Sergej Kotliar How To Watch Bitcoin’s Mempool, Lightning Adoption & Privacy

Hi, you're listening to the Stephan Livera podcast, a show about Bitcoin and Austrian economics. Today for episode two hundred and ten, Sergej Kotliar, CEO of Bitrefill, re-joins me on the show, and we're chatting about how to watch Bitcoin's mempool, what tools we should use, the implications of a block-based market, and we also talk about Lightning adoption and privacy, as well as Bitcoiners on COVID. This show brought to you by Swan Bitcoin. If you are in the US or you have friends in the US, absolutely get them on to Swan. The process is so simple and no coiner could do it, and they are Bitcoin only. So, step one, auto fund USD from your bank account, two, auto-stake your Bitcoin, and three, withdraw that Bitcoin to your cold storage. Swan doesn't charge withdrawal fees, they want you to follow Bitcoin best practices, and they crush Coinbase's fees for recurring buys by up to eighty percent and cash ups fees by up to fifty-seven percent. So Set and forget, enjoy your life, just swan and chill. Go to swanbitcoin dot com slash livera to start auto-stacking with Swan today. Use that ref link to get ten dollars of Bitcoin dropped into your account when you start stacking with Swan. This show also brought to you by Knox, a Bitcoin custodian dedicated to ensuring their insurance protection covers the full value of their customers' assets. So if you're a Bitcoin company, investment fund, trust, or family office, you might be looking for this kind of solution. So for example, suppose a fiduciary wants to hold two With Knox, Knox will seek to obtain two hundred fifty million dollars of insurance dedicated exclusively to that account and adjustable to volatility, no fractional coverage or narrow scope insurance for what it's worth, a tool to transfer risk. Knox is backed by investors such as Fidelity Investments Canada, Initialized Capital, and Inovio. The website is knoxcustody dot com. Next is the Cipher Wheel produced by CipherSafe, so this is a metal seed backup product for your Bitcoin twelve or twenty-four seed words. So when you create a Bitcoin wallet, such as a hardware wallet, you've got to write down that twelve or twenty-four word seed. Now, don't just keep that on a piece of paper, keep that on a metal backup that's fireproof, waterproof, rustproof, petproof, and tamper evident. The cipher wheel is in a wheel shape, and you get tiles, and you slide them in, four letters per word, and you can also get a padlock tamper evidence seal so you know if it's been opened. Don't leave it to chance, just make sure that your loved ones

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Happy to be back.

So, Sergey. I know you've got a lot of, interesting, things that you're chatting about often, and, I know one that you love to chat about is the mempool. You're a big mempool watcher, aren't you?

I like to think so. I like to think so. but I'm not alone anymore. there's, there's a good group, Partaking in this lovely hobby.

So what are some of the things that you would keep an eye on, mempool wise?

Well, I mean, like for me personally, we, we consolidate our coins on the weekends, at, at PetriPhil and And so it's, it's important to get a, get a low, low cost. I think that's the, like the original motivation for it. but, so yeah, you know, look for, what the fees are, who's bidding how much, and so on. But you can also see, like, a lot of interesting things, like lots of large- Chunks of transactions being dumped, and sometimes you can click into them and see what's, what's going on there, and you kind of learn. Like, I think, for me, one of my motivators has always been to, to understand, this field, that we're in. and, and there is a lot of, as you know, a lot of different kinds of bullshit and disinformation, but something that's not bullshit is, is what you see on the mempool. And yes, so that's,

And why, why I like looking at

it. Do you have any preferred mempool watching tools or are you just more like a command line wizard style?

no, actually I use tools. I use, well, Joho's, colorful chart, I think many people know, and, more recently been using mempool dot space a bit. I also have this one, called the fee calculator at bybitcoinworldwide, dot com, which shows the top two bucks, like transaction by transaction, and you can kind of see, the big ones there. I think that's my, my secret weapon here. and then, for, fork dot lol, as well. obviously not specifically for the mempool, but generally for it. I have

like a, a couple tools. And so then, if you found something that you wanna try to dig into further, how do you, what's your process then?

Usually I check them on o-o-x-t dot- dot me, and they, they get basic clustering and find out which entities are what.

Yeah, so I guess just for listeners who aren't familiar with that, can you just tell us a little bit about what that clustering is and what kind of information you are able to glean from it?

So xD dot me is, i-is, I guess a block explorer, type service that does, Like relatively rudimentary, chain analysis, algorithm, where it, basically checks which transactions appear com-to be coming from the same entity, and there is some like user-generated info about, yeah, who people think, which entity is, and, It's free and open for everybody. Yeah, you need to have an account, but you can just sign up for an account. and it's, it's pretty good, and you can, you know, not, not always, but, oftentimes you can, like, you click around a little bit, you're like, "Ah, that's Binance," or like, "Ah, that's Coinbase."

So with that, you can then start to understand, okay, a whole bunch of transactions just hit the mempool. I'll go and search that transaction ID,

Something like that, right?

Yeah. I mean, in practice, the interesting thing is just to overbid them by, by, by a fraction of, a point zero one, sat per byte. That's the real sport. But, you know, if you're curious, about, who suddenly dumped, a couple of megabytes of high-paying transactions of the mempool, you can get an impression. I mean, that's how If you remember, I was some time back, I was yelling about, BitMEX and, and Coinbase, and most of it came from just things like that and just seeing them, you know, over and over again.

Right. And so I think you were commenting then, and this is probably still the case, is that many of Bitcoin's transactions are actually into exchange, right? Was that, that was what you were saying, right? Right.

Yes. And we did the math on that, lately, and I think it landed at fifty-five percent, if I remember correctly. Yeah, or not into exchange coming from an exchange, but you can kind of assume that if, you know, if it's fifty-five percent from, then it's probably fifty-five percent to, but I can't really prove that.

I see, yeah. So I guess, how would you distinguish then? You might look it up on OXT to see if it's going from one exchange to another, or as you were saying, from exchange, meaning probably out to somebody's own wallet if they're doing a withdrawal, right?

Right. Well, I mean, you can, For, for that metric, we just, looked at, what percent, percentage used batching, and, because if you use batching, then you're some type of entity, right? You're not a regular person with a wallet. and so, based on that, you can, you can estimate a lower bound, which was fifty-five percent. I should probably add a little bit to that, yeah. So fifty-five is a lower bound.

I see. So this is batched on the exchange side, and I guess the heuristic or kind of heuristic you're, you're applying there is that most individuals, although they can technically do a batched transaction using certain wallets that have that feature, most people aren't. And so I guess that's also another way to sort of understand a little bit about what's going on, on the chain and who is using it, right? Exactly. And so you would also see other Bitcoin businesses doing their own- Consolidations or their own periodic, like for example, I think BitMEX is known for doing a, a daily transaction, and at that time it just a whole bunch of transactions hit the chain, right?

Right.

I guess, are there any other interesting patterns that people could see? Is it, I mean, the one that most people kind of colloquially understand is that most of the transactions during the week, they're kind of a bit higher, and then during, usually on the weekend, it's a bit lower, right? That, that's essentially your experience. Are there any other patterns

Yeah, I guess, those are the main things. I mean, it's pretty clear that we're seeing tendencies towards something that might be called a, called a fee market or, or maybe even that there's two different fee markets, like one for, during, office hours and weekdays and, and one for, for the weekends. Yeah, which is interesting, but I, I still like, I, I think I remain one of the, of the, let's say skeptics on, on the free market, concept, Not that I don't want it to happen or think that it would be good, but just that I think that for a market to evolve, it's, it's, Markets need to have human participants, needs to have a majority of human participants, that, you know, decide, hey, do I, do I want my transaction? How, how badly do I want it, and so on. whereas if the vast majority of all transactions are done programmatically and not actively, monitored by a human, then sometimes, these things can be, not exactly market related, right? So, so you have things like I guess when Bitmix does their dump, at, nine AM Eastern Time, that kind of pushes the averages for, for, for the whole network, significantly higher for the rest of, the rest of the workday, US Eastern Time. but there's also things like, you know, if your certain exchanges just always want to be in, in the next block and, how they will deal with it when that's no longer possible, I don't know. And so it becomes, this, this this, I guess, a-algorithmic bidding war, I guess like we saw in the past on, on Amazon, where you would have products selling for one penny, because they, they were configured to always outbid their, their competitor, and the competitor also, outbids their competitor, and so on, and then it becomes a race to the bottom. And we definitely have these types of things going on in the, in the, in the fee market, right now, which is why I'm like a little bit, cautious to declare, that we now have a fee market and everything is good, and, or things like some people count, how much fees were spent in a day and see that as an indication of a viable fee market.

Yeah, I see. And so part of what you're talking about there also comes to To fee estimation, and so Bitcoin wallets have to try and estimate what sort of fee do I want to put through, whether it's a low, medium, or high priority, and then that will determine how many sats per byte. So wondering, and

that's obviously super, super tricky to do because you can't-- it's hard to predict the future, right? It's like, driving a car, while only looking in the rearview. Like, you know, it's, it's, it's hard. They, they do the best they can, but, it's a tricky, tricky area. and again, it's weird that it's not, you know, you maybe it would be more efficient if people did a blind, blind bid, just like, "I might be willing to pay this much," but now you see all the transactions and you can just outbid them by, by, by a fraction of a sat.

So jumping into that a little bit further, as an example, you might be looking to do a transaction, and then you might look up on Mempool.Space or one of these, sites and think, "Oh, okay, I don't care that much about next block, but maybe I'll target for, say, the third or the fourth block sort of thing." And then you, that might come back with, "Oh, okay, you need to put it at, you know, ten sat per byte or something like that to get

it in, or whatever." and then you might transaction in as well, right? For

example, and so for example, again, if we're talking about the BitMEX dump, if you don't know, that, it's going to happen at nine AM Eastern Time every day, then you might think that you're the highest bidder, and then poof, and then suddenly you're outbid and you're stuck for the rest of the day. And there's these things that people don't, don't know about enough, and, and it's hard for an algorithm to know that. level of AI, they would learn that, you know, every day at this time, the, usually, the, this happens. Yeah. But, but it's, I mean, it, it is hard because they're just programs.

And some have tried to, you know, criticize Bitmax and say, "Oh, you guys should, you know, whatever, spread it out or do other things." But would that also change in terms of, you know, maybe it's a good thing that it's more predictable for people?

I guess.

I don't think it is in, in the sense of how, how given that the fee estimation algorithms only, drive by looking in the rear mirror, it actually makes it less predictable. Paradoxically. but I mean, look, I don't wanna talk too much about them, I know that they're, they have smart and good people and that they are working at, at fixing this particular issue,

and with, with- We've backed them enough, I think, I think they know, and are aware, of, of their impact. And it's not just them, I mean, there's a lot of different companies and entities that, that periodically do this, and it's, it's curious to see, I mean, it's, in a lot of ways, it's like, I guess, a, a bragging thing if you like, you know, spend a, a couple of bitcoins, on transaction fees when you didn't really need to. This thing. It's a power, it's a power move. It says something about, about, about the company that you can afford to do this. You know, hey, hey, you know, it's just a Bitcoin, we can't, right? And you say those, every once in a while, and, and that's curious too.

Yeah. And then the other thing is, it's a whole dynamic around, there might be a time when, let's say, a large custodian wants to do their co-consolidation, and so they might wait for a good time and then put through a big consolidation at a very low sat per byte, 'cause obviously that's, better to do it, to do it at that time.

Right. Yeah, that's what we do, and many others, Yeah, which ends up costing them a couple of bitcoins each time.

Oh, well, that's the power move. It is,

it is,

yeah, I respect it. One other thing, with exchanges, so do you see it like exchanges will start to offer, say, low priority withdrawals? I know, for example, Bittaroo, an Australian exchange, they offer that as a feature where you can actually say, "I want a low, low fee, low priority withdrawal, so I wanna pay less and get it for cheaper." do you see that as a coming practice or what What's your view on that?

Yeah, I think so. And I mean, and that's what would need to happen for fee market to be, to, to, to have a peer is when all transactions are a little bit like that, in the end, there is someone deciding, some person deciding for each individual, payment, how much they would be willing to pay for it. So Yeah. So, I mean, it's heading there, but, but it's, as everything in this space is heading much slower than, than what I would have liked.

Yeah. I also wanna chat about the-- There's a funny sort of seesaw effect as well. So I mentioned this, on my recent, chat with Resby from Lightning Labs as well, and he, and we were just chatting a little bit about how there's this funny dynamic in the block space market where it's kind of like For an initial period of time, companies won't want to-- they might not care that much about doing SegWit and batching and using Lightning and all these efficiency things because it just doesn't cost them enough and they don't care enough. But then it kind of, it gets to a point where the fees aren't that high and now they get pushed into using some of these, you know, smart engineering tricks and engineering, methods to try and basically get more for less. But then maybe it kind of-- then the seesaw goes back the other way and then now it's like the fee Please come really low again. Do you see that dynamic playing out over the next few years?

Absolutely. I mean, and it, it doesn't even need to be like that. I mean, i-it's very simply, you have, I mean, y- When you run a company, you shouldn't optimize something that's not a problem. Yeah. And so when it becomes a problem, you optimize it. And so, I mean, this is why, I've had long discussions with core devs about this as well, that like, you know, the theory of the never-ending, mempool never emptying mempool, that it's, you know, it, it remains to be seen because, every time that there is pay pressure, a lot of people start optimizing. and when people optimize, then that relieves the pressure and eventually it, it goes to zero again. And so, it's, The question is, will this even out eventually? And it's hard to know, because, it's a little bit like saying that eventually we'll run out of optimizations, and I'm just not sure that that's the case. I think there's always going to be optimizations, of all kinds of, you know, depending on E-Eventually, if the cost is high enough, then people are going to start doing all kinds of interesting trade-offs, to, to avoid paying. So that's kind of, I guess, Let's say that, I'm, I actually do think that we will see a meaningful, if you, if you made me bet, yeah, I would, bet on that there will be a meaningful fee market eventually in, in Bitcoin. but I'm just saying that it's, it's not a certainty. Yeah,

I see. And so we might see it play out, and I guess most of us, obviously you and me, and probably, you know, all my listeners, or most of them, would be very, very bullish on Bitcoin. We see it like a lot more people are coming into this space. It just, it's a, it's a question of time, and maybe over the next ten years or something like that, then really we'll see a lot more people come in. But as you were saying, it's a question of how good will all the clever engineers get at packing more into

effect happen and then the fees come back down, to very cheap levels. And I guess, as I'm sure you are very well aware, longer term Bitcoin does have to transition into having a block space market where, you know, there's like a solid, you know, base load of demand to provide the additional revenue for the miners because, you know, some of-- there might be some bad implications if it doesn't develop within, let's say, fifteen years, something like that, right?

But fifteen years is a very long time, and we have to remember that. And this is why, like, the people that are like, "Oh, it's going to be needing inflation and this and that," it's like, look, fifteen years, We don't know, if it becomes a problem, and definitely this is a problem that it's not going to suddenly appear and hit everybody over the head. it's a problem that's going to evolve gradually, right? And so if it evolves gradually, it be-start, it will make sense to, to work on a solution. And, I definitely think that, you know, over a four-year, halving period, it's something that should be resolvable. yeah. So I'm not, I'm not, I'm not, I'm not like worried for the sustainability of, of, the Bitcoin network, for the long term. I'm just saying that we're not, we're not yet seeing, the evolution of, the fee market in, in ways that some people like to think that we do. The same goes for Ethereum, like there was a lot of noise the other day, that, hey, Ethereum generated more transaction fees on Bitcoin, which is like, yes, they did, but if Bitcoin isn't optimized, then Ethereum is ten x, less optimized, 'cause they've never had any fee issues, and, and, a lot of usages is driven by, like- You know, speculative and investment use, as it is in, in Bitcoin as well, you know, and, and so like making these comparisons becomes, not meaningful because in a lot of ways you're measuring who's optimized and to which degree, and it's hard to know because you don't see outputs.

Yeah, that's a really good point. It's, it's not an apples to apples comparison because it might be, it might be the case that you could argue that Bitcoin, and I guess colloquially we could say Bitcoin has optimized more Around the fees and things like SegWit and people using Lightning and so on, and we should anticipate that over the years, as more and more people adopt these things like Lightning, well, then that kind of takes some of the, the load off the chain, but given how small Bitcoin is, we will probably see so many more people come into Bitcoin that on the whole, like eventually, like in fifteen years time or whatever, by then we would- Likely see a block space market, but I think it's also interesting to talk about some of the implications of that because as I understand, if, so there's a few concerns there. One would be hypothetically if the block Reward, so that's the combination of the subsidy and the fees paid. If that's too variable, we might see, start seeing funny behavior from the miners in terms of things like fee sniping. people might not be quite happy with the level of mining security provided, so they might need to now wait for more confirmations before having the, the right level of assurance. I guess there are a few examples. Do you have any thoughts to share on that?

I mean, look, when, when we see those problems, like there are countermeasures For these things, yeah, right. I mean, you could, naively, a miner could just, commit, x BTC to the next block, to encourage the, the next miner to mine on top of it, and so on. So that there's all of these things, I think that, when we see the problem, we'll assess, and smarter people than me, will assess the, the different countermeasures and we'll try some of them and eventually something will

probably fly. I see. Yeah, because It could be around if there's a lot of reorganization happening, that could be quite difficult in terms of using Bitcoin practically, because let's say you might have a, it might make Lightning more difficult, because, I don't know, maybe you, you wouldn't be sure about whether you need to like close out your channel or things like that as well, I suppose. For sure. Yeah,

for sure. But that's the, that's the thing, is like, there are problems, but I think that given that they're relatively far away, in the time, that, We should expect that there will also be, solutions. And we, as we know of problems, we already know of a couple of these solutions, we just haven't tested them out yet. So we don't, we don't know, whether they actually work or not, and which one will work ever, and so

on. Yeah, and I should stress these are kind of, we're kind of talking a little bit theoretically here, because I think in practice the most likely scenario is we just see continual, you know, four-year cycles, and each time we bring in a whole new round

We'll eventually get to that, you know, it's, I think, in the end, it's, you know, maybe we're just talking about all this stuff and it won't really matter in the end because there'll just be so many people who want to use Bitcoin.

Well, yeah, yeah, but then too, there will be certain problems, so, it'll be interesting. Yeah, scalability issues are fun, I would say.

so look, let's get into Lightning then. So Bitrefill has been, one of the more well-known Lightning adopt

What you're seeing at the moment or what you're seeing and doing these days, with Lightning at Bitrefill?

Sure. well, I mean, for, when it comes to Lightning, like we've made a, let's say big strategic bet, on Lightning, given that it's- What we think is the most likely candidate for being the technology that, that brings about, the circular economy, in the, in the cryptocurrency world. and, and so we've, we've made a bet, on Lightning and made sure to always be, you know, first and best and, and so on when it comes to both using Lightning, And, but also, to some extent, building utilities, for people that use Lightning and people that, live in, in the circular economy that live on crypto and so on. and so for us, we've, we always enabled, different ways of, New modes of, of Lightning stuff, we see definitely that it's, it's increasing, now that, transaction fees are becoming meaningful, but it's still, it's still niche. and I think that, like had you asked me a year ago, I would have definitely thought that we would have been much more further along, in terms of Lightning adoption than where we actually are right now. and I think this is a thing in, in the crypto space in general that everything moves, much, much slower than, than we think and than we'd like. And, yeah, we're still at, you know, less, less than ten percent of our traffic is, is coming in with, with Lightning, which I think is, is, is low, like I would have thought it would have been, a big chunk of Of our, on-chain volume coming in with Lightning now.

I see. Do you have any speculations as to why that might be?

It's a good question. I think- To be honest, I think the real reason is, I think that the, here's controversial statement, I think that, Lightning ad-uh, adoption is slow, for the same reason that the Blockchain dot com wallet is the largest wallet. Yeah, and that, that there is a certain, what do you call it, slowness, in, in, in, When it comes to the masses, and again, the masses aren't the people that you see on Twitter, and probably the masses aren't the people that are listening to this podcast, and so they'll be, kind of shocked, by, by me saying the, these things, but- I think that, yeah, like, it seems like people aren't mu- quick to jump on the, on the latest new thing, and they need to be motivated. And I think that, high transaction fees are one such motivator, and, Then, you know, in the Lightning world, things are different, you still don't have, enough exchanges supporting it, which I think is a big, big thing, given how, how it seems like the industry is, is circulating around different kinds of speculative uses, you would, And the, majority of traffic is happening between exchanges. it would have been good, if, if more exchanges, were adopting Lightning. I think, Bitfinex has done an excellent job with their, Lightning presence, and I look forward to, to more, major exchanges, joining them and building, Building a lightning network for exchanges, I guess, or

just connecting their exchanges to the lightning network. Yeah.

Sure.

And so it's probably fair to say Bitfinex are one of the leaders in terms of exchanges offering lightning. I think, River is probably another example where they're trying to be like a technology leader with lightning as well. So, tell us a little bit about how the Bitrefill and Bitfinex partnership, arrangement went.

I'd say it went really well. it's a, it's a pretty cool integration. you can So if you go to bitfinex dot com slash bitriffle, and basically runs, the entirety of the bitriffle website inside of the bitfinex, website in an iframe. but the cool part of it is that the, the payment part actually happens over lightning. Yeah. And so it means that there's no, like, we don't keep a balance with, bitfinex, they don't keep a balance with us, nobody owes anybody any money at all. Any point, but, when the user goes to make a purchase, there, there is an actual withdrawal, over Lightning happening from their account, that goes straight to us. Yeah, which is pretty cool. and I, I think it's, definitely the way that, that these, integrations are going to be happening,

In the future. Coming back to the lightning adoption question, do you think that again comes down to the whole hodling and number go up stuff versus the circular economy and spending aspects? Do you think that maybe at, you know, let's say we hit another bull market coming over the next year or whatever, you-- do you anticipate then we'd see a lot more people getting onto lightning in that way, right?

Well, I think that, yes, I think that once we see more periods of fee pressure, that should drive people towards, towards Lightning. But I, I also, again, it's not only about the, the hodling versus the circular economy, dichotomy, because again, like, a big part of the circular economy is people using blockchain dot com, right? and, and so it's not, the, the debate isn't necessarily what you see on Twitter. it's, yeah, I don't know, I think it's just that, I mean, t-there's different sub-communities and cultures and different of them, prioritize, different things. I mean, there's a, a ton of, really cool stories about, about Lightning adoption. the most interesting one is, from the, the community in, El Salvador, where they, they actually have a sort of a, small type, circular economy going already, which is really cool. There's a lot of these things, that are evolving, and there's a lot of people that are like, "What do you mean, not Lightning?" Yeah, but there's also like, a large chunk of people that, they search for Bitcoin wallet in, in, in the App Store of, of their iPhone or, or their, Android phone, and, they get, you know, one of the top options, and it's gonna be one of those.

Yeah, so it comes down to default for many people, and if Blockchain dot com doesn't have it, then, yeah. but I suppose in terms of when you, let's say you are teaching a friend and they're inter-- they just got interested in Bitcoin, would you teach them Bitcoin on chain or would you actually teach them Lightning first?

It's a good question, yeah, it's a good question. I guess it depends on what I anticipate this person using, the Bitcoins for. Yeah, right. if, I expect them to- to, to buy them as an investment and hold them in, in, in storage for years, then probably I think doesn't really make sense, right? And so, whereas if it's somebody who just wants to send transactions, then, then, yeah, definitely. But that case will probably, def- at least for the, for the first, attempts, one of the, the not your keys, types, of wallets.

Yeah, so let's say, I mean, for me, I actually do something similar as well. Like I basically try and figure out, well, does this person, are they looking for, you know, the savings technology, number go up stuff? Okay, get them on a hardware wallet or multi-signature if they're, you know, getting enough for it. and then if they're interested in the day-to-day stuff, well, then, yeah, I will typically try and show them Phoenix or Breeze at that point because those are some of the nice, kind of easy phone Learning and they just want like the wallet that manages it for them, what's your experience been like with teaching people Lightning? Yeah, I

agree with everything that you say. Yeah, I think that does Those wallets are, are excellent, yeah, and, there's a couple of others as well, that are really good. And yeah, I don't know, like I, I, to be honest, I don't, I don't actually go around preaching Bitcoin all that much, in my, in my surroundings, not sure why, just Yeah, focus, I think, on, on the, the Bitcoin users that are, that are out there already.

Of course, yeah, yeah. For me, it's more, I'm, I'm talking here more like if I'm at a Bitcoin meetup and I'm trying to teach a new coiner, I might demonstrate a quick payment with Lightning or something like that, just as a way to kind of give them a, a feel of what's going on here. but I guess it can be confusing as well, like, let's say you're trying to teach that And oh, well, see, the wallet can actually swap out from Lightning into Bitcoin, and it's not like you probably already lost them already, right?

Well, yeah, I mean, it's, it's, it's tricky. all of this stuff is tricky, and, in the end, you will need to abstract away all of the channel stuff, right? but, but it's always a question of, at which point do you abstract away the controls or do, or do you optimize for the power users that can handle the controls or, Yeah, that's a common UX, problem in, in the field.

In terms of Lightning, obviously one of the big ones is around having incoming capacity and so on. And I know this is something you have a service around that. can you tell us a little bit about your experience in terms of offering that service, and, you know, just running one of the well-known Lightning nodes? Right.

Well, I mean, we, we built this, I think it was over a year ago now, we built the services for getting, channels In a similar way to how an ISP opens, opens a connection, to your, your phone, right, or your computer. and so this became, Later evolved into the, the, the LSB notion, the Lightning Service Providers, and now it seems like both,

That, well, Lightning Labs is working on a service in, in this area, and there is,

there is functionality, in the Phoenix wallet that is very similar to things that we built, and Breeze Wallet is doing, things in that direction as well. So it, it's, And when we built it, it was definitely, still is, I mean, it's a tool for, for power users, but it, it definitely, started off, a lot of interesting, things, In terms of like where to, where to build, I think, un-unexpected side reaction is that it kicked off, the usage of the LN URL format, which in, in the beginning was specifically designed to, between us and the Bitcoin Lightning wallet, to open Thor channels, with that wallet. and then it kind of has evolved and, and suddenly, we find that, that LN URL is actually fixing certain things that I would say are like design flaws in the original, the original Lightning, w-which is really cool, and, and I think that that's like the LNURL community, is probably the most, the most vibrant, Community right now, in terms of, building, yeah, building things with Lightning, thinking about these things and so on.

Yeah, there's, there's definitely a few contributors there, Fiat Jeff and, I forgot the other guy's name, who I was thinking of. But yeah, there's a few of these guys who are out there trying to get like LNURL, which is a really slick thing from a user experience point of view, because, you know, people who wanna play games and then withdraw their Sats and things like that using LNURL is very, very slick compared to the typical copy-paste flow, and that might be another way that people start getting into Lightning just because it's easier if they wanna do those small spends and with LNURL.

Yeah, I mean, it fixes So like it, it fixes, this thing where Lightning uses a different UI than transactions, usually do for deposits and withdrawals, yeah, which I think maybe is one of the hold, holdups for exchanges adopting Lightning, that they, they need to build a slightly different UI flow and educate, educate their support people and so on, whereas with Lightning URL, you, you, you literally have your deposit address and you can scan the QR code and everything works like in the old world. I would probably say that if I were an exchange looking at, integrating Lightning, I would probably start with, doing deposits over, over LNURL. because it's, it's just so simple, and it's, yeah, it, it fits with, all of your, frontend code that you already have. it makes things Make things easier for everybody, yeah. And I don't know why, when the Lightning protocol was designed, it was decided that it would focus on the invoice, invoice payment model. I guess there, there, there's definitely benefits with that as well. but we're also seeing that there's benefits in doing things that are compatible to the, to the old world, even if it's, if it's, less efficient.

And I know, some of the Lightning developers like Rusty are interested in trying to build something like that, like offers and things at the protocol level, but until then, you know, LNURL is, that seems to be the- Yeah,

but that, that's the thing, we always have in, in, in crypto that we're building these really sophisticated things, where I would argue that maybe we should like start with, okay, like, can we get, the ten largest exchanges on Lightning? You know, can we get it integrated into most wallets? Like, for me, that's always been, that's like in getting the things that we do have out, rather than focusing on like what, what's the coolest thing that we could build. I think that, when things are being used, that's Yeah, that's the coolest part.

Right, yeah, and look, to be fair, there are some things that, you know, it kind of takes being used in practice to realize what's needed. And so,

oh, for sure. And then, and there's also the whole-- There's also the, the whole area of, you know, when you build new things, then- Maybe people will actually use this, these things in ways that they haven't done before, yeah, which is the really cool part. So I, I, I, I'm not, you know, I'm not talking down on building cool new things on Lightning. on the contrary, you know, I want to encourage it in every way. but I also want us to remember to, to get it out there and to get it used.

You know, maybe another angle is, over time, although this won't be for a little while, but, As compared to, let's say, a naive Bitcoin transaction, obviously it's probably not as private as using a coinjoin transaction, but I guess it's a bit of a debatable point, around, you know, at least it's not hitting the chain and being recorded forever, right?

Exactly. Like, I, I don't know, I think that the, the- Privacy aspects are of Lightning are, are quite underestimated. Like, like everything, it doesn't solve the whole problem forever, as, even a coin join doesn't solve the entire problem forever, but it does solve the problem of on-chain analysis, to some extent. and, I think that, yeah, I'm a little bit, I guess, would have wanted for there to be a, a privacy focused, Lightning wallet by now. Not sure why, why we haven't seen it either from, from some of the privacy focused- Wallets, that are doing, coinjoins or the other way around, you know, but, intersection of, of, coinjoins and lightning should actually be quite useful.

Yeah, I think that's kind of the dream, and it may just be that we're just super early and right now developer time, reviewer time, et cetera, is so limited that teams have had to, I guess, prioritize which one they want to do. And so then, I guess, naturally, they've either done one or the other, and so That's probably at least part of the reason why we haven't seen kind of a meshing of CoinJoin and Lightning, even though there would be some cool benefits, like theoretically.

Yeah, I think the benefits would, like I said, They're, they're big and not just for privacy, also for, you know, the efficiency of opening lightning channels and opening them, coinjoin is probably a, be a good idea. Again, I know that Lightning Labs is working on Loop, and so on that are doing these things as well. So th-these things are happening, and it is, evolving at, yeah, the, the tech is evolving at a good pace, I would say. Yeah. The question is how we can get it into, into more, more users' hands and to get-- and maybe that's the interesting topic to discuss is like how do we get more of the users to care, about, the things that, that make Bitcoin unique. Maybe that's an interesting topic.

Yeah, well, I think, well Technically, I mean, if you do it correctly, like you could be more private if you, you know, using Samurai wallet and so on. Where I think because there's been discussion, or people hear on the news that, "Oh, this person using Bitcoin got busted," they think, "Oh, Bitcoin's not private." And okay, technically it's pseudonymous, et cetera, but if you use it the right way, if you, you know, use the right techniques, you can use it privately, but it's just a bit more-- It takes a little

Many people, it's, it's, it, it is a bit weird that there is no clear answer to the question like, is Bitcoin private? It's, it's, yeah, well, it might be if you're, if you're a sophisticated user, and you know which tools to use and how to use them, but it definitely isn't by default, and a lot of people that get busted, get busted because they, they like, they buy bitcoins on, an exchange where they give their personal information and they send And then they get busted, and, yeah. Like, and, and, and it's, it's tough, because there's simultaneously, the, the idea that, that it is private, but there's also the idea that it's not private, and I, I know that it's tricky for, for a newcomer to, to assess what's what.

Yeah, and I, I can, I totally sympathize because to a person who's not deeply into this world, like say you or me Like we are, it can be quite con-like confronting on the outside to sort of see what to the outsider might look like these crazy holy wars going on between, you know, all the, between the privacy wallets and, I mean, I, I personally, yeah, I mean, I'm kind of more on the samurai wallet side there. do you want to elaborate on that?

I'm, I'm, I want to hear. Like, for me, I, I observe, and, I, I think I'm, I'm leaning a

Sophisticated enough to assess the, the actual tech on it, and given the gravity of the accusations, it's, it's a little bit, scary. That's difficult. Yeah.

Yeah, and I, I, I mean, I, it's certainly, I want to hear your thoughts. I have to be careful here, right? Like, I, certain, like, firstly, I wanna say I'm not a privacy expert, right? Like, this is from my reading, from my understanding, from my talking with various people in the community, I think right now Bitcoin privacy, I think if you run your own Bitcoin full node like your Dojo and you're using Samurai Wallet, Wellpool, and you're using the correct post mix tools and so on, you're doing Stonewall, Stonewall X2, these transactions that either simulate a coin join or they are a coin join, I think that to me makes the most sense. But in terms of like this whole kind of back and forward warring and disclosures and vulnerabilities and so on, I think to me the reason I think the Samurai Wallet guys are I think their approach is better, is that they have set up their wallet in a more holistic way that the user doesn't have to consciously make so many decisions about what they're doing. So for example, it's very easy for a user to, in Wasabi, to like, you know, last I checked, that there's like a send all button and and, and some of the comments that come up around things like, "Oh, see, that was just user error," and at the same time you see even like Wasabi, you know, users, or Wasabi contributors themselves who've like doxxed things from trying to do Wasabi. So for me, that is probably-- I just think the- I just think the samurai approach, like s- assuming you're running your own dojo, I think that's a more holistically sound approach, and I think the other important part for me, at least from my reading of the articles and the back and forth, is that I think the samurai approach is around aiming for the Super high quality, high entropy mix, and actually creating no deterministic links between the coins going into a coin join and the coins coming out of a coin join, whereas I think some of the criticisms that have been leveled at Lizarbi are in relation to things like having unmixed change, not Actually creating zero deterministic links in the coinjoin, having address reuse in the coinjoin, and, you know, just consistently having address reuse. So to me, that seems like, well, hang on, address reuse has never been cool, right? So I guess there are a few points there, but I mean, what do you think?

Yeah, I, I, I, I second, your analysis, on all points, I would say. but, but again, yeah, it's, the, the tricky part is, I think we all agree that The sensible defaults are, are, very important, especially when it comes to this stuff. and again, it kind of goes to show that even when using, Privacy wallets aren't necessarily always safe. So

yeah, yeah, and look, I think in fairness, the criticisms that people would level at Samurai, right? They would say things like, "Oh, but hang on, they have mixing where it's not only Dojo pools, and so theoretically, even though the whirlpool coordinator is a different server to the Dojo server that they run for the users who aren't able to run their own Dojo, but it, it, I think it just gets really complicated because now you're starting to think about, okay, so If you run a dojo and you do the correct thing of mixing and remixing, crucially, then it would be to me, it seems extremely like tinfoil hat unlikely that someone is gonna like You know, let-- okay, hypothetically, let's say you're like a democracy activist or some human rights journalist or activist in some country with an oppressive government, and let's say you set up your dojo and you receive and you, you know, you do the correct flow using your own dojo, what's the likelihood that this oppressive government is gonna like go to the Iceland server and like somehow-- and like get all the xPubs and then try to reverse out from that because they won't have your xPub, so then they would have to- Try to reverse out which one is yours. I, I get, I mean, and then the other accusation as well, and again, this is difficult in the space because everyone's trying to, you know, fling stuff at the other guy, and they're trying to say, "Oh, well, see, what if you're a chain analyst? So what if you're actually just selling the info because you have an incentive to do it?" And, and then it just becomes like really difficult for anyone to sort of prove that they're a genuine person trying to provide privacy tools. And,

Mumbai or Wasabi, like would they have acted the way they did? I mean, I, I guess that's also, these are also things that people have to consider. Yeah.

But it's, I, I think, I agree that we should be careful with, attributing, malice and accusing of, of, of malice. It's a pretty strong accusation, that needs, a lot of, of evidence. At the same time, I think that it is interesting to think about the question of, Whether or not there are, bad actors and, in, in the space, and, and what to do if someone should, turn out to be a, a bad actor, not to say that anybody is a bad actor, Mikhail. Had a, a couple of, interesting, conversations with, with my father, from, originally from the, from the Soviet Union, who told me that he found out, and when he was a student, he was like active in different kind, some kind of student theater where, where ideas were discussed, which weren't supposed to be discussed. And, that they found out, many years later, that, one of the guys, in their, in their theater group, was, informant, and that, this person was, informing on, like, n-nothing had actually happened, but that they were just, filing reports, to, I guess some part of the political bureaus, about the things that were being, discussed in this, students' The theater group, right? And it kind of got me thinking about, about the crypto space as well. like, who knows? Like, who knows, if there are, any intelligence actors, operating in the space and what they're doing. Probably most of them are just collecting information. what kind of information do they get and so on? So, I think it's just to have a, to have a adversarial, mindset. I think th-this is one of the, one of the key things, ab-about, about Bitcoin is that what if, the service that I'm using is evil in different ways? And what are the different ways that they could be evil, against me and so on? Yeah, which, which is like why, like, the, these, these, like privacy focused things and so on are, are important.

Right. And I think you, you, you definitely raised a lot of interesting points there, because, well, I actually recall when, well, when I went to Baltic Currency last time in Latvia, and I went to the, the museum, one of the museums there, and they were talking about the way chequer would try to, compromise people. And so they would kind of hold it over someone's head We've got, we're gonna do something to your family or whatever, and that's why we need you to become an informant for us, right? And so it's kind of, you know, there are all sorts of crazy things like that that could happen and

somebody could be naive without being a bad person, right? Like they could be pressured or whatever. Yeah. So yeah.

Yeah. So that's, that part is tricky and, I guess you sort of have to look at what people are- Doing what info you're giving to that party as well, right? Because depending on what the wallet is and what the, the way you use it, do you have to give up any info? Do you have to give a name, name or email or whatever, and what could be done with that information?

Exactly.

So,

and not just by them, but also, but by, by, I guess, any hacker that ha-has access to that information.

Yeah, so it's a tricky space, and I think you, you kind of have to look at, well, I guess one indicator that I've noticed that, you know, some of the privacy wallet guys try to look at is darknet market use, right? So they're not like explicitly, it's not, that's not the only market for them, but obviously it is a market for them, and I guess if you see people using these techniques and technologies in the darknet market, then There's probably a, like, it's kind of-- there's, there's real world practical use, and you know there are people who are literally relying on that technology.

Well, I, I think it's, I think, like, from, from the, the, the- The studies that have been made that show that darknet use is a, is a very small fraction of, of the activity on the network. I actually think that, like, there's Probably it's not the most meaningful to talk about talkative with regards to privacy. Like, I think that privacy is, is such a huge factor. one thing that I've come to realize, lately, or maybe a little bit, not lately, but been thinking about lately, is that if you think about like old-timer Bitcoiners, like people who mined a bunch of coins in, in, Who knows when? Like, you know, and they're sitting in a considerable wealth on, on Bitcoin, and for them to sign up, to a, to a service that, That requires you to do full KYC, so you register your passport and your address, and probably make an on-chain transaction that, connects to the rest of your wallet. Like, is whatever it is that that service offers you, is that worth it? Right? and, and when you start thinking from, from that perspective, like, okay, I'm sending in my, my, my address and passport here to some service Who knows? Like even if the service, is probably, super honorable, but, what if they get hacked? Like this, eventually, These data banks become huge honeypots and, and eventually, like somebody wants to, wants to hack it, and then suddenly it says there, hey, so-and-so lives on that and that address. You know, and, and just from a perspective like that, I think it's, it's, it's enough, to, to motivate like why we should want, privacy on its own and that, that it's like, it's not necessarily because we're looking to do something, something that is disallowed, it can be, I mean, it should just be a default state of things.

I guess, yeah, just people have to be careful if they're spending, for example, out of a big UTXO, well then that's Using coinjoin techniques so that you've broken the link, and that people can't trace that back on the chain to your big UTXO, right? So that's- But, but,

but it also depends on, like, you know, it doesn't, if, on the other hand, if you, well, I guess, like Privacy is important on all sides, and coinjoin is good for the, for the on-chain privacy, but I think it's also important with the, the off-chain privacy, in terms of, where you, custody, pun intended, your personal information, right? and, because, like if you talk about custodial wallets and so on, they ho-- they hold your coins for a while, until you withdraw them, yeah, and, and there is that, risk profile Somebody who, who has your personal information, they have that personal information forever.

Yeah, that's tricky. And depending on the data retention laws, like I think in Australia, it's something like seven years or, when the customer terminates their relationship with the supplier or the vendor, it's seven years from that date, I think, in certain financial services contexts. So that, I mean, but then the other thing is, you don't know how good, say, these banks or whatever are with data deletion. So they might have accidentally kept it because they- Exactly. I mean,

they should have backups somewhere. I mean, again, like, you know, seven years or forever or, or, or, whatever it may be, like, it makes sense to be, be careful with, with what trace you, you- Traces you leave about yourself on the internet. Yeah, right. And I think it's, at this point, it should be seen as like a fundamental core principle, something that it's, that is very important to, to fight about, and I guess it's one of the things that also I guess part of the, and the, samurai guys, crusade about, Like that there is a trade-off between, wanting, the number go up, you know, the, the adoption and, and, and, and privacy, right? and we see this, trade-off in play, a lot of times when, I mean Like for example, we have this,

like the stacking sats, meme, which is a great meme, but it also usually implies that you register with some service, that will require your, your personal information to be stored in a, in a, in a data bank, right? And so, where, whereas if you, if you say that, hey, people should not use, services that require your personal information, well, then that limits, it's- Significantly, right, the realm, of, of, of possible services for people to use. And so there is this, this weird, trade-off. I mean, the ex-extreme example is, like this, full ecosystem, like, Grayscale or the, the Bitcoin ETN, here in the- in Scandinavia, where, you know, you clearly don't have control of your coins ever, but you buy them through an exchange, it's super simple, it's, it's good for, for getting number to grow up, but it doesn't, achieve, many of the other, goals and probably make it harder to achieve, those goals and, of privacy and Yeah, autonomy and so on in, in the long run. Yeah, and it's, I think that like conflicts about values are only interesting when, when both values and both sides are, are, are desirable, right? We, we want number to go up, but we also want, right? But we also want privacy, to, to go up, and in, in whatever num-numbers we, we measure that, and when this, this- Two desires are conflict, creates an interesting, that that becomes an interesting, question of, of values.

Yeah, let me give you an example, I guess. Maybe the way I'm thinking about that is maybe it's like a parallel with how if you look at the different core developers and their thoughts on things, like you might see, okay, on one end of the spectrum, you've got, you know, Luke Dashow who wants three hundred kilobyte blocks, and on the other end of the spectrum, there are some developers who believe that maybe longer term we So kind of more like, so long as anyone, like a, you know, an average person can run a full node, well, that's what's important, what counts. Maybe it's a similar thing here with privacy as well. It's like, so long as the average person can attain privacy using Bitcoin, if they buy non-KYC or if they earn it non-KYC or if they mine it and they use the right privacy techniques, can they be private? And I guess maybe that's a good, middle position. What do you think?

Yeah, maybe. I, I don't I think that we should consider, I mean, if you look outside in the world, there's turmoil, and, it's not unthinkable that- Yeah, that's, in a world of turmoil, Bitcoin will, will be successful in, in some ways and, given the turmoil is chaos, that means that some of, some of the powers that be, will be, opposed to it. Yeah, and so if, There is definitely, I would say, a risk of, the Bitcoin network being, being split, into the, the KYC side and the non-KYC side, and, That would be not great, right? Yeah. I don't know, like, I, I don't have any remedies to the solutions other than the things that, that are being discussed by, by smarter people than me, but it is, a topic that I think we should be, We should be mindful of, yeah, that, that we don't, I mean, I, I guess it's, I mean, maybe it's similar to how, like, in a, in a band, yeah, they, there comes a point where they get the choice of selling out, like, all right, do we do the, the popular music that is gonna get us paid, or do we do the music that we actually, believe in?

Yeah.

And maybe there is something like that, here as well, and, and type of scale, and figuring out what is the appropriate, level that we want to, want to be at. But, but it's also important to acknowledge that there, like, also, that's- Like, I'm also, simultaneously to this, I'm also not a fan of people that are like preaching that, you know, you must use Bitcoin like this or you must use Bitcoin like that, because the whole point of Bitcoin is that you can do whatever, whatever it is that you want with it. Yeah. Right. So, and then we, we kind of need to also acknowledge that this should be a network where all of these different participants can, in fact, interact with each other as best as they can. Yeah. Maybe, maybe that is, maybe that, that is the goal to optimize for, is to sort of, yeah, to, to optimize for differently minded people to, to be able to, to interact.

Bitcoin is the money of enemies, as well. Yeah, that's right. And, well, I guess the other thing with that is also, could it kill Bitcoin if it was no longer fungible? Would that be a problem or would it actually still be an overall win in that it stops governments from inflating further? And so I guess the, if you were to maximize- Yeah, and that's a tough kind of conversation to have because there might-- So hypothetically, if every sat was KYC'd, would that- Still, eventually, like some, you know, longer term, would that still result in governments losing the power of money, and maybe that's still a win overall, or do you think, you know, we can sort of, we can try to get both, and we can like have a hard money that is also private? And there are others who would make that argument that you can't have this unless it is private. So it's, it's a tough question. I don't think I've necessarily got any good answers, and, it's, something that will just have to evolve

Maybe we, you know, there is the sound money aspect, of, preventing government inflation, to it. There is the privacy aspect. there, there's a bunch of this. There's the, the- Technical sort of, anybody can build on that permissionless, aspect, efficiency aspects, and, it's like a composite of these things. And I don't know, I think we're also starting to see to some extent, other projects that try to satisfy, parts, of, of these things, but not other things and so on. Right? I mean, you should be, in a lot of ways, like I would argue that many, many altcoins are, are fiat currencies, right? The, the private fiat currencies, but what is to say that, that a cryptocurrency must necessarily be sound money? Maybe, maybe a fiat cryptocurrency is also useful for certain things for certain people and so on. Like, I'm not arguing for that, I'm just, rhetorically here.

And, I think, you know, the whole conversation around CBDC, central bank digital currencies and whatever is only, that's only gonna grow. So obviously we'll- We'll be here with our bitcoins, and, you know, I think over time people will just see, you know, number go up in bitcoins and they'll wanna get some. And, then it's a question of, you know, how, how ready is, all the Bitcoin tooling and services to kind of take that on?

Maybe it's always going to be a struggle, like, that, like, just like privacy is, on, on the regular internet, that there, it's just an ongoing, struggle that will always be ongoing. Maybe the Over time, but, but there will probably always be people that argue for more privacy, and, and try to build things for more privacy and, and others that, that, build for, other values such as efficiency, for example.

Yeah, that's right. And you mentioned battle lines, I, I think you were just before we went online, you, we were chatting about this idea of the battle lines that have been drawn around, COVID-19, or as I prefer to call it, hysteria-19. but tell us, what do you think?

Well, I think that it's been For me, it's been a very interesting last six months, I think it's been very interesting for everybody, but, I've, I see it as a great opportunity to evaluate, the biases, that we have a-and the different, inclinations, in, in, in thinking and so on, like, and- It's curious how, for example, in the beginning, it felt like, there was, like, like, the people were a little bit all over the place in terms of, like, you know, the assessment of, the danger and, and what- What should be done and so on, whereas like over some time, it kind of, let's say, settled down, into the usual political camps, both in terms of the left wing and right wing within each country, right? And the countries aren't very inconsistent with other countries, but also in, in like in the crypto world, is that like the meat eaters tend to say that, that, hysteria nineteen, that it's all, it's not, it's not a thing, whereas other whereas, you know, the, if you go on the sort of Ethereum camp, it's definitely a thing, and so on and And it's, it's interesting how, how we went from, from that to this. But I think it's also interesting to, to assess, like for me, it's a sign of, yeah, like a sign of groupthink is when you agree with, with the group, on every subject, right? So for example, I guess, if you're, like, if your, views on the Bitcoin block size debate are consistent with your views on dietary preferences. because it's an individual strategy, then, then, then, then at least warrants, evaluation. it might just be, that, that all these people are, are, are just happened to, to fall into the same lines, but it's also possible that it's not. And, and, and in some cases, in some cases, and in some cases, also, I think like for me, yeah, I ended up, so here, okay, here's an interesting, analogy that, like, many Bitcoiners in the question of like- Government mostly good or government mostly bad, right? Mo-most Bitcoiners tend to fall in the government mostly bad category, yeah, which, which led to a situation in which, most Bitcoiners were opposed to their specific country's, corona strategy. Yeah, yeah, it's, and, and, and, and which created this weird battle of like, no, my country's corona strategy is worse than your country's corona strategy. But yeah, 'cause that's, that, that is kind of where, where we are, because, because like you, you feel that, the Australian is, is hysterical, whereas I feel like the, the Swedish one, actually, maybe led us to, to needless people. Dying. but and, and it's kind of like, I don't know, it's, these things are, are curious and, at the same time, like when you find yourself, on, on opposing camp, it's also an interesting, moment to reflect, like, hey, suddenly I agree with, with, like, Balaji Srinivasan on, on a lot of things. Okay, interesting. I don't usually do that. Okay, but, but like... It, it's helpful for, for assessing, like, okay, is it that I'm inconsistent here and actually he's wrong about all things always, or, or is it that, is it that, you know, maybe he's right about this thing? Or, I don't know, it's, I think- This whole period has been useful for, from, from those regards and also given that like the different camps have been making predictions about the future, that, within six months, like, many, have already been, been able to be, to be evaluated, right? So you can, sort of, assess and, and draw some learnings, like, okay, these things that, that we believed turned out to be wrong, why were they wrong? And these things that we believed actually- It turned out to be right and why they believed that. So

yeah, I'll tell you what, I saw some interesting correlations as well, right? So as an example, and you probably, I wonder what you think, but Isn't it funny how a lot of the same people who are pro-Brexit and were pro-Trump in, you know, in the, in the twenty sixteen election, and let's say a lot of the people who are more on the climate skeptic side, tended to all line up on a similar side in terms of COVID, don't you think?

Except for Sweden. Yeah. In Sweden, we have the opposite. and that's kind of, I guess, what, what made it interesting for me, be-because again, like- it's, i-it's this government default bad, attitude, that, that we have, which I, you know, in a lot of ways kind of like. but, but like here in Sweden, for example, pro-probably fair that we are in a similar camp, with the, in the Corona question, with the Brexiteers and, and Trump and, and so on. but like, don't tell anybody that. Like, if, if people found out Our, our social democratic government, actually shares a lot of the same views with, with, with Trump. Like, people go bananas, but like if you go and show pictures, then it's like, there's a lot of similarities here. it's like, it's more in alignment than, than, than not. Yeah. And so- Again, like th-this is a g-good opportunity to, like, reassess, you know, where, where are we, what is the different,

you know Group things taking us. It got me actually thinking about, about, an aspect of, if I can go on a rant, five minutes maybe. for sure. An aspect of like- of, of maximalism, and specifically the, the flavor of maximalism of, of dismissing, the new thing, right? like, I think that if we look at-

if we look at, for example, okay, zoom out, we're still on the, on the COVID question. if we look at Sweden's coronavirus strategy, which has been, I guess- most people agree, slightly different in, in attitude from, from the rest of the world. it's not a controversial new strategy. on the contrary, the Swedish strategy is the, the tried and tested since a hundred years back. Yeah, and the, and the, the, the author of the, of it has also wrote one of the textbooks and so on. Right? And, and, and so I think that, and you'll see where I'm going with the, with, with-- because this is more about Bitcoin, but the, but the Corona stuff is an analogy, is that what happens in, in the world of, I think, at least this is all like my, my, speculating about these things, is that in the world of, of, infectious diseases, there's usually a lot of noise. Like, oh, this disease popped up in Asia, and it's probably not gonna be anything, and most of them aren't gonna be anything, right? And so you, like, probably best to not overreact, to, to every new thing that, that gets some, some, some hype, somewhere. and, and so over time, and, and I guess this is like similar to, to, in, in my view, to how like projects in crypto show up, and it's like, yeah, it's probably not, not useful now, it's probably broken, it's probably best to, to, like, not devote, attention to it, because most of it is gonna be crap. like, vast, vast, vast majority is, is gonna be crap. And so, but over time, like this type of, attitude, i-it's, it's going to be right in, you know, ninety-nine point something percent of the time. and I think that If we look at the Swedish krona strategy, it was definitely right about a lot of things. Some of them controversial. Right, it's been right about, probably about that it's not beneficial to forest people, and that maybe getting buy-in from the people is a good thing. It's probably right about the schools. Yeah, it's probably right about the- But a lot of this stuff However, it was, not right, in terms of dismissing the danger entirely, and, that led, to a situation where a lot of less informed and more hype-sensitive, countries, that did, you know, ninety percent of things wrong, still ended up with a better outcome, because of, you know, it's like a Nasim Taleb type, thinking that there's like the risk of- black swan things. and, and what you end up m-missing, when, if you get too good, at dismissing things that are mostly noise, is that you risk, dismissing, the one little thing, that, that isn't noise. And, and, so if you go back to the, to the crypto thing, They, in the, in the, the part of I think the, the, the maximalistic argument is that, you know, ninety-nine percent of crypto projects outside of Bitcoin are, are just noise and they are. and I've in-- and, and I've in the past, been saying things like, you know, hey, I actually respect the no coiners 'cause they're like ninety-nine percent right, and they, they get there with like no effort, right? It costs them like no thinking, just dismiss all of it, and they're right about ninety-nine percent of the stuff. But I think one thing that, that like I have a little bit, nuanced my view is that sometimes it's not the percentage of times that you're right that matters. Like And if you think about, in terms of, like, if you zoom back, if you talk Bitcoin about early Bitcoin history, and you zoom back to twenty ten, twenty eleven, and, and you take an attitude of like, "I'm gonna invest money into, ten, crazy Ponzi scheme looking, new money type setups." Right? And, and one of them, happens to be Bitcoin, and the other, the other nine end up, going to, to nothing. You're still going to be a very rich and successful person now, right? given the, the, the, the, the outside, outsized, returns. And so i-i-it's, and, probably, and it's probably gonna get me flack for this, but like if you're in twenty fourteen, if you invested in ten different altcoin projects,

Good investment. and so, even if you, even if you entirely lost, lost, your money in, in, in the other nine of ten, which is probably also goes together with like how, this, the- The sort of, the VC, Silicon Valley, part of the community were also the ones that very quickly, identified, the danger, of the thing. like we had, for example, Blockchistreni Vasan and some other people that were like very early in, in, in calling out that there was danger about and that- Like probably even if they're wrong about ninety percent or ninety-nine percent, of the stuff, then like even if you're, even if you're wrong about ninety-nine percent, but you're, you, you happen to be right about the one thing that matters, then, then maybe that is actually a better outcome, than being right ninety-nine percent of the time.

What do you think? So, I guess some of your comments are, you're sort of tying into that idea that maybe, you know, some people who bought in, and it was an accident of timing and of luck versus skill, and, you know, some of those people who, if they just bought into ETH early or whatever, then they would have gotten rich if they sold out at the top or whatever. but I, I think to me, there's more to it than that. I, I, like, I guess, you know, look, we always have to maintain some

You know, it is possible to reason about these things and to try to sort the wheat from the chaff, and I think those people who were able to do that with Bitcoin and say, "Oh, okay, hey, this thing with a fixed supply, oh, wow, like, the no government controls it, like, that would be historically significant and it's important, and that's why I wanted to get some and so on." And, I guess it's not, it's not to say that, oh yeah, whoever got in, 'cause look, some of those people who got in early, maybe they were lucky, but I think it's also fair to say some of those people who got in early were skilled. And I think in the Bitcoin world, like bringing it to the kind of corona nineteen or whatever, There were some who were better at sorting the wheat from the chaff and figuring out, oh, hold on, some of this, some things aren't smelling right statistically, that people are overstating the level of risk and they're overstating the CFR, the case fatality rate, and they didn't statistically sample it correctly, and that's why it looks right now like it's really deadly, but actually, if you look at where the sampling was better, then it actually isn't that high, and the-- so it is a real virus, it's just that the risk is being dramatically- Overstated. So I don't know, I guess that's kind of high level how I'm thinking about it, but w-w-w-Did I answer you there? Or I'm not quite sure.

my audio cut off for like a minute, so I, I missed a, a big, part. Oh, sure, sure. Yeah. So

I, I guess Yeah, so I guess like summing it up, I guess some of it is, some of it is an accident, maybe some, for some people it is an accident of luck and timing, and for other people it is really a question of skill. They were just better at sorting the wheat from the chaff. And, you know, for some people who are in this, and, and I'm probably in this camp, I'm in, I'm in here for the sound money aspects, and I, obviously now I also want the privacy aspects of Bitcoin, but that's kind of the prior I guess I have to sort of go more on the side of, hey, there was some skill involved, while still, you know, maintaining some level of humility here. It's not like, oh yeah, I-- 'cause I got this one thing right means I'm right about all these other things. Certainly not. but I guess it's, like, the whole precautionary principle aspects of it, I, I just think, I, I like Taylor's books, but I, I kinda think he got this stuff a little bit wrong. I think he ended up a little bit on the,

Right. I, I would say that the thing is that what you don't want to end up is with, with being smart and ending up with a worse, worse outcome than somebody who is being dumb, right? Yeah. because then, then, then if you're, if, if you're being smart and you end up outsmarted by somebody who's, who's actually dumb, then maybe you weren't that, that smart, at all. Maybe. Like, Yeah. And like, there is this, this, Clarke's law, says that like when a, distinguished by-- but el-elderly scientist, states that something is possible, he's almost certainly right, but when he states that something is impossible, he's very probably wrong. Yeah. And, I, I think that there- I, no, I, I guess like what, what I'm, I'm, what I'm trying to say is, I guess that I don't know, I don't, to be honest, I'm, I'm Like I'm, I'm not sure w-what it is that I, I am trying to say here either, because obviously, like, if you end up directing your attention at everything that, that has hype, you're going to waste a lot of time. Yeah. But I, I think that here as well, probably that there is, like, I think that what's important is to have, maybe, and probably Talib has better writings on this, but figuring out, proper alarm system For when, when you shouldn't no longer ignore things, yeah, right. And, and so that you can, ignore a lot of things, but like, if this happened, then I actually need to, need to, to pay attention, to, to this, this, hypersensitive thing.

I think sometimes you just have to- Take a critical eye to these things, but I also think, with the comments around like, did Sweden make the wrong call and things, I think there are some other factors here as well. Like it may, I think Sweden actually took a more long-term sustainable approach, right? Now, from Anders Segner, I know he was saying we made some mistakes in terms of protecting the nursing homes, but overall, I think he was mostly satisfied with it, and I think we-- a lot of other countries have just pressed pause and when, once for economic reasons. Since once they press play again, they're gonna get all those deaths come again. and unfortunately, it seems that some of the things like hydroxychloroquine and all, all these other things like some of the treatments have been very politicized, so then it kind of becomes difficult to use that. So I don't know, I think in a year's time or so, it'll look like You know, Sweden made the right call, and they were able to open up sooner and take less of a hit overall because they can actually open up and they can have tourism and stuff, whereas who knows with some of these other countries whether they will be able to open up that soon? And, you know, there's all these other costs, right? And

if you, if you look at the Swedish neighbors, they're all opened up, for everything except for Swedish people. their, their economies are, are, spinning better than the Swedish one, so on and so on Quoting Andrew Stigell, is, quite similar to Donald Trump, in the sense that if you want a topic, and an opinion, you'll find a quote where he says that, but he also says the other thing. Yeah. and so, so it's like I don't know, and I, I don't think that you, you and me discussing the, the, the chronology itself, is maybe the most interesting for, like, given that we're, you know, who, who, who are we to judge? I'm just like

podcast.

Yeah, I'm, I'm more interested on, about like, I guess, like the questions of like, what sensitivity should you have to the things that have hype, I guess. Yeah, is, is,

is one interesting topic, and In general, like, the observation that, that, like the, the hypersensitive people that are often in venture capital, seem to, to, pick up, or at least it was like different, and, and who picked up what in terms of this, in terms of the situation and,

yeah. I think for me, I've just, I mean, I've just stayed Bitcoin only the whole way. So for me, I, I, sometimes it's like shiny bright, what's the thing, shiny bright thing syndrome or whatever that happens in IT and people just kind of always chasing after some shiny thing and, you know, I think it can be a trap that way.

But, but ask yourself this, and, like, when you're, when you first, acquired some Bitcoins, if you did, was that Decision. Did that come from you being smart, or, or did that come from you being yolo? right? Yeah. and, because it's important, it's imp- it's, it's important, you can afterwards rationalize, "Oh, I was so smart and I did the analysis," or maybe it wasn't. and, and I'm not, I, like, I, I don't know about you, but for a lot of people, definitely, that decision was yolo, yolo-esque. and, and Bitcoin yellow light decisions, and it also explains, like, I think it, it sufficiently explains why the broader industry looks the way that it does, because it, it uses this dynamic to, to sell shitcoins to people, right? Yeah. Yeah. And, and, and so on. And like I've, I've heard otherwise smart people saying that, "Look, I know that this might be a scam, but if, you know, if I invest in ten of them and one of them ends up being the, the, the next big thing, then, And, nine hours gap, and I'm still in, in, in the green.

Then, well, I think for me, I came in with the vision of getting rid of central banks, right? So now, in, you know, the first time I ever bought Bitcoin, was I sure that Bitcoin was gonna do it? No, but I think it's probably fair to say I thought it was like a very good risk-adjusted bet, right? So I thought, okay, for the amount that I'm putting to risk here, it's well worth it. And then over time, as started, you know, regularly accumulating, and I guess that's my story on this stuff. obviously people have their own lessons and how they came into it, right? 'Cause some people came in from like 2017, got wrecked, and then only learned, you know, and there's, there's people, a lot of people in that camp, so Yeah, but I think you're right that we have to kind of self-assess and think, "Well, you know, why am I really here and what is the reason that I think, you know, Bitcoin is gonna win?"

Sure, but, but, but that's the motivation for why we stay here. I'm talking about like the, the motivation for, you know, making important decisions, right? And, Or I guess making decisions at all, like probably for most people when they, they bought their first bitcoins, probably wasn't an important decision. Like probably most people didn't put life-changing amounts of money into Bitcoin, as their first contact with it

either. Yeah. Well, I think it's kind of like, testing the waters, you know? Like you start out, you dip your toe in the water, and if it works well for you, well, then you, you know, keep going with it.

Exactly. I mean, it's probably not that

dis-distinct from running a business, right? Like you might start a certain product line and then it becomes popular, so then you put more into that.

Exactly.

Exactly. So yeah, I guess, that's kind of how I think of it. I think it's kind of like, you start out with a small amount, you dip your toe in the water, and then you kind of go from there if it's working out well for you. So

Right. But then, but then again, that, that, that's why the industry is what it is, because a lot of people continue dipping toes into the water. That's the thing. They're dipping

their toes in the wrong water, though, Sergej.

Right. But, but,

So we get back to it is that, even if it's the wrong w-w-what, ninety-nine percent of the time, if the hundredth time is more than, a hundred x outcome, then maybe it is actually the right one. maybe, I don't know. Like, I think that the, like I said, I think we're going in circles here, but, but it's, I think that, having these heuristics for, for dismissing, things that are bad, is obviously a good idea Anything else would probably not, not work, but I think that it's also important to, I guess, have heuristics, for, for, when to snap out of it, I guess, and when, when to find out, like what to pay attention to, I guess.

Yeah, yeah, I think it's just a qualitative filter that you have to apply. But anyway, look, I think that's, we'll probably leave it there. we've covered a lot of, interesting topics. I've certainly enjoyed chatting And where can they find Bitrefill?

Good question. You can find Bitrefill at, bitrefill dot com. you can, buy stuff, with, with your coins, using gift cards, actually, in Australia as well now. Other than that, you can find me on Twitter, I'm at, zigemon, and I'm sure there'll be a link, next to this, podcast.

Excellent. Well, thank you for joining me. Thank you as well. Get the show notes and subscribe at stephanlivera dot com. Thanks, and I'll see you in the citadels.