Bitcoin's Origin Story and the Unfinished Fight

So with all of that, Aaron, is Bitcoin the inevitable outcome of that work or is it a lucky accident that could easily have never happened? I don't think it was inevitable. I also wouldn't describe it as a lucky accident somewhere in between, I guess. I do think, yeah, so the way I wrote the book and the way I think history actually unfolded is that Bitcoin is best understood as an evolutionary step in the thinking and working on digital cash projects. Bitcoin was indeed not the first one, but there is a lineage of digital cash projects and also ideas. Not every idea was turned into an actual working project. Some of them were just conceptual, but still these ideas contributed to the ultimate design of Bitcoin itself.

No guilt, no gimmicks. Go to trustrevolution.co. That's trustrevolution.co. Okay, let's get into it. Aaron, how are you, sir? Welcome. I'm good. Thanks for having me. How are you? Very good. I am well. I appreciate it. I found myself about to attempt von Verden and wondering if I was going to do that properly. That's good enough. I copped out at the last minute. No, no. I mean, Americans and English-speaking people always ask me how to pronounce my name, but it's basically like written. Like, you always basically get it right. I mean, there's probably a slight nuanced touch if you really pronounce it in a Dutch way. If you have the time for it, yeah. Yeah, but it's close enough that it's basically fine. I love how Americans, we get a pass on most things when it comes to pronunciation. Well, thanks again, Aaron. I do appreciate it. And I want to start with a bit of a setup for those who may not know you, may not know the history that you have spent now many, many years covering.

And so, you know, most people, I think it's fair to say, think of Bitcoin as either a speculative asset or a technical curiosity. You have spent 13 years covering it as something else entirely, which is the latest chapter in a decades-long war to build money that governments can't control. Or at least that's my perspective on it. You'll correct me. And so for further backdrop, before Bitcoin, there were at least a dozen serious attempts. They all failed. The people who built them, you know, are largely forgotten. And then suddenly Bitcoin succeeds and almost immediately powerful interests try to capture it. And so that fight is ongoing. And Aaron, you have documented all of it. And so let's start here. You said the cypherpunks who tried to build digital cash before Bitcoin might one day be remembered like America's founding fathers. That is a striking comparison. What did they sacrifice and what did they almost achieve?

Well, yeah, so I made the comparison because I think they really recognized the Internet as a new frontier, essentially. right and even in their actual language that they would sometimes use uh tim may for example who's one of the founders of the cypherpunks he really describes the internet or the potential of the internet as uh i don't know if he literally said a new country but definitely like a new economy a new way for uh trade to happen a new way for business to happen and in such a way that it's separate distinct from the existing economies right so we really saw the internet as that's where we can start to build a new world with new institutions um what they recognized so they recognized the potential of the internet but they both saw that as a potential good as a potential

bad right so what they were concerned about really was that the internet would develop without privacy, essentially, and turn into an enormous panopticon, right? Where everything anyone does is, or at least can be monitored, tracked, spied on, used against you, potentially. So what they set out... They foresaw volunteer. Yeah, well, that's the type of things that they foresaw and were worried about, exactly. So what they set out to do was they wanted to build tools to prevent that future, to prevent a dystopian Orwellian future society, and instead build something that would protect human rights, privacy in particular. So that includes regular or just communication technologies, PGP, for example, just ways for people to interact.

But there were also more radical versions of that vision, a vision where legacy companies and maybe the governments couldn't even really function anymore and really instead build a new future. And the reason that they couldn't function anymore would, for example, be because they couldn't hold any secrets. So if a company can't hold any secrets or the government or an army can't hold any secrets, that it really undermines their operation. or if a government can't tax its population, can't tax economic activity, then it also becomes much harder for a government to even exist, to sustain itself. So they set out... And again, there's sort of different flavors of the cyberpunk. Some were more radical than others. Tim May was very radical. He really wants to bring down nation states and just instead build a completely new future on the internet. That was not necessarily true for all of them.

But yeah, so they wanted to create... Digital cash was one of the things they wanted to create. That's something that would enable a new economy, a new way for people to conduct commerce online. But also things like smart contracts, that's something Nick Zabo came up with, like a way to conduct business online in a way that wouldn't require conventional contracts and governments to enforce these contracts. But really, if you provide a service, then automatically you get paid for providing that service. So all kinds of ideas to build a whole new parallel economy on the internet, essentially, with digital cash as a crucial component. Right. And I think, I mean, I don't know that everyone would agree on this, but I think in many ways they were describing what at least

Biologist Svonivasan calls the network state. And I don't know that, you know, full credit to biology. Some people have their beef with him as to being a shit-coiner. But, you know, I think he has taken, in my view, a pragmatic, maybe some would say a compromised take on Tim May and others' vision of what that network state would look like. So with all of that, Aaron, is Bitcoin the inevitable outcome of that work, or is it a lucky accident that could easily have never happened? I don't think it was inevitable. I also wouldn't describe it as a lucky accident, somewhere in between, I guess. I do think, yeah, so the way I wrote the book and the way I think history actually unfolded is that Bitcoin is best understood as an evolutionary step in the thinking and working on digital cash projects, right? So Bitcoin was indeed not the first one, but there's

a lineage of digital cash projects and also ideas. Not every idea was turned into an actual working projects projects some of them were were just conceptual but still these ideas contributed to the ultimate design of bitcoin itself but yeah i am quite convinced although i haven't spoken with him i can't know for sure but i'm quite convinced that satoshi was part of or at least aware of the cypherpunk community and was aware and and had you know studied these other digital cash projects because bitcoin just resembles some of these projects or at least in part it takes inspiration from them that seems pretty clear to me uh so yeah i mean And the obvious one is like proof of work, right? Introduced by Anand Back and Hashcash. There was also another proof of work system, by the way,

which I describe in the book, but that works a little bit differently than Hashcash, which very directly sort of is implemented in Bitcoin, but also Bitgold and WhiteEyes, B-Money, and like all these projects inch closer towards something that can actually work as a digital cash system, But also all of them had some sort of limitation, which made that they either couldn't quite work or they could work, but the incentives weren't quite right to be adopted as digital cash. And Bitcoin brought together these different ideas, also ideas about money itself, also Austrian economics influences. And it was all brought together in a system that works. So I, you know, well, that's a big debate in history more generally. Certainly.

Revolution, evolution, invention. And like do inventions, were they inevitable or did it really take unique individuals or particularly insightful individuals to sort of make that step? Like without Satoshi Nakamoto, whoever it was, would Bitcoin still have been invented? Well, probably not in the exact same way, but it's clear that there was a step-by-step evolution towards something like Bitcoin, at least. I don't know if this just crept into my mind and someone else deserves credit for it, but I tend to think of it as a chemistry experiment where stability was finally reached. You know, you see all the beakers exploding and the crazy lab meltdowns, and then suddenly someone got the formula right. Well, and you touched on this, Aaron. So let's do go back and go deeper. Before Satoshi, you know, brilliant individuals, some of whom you've already named, spent decades trying to solve this problem. Notably, David Schaum was a world-class, is a world-class, I'm suddenly realizing whether I don't recall if he's still with us, world-class cryptographer.

Okay, good, good, good. Thank you for that. And he built a working digital cash in 1989. As I understand, banks were interested. He had venture funding and then it collapsed. And so walk us through DigiCash. What did Shom build? How close did he get to driving it as a standard and what ultimately killed it? Yeah, so digital cash actually existed, right? So that's one of the digital cash projects that was, in fact, implemented. And it's really, you know, David Chown really showed the way. He was way ahead of his time. He was basically the first person in the world to realize that money is going digital, right? With the emergence of the internet and computers, money will go digital. And then, as I alluded to before, but this is even before the cypherpunks, that's why I'm saying he was ahead of his time. Even before the cypherpunks were established, he recognized that that can lead to two different futures.

A future where every payment that anyone ever makes is monitored or can be monitored, traced, this Orwellian future. or we create a digital form of cash. And what he really meant by that is a form of money for the internet that can be used privately, anonymously, so it can't be tracked in that way. He was really the first person to foresee that and indeed also the first person to, in fact, implement it. I think, well, you mentioned 89. I think that's when he first proposed the idea. It was implemented a bit later, sometime in the mid-90s. And what that was, so he was not trying to reinvent money itself. He was not, you know, like the Austrian economics folks that were also getting involved with digital cash.

He was not one of those. Digital cash was really a layer, a tech layer for banks themselves. So banks could adopt it. That was the idea. And some banks did and could issue digital cash to their customers, essentially. So you would withdraw. It was basically just a number from a bank and you could send that number to someone else through whatever mode of transfer you wanted. It could just be via email or you could write it down on a piece of paper, I guess, if you really want to. It didn't matter. and then that person could withdraw the cash again to their own account essentially. So it would use euros or dollars or whatever the bank, whatever the fiat currency of the bank was, that's what you could use. The problem with DigiCash, as I mentioned, it was implemented. There's kind of different versions of the story of why it went wrong. There's, you know, not everyone agrees on that and especially the people that were involved with it pretty strongly agree on some of the points

of why it didn't quite catch on on a big scale. One version of the story, and personally, I think both sides of the story are probably at least partly true. One side of the story is that there was just no real demand for it. So even though it worked, people could use DigiCache, eCache. They could use it, but there was just not a huge demand for privacy in that way, unfortunately. I think there's a lot of truth to that. We see that, you know, even today, a lot of people don't really care that much about their privacy. I think it's growing a bit. I would just say quickly, and thank you for the correction, Aaron, on 89 versus early 90s. I got those mixed up. But I think in 89, when he was conceptualizing, I would just note for the younger people in the audience, this was pre-web, early internet. Really, email was the only thing we had. And so to fast forward even into the early 90s, Webb was 93, 94, was radical.

And so as you follow that up, Aaron, and again, sorry to interrupt you, I'd love to get your take on the presumption that this had to be done via banks, you know, versus we'll come to this Bitcoin and be your own bank. So, you know, is there in your research, in your work, have you found any insights into would there have been a conceptualization to move outside of banks or was it just, hey, this is the way you've got to do it? Well, he did have a test project as well. So Digicash the company that he had and this is a big part of the story in the Genesis book actually But he did have a test version of eCash as well that did operate outside of banks So what they did was they just promised, essentially, there was no way to guarantee this cryptographically or in any other way. But they did promise there will only ever be 100 million of these currency units. but in their view this was really a test project they did not foresee this having any real world

value they did not see this as a real alternative that people would use it was just sort of to play around with and test the technology in his vision in his mind the ultimate you know user would indeed be banks offering it to their customers that that was really uh what what digicast itself was working towards but and other other cypherpunks did for example play with that test project and they did run with the idea basically that it could potentially also work outside of banks and indeed create a new form of currency and back in particular he saw that this digicash test project was gaining some real world adoption and that for him was a sign that wait a minute that means that we can also just do it without the banks. I think that was a huge inspiration or step in the thinking towards Bitcoin, that test project that did the cash out. Right. And then if I do get this date correct, Nick Szabo designed something, I think most would

say almost identical to Bitcoin in 98. Why ultimately could he not make that work? And consequently, what was Satoshi's breakthrough? Yeah, I would not say it was almost identical, but it was definitely inching closer towards Bitcoin. It had the same proof-of-work mining, essentially. It even had something that you could, you know, if you squint your eyes, kind of see as a blockchain kind of thing. It was also very complex, however. Excuse me. It was a pretty complex design. And that has a lot to do with the way. So with these other digital cash projects, usually the proof of work that you created, the hashes, these were themselves the currency units. That's something Satoshi abandoned, right? He uses it as a consensus mechanism and also as a way to get coins into circulation. But the hashes themselves are not the currency units.

And with these other projects, they often were. The hashes were the currency. That's what you would basically send and receive to someone else. So the problem with that, one, is that as computers become faster over time, it becomes easier to produce these. And so you have a sort of technological inflation that's then in the system. It just becomes easier and easier to create more money. So, you know, you don't have a limited supply of money in that way. so that's something satoshi solved with the difficulty algorithm adjustment uh difficulty adjustment algorithm right so um and and just by saying that the hashes are not the currency the hashes are a way of proving that you did the proof work and then you get rewarded currency units but that's a fixed amount every block and therefore every two weeks because of the difficult adjustment algorithm the other thing that satoshi didn't quite solve was the

ownership registry so who owns what hashes there was a registry for that where you could look up which public keys own which hashes but someone had to maintain this registry and he had thought of a way that it it required like a special subset of users that would do that and then they would vote on if there's a double spend, if the same hash is sent to two public keys at the same time in different parts of the network, see different versions of the ledger because of it, splitting the network essentially. With Bitcoin, that's solved with Proof of Work, right? Longest chain ultimately gets, you know, everyone follows the longest chain. With Zabo's idea with Bitcoin, there was like a voting system and a subset of users, But it wasn't really watertight because, first of all, who gets to be one of the people that votes? And how do you stop civil attacks?

How do you stop one person having 10,000 accounts and skewing the vote that way? So that was sort of an unsolved problem. And I think because of that, Bitgold was one of these projects that was a concept, but it was never actually implemented because it still had such a fundamental problem that just wasn't solved. And from there, I mean, if we look at those two instances and others, where they fell short, what does that tell us about what could still break Bitcoin today? What do we draw from the two that we've discussed and the many others that you have studied at length? Well, I don't know if this relates. Well, I mean, ultimately, the known weakness of Bitcoin is a 51% attack, right? that Satoshi knew it, it's in the white paper. That's a way where you can attack Bitcoin successfully, which requires having a majority of hash power.

Or there's some mathematical models that you can do it with even a little less than a majority, but let's just say a majority of hash power. If you have that, then you can censor transactions, you can double spend, you can basically break the system in very bad ways. and I would say that is still the biggest problem ultimately like every other problem you can think of ultimately usually sort of gets down to well ultimately that's the real problem and you do see you know today in Bitcoin it's we're not in a great situation actually power is very concentrated a handful of mining pools that have the majority of hatch rates combined. There's huge data centers where a lot of the mining happens. There's only, you know, really only one or two chip manufacturers that can produce the machines that are required for mining.

So that's kind of like a supply chain attack in a way. But these are not really solved problems. Right now, they're mostly being solved because the incentives still align. But that also breaks down if and when mining becomes more heavily regulated and governments start to get more involved. I'm not necessarily bearish on it. I do think there are ways forward with this. We have some advantages on our side, essentially, when it comes to energy production is sort of inherently decentralized, or at least in a way that So there's the advantage of scale, right? Like it benefits you if you concentrate certain industries, in this case, mining in one position. But there's also disadvantages of scale, and that has a lot to do with energy production.

At some point, the energy that you're using for mining, you can put a miner next to let's say a hydro dam but at some point you've used all the energy on the hydro dam and then it becomes cheaper to use a different hydro dam or use solar energy somewhere so the energy part is sort of inherently decentralized and on the long term we can hope that because of that mining will also become more decentralized over time that's That's our best hope, I would say. Right. And then there's also some technological improvements when it comes to decentralizing mining itself. So there's, you know, there's reason. Definitely. And I want to get into that. To think it could improve. Yeah, go on. Yeah. And I think, so, you know, and I kind of bring us forward and bring us back. And so if we look then at Chalm in 89, some of his early research, we've got 20-ish years before Bitcoin, as we know, it actually worked.

It grew. And then something happened that most people today have never heard of but might, you know, be the most important event in Bitcoin's history. Between 2015 and 17, there was an all-out war over what Bitcoin would become. And on the one side, the largest mining companies, exchanges, well-funded startups. To your point, they controlled most of the hash power and most of the economic activity. And then on the other side, this ragtag coalition of developers and users, many anonymous running nodes in their basements. And so the big money lost. Aaron, you covered this at length. And as it unfolded, most people today have no idea it happened. For someone who wasn't there, paint a picture for us. How close did Bitcoin come to being captured in 2017? Yeah, well, captured or just failed entirely. These were two very real risks, at least in my mind, in my experience at that time, because that's another risk that I would say that's the other big risk is Bitcoin could split and basically the community could destroy itself potentially, because ultimately everyone does have to agree.

it's a very human very social sort of phenomenon where everyone does have to agree what bitcoin even is right and that came into question during the block size war where a segment of the bitcoin community users miners whatever uh they wanted bitcoin to have different protocol rules essentially And at that point, so they tried to, in a way, force that through. Had they been at least somewhat successful, then you could have gotten the split in the Bitcoin blockchain. And that can cause all kinds of confusion about, well, what is Bitcoin actually? It's a very sort of meta question about what is Bitcoin really? Which software is Bitcoin and which is not? And if there's no agreement on that, then it can get really messy with different exchanges listing different coins, essentially, as Bitcoin.

Someone sending a Bitcoin transaction, someone else not receiving it because apparently they're not on the same network. I think especially in the early days of the block size war, that was in my mind a very real risk that something like this could happen. And in these, again, in these early days, I think that could have potentially destroyed Bitcoin like that, that complete chaos and confusion. I think that could have devastated the entire project. I think we came out of it stronger than we went in because in a very real way, that problem was resolved in the sense that the community did sort of formulate a, at least a rough definition of Bitcoin, which is a sort of conservative definition of Bitcoin. Bitcoin is, you know, the rules that we were already using. If you want to change the rules, then that's not Bitcoin. It was not obvious at the beginning, but that's sort of what everyone settled on, which I think was the right, you know, that's the right place to settle.

That is how you can scale something like Bitcoin up and not introduce politics essentially, or at least not introduce a type of politics that could undermine the viability of Bitcoin. And then, yeah, to the question of, you know, could it have been captured? Also very possible. Like, it's also very possible if a big enough segment of users, miners, developers would have settled on a different, you know, definition of what is Bitcoin, then Bitcoin could have changed and arguably changed for the worse. In that specific case, it could have been changed to a form of Bitcoin that people can't actually run on their own computers. Therefore, they can't verify the Bitcoin supply, for example. Which for anyone who participates and owns, holds, uses Ethereum, that's where they have found themselves, right? So we could have become that. Right, yeah. I think it's of fundamental importance to Bitcoin,

probably the single most important thing, that it is trustless, that you don't have to rely on some authority to tell you, how many bitcoins are in circulation, for example, that you don't have to rely on some authority to confirm for you that you received a transaction. But actually, it is all based on code, math, raw energy, and you can verify that for yourself. So again, I think that was being put to the test during the scaling wars. And I would say Bitcoin came out of it stronger than it went in, because the question was settled on these points. Well, and a follow-up to that, in order to once again set a backdrop that carries us forward into what we may be encountering, again, the New York agreement, 50 companies, I believe, 80% of economic activity, they agreed to change the rules. No developers were invited. that's in some ways could have been a slam dunk for the so-called participants of the New York

agreement. What ultimately went wrong for them? And maybe that's a UASF discussion, but take it where you will. Well, I think a big part of it was, in fact, the market ultimately deciding otherwise. And by the markets, I mean users, individual users that value Bitcoin. That's where Bitcoin ultimately gets it valuable, right? People willing to accept it and hold it and value it as money. When someone asks what backs Bitcoin? It's the people, it's the users. Yeah, exactly. And during that time, we started to see fork futures. So people could basically buy. it's always a little bit hard to explain but people could on futures markets basically buy the different versions of Bitcoin that would exist after

a split and on these futures markets we clearly saw that the users, the markets valued the more conservative Bitcoin more than the Bitcoin that would change its rules controversially in that case. I think that's ultimately why the backers of the New York agreement gave up. I think that's why they ultimately said, okay, we don't want to destroy Bitcoin. I don't think they wanted to destroy Bitcoin. I think they, for the most part, just had a wrong idea about where Bitcoin gets its value from. And I think that really showed that to them. And the same is true for miners. Ultimately, miners want to make money. Ultimately, miners want to value or want to mine coins that are valuable. and these these fork futures really made it very clear that no the value is not where they thought it was it's actually in a more conservative version of bitcoin that doesn't change the rules when there is a dispute about that so all i mean that ultimately the market decides what is bitcoin that that ultimately what it comes down to And these fork futures really made that clear And even after the split happened it also been very clear right

We did see a split with Bitcoin Cash, for example. The New York agreement technically still had a coin, I believe, but that was not even worth, I don't, we don't even have to consider. A footnote. Yeah, exactly. But Bitcoin Cash is a good example that it was at one point trading at, I think at its peak, even at 40% of Bitcoin's value. But over time, it just trended to zero. And today, it's basically irrelevant because ultimately the market decides what is Bitcoin and what is valuable. Right, right. And that is the conservative version of it. So the users won, Bitcoin's rules held. But I think I take, you know, from my own observation and from certainly your writing, that the fight didn't end. It has changed forms. And you've alluded to this. So right now, if I have this correct, 11 percent of Bitcoin's mining power is actively censoring transactions that by some interpretation, the U.S. government or others don't like.

and meanwhile governments are buying bitcoin sort of the same governments bitcoin was designed to escape and so with that let's talk about f2 pool as an indication or a canary in the coal mine not necessarily you know in the in the weeds but they've been censoring ofac sanctioned transactions 11 of hash power again if my if my research is correct how much censorship can bitcoin survive before we lose the censorship-resistant money moniker? Well, it depends. There's two forms of censorship. One, I would say, is the harmless form of censorship. That's all we've seen so far. And that is, if an individual miner doesn't include certain transactions in a block, then they don't mind these transactions, but other miners still can. So I don't think that's really a big problem. If anything, it's a problem for the miners because they're missing out on fee revenue.

It's a very minor problem for those sending these transactions because sometimes they have to wait a little bit longer until it confirms. Not really a big deal. That wouldn't even be a big deal if it's over 50%. They have to wait longer for their transactions to confirm. even if it's 95% well now you have to wait a couple of hours which might be a pain in the ass but it's still it's not that big of a deal it's an annoyance at worst the real problem happens if miners not only refuse to mine transactions whether that's because the government doesn't want it or because they don't want it themselves or whatever the reason may be but if they also refuse to mine on top of blocks that include these transactions, right? So basically rework out any blocks that include transactions that they don't want to mine for some reason.

And was that part of Mara's proposal, Aaron? Was that? No. No, okay. No, I don't think Mara is even censoring anything anymore as far as I'm aware. They had a brief stint where they announced that they were mining OFAC compliant blocks. There was a big backlash against it and I think they dropped that policy pretty quickly. To your point, I do believe F2Pool was excluding certain forms of transactions as well. And then you also have Ocean that's excluding different type of transactions for different reasons. But again, these are harmless. At this point, these are harmless because they're still mining on top of blocks that do include these transactions. So it's not really a big deal. it's only a big deal if more than 50% of miners not only censor transactions, but also reorg out. So refuse to build on blocks that do include this. Then you get true censorship essentially.

And then, you know, then, then the question is, what do you do about that? Assuming that we want to do something about that, which I would say we do because I see censorship resistant as a fundamental value proposition of Bitcoin. So then what you do about that is you can, there's sort of two answers to that question. One answer is we don't do anything. It's just the people that want to make these transactions have to include higher fees. Then if the fees build up enough, then the incentives for miners should realign with including the transactions. So that's one answer. The other answer is then we actually do need to change the protocol, change the protocol in such a way that these transactions have to be included or you change the proof of work algorithm which essentially fires the miners and now you can get a whole new group of miners or home miners again or something like that that will start to include these transactions again.

So there's different answers to that question. And I think if we get to that point, That will be a very big controversial debate on which way to go. Hopefully, we'll never get there. Right. And that's helpful. I mean, there's a disagreement on how to handle that. Right. And as you say, the act itself is one thing. Refusing to mine on top of blocks that don't meet those filter criteria is another. So from that, good to hear that you don't think that's existential, at least not at present. Let's turn to opera turn. And so I think you've said that that's the biggest divide since the block size wars. Could you give us a sense of at a high level, you know, what is Operaturn? Why does it matter? And is this the same fight in a different form or a different beast entirely? Is it the same fight? No, I'll just start with your first question. Yeah, so OpReturn is a, I would summarize it as it's a trick to embed data in Bitcoin transactions.

So data that has nothing to do with sending money from A to B, but just different kind of data. It can be anything, can be an image or can be a text or whatever it is you want to, whatever it is someone would want to include in a Bitcoin transaction. The context is it was always possible to include data in Bitcoin transactions. That was also always something that people did. And it's probably not something that can be stopped either. and at some point Bitcoin developers decided that well if people are going to do this anyways then it's better if they use a method that's not as harmful because some of the other ways can be harmful for various reasons in particular make it harder to run a run a node more expensive to run a node so with up return you

kind of limit the harm that it does and recently there was always there was never a limit on Opperturn on a consensus level. The protocol was always allowed, you can put whatever data, however much you want as long as it fits in a block, you can fit in an Opperturn and then it can end up in the blockchain. However, for a long time, there was a sort of soft limit in the sense that if it wasn't included in a block yet then a transaction with a big up return would not be transmitted over the network. Nodes would not help share it to other nodes. But if it was included in the block, if a miner received it directly or a miner put it in themselves or whatever the reason is, if it's in a block, it's fine. But it was always a soft limit. That soft limit in the view of Bitcoin developers, and I agree with them,

has basically become useless in recent years because people had started to figure out other ways, again, to put data in transactions, including larger chunks of data. You saw that with inscriptions. It was a big rage with people putting all kinds of animated images and whatever it was in Bitcoin transactions. Monkey JPEGs. Yeah, whatever it was, they were putting that in Bitcoin transactions. and at that point Bitcoin developers figured okay well if people are doing that anyways then let's also get rid of that soft limit that's still on upper turn because upper turn is still a less harmful way of doing it it's still better if people use upper turn so let's get rid of the soft limit as well and then that's how people will hopefully do it there's a specific there was a specific trigger for this which was there was some meta protocol that wanted to use the Bitcoin blockchain to enable something that they were interested in enabling.

And they were starting to use basically popkeys of fake popkeys. So fake addresses, essentially. Addresses that you could send money to, but no one owned a private key. And that's a very harmful way of embedding data in the blockchain. It bloats to UTXOSet. It's a bit of a technical term. I don't know how technical your listeners are overall, but it's bad. It's a bad way of doing it. So at that point, it develops, okay, let's get rid of the soft limit. And this caused a lot of controversy because a segment of the Bitcoin community, they saw that as a sort of surrender or endorsement even of, you know, using the Bitcoin blockchain for other forms of data. I don't think that's an accurate way of looking at it. You know, that's not, I don't think Bitcoin developers were seeing it that way. I also don't think it's technically true. I think it was a harm reduction mechanism.

And that's how it was intended. And I think that was all things considered probably the way to go. But yeah, some segments of the community were very angry about it, are very angry about it. and in fact apparently want to do something about it by now changing the protocol to not only limit that, but also try to limit other forms of embedding data in the blockchain. I think it's a bad idea. I don't know how much in depth you want to go. I think it's disabling parts of Bitcoin. It doesn't solve the problem in a real way. in fact it's one of those things as mentioned operators essentially harm reduction it's one of those things if you try to fight it I think it gets worse because you try to fight it and now people are going to use other forms of including data on the blockchain again and the whole point was you know harm reduction so it's a bad idea

it's a badly guided proposal in my view but Well, and I think, you know, so you've answered some of this, I believe, but let me cast it in a slightly different light. And this is very much going to be your opinion. I'm not asking you to speak on anybody's behalf. But what we've talked about, the cypherpunks certainly understood what they were building. The supporters of the user-activated soft fork UASF understood. Does the current collection, do the current collections of ETF buyers, so-called institutional allocators? That one always gets me. and maybe even some Bitcoin core developers, in your view, do they understand what we're meant to be protecting? Bitcoin core developers, I would say yes, as far as I know them and have spoken to them and have listened to what they have to say or read the mailing list, then I think yes. And I think it's important to point out also from my own perspective, I don't like all this data I'm betting either. I think that's not what Bitcoin is intended for.

I wrote a whole book about what I think Bitcoin is intended for. I think it's intended to be a digital form of cash and a hard money and these things combined. I think that's what makes it interesting and valuable and important. And that's why I spent so much of my time writing about it and focusing on it. I think for the most part, the same is true for Bitcoin core developers. I think they generally share that perspective. At the same time, I mentioned earlier, I think censorship-resistant is a fundamental property of Bitcoin. And I do think that comes with, there are some downsides to that. Not just when it comes to people will make transactions that I actually personally don't like. But also, something like this, data embedding is very hard to stop. When you design something to be censorship-resistant, then it's very hard. and probably impossible to stop people from kind of abusing the system as well sometimes.

Now, I think Bitcoin has an inbuilt solution to that problem. It's the block size limit and by extension transaction fees. I think over time, this will outprice any spam and any bad use or any low value use of Bitcoin like including images, which I think- Non-monetary. Yeah, I think there will be a lot of demand for censorship, resistant, hard money. Bitcoin is the best form of money ever invented if it all keeps working as intended. And I think there will be a lot of demand for that. And that demand will price out these more frivolous forms of using the Bitcoin blockchain. That's what I think. And by extension, I think that if you're going to try to stop that, you might actually harm these fundamental properties of Bitcoin of censorship resistance.

That's what you might destroy in the process. Just because you want to stop some wizard JPEG, it might lead to much harmful places where you do actually undermine Bitcoin's value proposition. So we have talked about, give or take, three decades of this work, this fight to build electronic cash. Those who, you know, have attempted and fallen short, the Block Size War 2017, the threats by different definitions that we've talked about. To get a bit personal, you've been at this for 13 plus years, I think. And, you know, from your reading, I believe I understand you've, and most of us have, seen people sort of burn out, you know, cash out, go to prison, sadly, most recently. You're still in this. what keeps you in it? I think Bitcoin is the most important well I always said that there's recently well my answer was always I think Bitcoin is the most important

technology in the world right now I think it has the most potential to change the world and change the world I think for the better and you know if I have to decide where I'm going to spend my time and energy on then I would like to spend my time and energy on what I think is the most important thing. I do think AI is starting to catch up. I'm starting to think AI is also up there as I would agree. Arguably the most important technology in the world. My attention is maybe starting to get a little bit divided With you For good or for ill right Depending Right It a very similar dilemma in that sense In the sense, like I said, with the cypherpunks who sort of foresaw the future of the internet and foresaw that it could either usher in dystopia or revolutionize how people live and work for the better.

AI has a very similar component to that. It seems like it could still go both ways. Let's leave AI aside for now. We'll do that. We'll do a part two. You can show us your vibe coding. Well, so, you know, so kind of staying on. Real quick. Yeah, I mean, I think money is such, what is more important than money? There's very little that I can think of That's more important than money as far as human societies and humanity goes. Language is up there as well. But, you know, there's not that much you can do about language. It just sort of exists and evolves. And there's not too much to write about there, I think. Until we get the universal translator, not much is going to change there. Right. Yeah. Or get Esperanto to make a comeback or something like that. yeah but Bitcoin is still an evolving project

and that also makes it interesting to focus on it is still growing we are still learning about it I mean we were just discussing this new idea about trying to stop spam or something as an example of I find myself on one side of the debate but you know it is an example of the conversation about Bitcoin is still evolving pretty much alive something yeah or you know it's been it's now been a while since we had a protocol upgrade but i think these are also you know these are very fundamental questions about bitcoin like what is bitcoin what do we want bitcoin to be uh what do we want bitcoin to be in 100 years from now right and and decisions we make now in that regard can really ripple out into the future and that makes it a particularly interesting project to focus my time and attention on i think Well, and that note maybe takes me to a question, which is, you know, you've interviewed cypherpunks, early developers, the people who working on this and built it before anybody cared.

From an historical perspective and what we see in the future in this next hundred years, as you laid out, what are those early builders, philosophers, writers, what do they carry that the new wave doesn't? What do we lose as that generation fades? You mean the... Sorry, I referring to like the... Yeah. Well, I hope it doesn't fade. I hope this is the wave of the future. That's the... Sorry, by that, well, let me clarify. What I mean is ethos, spirit, commitment, work ethic, any of... I mean, maybe that just isn't something that concerns you, and that's good too. No, but I think it's a good question, but I want to make sure that I understand correctly. So is your question if the sort of first generation of Bitcoin developers kind of retires and then what happens next? Yeah, well, I mean, and Nick Szabo recently resurfaced on X, right? And that's fantastic. Adam Back is, you know, still quite active. I mean, as those guys, you know, do what they do, run off into the sunset, whatever.

Do you think, is there something that we need to reinvigorate that they today are the torchbearers of? I mean, I hope that, you know, future Bitcoin generations will continue to find privacy important. Yeah, as I write in the Genesis book, I think Bitcoin really has two sort of origin stories and they merge into one. And that's also very much how I wrote the book. One of them is the hard money side, or I should really say the separating money and state side. There's a lot of emphasis on Hayek in that part of the book. And then the other is the privacy side, so the David Chown aspect of it. And I do think that, at least in the broader Bitcoin culture, one of them is emphasized much stronger than the other.

In fact, the current Bitcoin narrative is evolving away from even really being considered as money, but more as like a financial asset or something like that. but I would say still the separating money estate and the hard money aspect that's still quite present as well it's the privacy aspect that's sort of you know that muscle isn't being trained as much and I do think that's important that is the future that I want to see where transactions are in fact private I don't want to live in that dystopian world Bitcoin itself could still So, you know, that door is not closed because Bitcoin doesn't have perfect privacy. Absolutely. The door to a dystopian world, even with Bitcoin, is still open in that sense, I would say. And I think that's still going to require a lot of work and also people caring about that to adopt these kinds of technologies, to adopt privacy-improving technologies.

think of things like Fediment or privacy layers. Even the Lightning Network has privacy inbuilt. Yeah, exactly. I think it's very important to, and hopefully also on the base layer, we can see improvements. I think that's, yeah, if I'm worried about any torch sort of dimming, that would be the one. I do think that is still quite alive within the development community today, though. I think if you go to technical conferences and if you reach the mailing list, a place where developers are talking, then for them it is still definitely on their mind and at least one of the priorities that they do actually care about. But, yeah, I hope they stay that way, or at least in that domain. Well, and so that may be one in the same as what I'm about to ask, but you talked about, you know, continuing to sort of carry the torch in terms of valuing the aspect of the critical aspect of privacy.

is there anything that you see Aaron as the most plausible failure mode so maybe it's not the 51% attack but what sort of creeps around in the back of your head as the thing that could could could be a failure mode for Bitcoin yeah I would say I'm most worried about sort of incremental regulation that just makes it harder and harder to use Bitcoin really as a digital cash. As unconcerned as I am about, you know, spam or something making that impossible, which is getting everyone riled up, I am actually concerned about legislation making that harder and harder. The slow death. Yeah, exactly. The embrace, what there's a saying, right, in English? Embrace and... Ah, you know what? Fun story. I was at Microsoft when the Embrace, Extend, Extinguish was invented. Yeah. Oh, you were. Right. Yeah. I wasn't that. Yeah. Yeah. So making self-custodial wallets or, I mean, even the fact that we're using that term now,

self-custodial wallets, it's, you know, just using wallets. That was a linguistic hack. That was absolutely. I think it was, I think we, the Bitcoin community actually came up with that, unfortunately, or ironically. Okay. I thought that was foisted or shoved in by some clever legislator. I think the term was introduced to actually protect the rights of self-custodial wallets. To create a category that could be protected. Yeah, exactly. So it was sort of invented for a good reason, but it's still a term that I don't like because it should just be a wallet. That should just be the default way that people think about using Bitcoin is having your own private keys or your own wallet. But yeah, making that harder and harder. As I think you mentioned at the start of the show, we're already seeing privacy developers going to jail. Very bad development, obviously. Just the increase of KYC, AML type of regulation, which is getting really ridiculous in my own experience in some cases.

Absolutely. Yeah, and then at the same time, in parallel, you do see the very regulated institutions adopting Bitcoin in a way, whether it's ETFs or treasury companies, but in a way that has nothing to do with actually using Bitcoin as a form of digital cash. So you see these two tracks sort of playing out at once where, no, they're not banning Bitcoin. They're also not attacking it on the protocol level yet, at least. Although, you know, even miners, I think, are increasingly, you know, dealing with various forms of regulation. So, you know, that can be ramped up over time. But yeah, I would say the incremental regulating more and more parts of Bitcoin, that's not even a future concern. It's just the present concern. Absolutely. That's happening day after day, essentially. Yes. And, you know, continues here in the U.S. for anyone who's, you know, dealt with banking and Bitcoin, you know, in my time at NYDIG and just seeing what choke point one, two, three, four, five and beyond the so-called operation choke point, what that has done to your point.

And quite devilishly, you know, it doesn't need to be one fell swoop. It just needs to be suffocation. And so I think that is certainly the thing that I think most about. Let's wrap it up here, Aaron. The big concern is sort of the emailification of Bitcoin, right? Touche. And I think I know, I think I understand your subtweet. My subtweet? Yeah, maybe I'm being too aloof. But there are certain players that are looking to make it as simple as email, but with it as highly monitored and susceptible to manipulation, man-in-the-middle attacks and the like. Right. Well, yeah, I wasn't getting that specific necessarily, but yeah, the general idea that, you know, the SMTP protocol is still out there, but no one actually uses it directly. Runs there. Yeah, exactly. And, you know, that's sort of the bad scenario for Bitcoin is that the Bitcoin protocol is out there, but no one's actually interacting with it directly because everything is happening through custodial solutions and regulated entities.

Absolutely. You really lose what makes Bitcoin important and arguably valuable in that way. Well, shout out to my node there in the corner of my office. So, Aaron, for someone who's listening who maybe recently realized that the money in their bank is not actually theirs, what should they do and what do they need to understand first? About Bitcoin or just in general? Unless you have other tips. I mean, I think the best tip is to just start with, just get yourself a little bit of Bitcoin, right? But get it on your own wallet. Get a wallet, get some Bitcoin on it. If you really haven't used Bitcoin yet, you know, just try it out with a small amount. And I think, you know, just touching it is the first entry point to getting more interested, hopefully. yeah I mean I would recommend

maybe there's a good point to pitch my book here or please do absolutely I was trying to tee you up for that that was the tee up yeah well the Genesis book check it out it's the prehistory of Bitcoin the origin story of Bitcoin if you want to know where Bitcoin came from the Genesis book is the place to go So if you could sit down with a version of yourself who, as I understand it, first found Bitcoin in 2013 by way of Silk Road, what would you tell him about what this would entail? And would you still advise to go down this path? I would say nothing. No spoilers. No spoilers. That's more fun that way. I'm happy no one told me what to expect because Bitcoin has been a wild and interesting right never boring in Bitcoin land

I'll tell you that well good I'm glad we're not in that alternate future I definitely don't regret it I definitely don't regret it obviously it's been a super interesting over decades by now it's been an interesting time maybe I would tell myself something about, you know, if you're going to write a book, don't expect to be done in a year. That was the biggest surprise for me. Writing a book is a lot of work, I will tell you. My other friends would agree. I was not, well, I mean, I finished it, but I was not prepared for that when I started. In my mind, I would write a book in like a year and then it's done, but that was something, you know. And what was the start to finish for you? How long did it take to go from I'm going to do this to it's available? Yeah, it was like five years, five, six years from X. But yeah, I really started from scratch, right? I didn't even know myself what book I was going to write.

I knew that I wanted to write the origin story of Bitcoin, like the projects, like the people on projects that came before Bitcoin. I knew that. But other than that, I really went in as a sort of blank slate myself, other than, you know, the couple of pages that you read in another Bitcoin book about, you know, there were some things before Bitcoin, but I was not an expert in that domain before I started. So when I started writing the book, I did not know what book I was going to write, essentially. It was a big discovery journey for myself as well. Brilliant. Well, glad you did it. Appreciate all your work, Aaron. I know you're on Noster. I think you have turned away from the X, the Twitter. What's the best place to follow your writing and your work? Yeah, Noster is probably the best place to follow me right now. So it's just Aaron Van W on Primal. Or you can just go to my X and, you know, it's at Aaron Van W and you'll find my Noster publicly there as well.

I'll still sometimes... Love that low-key advertisement. Yeah, I'll still sometimes tweet or retweet some self-promotional things on X, but that's really all I use it for anymore. Got to get that distribution. Not serious where I'll share more of my thoughts and these kind of things. I'm with you there. Well, Aaron, thanks again for the time. Appreciate it. And hopefully we can do this very soon. Yeah. Thank you for having me. All the best. See ya. Thank you.