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Jameson Lopp and Eric Martindale: Swan Signal Live E24

Posted 8/20/20 by Brady Swenson

Jameson Lopp, Founder and CTO of Casa, and Eric Martin­dale, cypher­punk and devel­oper and founder of Fabric Protocol, discuss Bitcoin’s past, present, future, the state of Bitcoin tech, cutting edge layer 3 devel­op­ment, Bitcoin businesses, and their predic­tions for transi­tions onto a Bitcoin standard. As always, Brady Swenson, Swan Head of Educa­tion, hosted the lively discus­sion.

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Summary:

0:00 Intro­duc­tions

2:14 Perspec­tive on current Bitcoin events

7:27 How will Bitcoin transi­tion play out?

14:27 Why were you origi­nally inter­ested in Bitcoin?

18:48 Societal transi­tion away from State power

34:06 Most pivotal moment in Bitcoin history

38:36 What does Casa do?

44:54 Will keys get central­ized in third party custo­dians?

51:30 What is the Fabric Protocol?

1:02:16 How challenging is it to building on Layer 3 of Bitcoin?

1:08:34 Wrap up

Transcript:

Brady Swenson:

All right. Swan fans, welcome back to Swan Signal Live. This is, of course, a produc­tion of Swan Bitcoin. Swan Signal is a weekly show that pairs up great guests for compelling discus­sions about Bitcoin and economics. I am your host Brady Swenson, head of educa­tion at Swan. Before we dive into today’s great discus­sion with two great Bitcoiners, a quick word about the service we provide here at Swan, we have built the best way to accumu­late Bitcoin with automatic recur­ring buys.

Brady Swenson:

You can very simply connect your bank account and your auto fund USD into your Swan account. We’ll automat­i­cally stack stats for you and you can option­ally set up automatic withdrawals to your wallets to hold your own keys as is best practice in Bitcoin. We do all that at very, very low fees in the industry. We’re up to 80% lower than Coinbase, absolutely crushing Coinbase. Delete Coinbase and move over to Swan Bitcoin only for the win.

Brady Swenson:

We’re also 57% cheaper than Cash App on the fees so there’s really no reason to be autostacking anywhere else in the United States except for Swan. In case you missed it, we are launching our daily frequency soon so you can be able to buy on the daily with your Swan accounts. We’ve had massive demand for daily since the day we launched. It is coming so go to Swanbitcoin.com/daily buys and you’ll be among the first daily stackers on the Swan squad.

Brady Swenson:

Let’s get into this one. We have two Bitcoin legends with us today. Both have been around since the very early years of the project, very well respected Bitcoin devel­opers. I’m really excited to have the oppor­tu­nity to talk with these guys and share it with you all. First, we have Jameson Lopp, cofounder and CTO of Casa. Thanks for joining us, Lopp. How’s it going, man?

Jameson Lopp:

Great. I’m happy to be here with my bearded brother.

Brady Swenson:

I have a little work to do to catch up with you guys. And the other gentlemen with us today here is, of course, Eric Martin­dale. He’s currently working on the Fabric Protocol, an early Layer three system for Bitcoin. Thanks for being here, Eric.

Eric Martin­dale:

It’s awesome to be here. Good to see you again, Jameson. I guess, appar­ently, the beard comes with the crypto knowl­edge. It grows out as you learn more, right?

Brady Swenson:

Sounds good. That sounds about right. At least I have a little bit going on so I guess I’ve learned a little bit of knowl­edge over these couple of years. Let’s dive into this one. As I said, these guys have been around for a long time. Whenever I get a chance to speak with Bitcoiners who have been here for most of the life of the project, I think it’s really, really valuable to dive into some history. I’m newer to Bitcoin. I’ve been around for a few years now, and I know a lot of you watching are even more recent than that so it’s really valuable to learn and get perspec­tive from the history of the project.

Brady Swenson:

We’re going to dive into some history and it’s going to be a lot of fun, but I think to set the scene in context, I’d really like to take a moment to consider the present moment that we find ourselves in, in Bitcoin because it’s a very unique one, even in the history of this very exciting project that’s filled with unique events. We’re living in a time where the case for Bitcoin is really standing stark, even more stark than ever against the backdrop of Keyne­sian monetary policy or run amok.

Brady Swenson:

It’s a time where some of the world’s biggest investors and even the biggest compa­nies in the world are investing in Bitcoin and converting their cash reserves to Bitcoin. It’s surreal in this partic­ular year. I don’t think any of us saw all of this mashing together into a six-month period so soon. Jameson, we’ll start with you and then we’ll go to Eric. What’s it like for you person­ally, having been in Bitcoin for so long, to experi­ence these events unfold as they are before us?

Jameson Lopp:

When I think back on the things that I find most grati­fying, it’s not the fact that the Bitcoin price went up so much, it’s just my crazy rants from eight years ago actually turned out to be pretty accurate and all the folks who said I was crazy have to eat their words now. You don’t want to dwell too much on the I told you so stuff because there’s always going to be some element of that.

Jameson Lopp:

Whenever you’re talking about massive funda­mental changes and shifts in society, economics and so on, then obviously there will be a lot of skeptics and it’s, in many cases, impos­sible to convince someone of a poten­tial future actually being possible. We just see that the one constant is that, the world continues to get weirder and now it seems like even the most implau­sible theory is about, what might happen in the next few years suddenly seem a lot more possible.

Brady Swenson:

Eric, how are you feeling, man? Is this surreal for you to watch all this happening?

Eric Martin­dale:

Yeah, it’s super surreal. I definitely came at it from the liber­tarian angle initially and then I, I guess, evolved into an anarchist over time, but it really has been just incred­ible series of events. It used to be the tinfoil hat conspiracy theorist talking about the infla­tion from the Fed and how the Fiat currency was going to collapse. And even just a few years ago, it was really hard to say that anything that’s happening right now was ever going to happen, it was all a very distant idea in the mind.

Eric Martin­dale:

It was a way of just trying to teach people about Fiat systems, central banking and so on and try to get them more aware of what’s going on in the world and how they can actually effect change rather than going through the polit­ical systems. But where we are now, a few years ago, we didn’t even see this coming so it’s almost like a dream. It’s a Cypher­punk dream in a way. It’s basically every­thing that the original Cypher­punks talked about back in the day.

Eric Martin­dale:

When Satoshi came out with a white paper, he really hit on all of those points extremely well in all of the talking and postings that he shared initially. We’re what, almost 12 years in, I think, at this point or something like that and it’s gone even further than, I think, even in the very begin­ning days when there was a lot of crazy, ranty liber­tar­ians running around on the forums talking about the collapse of the Fiat system. But we’re witnessing it before our eyes just with the latest round of infla­tion, global pandemic and the govern­ment just printing more and more money, basically, in an attempt to address the issue.

Brady Swenson:

At this point, as we’ve discussed many times on this podcast and elsewhere as Bitcoiners, there’s really no other way out at this point. In terms of the Federal Reserve in the U.S. govern­ment, we as citizens of the United States are committed, whether we like it or not, to this path of Keyne­sian monetary policy in ride or die. Fortu­nately, we have this escape hatch, this Plan B. I’d like to know, Jameson, let me put it this way, how does the recent events affect the way you envision transi­tion to Bitcoin playing out? Do you think it’s going to pull that future forward a bit?

Jameson Lopp:

I think it was the combi­na­tion of people being locked inside for a long time and all of the macroevents giving them more of an oppor­tu­nity to inves­ti­gate some of these issues that people gener­ally go most of their lives not thinking about that has resulted in a resur­gence of new inbound inter­ests. Now, obviously there been the more public well-known investors and other public figures who have come forward to state their own bullish case for Bitcoin.

Jameson Lopp:

But at Casa, we’re just onboarding a lot of normal, new coiners, white collar profes­sionals people who have enough wealth that they are thinking about, maybe I need to diver­sify, maybe I need a hedge against some risks that I’ve never really consid­ered risks before. These things, they are incen­tivizing people to actually give a look at Bitcoin.

Jameson Lopp:

Whereas before, Bitcoin was a really hard sell to people in first world countries that had good access to finan­cial infra­struc­ture, it was a much easier sell to people who were in third world countries that were hyper­in­flating or didn’t have good access to banking networks. Now, those of us who were deemed the crazy Austro liber­tarian folks in the first world suddenly seem a lot less crazier. I think it’s just another one of the big use cases for this technology that, the value has always been there and now it’s just becoming more obvious because of the friction that people are feeling.

Eric Martin­dale:

I’ll just expand on that a little bit. Even in the early days, it was imagined that it wouldn’t be the first world countries that would adopt Bitcoin quickly. So it wouldn’t be the United States, certainly the U.S. would be the last to the table. And you can draw a parallel for reasons for that in the energy industry, for example. The United States has something like 150 year-old electrical grid. This is all infra­struc­ture that’s already in place, it’s already widely used, the lights stay on and the water continues getting pumped so there’s really not that much room or not much more incen­tive for new infra­struc­ture to be put in place or new technology to be put in place.

Eric Martin­dale:

Whereas, say, in the devel­oping world, for example, all sorts of places, where they don’t have access to robust finan­cial services, we always antic­i­pated that, that would be where Bitcoin started to take off first. You could see that develop at least initially in the remit­tance market, for example. Bitcoin is a censor­ship-resis­tant money and it allows you to top borders or basically ignore national borders in terms of your ability to move capital.

Eric Martin­dale:

So we really saw, for example, the Philip­pines, people’s spending money back to the Philip­pines and using it to really just bypass these legacy regula­tions that are in place. I do think it’s a rising swell. Obviously, we didn’t really expect the banks per se to move into the Bitcoin industry as quickly as they have. Say, seven or eight years ago it was like, oh, one day, 20 or 30 years down the line. Now, we have the national bank of number of different countries at this point starting to talk about Bitcoin, releasing reports on Bitcoin. You’ve got the Goldman Sachs report on Bitcoin that came out.

Eric Martin­dale:

You’ve got all these major finan­cial insti­tu­tions that, here we are 12 years later, starting to pay atten­tion to it because it has worked in places like Venezuela and in places like the Philip­pines, in all of these places where there’s either onerous regula­tion, these draconian systems which restrict how we freely move money or just there’s an infla­tion problem, for example. You see people being able to lift up their families, support and build a dream where they wouldn’t have been able to other­wise because they saw this thing on the internet four or five years ago and it happens to have a defla­tionary design rather than an infla­tionary design.

Eric Martin­dale:

As their nation’s currency collapsed, they were able to lift their family up and out of that situa­tion and move them somewhere else in a lot of cases. So I’m hearing a lot of stories like that, and that’s really what energizes me about Bitcoin that there is an actual, tangible, social benefit in the real world for this stuff. And then obviously, we could go down the rabbit hole in terms of things that you can actually do with it as a program­mable money, for example. But just seeing that it’s actually solving a real problem in the real world.

Eric Martin­dale:

Startups have to face that problem every day, what the problem is that you’re solving for your customer. Bitcoin’s use cases definitely maybe a bit esoteric for some, especially here in the devel­oped world, but at the end of the day this is a long process. So that tidal wave, you can start to see is really swelling and that’s reflecting in the market prices, not that anybody cares what the price of Bitcoin is and Fiat currency because it’s going to get inflated, what the hell. But now I do think it’s a huge groundswell and we’re still at the very tip of that iceberg.

Brady Swenson:

Is that what origi­nally inspired you about Bitcoin? Did you see it as a way for people living in regimes with already failing curren­cies and more autocratic govern­ment as a way to opt out of the power struc­ture there?

Eric Martin­dale:

Yeah, definitely on the broader sense. I look at Bitcoin as the tip of the spear in the slaying of this legacy idea that we need some sort of a central­ized insti­tu­tion to run society, frankly, govern­ment at large, this idea that one man or one group of people can write laws which govern over somebody else. I think Bitcoin basically demon­e­tizes the systems, it defunds them so it’s a way of basically forcing them to compete in the market for the services that they’re providing liber­ating the market to compete on services.

Eric Martin­dale:

Bitcoin being seizure­ship proof basically, it allows you to basically opt out and partic­i­pate in the businesses that you’re inter­ested in rather than having to comply with whatever onerous regula­tion. In the U.S., we really don’t even have it that bad. We have a Central Bank which was created in 1913 and person­ally I view the fact that we have a Central Bank that has the authority to hold monopoly over the monetary system, anytime you have a monopoly, it obviously kills out all the compe­ti­tion but you end up with much lower quality of services at a much higher cost.

Jameson Lopp:

But it allows us to dump dollars on the rest of the world.

Eric Martin­dale:

Yeah, exactly. It puts us in a defacto tyran­nical position even if the Keyne­sians are well inten­tioned. Even if the Keyne­sians think that tweaking these dials and tuning these levers is actually going to help people improve their quality of life, however diluted they are, the damage is real. People say, taxation is theft, well, infla­tion is an even greater theft. I definitely agree that taxation is theft but infla­tion is the more insid­ious one because it steals from every­body at the same time and there’s absolutely nothing you can do about it, at least, to address it directly.

Eric Martin­dale:

I was saying, since 1913, ever since there has been a private bank that has had the authority to issue the money and the lawmakers are directly tied to it by way of the 16th amend­ment, at least here in the United States, which grants them the rights to a levy and a portion pact for the first time in history, 1913, the creation of the income tax, every legal decision, every law written since that point in time, from my perspec­tive, is illegit­i­mate. Because now that you have the tight coupling, this marriage of money and state, how can you possibly hope to have a legit­i­mate polit­ical system at all?

Eric Martin­dale:

So Bitcoin repre­sents the separa­tion of money and state. It’s the opt out, you have the voice and exit strategy. It gives you the personal sover­eignty, the individual autonomy, it allows you to express your personal beliefs and decisions and I do think that, absolutely, it’s tapping the areas of most need. And then, because of the U.S. is certainly at the top of the ladder, they’re really going to be the last of the table. So pretty much every­body who’s even aware of what Bitcoin is, at least just beyond the surface level, is way ahead of the curve at this point, even now.

Brady Swenson:

Jameson, Bitcoin itself is a large orange pill to swallow, to relearn what money is. I think for a lot of Bitcoiners, Bitcoin has done that. If you were not a bug before from the liber­tarian monetary perspec­tive, you have been taught what money really is by Bitcoin. That is a disori­enting shift in world­view and then you start to follow the rabbit hole down all of the conse­quences of poten­tial outcomes from that sort of change in the world­view. Eric is walking down that rabbit hole. As Bitcoin starts to really exert its force globally, as it already is, I think we’re seeing it happen now in real time, how does this transi­tion happen?

Brady Swenson:

We’re not going to move directly from … Democ­racy is pretty Lindy at this point. Our current form of democ­racy or whatever you want to call it, you can debate the seman­tics and all that, but the current form of govern­ment in the United States is going to resist change obviously so is the monetary policy so there’s a lot to unpack there. How do you see Bitcoin affecting the way we govern our society, the way we live and how can that transi­tion happen in any remotely peaceful way, do you think?

Jameson Lopp:

Well, that’s the real question. This is where talking about anarcho-capitalism, poten­tial volun­tary society, it’s somewhat easy to talk about living in a society that’s already fully in that type of frame of refer­ence, but how do you get from point A to point B without a lot of people killing each other because nobody willingly gives up their power volun­tarily. That’s the major problem, how do you take power away without a lot of blood­shed, violence and whatnot?

Jameson Lopp:

That is going to be, I think, a very inter­esting transi­tion to watch because if you follow through the theory, some of these theories being that ultimately taking the power of control­ling money away from the state will disem­power it in terms of things like taxation or basically self-funding in a variety of different ways both through infla­tion and taxation, that is going to make nation-states very upset.

Jameson Lopp:

They are going to probably do some things that are violent and the real question I think will be, what will the timing be like on that? Will the nation-states be too sluggish, will they act too late past the point of no return where the system has already become so decen­tral­ized and widespread that even the power of nation-states, which are very powerful when they can concen­trate at a single target, is still very diffi­cult for nation-states to undergo something where they are having to fight the entire citizenry?

Jameson Lopp:

This is something that I’ve argued with people about in liber­tarian style arguments. The second amend­ment arguments my entire life is that, there are a lot of people who just don’t seem to under­stand what the real power balance is. Well, frankly, most nation-states have done a very good job of putting forward their monopoly on violence and instilling fear in the populace. I would say, a decent propor­tion of people are fearful enough of their states that they think that if they do anything against the state’s wishes, hellfire will rain down upon them, but they don’t seem to under­stand that even nation-states are only comprised basically of a small percentage of the actual popula­tion and they don’t have the ability to force their will against a populace that ultimately opposes them.

Jameson Lopp:

We see this all the time even with dicta­tor­ships and popular upris­ings. It’s like, once you get a decent portion of the popula­tion to rise up, in many cases, it doesn’t even matter if they’re armed or not because they will find ways to arm themselves, they ultimately take the power that they need to fight back against whatever is upset­ting them. So will there be violence? I’m sure there will, it’s not going to be a completely peaceful transi­tion. How long is it going to take? Years or decades or gener­a­tions, it’s hard to say. But in general like Eric was saying, technology seems to continue to impress everyone in the pace at which it is adopted and spread so sooner rather than later seems to be the answer for almost every­thing in this space.

Jameson Lopp:

There’s still so much work to be done though to make the technology more user friendly, more secure, more scalable, et cetera, et cetera. We don’t have the perfect money yet but I have believed all along that the frame­work under which Bitcoin was origi­nally created as an open source collab­o­ra­tive project, a volun­tary project where anyone who cares can contribute, is the most sound founda­tion that you can have.

Brady Swenson:

Beautiful.

Eric Martin­dale:

I think it’s a pretty serious issue. For example, even 100 years ago here in the United States, we had a very different kind of culture. People were more aware of their individual autonomy at the time. We’ve had a long series, especially here in the United States, of events which have led us to rely more and more on the govern­ment and I think that’s put the popula­tion in a very vulner­able position.

Eric Martin­dale:

I view these central­ized systems as vectors of attack. Just like Nick Szabo’s famous, Trusted Third Parties are Security Holes, when you have a central­ized govern­ment, to your point about open source, it’s a security threat. It’s an attack vector that can be exploited. Just like we’re even seeing out in the world today, it’s pretty dangerous times when your popula­tion gets unhappy and turns to violence to attempt to effect their polit­ical goals.

Eric Martin­dale:

But the open source model, anytime power is changing hands, you have that sort of danger. Just to hit on Jameson’s point there, the open source model, rather than looking to take over the existing system, the existing struc­ture and change it to suit your wins, the better option is to build an alter­na­tive. And that’s exactly what Sitoshi did, that’s exactly what Bitcoin repre­sents. That’s exactly why Bitcoin is an open source project that very strictly and firmly does not have a gover­nance compo­nent. There’s no central committee, there’s no company, there’s no authority that can tell you what software you can run at least in terms of your full node.

Jameson Lopp:

It’s very diffi­cult to convince a lot of people of that though. Something that I’ve actually just started thinking about recently, this is the problem of proving a negative. I’ve written so many Fiat debunking articles of like, does Bitcoin Core control Bitcoin, does the Chinese Minor Consor­tium control Bitcoin. You can’t prove that something doesn’t happen and that’s where there’s almost a leap of faith required for you to have been in the space so long and looked at the system for so many different angles.

Eric Martin­dale:

That’s definitely true. It’s definitely coming from an engineering perspec­tive knowing that pretty much for my entire life, I have almost exclu­sively relied on open source software. I ran Gentoo Linux for a long time where every single program that ran on my computer with the excep­tion of the bios at the time, but even now you can replace that with open source alter­na­tives as well, the source code was downloaded, compiled and then built on my own machine. So it’s different coming from maybe our perspec­tive or my perspec­tive at least and it’s much easier to see how you do have that autonomy, but from an outsider, I agree completely that, that’s a very diffi­cult hurdle to get over.

Eric Martin­dale:

You can say that the Bitcoin core devel­opers are maintainers of one of the imple­men­ta­tions of Bitcoin, but that’s not very satis­fying for a market that there aren’t that many other alter­na­tives. There’s Bcoin, there’s a couple of other smaller imple­men­ta­tions but they just don’t have a presence. If somebody wanted to make a change for themselves, they don’t even have the toolbox let alone the tools in that toolbox to start making those changes.

Eric Martin­dale:

You made a point earlier about how far we are and how much further we have to go in terms of user experi­ence, I think that the biggest remaining hurdle or boundary to cross is how do we give people easier access to tools, for example, the power that Bitcoin provides. You guys do multisig and there’s all sorts of custo­di­an­ship stuff that’s inter­esting but how do we make these things easier to use and more ready as drop in replace­ments for the existing central­ized systems that they already use?

Jameson Lopp:

We would probably agree. It would be great if every American family had an AR-15 or two and a few thousand rounds of ammo. We think that, that would make the country more resilient against things like a tyran­nical govern­ment attack. But you wouldn’t just print up a bunch of AR-15s and go dropping them off on people’s doorsteps without some training and other instruc­tions and trying to make these things not have literal foot guns in them.

Eric Martin­dale:

The educa­tion thing is also something that definitely needs to be improved and worked on. I think we see that play out with some of the other copycats that have cropped up since Bitcoin was released. Some of them, for example, Ethereum, really tried to make the devel­oper process easier to try to build out that ecosystem but Bitcoin has some really, really impor­tant core princi­ples that do make it somewhat diffi­cult to convey those ideas to people or make them acces­sible at least. But at the end of the day, it becomes a more powerful system. It’s a marathon not a sprint.

Eric Martin­dale:

This is a 100-year plus societal change so we can’t just rush into this and then not expect people to lose their money in bugged contracts and broken engineering solutions. So I definitely think the educa­tion aspect of it, not only from that engineering philos­ophy, that preci­sion-oriented engineering perspec­tive but just from the technology aspect itself, getting into the nitty gritty of as Bitcoin is a form of smart contracts, how these systems work and why you might want certain proper­ties versus others. And then, the level above that is educating people about the utility of these things and then making it acces­sible for them to inter­face with them.

Eric Martin­dale:

The more of those systems that we have, obviously, it’s a funnel. You’ve got to improve the educa­tion to make people aware that these things even exist, you’ve got to teach them how to build things with them, how to use them, then you’ve got to make the tools not clunky, slow and awkward to use and then you’ve got to get the market momentum. So it’s just this huge funnel of all these individual pieces that we’ve got to get through. But at the end of the day, I think it does start with educa­tion and just contin­uing to share the overall ethos and logos, for example, of what Bitcoin repre­sents as a system.

Brady Swenson:

That’s what we’re here for. A lot of us are working on it and I think we see the impor­tance of educa­tion just because this is such a massive change. It’s the polar opposite of the way we’ve been running the show for a century. I wonder though, I hear you laying out the path or the funnel for adoption but I can’t help but think that’s not going to be up to us. The devel­opers and designers aren’t neces­sarily going to be able to be like, all right, we need to get this, this and this place, now you guys can come in.

Brady Swenson:

It seems like that’s happening now. I guess the demand is rising because of events that are happening and people are waking up to Bitcoin being a better savings technology. In that capacity as Bitcoin being a better savings technology, it seems like we’re in pretty good shape at this point. I think in other use cases down the road, I agree, obviously we have a lot of work to do, and I know both of you guys are working on this.

Brady Swenson:

I want to get into Fabric and I want to get into Casa, but I did want to do a little bit of history stuff first. So let’s hit that and then we’ll finish up with what you guys are working on right now. A question I had for you was, for you, what was the most pivotal event in Bitcoin’s history and why? Give us some context and color about your experi­ence as you went through it. You both can’t pick the four-course to X, you have to pick one. Who wants to go first and take the low hanging fruit?

Eric Martin­dale:

I’ll take the easy low hanging fruit, and that would probably be Mt. Gox. In the early days, right as Bitcoin was happening, we had this huge finan­cial collapse. There was a lot of trust that people just assumed was going to be followed through on. We saw the 2008 finan­cial crisis and then, pop, here comes Bitcoin right at the most perfect oppor­tune moment and it repre­sented a lot. It was fairly cohesive at least in the begin­ning as to what it repre­sented. It was sort of a cypher­punk movement.

Eric Martin­dale:

And in the cypher­punk ideology, we’ve been talking about this stuff for years so to see Bitcoin go just a couple of years later … There was the Bitcoin Inca hack before that so that was another exchange that existed and there was a couple of other really small ones. But as Bitcoin had started to gain momentum and speed, the exchange rate was going up. It went from zero to $2, $6, $20 something and I don’t remember exactly what the price was, probably something like $200 or something like that when Mt. Gox went down.

Eric Martin­dale:

Seeing people forget what the whole thing was about, which is decen­tral­izing that power, decen­tral­izing the ability to have a stable sound currency, a sound money, and putting it in the hands of the people so that it couldn’t be inflated away by a Keyne­sian econo­mists sitting off somewhere, and to see like Mt. Gox in partic­ular, I think that woke a lot of people up and gave us a course correc­tion because that really is where not your keys, not your money meme came from. Because a lot of people lost a lot of money during that debacle and it was really unfor­tu­nate, but it was really a demon­stra­tion of exactly why you don’t trust a central­ized insti­tu­tion with your money. And if not, you treat it like an invest­ment.

Eric Martin­dale:

So I’m really glad that the ideology, if you will, speaking broadly, how has somewhat unified around the self-sover­eignty aspect of what Bitcoin provides. Today, we see that savings narra­tive develop and really be defended well because of that. But I do split it into three phases. Initially, it’s perceived as an invest­ment for the future for the eventual collapse of the Fiat currency. And then, as we hit the middle of the S curve, that’s the savings period. Now it’s still an invest­ment of some sort. The purchasing power of Bitcoin is still going to continue to increase. And then as we hit that top of the S curve, as we achieve market penetra­tion and more and more people adopt Bitcoin, then we hit that consumer adoption aspect.

Eric Martin­dale:

But I’m just super happy that at least many people who are in the Bitcoin ecosystem have learned their lesson about central­ized systems. Unfor­tu­nately, it was an expen­sive lesson for some, I think I even I lost a couple of Bitcoin there but I still love it. But I’m glad that, that meme continues, not your keys, not your money.

Brady Swenson:

Jameson, I want to hear your little history first but, Casa was born out of this meme. That was kind of the genesis of Casa eight years before, the idea that you’ve got to get your money off exchanges as soon as possible other­wise it’s not your money. I assume that, that’s something that’s been motivating you to work in Casa for a long time. Talk about how you guys have made it way easier to hold your own keys. I’m a customer and it’s a few clicks and it’s really easy to hold your keys within a much more secure way than holding it on a single device.

Jameson Lopp:

There are a ton of things that you could talk about that point to the amazing advance­ments that the Bitcoin ecosystem has made over the years. Especially, it’s been fasci­nating to watch second and third layer proto­cols being devel­oped at a very rapid pace because they don’t need to get consensus from the entire ecosystem to do that devel­op­ment. As for myself, I’ve spent the past five or six years now doing what I consider to be really boring low level work, which is just private key manage­ment. It’s a very funda­mental problem that still has not been fully solved.

Jameson Lopp:

I won’t consider this to be a solved problem until we stop hearing about people losing their keys, until we stop hearing about people getting hacked and having their money stolen, though it’s really the self-loss that is I think the bigger problem, at least at this point in time. That’s why I really say it is a lot about usability. I guess a short version of what we try to do at Casa is, we look out on the entire ecosystem and all of the best practices that we’ve learned through a lot of very hard lessons over the years and then we ask ourselves, well, we know that basically none of the users are going to read the fucking manual so how do we build the software to guide them through the best practices?

Jameson Lopp:

And that’s how we end up with what is a fairly simple and yet an elegant inter­face in Casa. We actually strip out probably 99% of the possible things that you could do with the Bitcoin protocol because most of them are foot guns and we say, this is how you get yourself into a nice, robust, manage­able, vault style, cold storage setup. There’s still a lot of work to do there. There’s more complexity than I would like. I’ve got plenty of plans for ways to continue to simplify it.

Jameson Lopp:

It’s fun to look out and see the advance­ments that are happening. In the hardware device ecosystem, we’re going to start to see new gener­a­tions of dedicated hardware. Key managers come out and continue to evaluate and look at those. At Casa, we don’t want to invent anything novel. With security, novelty is often a bad thing. We don’t want to roll our own crypto, we don’t want to create completely novel security models so we’re going to just keep doing what we do, ingest every­thing that there is to ingest and then try to distill it down to the most awesome bits of security and usability.

Jameson Lopp:

But to get back to your question though, since I can’t say four cores or UASF or anything like that, I would actually say some of the most pivotal moments and things that I think have been impactful are not the things that happen in the Bitcoin ecosystem or the advance­ments by its propo­nents but rather the self-owns of the detrac­tors, the haters and the author­i­tar­ians. Look at all the countries that have banned Bitcoin over the years and how all that worked out for them, or more recently, the federal reserve being pressed and saying, there is an infinite amount of cash and essen­tially creating a meme, the Money Printer Go Brrr, which hit the mainstream conscious­ness and has helped propel, once again, Bitcoin into mainstream thought.

Brady Swenson:

That’s an absolutely great point. At that point, we had Bitcoin just narrow down to two memes. It was Money Printer Go Brrr and Bitcoin Fixes This. And that’s all you need to know about Bitcoin, the use case and the elevator pitch. I want to talk a little bit more about … By the way, thank you for what you guys do at Casa. I think we have still obviously a massive uphill battle on the not your keys, not your coins front. As we get more people saving Bitcoin or holding Bitcoin for the longterm, I think that trend is really picking up with the massive investors coming in the space and the MicroS­trategy news that they’re just turning their corpo­rate treasury, 60% of it, into Bitcoin.

Brady Swenson:

Bitcoin savings technology is out there, it’s happening so it’s just going to keep ramping up over the next couple of years. Now, the OCC, which is a depart­ment of the treasury that I don’t think anybody had ever heard of before this announce­ment, at least in Bitcoin I hadn’t, now say that banks can custody Bitcoin legally in the United States. It’s obviously going to be the path of least resis­tance for people to open up a Bitcoin account at their local bank or at the Bank of America and start buying their Bitcoin and putting it still in custody or whatever. Or maybe Bank of America started selling Bitcoin probably.

Brady Swenson:

Besides just building the products and having them out there and obviously educa­tion’s piece of it, do you have hope that we’ll be able to keep most or at least enough Bitcoin out of large central third parties custo­di­an­ship?

Eric Martin­dale:

I person­ally think absolutely. I think just looking at the technology devel­op­ment and seeing how, certainly in the Bitcoin space but far less so in the alter­na­tive. All coins, they’re all locking their funds up in other people’s multisig, throwing their money in exchanges. It’s ridicu­lous to watch that all happen. But meanwhile, in Bitcoin space, we have, the name is escaping me right now, but it’s a desktop trading app basically, it doesn’t have an exchange, but we’re seeing the devel­op­ment-

Jameson Lopp:

The Bisq, I think it is.

Eric Martin­dale:

Bisq, thank you. It’s it used to be Bitsquare that’s why I was like, I can’t remember Bisq. That’s right. We have Bisq. I’m working on a project called Portal through Fabric which is trying to use Bitcoin’s HTLC compo­nents to build these decen­tral­ized or these contracts that don’t rely on central depos­i­tor­ship. So I definitely think the technology is there.

Eric Martin­dale:

But just like we covered in the begin­ning of the call, it has to be usable, that’s the tough part. Quite frankly, central­ized systems, especially exchanges and the poten­tial oppor­tu­ni­ties to make money which are capital invest­ments rather than savings, it’s more of a gamble than it is just buy and hold. There’s a psychology thing that has to go on there as well. But these systems are definitely in their fledg­ling state but they exist. The fact that we see them so early in Bitcoin’s devel­op­ment is a very, very positive sign.

Eric Martin­dale:

The fact that that meme has stuck around, not your keys, not your coin, the fact that central­ized systems continue to get hacked, these honey­pots, these aggre­ga­tors, where if I can go rob the bank rather than having to go around pick-pocketing 200,000 people to get the same amount of money, I’m going to go rob the bank. So it’s going to continue happening in other more poorly thought out systems, the security bugs are going to continue happening, these flaws are going to continue getting exposed and I just think that, that trend continues.

Eric Martin­dale:

Sure, the overall volume of influx into Bitcoin is definitely going to continue to grow. Even the trading across the all coin markets is going to continue to grow, central­ized exchanges are going to continue to grow, but as that continues, as the technology develops out, the propor­tion of alter­na­tive decen­tral­ized systems or at least trust-minimized system is also going to grow and as a propor­tion not as a linear metric.

Eric Martin­dale:

So I definitely think that the saving aspect is a huge compo­nent of that and the fact that you can put your Bitcoin onto a steel key, you can stamp it into a sheet of steel and then bury it in your backyard and then come back to it in 20 years and then go purchase your rocket and fly to Europe. I think that’s the low time prefer­ence that I think a lot of Bitcoiners at this point are starting to look at. I do think the portion of the market, however fast it continues to grow that is relying on trust, it’s going to continue to demon­strate its previous pattern of failure and that portion is going to continue to shrink as people realize what is actually going on.

Jameson Lopp:

There were even early adopters like How Finney who opined upon the idea that maybe Bitcoin does end up mostly being held in vaults by banks, like gold is a reserve currency. And even though that would not be optimal in terms of entire antifragility of the system, we would at least still have the ability to audit the total supply. We know that they’re not inflating it. There’s no central bank that control it. But I think that this is funda­men­tally one of the things that I’m fighting against, that unless we continue to build more and more user friendly self-custody products, that is an inevitable future because we know what the average person is capable and willing to do in terms of amount of time and effort that they want to spend thinking about managing their money.

Jameson Lopp:

So we do need to make self-custody suffi­ciently robust that people are confi­dent that they can do it themselves. The recur­ring theme that I hear in the system is, sure, there are a lot of newbies out there who don’t even really know the differ­ence so they never withdraw from wherever they buy but there’s also quite a few people who do know the differ­ence but they’re not confi­dent enough and they do believe leaving their keys with a trusted entity that has a bunch of special­ists that worry about the security of those keys is, for them, possibly a better risk reward ratio than taking on the onus and the respon­si­bility of self-custody.

Brady Swenson:

Absolutely. It makes sense. I hadn’t thought about it that way, Eric, that central­iza­tion is going to central­iza­tion. They’re going to do it, it’s going to fail and it’s going to continue. Bounce docs lessons will continue to happen and push people toward the easy solutions like Casa. I want to dive into Fabric. I don’t know much about Fabric and I think it’s probably the same for a lot of people watching today.

Brady Swenson:

I’m really excited to hear about, it’s a new Layer three protocol which is just cutting edge in and of itself because we have some Layer two proto­cols that Bitcoiners have gotten used to, Light­ning and Liquid. I also know that you were involved in Liquid. So if you want to comment on how you Liquid has evolved and comments on that and also tell us about Fabric, that’d be awesome.

Eric Martin­dale:

Sure. Just to give the overview, Fabric starts from the origin of the idea of building what’s called an infor­ma­tion market. This is an exchange, if you will, an order book of infor­ma­tion that you can buy and sell. Fabric is intending to build a system which utilizes Bitcoins’ HTLC and smart contracting capabil­i­ties to allow you to partic­i­pate in the exchange of infor­ma­tion without having to rely on a central­ized authority.

Eric Martin­dale:

So perhaps the biggest appli­ca­tions that histor­i­cally would benefit from this model or has been built that somewhat repre­sents it is the world­wide web. And it radically changed the world much in the same way, although perhaps a little bit less over the longterm than Bitcoin has, but the world­wide web is this idea that you have these documents, these pages that live on a server and your web browser acts like requests. You get a link to one, either from another webpage that you’ve already visited or you type it in or through a search engine these days, or what have you, and you discover this document.

Eric Martin­dale:

The simplest case is that, rather than your web browser sending a request to the server to download this document from that implic­itly central­ized authority, why not broad­cast a request that has some attached amount of Bitcoin, for example, that says, hey, if you could get me this piece of infor­ma­tion that I’m looking for, you can claim this money on the flip side. So there is a construc­tion known as a zero knowl­edge contin­gent payment. Basically, by deliv­ering the document that I requested, you now can spend the funds that I bonded into my initial request.

Brady Swenson:

Cool.

Eric Martin­dale:

If you’re familiar with HTTP, I think it’s HTTP 402 or something like that, payment required, it would be an alter­na­tive almost. It could be an upgrade to the existing world­wide web but unfor­tu­nately the way the world­wide web, as an appli­ca­tion, sits on top of the internet, the world­wide web has so many points of central­iza­tion in it already. HTTP as a protocol design, pretty much, it’s implic­itly central­ized. You’re sending a request from a client to a server within the protocol design. All the way down to DNS, there’s a central­ized authority on DNS. There’s ICANN, which controls the IP addresses and the domain name system and all the way down to BGP and the routing pro. BGP is certainly a lot better as a routing pro. That’s the funda­mental layer at the base of the internet that deter­mines how traffic moves around the internet.

Eric Martin­dale:

That’s probably the single biggest appli­ca­tion but there’s a lot of compo­nents. We’ve actually been working on this project to some extent since 2015. Even before I joined Block­stream, I had just come out of BitPay where, at the time, BitPay was actually really inter­ested in things like payment channels and building open source stuff but there was a funda­mental shift in BitPay’s philos­ophy around the 2014 timeline and unfor­tu­nately they went in a different direc­tion. That summer in 2015, basically, I wanted to take a lot of the ideas that we had come up with and build something around them.

Eric Martin­dale:

Just to describe the Layer three things, Bitcoin is the base layer, we say Layer one. In the monetary world, we might even say M zero, so it’s the amount of physical currency that actually exists, at least in the case of Bitcoin, it’s the base supply. The Bitcoin blockchain is obviously a very expen­sive distrib­uted database. It’s the database that’s probably going to last for at least 10,000 years, I think. So if you put something into this database, you know that it’s going to be there for an extremely long time. It has thermo­dy­namics security proper­ties et cetera, we all know all of that stuff.

Eric Martin­dale:

It makes a lot of sense to use that kind of system as an anchoring point for a Layer two system. You see this taking shape exactly in the form of light­ening and Liquid. Light­ning is a payment channel network. Payment channels have been talked about for a long time all the way back at least as far as 2012, I think. Certainly, there’s been posts on the forums before that, I’m pretty sure. It’s this idea that, rather than putting the trans­ac­tion into the network and letting it confirm in a block, you simply exchange infor­ma­tion with a group of peers and update a single trans­ac­tion or a group of trans­ac­tions over time. And then, if you choose, you can then settle back out onto the chain if you want to, or like the light­ening approach.

Eric Martin­dale:

There was a group of projects around that time that had very similar ideas and I think we’re very fortu­nate that Light­ning has devel­oped as far as it has. But instead of settling back out on your payment channel, you can use that as input into another payment channel and build a network of those payment channels. So that’s your Layer two network, where Bitcoin has this 10-minute interval between block turns. It actually doesn’t really make that much sense in terms of internet payments. Especially when you want to pay an invoice, you don’t want to wait for one confir­ma­tion for it, let alone really the three or six or 12 that you really should be waiting to guarantee you that you have that money.

Eric Martin­dale:

So these Layer two systems really give an oppor­tu­nity to use the Bitcoin-based layer proper­ties and adapt them into something that’s a little bit more target specific, and payments is very specif­i­cally one that is obvious. Light­ening does instant payments and you have instant under­stand­ings and guaran­tees about whether or not your funds are good. So Fabric sits at Layer three. If we look at this as a protocol stack, we have the settle­ment layer and we have a payment layer, where there’s instan­ta­neous movement of funds.

Eric Martin­dale:

At Layer three, we do what’s called compu­ta­tion. This is where we build the actual machines or programs which can run inside of these networks. So if you wanted to imple­ment, for example, a Turing machine, you would be able to do that here safely at Layer three rather than imple­menting it, for example, at layer one like Ethereum choose to do.

Eric Martin­dale:

A Turing system, you would be able to pay for each cycle in the contract and basically passing messages around from peer to peer and, we don’t call this, the academic commu­nity calls this secure multi­party compu­ta­tion. So multiple people partic­i­pate in this compu­ta­tion. There’s some crypto­graphic elements that allow you to homomor­phi­cally fill that infor­ma­tion so none of those people can actually read the infor­ma­tion, but it produces meaningful output that the initial requester can actually inter­pret and process.

Eric Martin­dale:

So that’s where Fabric sits, at that Layer three. This is definitely a preci­sion-oriented problem and there’s a lot of different moving parts that has to be built in order for this to exist. For the past couple of years since I left Block­stream, I’ve been building out those compo­nents and doing protocol work, building out smaller pieces of software libraries that are part of the system. We’re pretty close to something that we can actually publish that could be reviewed, I hope, by the commu­nity with a working demon­stra­tion and every­thing so we’re pretty excited about that. That’s the 10,000 foot overview without getting into all the crazy math of homomor­phic encryp­tion.

Jameson Lopp:

Well, going back to something I refer­enced earlier, how do you deal with trade offs of complexity, security, usability? How comfort­able do you feel building on top of a Layer two protocol that’s still evolving?

Eric Martin­dale:

That’s actually a very big portion of the reason why it’s taken so long to get where we are. We love Light­ning. I still like Liquid, I think it’s a halfway solution. Multisig, first of all, is actually vulner­able in Bitcoin land, at least the way it’s imple­mented today until Schnorr signa­tures get merged, which should be happening soon, I’m very stoked about that tap route. I’m a big fan of Light­ning but it’s still fairly early. What we ended up doing is, we took a much simpler construc­tion or payment channels and we built our own peer to peer network. So we ended up having to also imple­ment a layer two solution that is similar to Light­ning but is much more tightly constrained in its capabil­i­ties.

Brady Swenson:

Got you.

Eric Martin­dale:

Light­ning tries to do a lot of different things actually right now. There’s some really incred­ible work going on over there between Lalu over at Light­ning and Chris­tian Becker at Block­stream. They’re both doing incred­ible work with multi­path payments and all sorts of really awesome stuff. But our approach has been to refine every­thing down to the smallest possible use case and then refine it into a software library that’s only doing that one thing. So do one thing and do it really well.

Eric Martin­dale:

Ultimately, sometimes we find that a partic­ular problem actually can be divided into three other problems then we solve individ­u­ally on those. So we end up with all of these small pieces that ultimately are compos­able tools in a toolbox that you can use to build things down the line. This is the same atomic approach that the Unix philos­ophy is. It’s the same idea that, you don’t want your program to get bigger and bigger and do so many different things, you can build higher order complexity from small, simple compo­nents if you make them compos­able.

Eric Martin­dale:

And in computer science, Jameson, I’m sure you know this stuff but functional program­ming and Lambda calculus at large, this idea that these individual functions which only take one input and produce one output, that is that compos­ability. You can put those things together and build higher order functions from them. Just keeping things limited and domain-oriented and not allowing scope creep which is tough. There’s always something that we want to build or some cool product or some customer that we want to help them build their thing, but it very quickly can expand and it creates an attack surface. So it’s more-

Brady Swenson:

What are some products examples or specific use cases for Fabric?

Eric Martin­dale:

The biggest customer that we have right now that is probably the best fit is doing medical data processing. In the U.S. system, I think actually it may be world­wide, but there’s, there’s this idea of the HIPAA regula­tion where any medical service provider who is collecting patient data, it’s a stupid rule but, basically you have to make your best effort to protect that data from being leaked.

Eric Martin­dale:

With Fabric and with homomor­phic encryp­tion at large, you have the ability to encrypt that patient infor­ma­tion in a way that only the patient can decrypt it and still make it so that medical software and medical providers can generate meaningful infor­ma­tion. For example, dosages of a certain drug, for example, if you’re taking somebody’s lab results and then you process or pass it into this algorithm which outputs the appro­priate dosage of whatever drug that you want to give them, removing the need for a human oversight in some of these systems.

Eric Martin­dale:

The simpler one are very clear cut cases of, liter­ally, no one should ever be able to see that data except for the individual patient. Forget this regula­tion thing protecting that data, forget this idea of using the legal system and trusting that this infor­ma­tion is safe, it would be better if it was simply mathe­mat­i­cally impos­sible for that data to leak or for that infor­ma­tion to be decrypted. So that’s one that I’m super excited about. But we’ve got Portal which is a trust-minimize exchange basically. It uses the same contract that you would call dark pool. So encrypted order books where you put your order in. You can actually read the order book and it either executes or it doesn’t. That’s really exciting and inter­esting, but lots of-

Brady Swenson:

Amazing, man. It’s really exciting. I’m looking forward to seeing what you guys end up publishing and the conver­sa­tion around it. It’s really exciting what’s going on in Bitcoin. It’s still such early days on all fronts and to be here with eyes open at this point in the project’s history is a privi­lege and an honor. It’s going to be just a lot of fun to watch it unfold. So I want to thank you both of you guys for your time today. Keep up the great work. Thank you to Casa. Thank you to Eric and the work on Fabric, really exciting stuff.

Brady Swenson:

Thank you guys for tuning in, watching and educating yourself about this very impor­tant project. It’s a very impor­tant movement in the world today. Continue to educate yourself, continue to stack your stats at Swan bitcoin.com. Happy third anniver­sary to the birth of the BTCPay server project. You can go to Swanbitcoin.com/btcpay and 25% of all of your fees for every automatic purchase you make will go to support the project so check it out. Thanks guys. That’s a wrap.

Jameson Lopp:

Thanks. Bye.

Brady Swenson:

All right. That’s it. Thanks guys. I appre­ciate it.

Eric Martin­dale:

Thanks.

Brady Swenson:

I know you’ve got to bounce, Jameson. That’s was helpful.

Jameson Lopp:

See you at the next podcast.

Eric Martin­dale:

Hopefully we get confer­ences on again soon so I can see you again, Jameson.

Jameson Lopp:

There you go, we’ll compare beard lengths.

Eric Martin­dale:

All right, man. Enjoy your day, man.

Brady Swenson:

Bye guys.

Eric Martin­dale:

Thanks

Other Episodes

Episode 8 –Andy Edstrom and Ansel Linder

Episode 9 –Rockstar Devel­oper and Jeremy Rubin

Episode 10 – Bitcoin TINA and CK Snarks

Episode 11– Gigi and Knut Svanholm

Episode 12 –Adam Back and Preston Pysh

Episode 13 –Alex Gladstein and Matt Odell

Episode 14 –Robert Breedlove and Tuur Demeester

Episode 15 –Isaiah Jackson and Max Keiser

Episode 16 –Gigi and Udi Wertheimer

Episode 17 –Aleks Svetski and Jimmy Song

Episode 18 –Stephan Livera and Marty Bent

Episode 19 –Mark Moss and Ben Prentice

Episode 20 –Samson Mow and Parker Lewis

Episode 21–Lyn Alden and Jeff Booth

Episode 22– Robert Breedlove and Cory Klipp­sten

Episode 23 — Saifedean Ammous and George Gammon

Links

Swan Bitcoin

Jameson Lopp

Casa –Jameson’s company

Bitcoin Resources –Jameson’s Personal Website

Jameson Lopp on Twitter

Jameson Lopp on Youtube

Eric Martindale

Eric Martin­dale on Twitter

Eric Martin­dale’s Personal Website

Eric Martin­dale on LinkedIn

This blog offers thoughts and opinions on Bitcoin from the Swan Bitcoin team and friends. Swan Bitcoin is the easiest way to buy Bitcoin using your bank account automatically every week, month, or paycheck, starting with as little as $10. Sign up or learn more here.

Brady Swenson

Brady is the Head of Education at Swan Bitcoin, the best place to buy Bitcoin with easy recurring purchases straight from your bank account. Brady also hosts Citizen Bitcoin, a podcast focused on documenting his journey learning Bitcoin, featuring some of the biggest names in the Bitcoin world.

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