Clark Moody, Bitcoin OG and entrepreneur joins me to talk about his dashboard, which is a fantastic resource for learning about bitcoin and monitoring bitcoin statistics. This is a great episode to learn about useful concepts in Bitcoin and Lightning. We talk about:
- Clark’s history in bitcoin
- Why he started the dashboard
- Blockchain stats
- Node stats
- Mining economics
- S2F
- Output types
- Future directions
Clark Moody links:
- Twitter: @clarkmoody
- Dashboard: https://bitcoin.clarkmoody.com/dashboard/
Sponsor links:
- Kraken
- Unchained Capital
- CypherWheel by CypherSafe
- SwanBitcoin
Stephan Livera links:
- Show notes and website
- Follow me on twitter @stephanlivera
- Subscribe to the podcast
- Patreon @stephanlivera
Podcast Transcript:
Stephan Livera:
Clark, welcome to the show.
Clark Moody:
It’s great to be here.
Stephan Livera:
So Clark. I’m a fan of your work. I know you’ve been around the Bitcoin game for a while. You’ve done various start-ups, you’ve worked with Dan Held as well. And also you’ve got this awesome dashboard which we’re going to talk to as well. But just tell us a little bit about yourself. What are you working on these days?
Clark Moody:
Yeah, so I started my Bitcoin journey in 2011 built a Mt. Gox live charts and order book and all of that stuff. And at the same time I was working on a project called RTBTC, which was a web based trading platform interface so you could trade any of the exchanges you wanted with the same UI. So really nice charts, really nice UI. During that time is when I first met up with Dan and we actually collaborated on his ZeroBlock mobile app. So he needed a chart. I had charts, so we embedded my charts in his app, you know, simple web view. But it was the fastest way to get charts in there. And it was good that we worked together because we were both acquired by Blockchain, late 2013, early 2014, kind of that first big $1100 bubble run up.
Clark Moody:
And so we worked together on that, rebranded my product from RTBTC, which is like the worst name ever to ZeroBlock trading. And so that was fun to work, you know, get to know him, worked with him. And then we got back together in 2017 and Co-founded Interchange along with Matt Galligan to build institutional back-office tools for managing any crypto asset, answering questions, what do I own, where is it, what’s it worth right now? Doing accounting on that. And that was acquired by Kraken last year mid 2019. So we’re still still going strong at Kraken and yeah, so I’ve been in the space awhile worked with Dan for a while.
Stephan Livera:
Yeah. Like I said, I’m a big fan of your dashboard. I use it quite often myself when I want to check out stats on Bitcoin network. And I even use it as a teaching tool when I’m working with a newcoiner and they’ve got different questions like, Oh, how many Bitcoins have been issued? I go, okay, one sec. Let me just pull up the dashboard and then boom, you can show them, okay, this is the money supply today. Some of the different statistics. So why did you start this dashboard?
Clark Moody:
Well, yeah, first of all, it was, you know, I build all my products for me first. It’s the kind of thing that it’s like I’ve got it sitting up on one of my monitors for two or three months before I even tell anybody about it. But yeah, I just wanted that quick glance, broad overview of the entire Bitcoin ecosystem so that you could just say, I wonder where the hashrate’s sitting. I wonder where this is sitting, where the mempool is, whatever. And you, you know, instead of pulling up your bookmarks folder on your browser, you’ve got just the numbers refined down during the, the, the SegWit activation time. You know, you were going and checking out block version numbers and what’s the miner signaling? And we don’t have any in-flight soft forks right now, but I’ll sure have that stuff when the time comes.
Clark Moody:
But you’re looking at block sizes, you’re looking at fees, you’re looking at everything. And you know, I’m sure you did, like you found yourself go into 10 different sites and you had them all up. So I wanted to bring those all into one place. I’d also like to give a shout out to Ansel at Bitcoin and Markets podcast. So during 2017 he was like my go to podcast and he would rattle off these various figures throughout the show and you could tell he was going to different sites. And so I was like, man, it’d be nice if there was that one place where all of these things were. One of the most interesting stats that he had, which I don’t have on my dashboard, but one of his was the chain value density was this like the block size divided by the market cap or market cap divided by block size. So you get this kind of like dollar per megabyte of block space number and you could use it to compare chains, you know, Bitcoin Cash at the time. Anyway. So that was just one of those really interesting ones. That’s kind of a weird stat that’d be fun to have.
Stephan Livera:
Yeah, that’s great. And Ansel is has another in the space and he’s done a great job with his podcast and the work he shares on Twitter and so on. In terms of your dashboard then, do you see it as a monitoring tool and then also somewhat of an education tool? Would you say that’s basically how you see it?
Clark Moody:
Yeah, I’d say monitoring primarily, but I’ve got those descriptions on each field. Like when you click a field in the dashboard, there’s a small description of what it is, like that takes writing like actual sentences, which is a lot harder for me than writing code. So some of those could be improved. But yeah, it’s so you could just pop up. I found myself at meetups are local meetup saying, you know, we’re talking about block size, we’re talking about something. And I pull out the dashboard two or three times during the conversation just to say, here it is right now. This is what it is right now, you know?
Stephan Livera:
Awesome. So yeah. So let’s talk through some of the different statistics and maybe what we can do today is also not just talk through the statistic, but also what’s the deeper meaning of it and how are you thinking about it? Because I think that will be useful for listeners maybe for the beginner and intermediate level listeners for them to get their own, improve their own grasp of what’s going on with the blockchain and so on. So look high level, I guess when we first looked at the dashboard and the top left, you’ve got the price right? You’ve got sats per dollar, you know, it’s you know, and we can see like the block height, right? So Bitcoin has a blockchain and we can say exactly how many blocks there are. It’s funny, you’ve also got here the GBTC premium. And so right now as we record this, it’s sitting around 20%, 20.8%. What do you make of that GBTC premium? Is it just that people are willing to pay that much more for easy access to synthetic Bitcoin?
Clark Moody:
Yeah. So GBTC is a traditional ticker that you can buy through your brokerage and it kind of represents that just like you said, that convenience premium of, I don’t know how to custody Bitcoin, I just want some exposure. I can just go into my standard brokerage. I’ve got Apple stock, I’ve got whatever, and I’ve got GBTC. So the premium kind of represents that opportunity that people are willing to pay for that convenience.
Stephan Livera:
Yup. And in terms of the price and then the market cap, obviously that’s not one funny thing I find is that the longer someone’s been around in Bitcoin, they tend to talk about price less often, right? Because they’re just more focused on development or the community building or some other aspect of it. But I suppose it is in fairness. The bigger Bitcoin’s price go as in the bigger the market capitalization goes, the more use value somebody has with Bitcoin because now they can actually transfer more money without necessarily moving the price of Bitcoin up and down with like slippage. Do you have any comments on that kind of idea?
Clark Moody:
Yeah, sure. So liquidity is a measure that I’m not showing here, but liquidity is this interesting word that it really represents. How much is available to buy or sell right now. It’s time based. There’s not just, you can say, Oh, that market’s liquid. What you’re really saying is that market has buyers and sellers at size all the time. And it might look, you know, the dashboard now has, that market’s block is pretty small and it’s the first thing I do plan on putting more things up there in the markets related stuff. There’s tons of stuff you could do there, but so it’s, you know, you leave with the price because maybe that’s the first thing that people are gonna glance at on their phone. It’s the top thing on the site. You look at it quick. But the market cap does represent that kind of easy to grasp. How big is Bitcoin? How big is it right now? And you know, when it’s sitting at a trillion, Bitcoin’s like $44,000 or whatever. And so if it’s 7 trillion, it’s as big as gold and you could just have that really quick glance at while Bitcoin’s pretty big, you know? So for maybe the person looking at it for the first time say, Oh, this is 160 billion as we’re recording $160 billion thing, that’s not insignificant. Right?
Stephan Livera:
Yeah. And so the next one down is the blockchain. And so we’ve got the block height, we’ve got the money supply, very important percentage issued. So I find this now personally when I’m trying to teach a newcoiner, it’s quite a interesting thing to point out to them that look on this dashboard, you can see again at the time of recording percentage issued, 86.9%, 18.25 million of the Bitcoins that will ever be mined is already out there existing today. And that that’s perhaps counter-intuitive for some.
Clark Moody:
Yeah, fully auditable supply. Hugely important. It’s one of the fundamental value propositions of Bitcoin is that there’s the supply exactly. Fully audited. You can audit it for yourself and you don’t have to trust anybody else that says, Hey, trust us, we’ve got 18.249 million, Bitcoin in the bank. No, it’s fully audited. Cryptographically that that’s how many Bitcoin there are. And so that’s, that is really important to, to know coming into the space that yeah, you have this fully audited guarantee of supply and nobody can change that without significant you know, hard fork of the network. And if you’re running your own node, you don’t have to follow that. You’re going to stick to, you can stick to the chain that, that only has 21 million total.
Stephan Livera:
Right. And and you don’t even have to rely on the dashboard if you’re on your own node. Right? Because you can do a, I forgot the exact command. I think it’s gettxoutset, I think that’s a, there’s like a command you can run and basically check. This is the exact outstanding number right now. So let’s talk a little bit about the UTXO set size, so that’s about 66 million. What does that mean? What is the UTXO set?
Clark Moody:
A UTXS0 is an unspent transaction output and that represents a portion of Bitcoin that’s available to spend. And so the number of those 66 million, I like to think of it as, you could kind of think of it as a soft upper bound on the total number of people who hold Bitcoin. So that’s kind of individual addresses that have a balance. Roughly. It’s, you know, addresses could be multisig. So that’s multiple parties controlling the same coins. But roughly you could think of it as an upper bound on total people self custodying, their independent Bitcoins. Now your wallet is made up of UTXO’s. So your wallet has multiple UTXO’s. In it. That’s why this number could be seen as an upper bound.
Stephan Livera:
Yup. And it’s also, I guess when we think about Bitcoin into the future and how Bitcoin scales and so on, that’s also an important consideration because it’s not merely the blockchain size. So today as we, as we speak, it’s about 301 gigabytes, but it’s also about each device who wants to run a full node? Are they able to contain that UTXO set in their own memory and do all the calculations of incomings and outgoings.
Clark Moody:
And one thing to note that set the blockchain gets you there. But that set in essence is Bitcoin. That’s the current state of the Liesure is that UTXO set. So if there’s a way to, you know, trustlessly, get there, you can actually delete the whole blockchain, keep the headers, delete the whole chain, and just have that UTXO set, and that’s what pruned full nodes do. So if you could stand downloading that, that chain and verifying it, you can actually throw it away and just keep that up to date. So set up to date and you’re up to date with Bitcoin.
Stephan Livera:
Yup. And so I guess one way to think through that is right now if you want to run the full node that’s about 300 gigabytes at the time of recording, obviously that will go up in time. And people can run pruned nodes at like five gigabytes of storage, let’s say. And now then you would have the complete picture for yourself that you have verified. But then if you’re running a pruned node and you don’t have the full, the rest of the blockchain you couldn’t forward, you can give that unto other people. So there’s kind of an interesting aspect there around past history. Yeah, that’s right. And so another very counterintuitive statistic here. For some people it might be this one here, one year average block time. And so, but Clark, I thought Bitcoin blocks were only every 10 minutes. What’s going on with that?
Clark Moody:
Well, we have this thing called difficulty adjustment that targets 10 minutes. So if you see this number below 10 minutes, that means that hash power has been coming online, continually making blocks happen faster, and the network is trying to adjust downward. If we had no growth in hash rate, that number would be right around 10 minutes. So you know, the way that I calculate this as I go back one year, what was the block one year ago and just divide through by the number of that total time by the number of blocks to get this long average. But yeah, so the hash power, since the beginning of Bitcoin has increased 18 orders of magnitude or something. Some maybe not that much, 6, 7, 15, I don’t know, a huge number of orders of magnitude increase in the power of the network. So if you didn’t have the difficulty adjustment, the blocks would just be zipping by once every couple of milliseconds.
Stephan Livera:
So we spoke about it before the chain size. So that’s about 301 gigabytes. And that’s also interesting from a scaling perspective and how quickly is that growing every year? Right. So again, a couple of years ago for the listeners who are maybe a little newer to Bitcoin, there was a big debate a couple years ago around how, what direction should get Bitcoin go. And one of the big arguments was “Oh hard drives space is really cheap”. But there were other factors there too, that little, well large debate as well. So things like minor centralization, the ability of the network to remain in a decentralized consensus even with bigger blocks. So do you have any thoughts to share with the listeners there on the chain size and how quickly that’s growing? What are the implications of that?
Clark Moody:
Yeah, so two things. If the chain is large just in its on disk size and it takes a long time to get caught up. But the bigger problem is if the blocks are too big, you can never catch up if you have constrained bandwidth. So bandwidth is probably the limiting factor for many places around the world. If you can’t catch up with bandwidth and associated hardware requirements to validate the chain, larger and larger blocks take more resources to validate. If you can’t validate each block on average in 10 minutes or you know, download it and validated in 10 minutes, you’re going to fall behind on average and you’ll never actually catch up if the changes keeps rolling on ahead. So the on chain storage size is one thing to keep in mind if you want to run a full archival node, but hard drive space is really cheap and there are other computer resources that are more limiting than, than total hard drive space.
Stephan Livera:
Yup. And I suppose there’s also, it might be interesting as all for some listeners is to understand some of the different perspectives amongst Bitcoin developers. So famously Luke Dashjr has the point of view of we need to lower the block size down to 300 kilobytes and on the and then there’s probably a bunch of Bitcoin and lightning developers who think, you know, where we are now is okay. And then there are some who might like who might believe not right now, but maybe 10 years time, 15 years time that there should be a block size increase because for whatever reason they want people to be able to interact in a more trust, minimized way and the current size of the blocks, like eventually, like if you go out to millions and millions of people, then it might not actually be enough for every person to have their own UTXO, and then that might impact on the ability of people to participate in Bitcoin. Did you have any thoughts to share on that kind of that range in opinions?
Clark Moody:
My thinking is that kind of to jump to the end, Bitcoin has one hard fork and that’s it. We have to hard fork the timestamp before it overflows 32 bit unsigned integer. So that’s a for sure hard fork. Other than that, you know, there’s a market, right? Prices, allocate scarce resources. The block size is what it is to raise it too far, requires a hard fork. We could raise it again with a software, I don’t know, you know, like we did a SegWit effectively allowing more block weight as it were. But you, you just can’t hard fork this sort of system. Someone posted a while back, a great comparison to the IPV4, IPV5, IPV6 protocol development Wars in the 90s, and go read up on that for kind of an equivalent idea of how hard it is to change a protocol.
Clark Moody:
Bitcoin’s a protocol. Bitcoin’s not a technology. I think this is maybe what a lot of investors don’t understand is that it’s not a technology, you know, it’s not a tech company. It’s a protocol. And so that, you know, that should, that should inform your thinking about hard forks, you know, everybody has to upgrade for a hard fork. So I think Bitcoin has one, I think it will be the sort of thing where the timer starts and it’s like everybody we’re upgrading in five years, it’s a five or 10 year runway and it’s like take the next five years to get your house in order before this thing’s upgrading. Here we go. It’s not going to be a quick thing unless there’s some emergency change that has to happen, but hopefully we don’t have that. Again, we had the the database indexing problem in 2013, but hopefully we don’t have any other, other sort of problems like that. That’s kinda my thinking on forks.
Stephan Livera:
Yup. And just for the listeners who aren’t familiar, the fork that Clark is referring to there, the one hard fork that we’d know for sure is coming is known as the Y 2038 bug. But it’s a bit of a misnomer. It’s not actually happening in the year 2038 it’s actually happening I think in like 80 years or something. So look, we may not be alive for that, but you know, it needs to get solved by then.
Clark Moody:
Bitcoins going to the stars, we’ll have to fix this problem before then.
Stephan Livera:
So it may not be us, but it may be, children and grandchildren generation who are dealing with that. But that is a hard fork that we know is coming. Okay. And so there is also this question of the OP return data. So today that is 2.3 gigabytes. And again, for the listeners, OP RETURN is like a special kind of unspendable output that allows people to essentially write into the chain a certain small amount of information. I think there are some other maybe more hipster or ghetto ways to do it, but the main way to do it is OP RETURN. So what’s what’s the deal with this OP turn stuff? Does that mean every full node has to now maintain OP RETURN data for now and forevermore?
Clark Moody:
OP RETURN data is safely discardable by the node. Since it is in a Bitcoin core node, calls it null data. So it’s literally just a piece of data and nodes could throw it away. I included it on the dashboard just so that people kind of are aware of the size because some people say that the blockchain is not a public storage space, we’re not putting images on it, etcetera. So just to know how big it actually is is good for the discussion, right? So as it stands, every full notice carrying around 2.3 gigabytes of this data, sure it could get thrown away in later versions, but that’s the way it is now. And some really important applications could be anchored into this OP RETURN data like open and the identity work that Microsoft is doing. You cannot, you can hook billions of records into the chain with just one 32 byte piece of data. As a, the root of a Merkle tree can anchor a huge amount of data into the chain in these other protocols.
Stephan Livera:
And on that it might be at first glance, people would think, Oh, hold on. Pretty much everything else will get priced out of Bitcoin. Right? Like unless you are doing real economic value transactions, you’re just going to get priced out. You can’t just rely on being able to put this stuff into the chain for free or very cheap. It’s going to go up in time. But I think to the point you’re making is that some of the guys at Microsoft, I think his name Daniel or Buechner, I’m not sure how to pronounce his name. And he’s got the decentralized ID ion approach. And as you were saying, you would sort of anchor in with one hash, the information relating to say billions of information, billions of people or millions of people. And so that is how it might be cost effective.
Clark Moody:
That’s right. And he says, you know, even if it costs $100 to anchor a decentralized identity system to the blockchain, it would be worth it because now your identity is not tied to a company or a state. It’s tied to the blockchain, which is apolitical, anti-political, you know, free from interference.
Stephan Livera:
Another interesting conception and idea for listeners. Maybe this is revision for the advanced listeners, but for the beginners and intermediates, this idea of container ships. So this idea that a Bitcoin transaction is not necessarily always a single payment and that it may eventually over time, it will contain many payments. Whether that is a lightning channel open and close transaction, or whether that is a payment between, let’s say two Bitcoin banks and really inside that is actually contained a lot more transaction data. How are you thinking about that kind of idea?
Clark Moody:
Yeah, I’ve thought about the custodial Bitcoin bank idea and you would have two banks settle on chain daily, weekly, whatever. But you know, they have cryptographically signed messages to one another throughout the week and then they settle up just like banks used to settle in gold. You know, here’s a bunch of your checks back. Give us the gold from your vault. It could be exactly the same thing. And that’s worth it to a bank to settle billions and billions of dollars of transactions on chain. Maybe, maybe they’re moving a couple of million they’re willing to pay a hundred dollars transaction fee for that, $1,000 transaction fee for that to have that final settlement guarantee.
Stephan Livera:
Yeah. And Dan Held has done some work on this as well. He’s a article about Bitcoin security longterm relying on more transaction fees than miners. But we’ll get to that. I think we’ve got a section on mining, so we’ll probably leave that for but let’s talk about the Bitcoin network now. So we’ve got about 10,000 reachable Bitcoin nodes and how does this compare with some of the other statistics such as Luke Dashjr’s statistics,
Clark Moody:
This box is from the bit nodes.io, 21.co, earn.co, whatever it is now from their scanner of the chain. And it’s, I think it’s just listening nodes. So this is the number of nodes that have an open network port that can accept incoming transactions. Luke has a scanner that seems to report over a hundred thousand nodes and it may be using a different methodology of finding those. Either way that, you know, it’s important that this number is large and it’s also, I don’t think this number has changed all that much. I remember it being around this, this count back in 2017 and everyone’s running their UASF nodes and we’re counting those user agents and things like that. It seems, if I recall, it was about 10,000, like it wasn’t five and it wasn’t 30, so maybe this number is stable and it represents kind of hardcore Bitcoiners and I don’t know, it’ll be interesting to watch this one going into the future. Like where are we in a couple of decades, right?
Stephan Livera:
Yeah. And it also, because there’s a few points here and I think Bitcoin’s community as it were, for want of a better word, has become more aware around this idea that it’s not just the mere number of nodes, right? Like someone can just go spin up on AWS, a whole bunch of cloud nodes, but really what matters is an economic node. Are you using that node to accept or reject an incoming transaction and say, no, that’s fake Bitcoin. I’m not accepting that. Or yes, that’s real Bitcoin I trust. I have validated that on my own Bitcoin node. I guess that’s the important way to think for the listeners there.
Clark Moody:
Right? Yeah. We’ve seen that tactic of spinning up a thousand nodes for other other fork projects and it everybody sees right through it.
Stephan Livera:
Again, I don’t know exactly Hey, but I believe Luke’s statistic might have something to do with running one of the seed nodes for new nodes who are spinning up on the network. Do you know when they’re starting? Yeah, he might be. He might be able to use some of the statistics from that to then figure out a more accurate picture of how many actual nodes are there out there in the world. Because as you said, this is reachable Bitcoin nodes. So for listeners who are unfamiliar, if you just double click Bitcoin core and just run that and you haven’t opened a port, your node will not come up in this statistic because you haven’t forwarded the port to open that port. So there may be many more nodes out there, but they just don’t have an open port. And maybe that’s a good thing, right? We’ve got more people who have a copy of the Bitcoin node, you know, a Bitcoin blockchain and are transacting. But we just don’t necessarily know who they are.
Clark Moody:
Yeah, your node, is the beachhead into the ecosystem. And so you can self validate the chain and using tools like Samourai Dojo for instance, you could host your family and friends. They can help to your Jojo. And so your nodes powering a local community of people. Or your node could be powering a business and it represents thousands, millions of users of their entry into the network. So it’s not one user per node.
Stephan Livera:
Yeah, that’s a great point to remember. And so lightning network. So similarly we’ve got about 6,500 lightning nodes. So where are you getting that stat from?
Clark Moody:
I’m running an LND node on a server and I’ve connected to a few peers and I’m just processing the describe graph RPC call that gives us total capacity, total channels, Tor nodes. So that’s, that’s where I’m getting that data.
Stephan Livera:
Awesome. And so today we have about 864 bit clients that have been funded into lightning channels. And I guess there is some amount of debate and sometimes on the, you know, Bitcoin and you know, crypto news, quote unquote they’ll say things like, Oh look, the capacity has gone up. Or sometimes people might say, Oh look, there’s more locked up in some other, some other cryptocurrency. How are you thinking about that? Is that a measure of, you know, real transactional volume? Is it just an experimental thing? These are people who want to play around with the lightning network or, or here’s another take. Maybe it might be actually using less Bitcoins to achieve more is more capital efficient. So what, what’s your thought there?
Clark Moody:
My thought is that I’d like to see this number rising. It’s been around this 850, 830 coins for a couple months. So we’re not seeing the explosive growth like we saw at the beginning of the lightning network. You’re right, you can anchor 2 billion transactions to the chain with two on chain transactions. So there could be huge amounts of activity happening. We just don’t see it. Also, this is public capacity. So there are private channels that my node wouldn’t know about. So there is hidden capacity and as people say, mobile wallets now are defaulting to private channels. So you’re not going to necessarily have a correspondence with the more people who sign on. So those are some caveats. No, but the lightning network and who knows what they do in the future. I mean there’s so many. You had a podcast a little while back talking about lightning privacy, which was excellent. And it was just all these different ways of shielding the amounts transacting with whom all these things. So they’re continually thinking about those those issues on lightning. And it’s very interesting to see,
Stephan Livera:
Right? Because there’s so many developments still to come, right? So if we get Taproot and Schnorr and as Rusty Russell mentioned on that episode, there’s all these different changes that could come to the protocol. So for example, we might have point time locking and we might have better ways of doing MPP multi-part payment. So they’re just a couple of ideas there. And also there is just that factor of maybe a lot of people are just HODLing, right? They’re not necessarily caring about trying to spend right now, they planning to spend in 5, 10, 15 years. Who knows? So that that’s an important factor as well, that maybe we’re just early.
Clark Moody:
And fees are pretty low too. So lower valued economic activity can still happen on chain with very low fees if you’re willing to wait until night or weekend times. So if we see continually full blocks, if we see base fee rates rising, then we could see an uptake in lightning as people move that activity off chain.
Stephan Livera:
Right. And I think that’s a good parallel to what happened in 2017 because there was a lot of on chain volume. Now it’s also fair to say that there may have been actors trying to basically spam the chain, right? Just to make it look like it was overly full. And there really weren’t that many people. But there has also been to acknowledge the efforts of people from Bitcoin Optech and so on working with exchanges saying, Hey, let’s get you using SegWit. Let’s yet, you using Batching. Let’s get you guys doing low fee, low balling the fee, and obvious replaced by fees, the fee higher if you can’t get it confirmed in a certain period of time. And so it’s kind of like this weird sort of tension because in one way, the put it this way, the what drives people to look for those engineering improvements is the chain getting congested. But then the more engineering talent that gets put into it, then you can start cramming more and more into it and get more for less.
Clark Moody:
Right, right. Yeah. Compact representations, you know, shorter addresses, shorter hashes and all these things. You know, there was an article about scaling Bitcoin came out in 2017 I think on the Bitcoin core blog and it talked about all the improvements in just the node technology to be able to validate the chain faster, which is, makes you able to scale to more consistent throughput. So running a 0.8 node or a 0.3 node right now probably, definitely couldn’t have kept up with the chain in 2017 because there was just too much to validate and the software itself has gotten so much better.
Stephan Livera:
Yeah. I think there was also a very interesting BitMex research piece where they compared the different versions of Bitcoin core and I think there was one that had a big drop in a time, i.e. there was a big efficiency gain in terms of initial download and sync of the Bitcoin blockchain. So also with the lightning network, I know this is one of Matt Odell’s favorite topics is the Tor percentage. So currently we’re at 40% of Tor capacity. So what does that mean for a listener who doesn’t really know what lightning network and Tor is?
Clark Moody:
So a lightning channel has two nodes. If one of the nodes is listening on Tor on at least one of its listening addresses, then I count it, I count that whole channel toward Tor capacity, which means that at least part of a payment could be routed through a lightning node that’s listening Tor. Tor is the onion router. Tor, is an a routing system on the internet to try to hide the source IP that’s making a request. So if you can get into Tor, your request pops out the other side and hopefully no one can put the two together. So you could route a payment on the lightning network and route in such a way that your internet service provider doesn’t know that it was you. So there are multiple stats you could report here, like number of channels where both sides are in Tor. Both sides are only listening only, solely on Tor. That’s a lot smaller. But I reported the biggest number and only one of them. So you could have, you could have six or seven more, metrics in this box about just this topic.
Stephan Livera:
Right? But your role is as a curator as well. And it’s important that you just put kind of the case statistics and not bombard with too many and then it just becomes, it’s not useful anymore. So I like that. I appreciate that. That you’ve done a fair bit of curation. Obviously the trade off then is the user of the dashboard is sort of relying on your curation that you’re kind of selecting, okay, these are the important statistics. And but yeah, that’s an important statistic as well. In terms of the privacy of lightning network and hopefully that advances as we go. So let’s talk about transactions. So this is sort of recently we just passed a 500 million transaction. So today we’re sitting around 508 million, 787 thousand transactions. And there’s this statistic there where you’ve got the, the rate, which is really interesting as cause we’ve got 3.8 transactions per second. So the famous seven transactions per second of Bitcoin is not even, we’re not even using that.
Clark Moody:
Right? Yeah. So this comes from a Bitcoin core RPC call that you can give it, give it a block height and it’ll spit out these, these statistics for you. So I just gave it 30 days and that’s, that’s that 3.8 transactions per second, if you just average it across all the blocks in the last 30 days. So what that tells us is that the blocks are not full. Maybe they’re a little more than half full on average. And then it does report the total all time, which is really nice. It’s also a fast RPC call for you developers. Some of the RPC calls are slow, but this one is fast.
Stephan Livera:
Very nice. And then you’ve got here chain security. So we’ve got the hash rate, 105 Exahash and the chain rewrite days, which is an interesting one. What’s that?
Clark Moody:
Chain rewrite days is if you took the total work of the chain, so the total number of hashes in the whole chain and you divide through by that hundred five Exahash per second, how many seconds and hence days would it take to produce an equivalent amount of work. So you could say that you could rewrite the chain from Genesis till now in only 421 days. What we would like to see is that number increasing one day every day so that it takes longer and longer to rewrite the whole chain because hash power is growing. If hash power is shrunk, that number would shrink so that it’s less time. Now if someone spun up enough computers for that many days to rewrite the whole chain and that would essentially just, you could rewrite a lot less of the chain to destroy Bitcoin. But this is just kind of a nice like represents the total amount of hashes done in all of the Bitcoins history.
Stephan Livera:
Gotcha. Yup. And, and let’s go into, now you’ve got some boxes around mining, so mining and mining economics. So I think an interesting one to talk through is the, some of the mining economic stuff. So we’ve got the block subsidy and the block subsidy value. So what are these statistics getting at?
Clark Moody:
Subsidy is that money supply function. So every block right now gets 12 and a half Bitcoin. The block subsidy value is basically the market rate of 12 and a half Bitcoin, but the current price as well, next box is Halving so that that will soon drop to six and a quarter. It started at 50 then it went to 25 now it’s 12 and a half. And so that’s just every block a miner is incentivized with 12 and a half brand new Bitcoin for finding the block plus transaction fees.
Stephan Livera:
Right. And so that’s the point around how there’s the block reward, which is comprised of both the block subsidy plus the transaction fees. And so another really interesting stat, and this is coming back to what we were mentioning before, is the amount of fees per block. So for listeners who are unfamiliar, one of the debates that happens in Bitcoin is will Bitcoin be secure decades into the future? Because over time as the Halving happens, essentially there will be less and less of a block subsidy value, right? So that’s why you’ve got the block subsidy value. And I guess there’s a few different things to think about here. So first of all, price increases, right? So theoretically if the price doubles every four years, we’ll then that block subsidy value in fiat terms stays the same. But obviously we know that’s not going to happen forever.
Stephan Livera:
Right? I don’t know, maybe it will, who knows, right? But we should not anticipate that it will happen forever.
Clark Moody:
Thousand year bull run.
Stephan Livera:
That’s right. Bitcoin is designed to pump forever. I don’t know if doubling every four years forever is sustainable though. But yeah, so a really interesting statistic is this idea of how much of each block is made up or how much of the reward is made up by fees and versus how much of that is subsidy. And that ties into one of Dan Held’s, well known articles about Bitcoin security. So how are you thinking about that and kind of where are we today in terms of fees as a percentage of subsidy?
Stephan Livera:
So the current value is 1.3% average fee versus subsidy. So with a percentage, you could do it in multiple ways. This one is, if the fee is equal to the block reward, then this reads 100%. We saw that in 2017 some blocks had more than 12 and a half Bitcoins of fees. So this number would have been 110% or something. If we maintained a constant fee level in absolute terms and we have a Halving then this number doubles. So we’d be at 2.6% if the block subsidy were halved eventually this must go over a hundred percent because the subsidies get vanishingly small. So it’s just kind of a, just a metric to keep your eyes on. Like how much is the network transaction activity offsetting the diminishing subsidy.
Stephan Livera:
Yup. And it’s also probably a good call out or point to raise here, which is that we don’t want in the future. So imagine 20, 30 years into the future, we wouldn’t want the, we wouldn’t want that stat or average fees per block to be really lumpy. Like what we really want is kind of a stable backlog of transactions because if it’s really lumpy, what does that imply then in terms of mining?
Clark Moody:
Yeah. Variance in your revenue. You can’t, you can’t operate a business, you can’t make payments on your, on your capital investment. Someone said elsewhere, a reserve demand for block space. I don’t know which, I don’t know which podcast that was on, but reserved demand for block space is an incredible idea and that hopefully you always have at any fee level, you always have transactions that are ready to go for different use cases.
Stephan Livera:
Yeah. So kind of like a backlog of transactions basically.
Clark Moody:
Right. And then they may not even be in a meanpool. They may just be in independent applications looking for an opportunity time waiting til fees start to drop, and then they push transactions back through at a slightly lower fee rate, but they keep those fee levels relatively relatively constant.
Stephan Livera:
Gotcha. Yeah, and I guess some other factors, there could be things like imagining in the future, let’s say, you know everyone’s using lightning network. They might opportunistically wait for a low fee time to open their channels. And that’s an example there where maybe if you’ve already got a bunch of channels open and you just want to open one more, you’re not necessarily going to put really high fee on that. You might just put it at low fee and just leave it until it gets confirmed. That kind of idea.
Clark Moody:
The marginal channel opener.
Stephan Livera:
That’s right, the marginal channel opener is helping smooth out the fees of Bitcoin, right? Yeah. And I mean a similar thing could be said for coinjoining as well, right? So people might be waiting for a low fee and then go, okay, now I’m going to try and do my coinjoin.
Clark Moody:
It’s a transaction you don’t have to make, it’s a lot bigger, etcetera, etcetera.
Stephan Livera:
Yeah. I mean, again, we’re speculating, right? But hopefully in 10 or 20 years time they’ll look back on this podcast and be like, yeah, those guys are right. So we’ll see. So look, we’ve got the halving coming up and there’s a lot of debate around this Halving estimate. So what’s your current estimate for the halving?
Clark Moody:
May 9th, 2020 this is one of the first numbers I wanted to compute with the dashboard. And the way I’m doing it is I’m taking the last, I’m taking that one year average block time and just projecting it forward. So I’m kind of assuming it’s a, maybe a big assumption, but I’m just assuming that hash rate growth will be constant. So as it was in the past one year. So it will be for the next year when the Halving happens, this will be projecting out four years in the future. So this will be a really noisy prediction. I may take that interval farther back. Maybe you go back to the last, the distance from the Halving to project to the next one. Interestingly enough we’re within a day of being 10,000 blocks to the Halving, so that’s kind of big countdown goes from 10,000 to 9,999 and we keep chugging along. Others have put this in late May. I think that’s just like the naive 10 minute block forward estimate. So I kind of wanted a little bit more, maybe a little bit more accurate estimate. Who knows? You know, the difficulty adjustment was actually down, so we had greater than 10 minute block times. So we’ll see.
Stephan Livera:
Yeah. And so you say, you’ve got a bunch of different statistics here around the next block as well, so how many transactions are there in there? What’s the value of it and then some fee estimates as well. So this is another one where I think if you’re a little newer to Bitcoin, you might not understand that idea of, okay, how high should I set the fee for this transaction? And if I want it to go through in a day, I can put it through a bit lower than if I want to in the next block. So can you tell us a little bit about that and the fee estimates?
Clark Moody:
Yeah, so the very next block stuff is coming from the getblocktemplate RPC call. So it’s basically asking Bitcoin core construct a block for me that I can mine on. I’m not mining on it, but it constructs this block and I output, you know what it’s doing. So right now we’re looking at, you know, $25 million of value on a 0.1 Bitcoin fee. So a lot of value is moving in the next block and not very many, not very much fee is paying for it, 0.84% over subsidy. So below that I’ve got a box with these fee estimates. Immediate one hour, one day, one week. And so immediate is kind of like if you wanted it in the next block or two blocks, one hours, six blocks, you know interesting since I’ve launched this dashboard, the day and week numbers haven’t climbed above one Satoshi per byte. So at no time in the last couple of months could you not get a transaction in with a one Satoshi fee if you’re willing to wait a day. So that’s interesting. And you know, most full nodes purge their mem pull after three days, maybe three days or two weeks or something. So the transaction can sit there a long time just waiting for low fees. So if you don’t have to transact right now, don’t pay high fees. It’s another trick that maybe will keep us out of trouble when, when the usage goes up.
Stephan Livera:
Okay. And I guess one other thing that’s interesting there is some people might, depending on what business they’re using or what they’re doing, they might have different needs to try and get into the next block or into a reasonable time to block. And so if you are waiting for a confirmation, maybe you’re an exchange or waiting for a deposit or you’re an exchange and you want to make the pay out to the customer and you don’t, and that customer might be a little bit newer, they necessarily don’t understand some of these things. They just want to see the money hit their wallet and they, if it hasn’t come in a certain time, they might feel like, Oh, hang on, what you didn’t pay me?
Clark Moody:
Where’s the money? Where’s my money?
Stephan Livera:
Yeah, exactly. So I think that’s, those are some of the different dynamics there. And also you might have this weird dynamic of it kind of gets away from you, right? So you might’ve put it in at a certain time, but then straight after you put your transaction through it, then kind of climbs a little bit. Have you seen that happen? I’m sure you have, right?
Clark Moody:
It’s happened to me. I’ve paid for an invoice. It didn’t confirm in time. I had to pay more because the price was moving. So you know, the exchanges, if you’re listening, lightning network, instant withdrawals telling you, most people you know, have less than 0.16 coins coming in and out and they can get their 500 bucks worth of Bitcoin out instantaneously. Better UX, fewer support tickets, let’s make it happen.
Stephan Livera:
Yup. And it also Liquid between exchanges as well as another a good one as well. So these are some examples of things where exchanges who are forward thinking can really get ahead of the game and be ready for this sort of thing. But in fairness, there are many different competing priorities for the exchange. They don’t necessarily care about what a couple of people who are more focused on the engineering of it are thinking and talking about, so let’s now change to economics. So what’s the current inflation rate and you’ve got here the forward monetary inflation because tell us a little bit about that.
Clark Moody:
Current inflation is if you go back one year, look at the supply then and then look at the supply now, how much has the supply increased over that one year? So we’re sitting at 3.87% monetary inflation different than price inflation or price, you know, consumer price index stuff. This is monetary base inflation. The forward inflation is the same. I’m taking that one year average block time again and projecting out one year, dividing by block time to get number of blocks. And then how much new supply came on through the subsidy in that time. And right now it’s at 2.21%. So we’re, the forward inflation is significantly lower. Someone say almost half the current year.
Stephan Livera:
Yeah, that’s great. And this might also be a little bit counterintuitive for some people as well because every year we’ll go down. It’s not just the Halving factor it’s just the fact that you’re coming off a higher base now every year. So, so the actual percentage is actually coming down over time. Right. So that’s an interesting one for people to keep an eye on there and then stock to flow. So stock to flow is obviously very hotly debated. Obviously PlanB has been on the show and has spoken about that. So there’s a lot of people who are interested in say the investment aspect of Bitcoin are really focused on this stock to flow stuff. Can you tell us a little bit about how you’ve calculated the ratios and the prices here?
Clark Moody:
Stock to flow simply is one over the inflation rate. So one over 2.21% gives us a stock to flow of 45 going forward and that’s the number of years it would take to replenish the current supply at current inflation values. The PlanB model also has a price and my price, I am showing a stock to flow predicted price of 7,647 which is certainly lower than the market price and that one is based on some co-efficients I found on one of PlanB’s blog posts. This is on my to do list to like go back and do the regression myself to produce my own coefficients. But I just found some to get a price. There it is, take it or leave it, you know.
Stephan Livera:
Cool. No that’s, that’s cool. Let’s move on to output types. So this one is interesting as well. So I guess I’ll just do a quick summary just for the listeners what that is. So you’ve got here pub key hash script hash SegWit V zero pub key hash and SegWit V zero script hash. So if you’re just thinking in terms of Bitcoin wallets, maybe just like an easy way to think of it. Those 1 addresses the public key hash. Most of the 3 addresses types are like a script hash and then these other SegWit ones, the SegWit v0 are the bc1 addresses. So yeah, I like how you’ve got a split and a breakdown. So can you tell us a little bit about the split there?
Clark Moody:
Yeah, so we’re seeing that it’s 40% pub key hash. Those are those one addresses, kind of like standard wallet. The script hash 44% and those are probably multisig, probably exchanges. This is, this is the reported percentage of output volume, so not number of number of outputs, but output volumes of value. And so script hash 44% probably exchanges and then SegWit v0, the bc1 addresses it sums up to 16, 17%. And so that’s that kind of like SegWit usage percentage in terms of value throughput. And that’s a number that you could chart and see it climb and say, Oh, 50% of the transactions in this block were using SegWit, et cetera. This is on a value basis, but it’s good to keep an eye on that. And when taproot launches I’ll add a taproot output type here as well. So we can see.
Stephan Livera:
Yeah, that’s great. And I presume as well, because you can actually do multisig on the new, you know, SegWit v0. It’s just that many clients might, a lot of software right now does it on the three addresses are on the P2SH or the script hash type as you say. So it’s probably the case that over time people will shift over to using SegWit multisig anyway. And then we’ll probably see a lot of that percentage shift into using the newest type as well. And I suppose even with taproot outputs that will take some time as well for adoption and multisig using MuSig as well to show up that will be a type that shows up into the taproot output once we have that well, assuming we do get that right. Yep. So let’s talk a bit about the future supply. I think this is another one of those really counterintuitive boxes and people might not really appreciate that without seeing this dashboard. So can you tell us a bit about what’s going on here?
Stephan Livera:
You often hear the number 2140 thrown about Bitcoin supply increases till 2140. Well true, but it’s not exactly 2140 and it’s almost nothing at the, at that time. So it’s a geometric series that the slope of the curve drops in half every four years. And so what I’ve got is just dates of when we expect 90 95, 99, 99.9% supply. And that 90.9 is 2047. So 27 years from now, we have 0.1% of Bitcoin to get us the next hundred years. So people, it’s going to happen a lot faster than people think. And you know, the 90 and 95% levels were kind of requests from people on Twitter. Like, I need HODL targets, right? I need some short term. I’m not going to go until it’s after 90% or 95. So those are, you know, one in five years out. Give people some short term stuff. And then I’ve got this last full Bitcoin. So that’s when the supply is 21 million minus one coin, one full coin. And I’m looking at 2102. So the year 2102, a full 30 years to get that last coin. So if you’re thinking, Oh, you know, we have until 2140 to get all the coins, it’s going to take 30 years to get the last one. Now if it’s worth $1 trillion, and that’s the one thing, but you know,
Stephan Livera:
Well, that’s what we hope. That’s what we think it will be. And also some interesting, I guess, trivia and so on. There were some examples and I’m sure you’re aware of this clock but there were some examples in Bitcoin’s history where a miner has, for example, screwed up their software and incorrectly done the block reward and then got zero for it. I think there was one example where an OG Bitcoin user, I won’t dox their name just in case. But this user intentionally took one sat less than they were entitled to. And it was kind of like a bit of a joke, but that’s an example which permanently reduced the supply. So the actual, like once you count all these kinds of examples, it’s actually a bit less than 21 million. It’s like, I don’t know, 150 or 200 or a bit less than that 21 million.
Clark Moody:
Well my money supply number is actually, it counts,the block subsidies all the way through and it removes, some people send OP RETURNS with a value and that’s provably unspendable coin. And so I removed that from the supply number as well. If you look at other places, you’ll see a higher number. So mine’s a little bit lower. I should probably put like a coins lost, you know, provably unspendable supply, but I don’t have that yet.
Stephan Livera:
Right. Yeah. And then there’s also, I guess on that point, that’s also the point around how there’s, whatever, three or four years ago, Chainalysis came out with some work saying that apparently three to 4 million Bitcoins have already been lost and so on. So who knows. But again, that’s, that’s a bit more conjecture and we don’t exactly,
Stephan Livera:
No, for sure. So
Stephan Livera:
What about the future direction for the dashboard? Have you got any other ideas that you’re thinking about working on?
Clark Moody:
Yeah, I want to flush out the market section a little bit. Most of my other sites have been market data sites, so the futures, you know, forward curve, maybe an options curve, some maybe, maybe a picture, maybe a table transaction fee analysis. So I don’t have anything on like average transaction fee. And that’s a number that people are going to bandy about. And so I’ve got to report it so they can first of all come here and use it and not have to go elsewhere. But then it’s just an informative thing. So not only like a percentage in terms of like how much percentage are we paying, but also just dollar terms. Like what’s the average dollar transaction fee? UTXO set analysis, so like distribution of value. I haven’t quite found a way to get good at that UTXO set.
Clark Moody:
It’s a couple of gigabytes, you know, I’d like to analyze it. Maybe looking at side chains, how much is wrapped up in liquid, how much is wrapped up in wrapped BTC on Ethereum, etcetera. Maybe some of the coinjoin pools. It’d be cool to analyze the chain looking for Wasabi and Samourai and or JoinMarket transactions. Maybe report on that, those volumes and then traditional markets. So I’d like to do correlation with S&P 500 gold oil and bonds, let’s say. Just to see how correlated Bitcoin is. Because part of, part of the value proposition is this is uncorrelated. Well, I don’t know. We saw it, we saw it drop with the S & P recently. So maybe it’s not as correlated as not, not as uncorrelated as people would like. And then I’ve got kind of like a gee whiz module, I want to do an interplanetary Bitcoin module so that it’s latency times to Mars and Jupiter. So, so in the far future you can check, you know, is it a good time in the orbit of the planet to send a Bitcoin transaction?
Stephan Livera:
That reminds me of a Dhruv Bansal’s work from Unchained. I think he did some work about center of hash. And so I think basically he was, I think the upshot of it was basically that we won’t be able to use Bitcoin on Mars unless there’s some kind of fancy side chain thing going on. We might actually need a shitcoin we might actually need a Marscoin. Right. But I think that’s price the only permissible shitcoins is if you get, if you get to another planet, you get to start your own shitcoin.
Clark Moody:
Yeah. I wrote a blog post Bitcoin in the interplanetary frontier. That goes into that a little bit. You could use lightning on Mars just fine. Right? Cause it’s local network. Basically. The chain doesn’t have to know about it. But then all you have to do is wait for four confirmations. Once your transaction goes to, goes to earth to get to the main chain, just wait for confirmations, extra, and then you’re there.
Stephan Livera:
Ah, okay. Do you still monitor for like, a breach transaction and then you need to broadcast the justice transaction and so on. So maybe you would have to sit longer. What’s the word? Penalty or longer? I think they use CSV and CLTV windows. So maybe if you’re on Mars and you’ve got a lightning node, you’re going to have to set longer windows.
Clark Moody:
Yeah. And you could use main chain Bitcoin. You would just be a little bit behind. You couldn’t mine, but you could run a full node. Right? Of course. You have to make sure that you have multiple comm channels back to earth so that they can’t embargo your comms or anything like that.
Stephan Livera:
It gets, it gets crazy. It gets pretty wild. I mean, when you start thinking about it. Nah, that’s awesome.Look, I think that’s pretty much it. But did you have any closing thoughts for the listeners? Anything they should look out for when they’re using the dashboard?
Clark Moody:
You can set favorites right now. You can click it and put a couple, put a couple stats up at the top and it’ll save that locally so that you can refer to a few things. Stay tuned. You know, there’s a lot more to come. Everybody has been asking about time series data on this stuff, but I don’t know, it’s a point in time. It’s a point in time and it’s gone forever. Maybe so we’ll see. But yeah, it’s really fun. One of the things that’s a developer that I love about this sort of thing is that you could just launch something new. Right? You know, I’m kinda my own boss on, a little side project and it’s fun that people use it and, and it’s just a little, it’s like my free time I spend writing code, so I’m a just a huge nerd.
Stephan Livera:
As are many of myself and my listeners are as well. So look, where can we find you online? Where can they find the dashboard? Find you online.
Stephan Livera:
@clarkmoody on Twitter, and then Bitcoin.clarkmoody.com/dashboard
Stephan Livera:
Fantastic. Well, I’ve really enjoyed chatting with you Clark. Thank you for joining me today.
Stephan Livera:
Thank you.