which very limited what I can do in the first place, it's going to cost me a fortune even to try. And if I fail, I could lose millions of dollars. Okay. So I'm actually risking massive amounts of money to accomplish these things with proof of stake. If I'm a majority and it's my turn to order and submit transactions. Like, you don't get a turn with proof of work. You're just fighting to be the one that gets to submit valid work. So you don't know when your block's going to go through. You can't predict it and you can't plan for it. Proof of stake. Absolutely. Once you like, there's rounds, usually in different algorithms, different ways of doing the rounds. But once it's your turn, you can do whatever you want and it's free. And you know, for 100% that's what's going to go through. Now the only thing that can stop you, let's say if you did something that other people would consider to be illegal, is they might not sign it and then you'd get slashed. But if you are the majority, it's free for you to do any kind of attack you want. And the attacks are more, the attacks can be a much more serious in a proof of stake system as well. At least most of the ones the ways they're made. Now with proof of work, the users validate all the transactions. So the miner, just because he puts something in a block and it has the most proof of work doesn't mean anything. If all the users and the other, you know, and the other miners see that there are legal transactions in that block, or it's an illegal block, it, it gets kicked out. But, and so it's valid or invalid by definition according to whether the users, whether it's mathematically actually valid. [01:07:54] Speaker A: But with proof of stake software that's being run by pretty much everyone on. [01:07:57] Speaker B: The network, yeah, with proof of stake, whether it's valid or invalid has nothing to do necessarily with what's in the block, but by definition just by who signs the block. So if everybody agrees that a block is valid or the majority agree that it's valid, then it's valid by definition, you mean? Yeah, with proof of stake, a valid block is improve. A stake is one that is signed by all the signers, not one that everybody is verifying is actually valid. [01:08:26] Speaker A: Well, see, the thing is, is technically, technically that's not entirely true because if you are running a node, you can still check to see if like did that signature even match up with that person's coins. But here's the issue with it is that people completely misconstrue proof of stake as some sort of, as some sort of scaling option. So they use it as an excuse to say you don't need to run a node. We can have gigabyte blocks and all of this stuff and it's not like hugely costly. So they're, they're explicit. And almost everybody and generally in the shitcoin community, not everybody, but very, very generally and very, very widespread, they will argue that nodes don't matter, which means they're one defense against a hostile takeover. For proof of stake that would change the consensus rules or would try to spend the wrong person's coins is not even there. They argue that it doesn't matter and that they should not need that defense. [01:09:24] Speaker B: But they actually don't matter in proof stake because it doesn't matter if you see that a quote unquote illegal transaction was passed. If it's signed, it's valid. Like the signing is what makes it valid. It's different from Bitcoin. Bitcoin blocks are not valid because they have the most proof of work on them. They have to also follow the rules. [01:09:45] Speaker A: I don't think that's true for all of them. I don't think that's true for all of them because if somebody is running the software, they can reject a proof of stake, but they're not a signer. [01:09:55] Speaker B: So it doesn't matter. [01:09:56] Speaker A: But they're not a signer. They're not a signer, but they're still, they can still reject it from the network side. So let's say every single business and user was running a node that was checking to make sure the signatures were valid. [01:10:07] Speaker B: Even though you can't fork without the signers, like with proof of work you can fork with, with work with signers, there's no way to fork without them. Like the only box are valid are the ones they sign. So it's what they say goes, period. They are the forks. If there's a fork, like there's nothing you can do. [01:10:29] Speaker A: I think that's like the kind of force takeover with Steam makes it real, right? [01:10:36] Speaker B: So like it's a, it's a, it's a subtle and important difference. It's literally like you can, as all the users can decide, like, okay, we're not going to care about those signers anymore. We're going to make a new network basically that deletes all their coins and pretend like those guys don't exist and try again. [01:10:55] Speaker A: But like, well, they're, what they're doing though is they're, they're altering the network to make themselves the signers, right? [01:11:01] Speaker B: I mean, you know, and that's, you can just do that arbitrarily all day long. It's a big difference. You cannot go against the signers. It doesn't matter if they sign something illegal. There's no defense from a node. Only thing is, okay, we'll know maybe, but that's it. [01:11:15] Speaker A: I think, I still think the big attacks too though, like to, to really make sense of like proof of stake, I think is, it's hard to, it's very nuanced to articulate why it is that it's not secure and it's not like a legitimate consensus mechanism. And I think these, the band aids that, that they put on them and the attack vectors are how to make sense of what's wrong with proof of stake? So one of them is the old keys attack or the. I think it's actually like a slightly different name, but it's the fact that if I own 60% of the tokens, let's say I own 60% of tokens and I do a private transfer to somebody else, like Tron for, for instance, he buys the Steemit foundation. Right? Let's say I do a private off exchange trade with someone else and I buy all my bitcoin, but I still have keys. Even though I don't own the proof of stake token anymore, I still have keys for 60% of the supply. And when I still owned them, I can still sign as the majority signer for the history from that point where I had a wallet with 60% of the tokens. [01:12:31] Speaker B: Yeah, you have to stake grind, but. [01:12:32] Speaker A: I have no stake. I have absolutely no stake anymore. But I can stake grind. I can continue to write a new history, exclude my transaction where I sent it to someone else, and then I can sign a new history that has all valid, all valid transactions, all valid signatures, all of my valid stakeholders, that undoes my cell, my sale of the stake token and ends up being longer than the current quote unquote valid stake chain. And I can get all of my coins back and I still will have my Bitcoin because bitcoin actually has a real force field around it and nobody can do that to my Bitcoin. [01:13:11] Speaker B: Absolutely. And let me try to explain though why I feel that nodes matter. Proof of work, but not a proof of stake. The nodes are running the rules they want, and they are, and the miners are providing a service to those nodes. We are collectively running Bitcoin. Bitcoin's rules. There's 21 million of them, 6.25 per block. That cuts in half every four years. Difficulty algorithm, all these things, the consensus rules. If the miners want to make money, they can mine our rules that we as the users, as the node operators, are essentially paying them to run because we are also the purchaser of the asset, the one that brings value to the asset. So somebody else wants the new rules. They can run a new node with new rules. And if they have any economic like weight, then people can decide to go and mine those rules too and get paid by those people. That is what happens with proof of work. The people are the ones that are saying like I will pay you or I value this. So if you want to protect this. [01:14:13] Speaker A: You get paid, put security around this set of rules and I will allow you to take the fee and the reward. [01:14:21] Speaker B: These rules say you get paid within these rules. Exactly within these rules. That I respect includes ways that you're going to get paid. And, and so that's why the users ultimately are, are in charge there, because you as a miner, you're just doing with the user's value and getting paid by that. And if you think someone, if you want to get money from some other user that values me else, you're free to do that and get paid by that guy or his friends or whatever. Proof of stake, though, it's not about the rules, it's about the signers. The only thing you can do as a user running a node is to pick different signers. You don't get to pick different rules and you don't even necessarily pick the signers because you're opting into something that already has a distribution. Now, if you created the thing from scratch, then yes, you pick the signage. You can make it yourself, you can make it, you can friends, you can make it, whoever. But whatever those signers sign is the rules. If there's going to be a fork, it's because all the signers signed different rules or a block with different rules, and they can arbitrarily sign different things and it'll be up to. Of course, the users may not value that thing anymore. That's a risk. But if the signers sign something, that's it. The users don't get to say any signer out there that signs my thing that I like gets paid. No, like, only certain people can sign it and they get to decide what's real and what's not. It's a big difference. So whatever they sign, if you're running software that says they're in charge, then they're in charge and they can make the rules whatever they want. And all you can do about it as a user is run some software that doesn't care about those guys and cares about somebody else, whether it's yourself or somebody else. But whoever is the signer, even in your new thing, gets to make the rules. So that's the difference. Proof of work, it is about the rules. Proof of stake, they have rules that you can see, but whether or not they follow them and whether or not it matters it follows them depends on what they sign. [01:16:19] Speaker A: I, I still think in a general sense that the ability to run a node will define what the network accepts as valid from either a proof of work generator or a signer. But I know that, I know that also is true, though for some Proof of stake. I just don't think it's. I don't think it's ubiquitous across proof of stake because there are so many different implementations of it, even though most of the users do accept it that way, that it's. It's only a concern about who has the most. [01:16:50] Speaker B: Well, then the chain would just stop. I mean, like, if all the signers, let's say you, you. [01:16:54] Speaker A: I mean technically, technically, in a sense, proof of work. If all the proof of work miners, you know, switched over to like 90% of them switched over to another network, it would stop until they do it. [01:17:06] Speaker B: Anybody could do it, but anybody can't do it on proof of stake. So this is the, this is super important. Yeah. You know, it would literally like if the signers either, ultimately, this is why they get their way. Because if they're going to sign a certain thing and say this is valid, it's valid. Because if you want to say I'm a node and I say it's not, this isn't right. So, well, then you're literally. That chain will never be extended by anybody because the only people with the. [01:17:30] Speaker A: Authority, they have to edit it to remove the stake, because the stake is the only thing that can. You can get proof of work from somewhere else. You can change your proof of work market dynamic in, in that, in that thing. But you can't change the stake without changing the history, because it's within the history that defines who actually has the signature power. And that's what you're saying now. [01:17:50] Speaker B: I don't think you can make a system. [01:17:52] Speaker A: You can wait as a full node. You can wait until proof of work comes back and you can wait for them to give up spending on this shitcoin token that's not worth anything because it doesn't have a network or exchanges or anything like that, because everybody's running a node in proof of stake. You can't, because you simply can't start it back up without the dominant proof of stake without somebody else to a different network. [01:18:15] Speaker B: Yeah, you're saying these guys are wrong, but these guys are the only ones that are allowed to continue the chain. So by definition they cannot be wrong. That's why you cannot build a system where. [01:18:24] Speaker A: So you're stuck in a bottleneck where neither one of you have a cost to wait and only one of you can actually send it forward. So whereas proof of work you have like, let's say you fork off in a proof of work network, well, you have a huge cost to making a token that isn't on my network I'm the full nodes and I'm the network. Right? So, so I can just sit out and wait. It doesn't, it doesn't really cost me anything to just chill out for eight hours and watch you burn through millions and millions and millions of dollars on a shitcoin token. [01:18:54] Speaker B: Your rules, they'll get more miners. [01:18:56] Speaker A: Whereas proof of stake. It doesn't cost you anything to wait and it doesn't cost me. Like we're, we're even. Even though you're the one with the stake. You are, you're the one that should have the cost, but you don't. Well, he's why it's fake integrity. [01:19:09] Speaker B: They will continue the blocks, they'll continue. [01:19:10] Speaker A: The box, they'll continue it on a different network. Exactly. Exactly. [01:19:12] Speaker B: Well this the same network. The network is by the signers, not by the rules. The proof of stake. That's my point. The proof of stake. The network is by the signers. That's the only thing that matters. [01:19:23] Speaker A: Well you can to think about like the, the cost of this. See this is why checkpoints exist in essentially every proof of stake network because it's. It shows that there is not a real cost. The checkpoint is yet another. Like this is where, when, when your cost is based within the history and the cost is supposed to be the thing that makes it difficult to define the history, it makes the integrity of the history valid or is supposedly the source of its integrity. If your cost is in the history, well then the very thing that's supposed to be your source of integrity is the thing that defines whether or not there's any integrity. Like it's defining its own history as to whether or not it's being punished. Which is why you end up in checkpoints. That's where I think the real secret to showing why proof of stake doesn't work is all the band aids is somebody has to have a checkpoint. Going back to that old keys attack is that I used to have 60% of the tokens and 60% of the stake. Therefore I could create an alternate history of this proof of stake entire network in which I still own that. And then I have valid signatures and everything all the way up to the current date or the current block. So what do you do to protect against that? What do you predict? Maybe I had those keys two years ago. I can still just sign. I can still sign and fake timestamps and do do stuff all the way up to today and it cost me essentially nothing. [01:20:54] Speaker B: And so one of the. [01:20:55] Speaker A: So you use checkpoints you use checkpoints. The developers, the Ethereum foundation, the Steam foundation, whoever it is puts in checkpoints where after something is like a day old or a hundred blocks back or whatever it is, they sign it. And now this is official history. This is canon for the. For their blockchain. But what does that mean? That means that whoever has the checkpoint, whoever signs the checkpoint, what if they're the ones that had the 60% and they're the ones that want to attack right then, now they just sign different checkpoints. [01:21:30] Speaker B: One of the. [01:21:32] Speaker A: It's a hugely. It just. It's actually proof the checkpoints themselves are proof that it's centralized under a single authority as to what the official history is. [01:21:41] Speaker B: And here's another thing that is also on its own, despite. Even if none of the other things were the case, this alone would be enough to make this never, ever a part of Bitcoin or any equitable system. And that is the way that they punish. The way that. The way in the protocol that you punish a bad actor to say, oh, this guy didn't do the rules that we think he should have done as the majority or didn't like, his hardware's not good enough to timely sign these blocks. The way they punish in the Eth2 implementation and in some others is called slashing. And slashing means we're going to punish you for not doing something well enough or right enough, whether it was technical error or maliciousness. We're going to punish you by taking some of your coins, we're going to burn some of your coins. And like first glance, maybe you think, well, that's reasonable. This will prevent people from trying to do any of these evil things, they'll get their current, their coins burned. But if you consider that the majority ultimately decides what's getting slashed and what isn't, and you can say slashing happens according to certain things that are defined in the protocol. But one of those things is doing nothing. If you do nothing, you get slashed. So if I'm the majority, I can just ignore you, even though you're doing everything you're supposed to do. I can just not add your block and say, you did nothing, and I'm going to take your coins and every time it's your turn, I'm going to say, you did nothing and take your coins. And you can go on Twitter and you can scream and you can shout and say, here's my block, motherfucker. I did it. I signed it right here. And I can say, I don't see you, buddy. You're not on this chain that I'm signing right here. You did nothing. And so according to the protocol rules, we're taking some of your coins. So the majority can literally delete the minority and increase their majority, which makes. [01:23:41] Speaker A: It, which makes it higher risk and more dangerous for someone with less stake to actually participate, which, which gives them less incentive to do so and more incentive for the people who do have massive amounts of stake. And of course that stake is perpetual. So there's no attacking it. There's no, there's no undoing it. [01:23:59] Speaker B: Think about global politics today. You know, it started off with rules on paper that's in some cases sounded good. The United States Constitution sounded great. But in reality it's people with power using that power against other people, people even within that system. So if you could imagine one of these systems actually being taken seriously, multi billion or even trillion dollar systems with people that have control getting together and collaborating and you are the smallest guy at the table and well, I mean these guys can credibly delete your stake if you don't do whatever it is that they want you to do. I mean like these are, this is how corruption happens because you have individuals with real power, bad incentives, bad game theory, control. I mean the sky is the limit. We basically, by trusting these kinds of proof of stake systems, you're trusting that people will just behave in politics, they will ignore the incentive for corruption and they will just always be honest and good and thoughtful and make sure everybody's being treated fairly because they are a good person. [01:25:10] Speaker A: You're trusting that the people standing around the perimeter of, of your ecosystem, of your economy, who have all the power and who have the guns, won't turn it inward and use it to control rather than as a means of defense. [01:25:24] Speaker B: This is, this should be a complete. To anybody who actually cares about sovereignty, anybody who likes Bitcoin because it's outside of government, not even because it's, it's, it's its own thing that nobody can control. It's not anti government. It's just doesn't care about government. It's, it's its own thing with its own rules that nobody can fuck with that there's no way to corrupt. There's no, you cannot corrupt it because nobody's in control and nobody has an advantage over anybody. Even the biggest miner cannot, does not have any power control and he has to consistently constantly work for that power. Can't pass it on to his kids, this power that doesn't even give him anything. [01:26:02] Speaker A: And there's a Lot of dishonesty or maybe just ignorance around the conversation. For instance, every time I bring up the checkpoints thing is that invariably the slightly informed shitcoiner will immediately jump on. Oh, Bitcoin has checkpoints. And it's, it's basically a disingenuous, it's a disingenuous wording. It's, it's the, the checkpoints don't do the same thing. For instance, and this is, this is how the conversation gets so muddy so quickly is that terminology is abused. This is why, you know, in the context of blockchain validation we talked about, everybody talks about proof of work validation, proof of stake validation. That's not what validation is. Full nodes. Some people say, oh, Ethereum has more full nodes than Bitcoin when they aren't even checking the history, they cannot fully audit. They can't even tell you what the supply of Ethereum is. That's not a full node. You know, like, like so many of the words get misconstrued and checkpoints is one of the big ones because checkpoints are explicitly within the consensus rules of proof of stake. If something violates the quote unquote approved checkpoint from the Steam foundation or Ethereum, whatever, whoever your checkpoint signer is, your node, your, your software is supposed to consider it invalid. That is about the rules. That is about consensus. Those are check, those are consensus checkpoints as to what is real and what is not. The ones in Bitcoin are just block download checkpoints. They're just to prevent a spam attack back from the genesis block, where proof of work is so small that it's really easy to just proof produce it on a single computer because it was running on a single computer for like six months. There's like six people on the damn network. It's just an anti spam mechanism. The checkpoints have nothing to do with whether or not it's valid. If the rules are checked against those checkpoints and the rules are invalid or there's an invalid block, even though it has that signature, doesn't matter, you're throwing it out. It's got nothing to do with the rules. There just is just a shortcut so that you can download faster and you don't have to worry about a malicious node giving you false information for the first 10,000 blocks, which will cost somebody a couple of hours on their gpu. [01:28:28] Speaker B: Our nodes are programmed. If somebody somehow had a block that differed even from block two or chain of blocks that differed even from the second block and had every single block and became longest chain and it had all the same work in it. Like our nodes would start deleting or archiving the current ledger end, it would immediately move to the other one. I mean that's ridiculous. [01:28:49] Speaker A: But if you checkpoint 300,000 blocks up and you just kind of use that as your reference point and it's a valid block, well then you don't have to worry about those as long as it's valid when you continue downloading up to that checkpoint. So it's literally just a client side shortcut that if invalid data comes in within that shortcut, you will still reject it. Again. It's got nothing to do with consensus, it's got nothing to do with the valid rules of which blockchain is which. [01:29:15] Speaker B: The Ethereum guys have even changed their terminology with how they talk about nodes. So bitcoiners know a full node means you have all of the. [01:29:26] Speaker A: That gets me so much it drives me crazy. [01:29:28] Speaker B: They used to have arguments over their nodes and eventually because they wanted to be seen as also running full nodes, they changed a full node to mean basically like a validating node that has like some chain tip and maybe some, some of the recent data. But, but the, but with this actual what we would call a full node, they have changed the language to archive node. So you could have a bitcoiner arguing in good faith about full node and an Ethereum guy in some cases knowing full well they're not talking about the same thing. Say oh yeah, I can run a full node too. See, I'm also running a full node. Even though what they're talking about is not the equivalent thing. That name has been changed to archival node in Ethereum nomenclature. [01:30:15] Speaker A: And even worse, maybe it isn't somebody arguing for Ethereum who does know what they're talking about and they're being malicious. But more than likely, maybe somebody who has no idea that there's a difference. Like, I mean that's how, that's, that's how that's how they push it is that people will be like if you just go search full nodes, Ethereum full nodes, Bitcoin and look at the count. Looks like Bitcoin has less, but it doesn't because virtually none of those Ethereum full nodes. The thing is, what it's doing is it's verifying that there was the most proof of work on old blocks, but it's creating a shortcut. It's basically hashing down to a super compressed version of the history so that you're just trusting the aggregate rather than actually trusting the data. Which means that there could be invalid transactions, there could be double spins in that, as long as the accounting works out in the aggregate. But you're not checking, you're not checking. And I even had an argument with somebody once that they said, oh well, you can rebuild that Data from the 1.8 terabyte full node to the 8 terabyte archive node. You can recreate the data and check it. I was like, well, it's not a full node until you actually check the first data. Like that's the very thing that matters. You can't call it a full node. If you just skipped over this validation and assumed that the answer was right. Assume that two plus two equals four and you didn't check that it was actually two plus actually two. You just said, okay, I'll take the four and I'll run with it. Which is essentially what the Ethereum full node is doing is it's trying to shortcut and then saying that because they can get that data back later and check it if they wanted to, well then that means it's safe. It's like, no, it is not safe and it is not valid and it is not verified until you validate and verify it, period. Like it's just not. And it's where the conversation falls apart. So so often this is frustrating. [01:32:19] Speaker B: Yes. Yeah. I mean, so kind of to just wrap all this up a little bit is, it's. These are not even close to the same thing. One of them is incredibly centralized. It can be easily, you know, you can easily control it. You actually get control with proof of stake. You actually become the leader of the thing. If you have all the coins that are part of the protocol and it's. [01:32:48] Speaker A: Nobody can ever take it from you unless you give it to them. [01:32:51] Speaker B: It's not merit based. You can also be arrested and somebody else can take your control. If you're a big miner, if you have a big minor conference and you know they try to arrest all the miners there, it's irrelevant. You'd have to actually like take over all their companies and do all of their work forever. Like be like taking over. [01:33:10] Speaker A: The adversary can just sign with proof of stake arbitrarily for no cost. But you still have to run the mining machines and pay the electricity. You still have to break through the force field. Even if you have the most, the most computer power. [01:33:23] Speaker B: A hacker just gets your signature and that's it all he needs your signature. Now he controls the network or an authority. They get your signature, they control that piece of the network, which by extension Also controls the rules. There's no, there are no rules without the signers and proof of stake. [01:33:39] Speaker A: I mean, it's just think about how that dangerous that is. Is that somebody, somebody who was just there early, you know, got 70% pre mine or holds 40% of the tokens or something like that. That. What, what stake does a hacker have? You know, like, it's not even, it's not even just old keys that you have to worry about. It's hacked keys. That's not, that's not. You don't have to worry about that in Bitcoin. [01:33:59] Speaker B: No. And you also don't have to worry about in Bitcoin anybody having control over the protocol. Nobody, not even the biggest miners have control of the protocol. The biggest stakers absolutely have control and they can delete the smaller stakers. I mean, it's, it's, it's entirely different. I mean, proof of stake is what we already had before Bitcoin. Proof of stake is the old system. It's the most corrupt version of the old system. Actually worse than the old system because money literally is it. It's just money equals votes. In the old system, money maybe buys you votes if you're good at spending it and tricking people into giving you their votes. In the proof of stake system, literally the money is just plain old votes. There's no middleman. [01:34:37] Speaker A: Yeah. One of the interesting things to think about, like how would proof of stake play out if the stock market was proof of stake is. Think about it in the context, like let's say Apple, Right. Apple is, in a sense. Stock market is like stocks themselves and securities are proof of stake. But the authority over who owns what stock is essentially a combination of Apple and the stock exchange, the nasdaq, the authority that's exchanging ownership between one person and another. Now imagine if the authority over who owned what stock and what the history of trading in the stock is, are the biggest stockholders. Imagine if the guy who owns 60% of Apple is the one who decides the history of exchange and who ends up owning the most Apple stock. What if they don't like somebody? What if they don't like somebody on the board who owns 10% of the stock? How difficult is it for them to go if they have control over the history of all of the exchanges of Apple stock because they have the most keys, they have the most stake. Well, maybe I don't want that 10% signer, that 10% stake to be there anymore because I get to decide what the history is. Um, it's you, you wouldn't want that. That would be bad. That's why you have NASDAQ run who owns what. That's why you have an exchange and a legal system. Define the ownership and, and enforce it. Enforce it outside of that system is because within the system, the, the incentive is for the person with the most power. Power to take the most power. It's for them to control the most. And if they are the ones that define the history of who controls what, then they're gonna, they're going to favor themselves, period. And you can move that problem around, you can put it behind checkpoints and you can put it behind random number generators, but it's still there. You've just moved it to a different location. You've moved it from your, you know, from a hat on top of your head to something in your pocket, but it's still there. It's still the. It's a fundamental problem. [01:36:46] Speaker B: And I think it's worth mentioning too, by the way, that proof of work only matters if the users are involved and are running nodes. Yeah, because. [01:36:56] Speaker A: Yeah, that's a good point. [01:36:56] Speaker B: For example, right now, Ethereum is technically proof of work, but it doesn't matter because nobody. [01:37:04] Speaker A: People aren't checking the work, nobody runs a node. [01:37:07] Speaker B: So when they want to make a change, they can make any change they want, including deleting all the miners. When Ethereum 2.0 comes out, they're essentially cutting off all those miners, and there's not a damn thing the miners can do about it because they are in absolute control over what rules are being run. When they perform hard forks, they're in absolute control over what rules are being run when they move everybody off of the entire network until everybody to stop trading and just, you know, censor one hacker and then move the entire thing to a new chain. Like, they can do that because they're in control of what's being run. So even with proof of work, if it's centralized to a few nodes, then, you know, doesn't mean shit. So that's why I think one of the most. [01:37:55] Speaker A: Yeah, and I think one of the most beautiful things about proof of stake's vulnerabilities is that one of the. So checkpoints have been a way, a band aid, to get around this proof of stake problem and the old keys and the hacked keys problem. And then there have been a handful of other, you know, delegated proof of stake the pools. Like there's been all sorts of ways to band aid around the fundamental issue of the cost coming from within the thing. That you're defining the cost. But one of the funny things is one of the other band aids is a random number generator is that within the protocol there is a. There is a random chance that your signature, even if you have the majority of it is, is not valid and that you simply aren't chosen as a validator or as a, as a valid staker for this round. So it's an attempt to get around yet again this continuous problem of just moving the goalposts and moving the, the fundamental issue, moving it around so that it's really hard to defined. So this obscured. But what happens when, when they have to have a random number generator in order to have a valid signature? Well, then it's like rolling a dice. You, you can just roll a dice over and over and over again until that random number generator, that random die simply gives you that signature, that 60% signature like you want. And you'll just keep rolling, rolling the dice. And you can produce a history in which it favors you every single time because you keep trying over and over and over again until you are favored. And then you sign and you move forward. So you still can do it. But what happened? What did you just do? You turned proof of stake into proof of work. You just created a centralized proof of work where somebody can cheat proof of stake by using a real cost, the abuse of the random number generator of the hashes. You just created a centralized proof of work on that that can basically dominate the proof of stake. And that's why fundamentally the cost has to be real and it must come from outside of the system. And the only mechanism we know of in cryptography today, maybe there will be another one. But the only one that we know of today that cannot be cheated and is real is proof of work that takes a cost in the real world and produces digital integrity. And it's, it's. I always thought that was in my digging of proof of stake, I thought that was such an elegant truth is that even with all the different attempts to secure proof of stake, what ends up happening to what ends up happening at the end of the day, even to exploit it is to turn it into a proof of work proof of work system because they have to randomize the hash. [01:40:53] Speaker B: And these lobbyists now who are the Lummis Bill, that all the bitcoiners were supporting, these people are going to go against proof of work. Why? Because that's going to benefit where their lobbyist money comes from. When Ethereum and maybe other big protocols start focusing on proof of stake, they're going to leverage politics, national politics as a tool there by trying to crush the competition through narratives about the environment, trying to win over people to their system because it's environmentally friendly and ultimately it allows a small group of people to be in control. Bitcoin is amazing. And this won't kill bitcoin. You can't kill bitcoin. It just makes it, you know, you can hurt it in a jurisdiction or whatever. People can still use it. That's the beauty of it. But this, they, they don't like that. They don't like things that nobody controls. I know. And it's very hard to have a lobby around something that nobody controls. Nobody's getting like you know, kind of free money from that thing for a marketing budget or money from casinos and gambling and Ponzi schemes to pay for a marketing budget. And this is a big scale thing. This is multi billion dollar funds injecting money into very horrible things like BitCloud and others that are just outright like many of them very transparent scam and they're profiting from doing this on the backs of investors. BitCloud's made I think over $100 million in Bitcoin that you can't get back. [01:42:31] Speaker A: Jesus. [01:42:32] Speaker B: Because it's like a one way street. Like you can pay them bitcoin and they give you shitcoin and they even lie about what the value of that shitcoin is according to. But anyway, they won't give you any other bitcoin. [01:42:43] Speaker A: Should we do an episode on BitCloud? [01:42:45] Speaker B: We should, but by the time we get around to it'll probably, hopefully already be dead. But I mean this is a big, big, big business. And those lobbyists that we are representing and kind of lending our weight to as people, they are going to be in my opinion a bigger threat to us than Janet Yellen. These are going to be the ones that are feeding these politicians that are now on the floor of the Congress saying we need to protect Ethereum innovation limits. One that's our bitcoin champion that people are telling me, oh, you need to support limits because you fought so hard for us on the floor saying bitcoin or sorry, Ethereum innovation Lyman saying oh, proof of work. We can't afford to give proof of work. This horrible tech safe haven by supporting a bill with wording proof of work in it. These are the people who we are getting behind and making phone calls for and lending our political power as people to who are ultimately going to turn around and sell Washington like hey, the big crypto Lobby all the people that support crypto. That's us. And by the way, we all think that proof of work is bad. And so we as the crypto community would love to just focus on environmentally friendly solutions that don't hurt the environment. [01:44:09] Speaker A: Yeah, I do think that's a risk. As soon as that proof of work language came out, the speed with which crypto threw bitcoin under the bus, the shitcoin community were like, fuck it, I don't care. Yeah, screw bitcoin was alarming. I was like, you know what do you want the bitcoiners to actually have your back? Because God, that pisses me off. [01:44:34] Speaker B: If they. There's a lot of. [01:44:36] Speaker A: You're full of shit. If you want. If you think this is about freedom, if you think this is about. No, you're protecting your yield. Defi. Centralized scam, like, got it. Got it. [01:44:48] Speaker B: There's a lot of money there and, and, and more of that money may end up going into Washington. More that shitcoin money may end up going into Washington. And they very well could, you know, easily win Washington. Bad guys often do win in Washington. Whoever's got the biggest lobby can win Washington. Not that that matters. Bitcoin goes on and people support bitcoin because of what it is. It's the only thing that actually has any real value. And I think even the people who support, who aren't the ones who aren't making the money investing in these things and getting the pre sale deals, the end user, the dumb guy who thinks he's gonna, you know, get rich off whatever bullshit token and whatever bullshit yield, that guy's gonna get fucked. This doesn't help him. And eventually, who knows whether it'll keep supporting those lobbies or not. But because that money's there, I could easily see, you know, it would almost be the default. It would almost be what we should expect. Fiat is the greatest evil and that's also the biggest. You know, they have the most people on their side. Why shouldn't we expect that something else just as centralized, just as corrupt should be also, like, as far as politics goes, the default winner. Yeah, so, so, you know, I'm not willing to support anything or give my. Lend my credibility to anything that the shitcoin lobby does, because I'm not going to. [01:46:07] Speaker A: I'm still. I haven't read the. I know the update. The amendments have been updated. Updated. Like what I support, like, like what I think is legitimate and should happen is the, the Cruise amendment. Is it just. Yeah, all that shit should be Taken out. [01:46:23] Speaker B: Yeah. [01:46:23] Speaker A: Period. [01:46:23] Speaker B: Well, you're right. The cruise is the one. [01:46:25] Speaker A: It shouldn't have anything to do with the infrastructure bill. Should not say anything about defining cryptocurrency or brokers or any like it. Like, it just doesn't make any sense. There should be a legitimate, lengthy conversation about, what the hell, Bitcoin, proof of work, proof of stake, like what these things are. And there should be some. Some at least judicial definition of these things, because legal framework is at least useful. Legal and regulatory framework is at least useful in that context. Even though I'd like to see. I'd like to see it defined by bitcoin, I'd like to see it just play out. But nonetheless, I don't think we're. You know, if these things don't survive a government attack, then they were never going to survive anyway like that. [01:47:12] Speaker B: Right. [01:47:12] Speaker A: The point of these things is useless. It is arbitrary. [01:47:16] Speaker B: Bitcoin's not going to be taken down no matter what kind of rules they make against it. The defi. Shit will. And that, to me, is the free market claim. Same thing. Yeah, same thing as it losing to the free market. [01:47:28] Speaker A: That's interesting. We're going to keep a close eye on it and hopefully we'll be able to do some more shitcoin Insiders. Shitcoin Insider episodes. As this continues on, I want to ramp this back up. I feel real bad that we've let this sit for so long. So good chat today, man. Thanks for joining us. [01:47:49] Speaker B: Definitely. Always love being on here and getting to talk about this stuff. [01:47:53] Speaker A: Yeah. Good times. All right, man, let's go ahead and close this one out and we'll. We'll see if we can't go ahead and start getting this next one scheduled so we don't sit on it for months. All right, man. [01:48:07] Speaker B: Yeah. And tweet at the. Tweet at the ShitCoin Insider Twitter so. [01:48:10] Speaker A: We can know, you know, you're listening. [01:48:13] Speaker B: What you want or. Yeah. And that you're there. You know, it matters. [01:48:15] Speaker A: Yeah. Awesome. Thanks, man. Later. Thank you for listening, everybody. I hope you enjoyed this episode. We are not going anywhere. There will absolutely be new episodes of shitcoin Insider to come. Follow us Hitcoin Insider on Twitter and subscribe to the show so you don't miss it. Until next time, everybody stack sats and try to stay out of the shit. Peace. [01:48:52] Speaker B: This podcast is part of the C Suite Radio Network, turning the volume up on business.