← The Peter McCormack Show
The Peter McCormack Show
Beginner’s Guide #14: Bitcoin Things You Need to Know with Peter McCormack - WBD197
01:09:13
Location: Skype Date: Tuesday, 25th February Project: What Bitcoin Did & Defiance Role: Host Welcome to the Beginner's Guide to Bitcoin. Bitcoin can be intimidating for beginners. The protocol is complicated, the community can be aggressive and...
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- [00:01]
Peter McCormack
Welcome to the what Bitcoin did podcast. Hi there, how are you all? Welcome to the what Bitcoin did podcast, which is brought to you by Kraken. The best place to buy, sell and trade bitcoin. I'm your host, Peter McCormack and today's show is a little different. I've decided to put myself in the hot seat. I wanted to test my knowledge of bitcoin and whether I can articulate some of these tough subjects accurately. Now, I've had some great feedback on the Bitcoin Beginner's Guide. Lots of people have told me how they've really enjoyed it, how they've been sharing out with their friends and family. So thank you for that. But also, I'm increasingly getting asked questions about bitcoin, which cover some quite difficult subjects. So I enlisted the help of my producer Danny, and he is going to interview me here. But before that, I do have a message from my show sponsors. So let's give a big shout out to Travel by Bit. They sponsored my recent travel through South America. I did a lot of recording with a video camera, this time looking into making mini documentaries. There's also a trailer available that's up on my Twitter if you want to check it out. Now, Travel by Bit is a travel website which allows you to book flights and hotels using bitcoin and they also offer sats back on purchases with up to 10% back to you when booking. I'm always interested in getting the best price. Now historically, I've always compared Expedia and Momondo. I've now added Travel by Bit into the mix because on some of the routes they were very competitive and also cheaper. So they are going to be within my mix now anyway, even if I don't book with bitcoin. Now if you want to find out more, if you want to check them out, head over to travelbybit.com, which is t R A V E l b by bit.com and next up today I also want to talk about my new sponsor, Cointracker they've been sponsoring for the last few weeks. I also met with the team when I was out in San Francisco and I discussed with them that some people had given me some flak back about having them as a sponsor. Some people said, why are you promoting tax? Why are you promoting tax with a bitcoin podcast? Now they told me some interesting stories. I probably am going to do an interview with them at some point because they were telling me some of the situations that people have gone in who haven't paid their tax. So, listen, it's completely optional. It's completely up to you. If you want to avoid your tax, that's totally down to you. That is your problem to deal with. But we do have companies which are analyzing the blockchain, they're analyzing the data, and companies are being subpoenaed for the records. So if you avoid paying tax, you could get yourself in a sticky situation. Now, not everyone's like this. Some people are happy to pay their tax, I pay mine. I don't want to, of course I don't want to, but I pay mine. And I use Cointracker for the first time this year. And I've got to say, the software was amazing. And. And if you're interested in finding out, it is free for users who have 200 or fewer transactions in a year. But listeners of the podcast can also get a discount. You can get 10% off by heading to Cointracker IO AWBD. They do have an app which is available in the Apple and Android app stores. But if you want to go to the website and use the tool, head over to Cointracker IO, which is C O I n T R A C K E R IO and lastly, in the intro, I have to introduce my other new sponsor, Cypher Safe, who've been sponsoring the show this month. And also they've sent me three of their devices. Well, actually, they sent me four. One for me and three I'm gonna be giving away. Yes, I'm gonna be giving three Cypher Safe seed storage devices away. Now, why should you check this company out? They have a unique way of storing your private keys machined from solid stainless steel and not any stainless steel. It's 303 stainless. I don't know what the fuck that means, but following one of Jameson Lott's tests, they moved to three or three stainless, so it must be badass. Now, I know you're taking your bitcoin security seriously, but have you gone the ext step? Are you securing your seat from physical disaster? If not, you definitely should check out the cipher wheel. You want to find out more, head over to CipherSafe IO, which is C y P H e r S a F E IO and you can purchase a cipher wheel today. Okay, so onto the show. And as I said, this one's going to be a little bit different. In the previous 13 episodes in the Beginner's Guide to Bitcoin, there have been a number of useful guests who have absolutely smashed it. But when talking about something like Bitcoin, you can't help but go a little high level at times. You know, even though I've tried to keep these shows super simple, I know there are times where people explaining things and it was a little bit, you know, complicated. So in this episode, I decided I'm gonna take the hot seat for a while. I'd had in my agenda for all these shows. I had one show outlined, which was going to be a recap, and I didn't have a guest lined up for it. And I talked through it with my engineer, Danny. I said, you know what, Danny? I think I'm gonna do this one myself. I think we should go over some of the key takeaways from the series and break them down as simple as possible. Now, I'm aware I am opening myself up to a bit of criticism here, but I wanted the challenge. You know, I've been so lucky to have so many great guests on the show who can articulate the intricacies of bitcoin, whether that's tech or the economics. With such professionalism, I do, though, think it's time for me to challenge myself. And it's important to do. I'm always going on about how I'm not technical and trust me or not, I'm much better in the world of creativity and ux. But still, I'm increasingly being asked about bitcoin and I want to ensure that I've got a firm grip on some of these topics. And I won't lie, I was nervous. I did get flustered and have to repeat things a couple of times, which Danny edited out. But I did enjoy the challenge, so I hope you enjoy the show. I know it's a bit different and I am really looking forward to the feedback. It will probably be the least downloaded show because I think most people will be like, ugh, why you? Why haven't we got Tour de Meester on? Or Safety in a Moose? But, you know, it is what it is. I did want to challenge myself and I am looking for feedback so you can hit me up. My email address is hellotbitcoindid.com tell me the good, the bad. I'll take it. All right, Danny, how's it going, mate? I'm all right. How are you?
- [05:42]
Danny
Yeah, pretty good.
- [05:44]
Peter McCormack
So this is going to be a strange show. People aren't going to be expecting this. Okay, so firstly, let's introduce you. People don't. Won't really know who you are. You're my. You're my sound engineer, right. And my. The producer of Defiance. Of what bitcoin did.
- [05:58]
Danny
That's it. I am.
- [06:00]
Peter McCormack
How long we've been working together?
- [06:02]
Danny
I think I first reached out to you maybe June or July last year. So a little while now.
- [06:08]
Peter McCormack
Right, well, so listen, look. Anyone listening? This is the reason the show goes out every week. Doesn't matter where I am in the world, it doesn't matter what time it is. I can be getting a show to Danny at 2 in the morning, Australia time, and he gets out every time. So the absolute savior. If it wasn't for Danny, there wouldn't be shows going out at the moment. So big thanks to you, mate. So we thought we would do something a bit different here. We're obviously running this bitcoin beginner's guide, and Danny's been helping me prep them with the ideas and the structure. So what we thought we would do is we would run a show before we close out the series, which is a bit of a. Would you say a refresher, Danny?
- [06:50]
Danny
Yes. Sort of a recap of sort of the key takeaways from the series.
- [06:54]
Peter McCormack
Yeah. So all the key things that, you know, that you need to be aware of that you hopefully would have picked up. And also with us doing it, it's a good test on whether we've been learning me over the last two and a half years and whether you've been learning whether we've been picking up these things correctly. I expect, Danny, that this will have two things. Firstly, this will probably be the least downloaded show ever because no one really wants to hear from me. They always want to hear from the guest. And also, it's gonna be a test of our knowledge because I usually get the experts on to explain these things. And, you know, you're gonna be questioning me, I'm going to be explaining it. You're going to have to pick me up if I've got it wrong. And hopefully people will work their way through this and let me know if I've got things wrong or hopefully there'll be no mistakes. But I think this is going to be a good test of whether we've learned from this beginner's guide. So, yeah, be interested to see how this goes. How are you feeling?
- [07:48]
Danny
Yeah, all right. I'm on the wrong side of the microphone, but I think we'll be all right.
- [07:52]
Peter McCormack
I feel really, really nervous doing this, and I don't ever. I don't feel nervous doing interviews anymore. I feel nervous doing this because I've got no idea what the reaction would be. It could be a devastating blow to my Ego where people go, I don't want to fucking hear from him. And also I could get a whole bunch of shit wrong because everyone knows I'm not technical and we're going to cover some technical things. So anyway, let's get on with it, man. So listen, you're the, you're the question master today. You're interviewing me. I'm going to do my best. I'll. Well, how have you found this beginner sky, by the way?
- [08:26]
Danny
I think it's been really useful. I think it's been really good. There's obviously only a few beginner's guys really out there. I mean the lop one is brilliant. That's so thorough. But in sort of podcast form I don't think there's anything that's sort of gone through as much as we have over this series. So I hope it's really useful for people.
- [08:44]
Peter McCormack
Yeah, I found it. It's pretty much a structured. The thing about lopsing is so useful, but it's not structured. It's like here is a pool of resources that you can use and you know, he has got some organization into it. But with this I kind of wanted to, I wanted to get it into a struct structure, kind of a useful chronology of shows that people could go through and learn from and then they could share them out with their friends and family. I think we've achieved that and there's going to be more to go by. I think we've achieved it. Okay, so anyway, let's hand it over to you, Danny, you're in charge, you're the interviewer today.
- [09:18]
Danny
Let's go for it. So I think we need to break this down as simple as possible. Obviously during the previous interviews there are times when it gets a little bit high level. So I think we just go as basic as possible here.
- [09:31]
Peter McCormack
That suits me.
- [09:33]
Danny
Let's start with the white paper. So October 31, 2008, Satoshi drops a white paper. So was this the very first attempt at digital money? And what made this white paper so significant?
- [09:46]
Peter McCormack
Alright, well the white paper is something I tell everyone they should read and strangely I don't tell people to go and read the specs for a mobile phone before they buy it or anything like that. But I think everyone, it's a rite of passage. You should go and read, read the bitcoin white paper. I don't understand the majority of it, you know, which won't come as a surprise to most people listening because I get called an idiot all the time for. And I also get also get moaned up for saying I'm not technical, but I'm not. I'm a creative person. I'm not a technical person, but I do think it's a rite of passage. I do think it's important to read it and understand it. And as we covered in the show, where we looked at the Genesis files with Aaron Van Wearden, where we covered the prehistory, there were a number of attempts at creating a digital currency. Before Nick Zabr Bitgold, which was a white paper essentially itself never went into development. There was wadei's B Money, we had David Chowns E Cash. There were a number of attempts, and different ones failed for different reasons. They either weren't developed. I think Chalmes failed because it was centralized. But there were a number of reasons they failed. But when Satoshi released the white paper, and actually, let's talk about Satoshi, nobody knows who Satoshi is. They theorize who it is, but that person left the project. But it's essentially an anonymous and dropped this white paper on the cypherpunk cryptography list, as I believe it. And again, this was just at the time, it was another attempt. This was just another attempt at creating a decentralized digital form of money. And the reason it's so significant is this is the one that has worked. Some people say, still in beta, or if Bitcoin works. I kind of am in the camp now. The saying it has worked. I think after a decade, you know, it's worked. There are a number of technologies and inventions at different lifespans. You know, I don't have a phone. Do you have a phone in your house anymore? Nobody has a phone. I don't think.
- [11:44]
Danny
You know what? I've never owned. I've never owned a house phone.
- [11:46]
Peter McCormack
Well, I think I had one when I was at university. I think we had to. And you have to. In the uk, if you want broadband, you have to have a phone number, but we don't have a phone. Everyone has a mobile. So, you know, the landline is now dead. And, you know, there are certain inventions and things that will exist for a period of time and then they won't exist anymore. So, you know, even if Bitcoin failed In a year, five years, 10 years, I still think it succeeded. There was a period of time, whether it's 10, 11, 20 years, where blocks were continued to be created every 10 minutes and people were able to use it, they were able to solve problems, they were able to make payments they wouldn't already be able to make, or they were able to save money they weren't able to save before. They were able to do things like the people I met in Venezuela, you know, they were able to do things they wouldn't be able to do before. So I. I don't say if bitcoin succeeds, I say it's already succeeded, but it might have a lifespan of. Whether that lifespan is another year, 10 years, 50 years or 100 years, it doesn't matter. But if you're coming into bitcoin, you should definitely go and read the white paper. Even if you don't understand the technicals, you should definitely work through it. Because I think there's a couple of quite important sections. I think the section on privacy is very important. I think. I think where Satoshi discusses about removing the reliance on trust is also important. But, yeah, the white paper is super important. Go and read it. It's in the show notes for most of the shows in this series. And, yeah, I think everyone should go and check it out.
- [13:10]
Danny
Yeah. So bitcoin actually got beyond the white paper stage, which not all of the precursors to bitcoin did. So on January 3, 2009, Bitcoin was released to the world. And in the coinbase of the Genesis block, Satoshi left a message. Chancellor on the brink of second bailout for the banks. So why is that message relevant?
- [13:31]
Peter McCormack
Well, it's relevant to you and I more than a lot of people, because we're both British, we understand. Understood exactly what that meant. So, technically, the reason it exists was used as a proof that the first block was actually mined on that date. It was kind of like, you know, when someone's kidnapped and they make them hold up a newspaper to prove. To prove the date where that photo was taken. This was used to essentially timestamp the creation of the first block that was mined. But a number of people obviously think this is a hint that Satoshi had left us an Easter egg, a hint at why he created bitcoin. Bitcoin is this decentralized form of money without central banks. It's got its own monetary policy, which I covered with Dan Howard in the series where we talked about how beautiful and simple the design of bitcoin's monetary policy is. But we're based in the uk. We understand what was happening here. I think it was back in 2008, the banks were failing and Gordon Brown was Prime Minister. He'd taken over from Tony Blair after he'd resigned following the financial crisis. And The treasury invested 37 billion pounds, which I think is that about $50 billion, $55 billion. But they invested that as new capital into UK banks, primarily the Royal bank of Scotland and Lloyds TSB. I think it was HBOSS as well. But that was to stop the bank's failings. They've. The banks were on the verge of collapse and the governments essentially became the majority shareholder in these. So that nationalization of the banks, well, part nationalization was to keep the credit flowing, but it didn't ultimately succeed initially. And the Times headline was that the Chancellor Alistair Darling had been forced to consider a second bailout for the banks as the lending droughts were worsening. And so you can say this is pure coincidence. You know, this was the headline. Satoshi just wanted a timestamp that first block. But it seems a bit, a little bit too much of a coincidence that at the time we have a financial crisis which is worsening, that Satoshi is releasing a new form of money without any central bank that avoids the need for a central bank that carries that message. I don't know about you, I tend to think it, it was a hint. I tend to think it almost certainly was alluding to why he created bitcoin.
- [15:51]
Danny
I mean there were plenty of other newspaper headlines he could have chosen.
- [15:54]
Peter McCormack
True. But what if that headline hadn't existed that day? Yeah. So I would say to anyone who has an interest in that, if you haven't checked out the whole series, go back and listen to. There's a couple of shows actually. You should really listen to the Nature of Money with Parker Lewis. That's a very good introduction to understand what money is. But then go and listen to the show with Dan Held where he talks about the beautiful simplicity of bitcoin's monetary policy. I think they're really helpful shows.
- [16:20]
Danny
Yeah. So you mentioned bitcoin's monetary policy. Bitcoin is inherently different to the fiat currencies that we use in sort of day to day life. One of the key differentiators is the 21 million hard cap. So only 21 million Bitcoin will ever be created. So why is that hard cap important?
- [16:37]
Peter McCormack
Yeah, it's a great question and it wasn't something I originally understood when I first got into bitcoin. Had you ever heard of fiat currencies before bitcoin?
- [16:45]
Danny
No, only the car.
- [16:47]
Peter McCormack
Yeah, I'd never heard of fiat currency. So if you don't know by now, if you haven't listened to the shows, a fiat currency is just a national currency like the pound, the dollar, the yen. That's all it is. That's the term used to refer to them. So why is the fixed cap so important? Well, again, this comes down to the beautiful simplicity of Bitcoin's design. One of the central pillars to the monetary policy is this fixed supply. Or some people talk about the predictable supply that, you know, the issuance rate, you know how many Bitcoin are going to be released every day, you know, when the halving is, which I'll cover in a moment. And this is different from central banks such as the Fed. And I refer to the Fed rather than the UK central bank because the majority of the list is in the US but any central bank, really, they have the ability to print money at will. They can increase the monetary base. And I do have a show with Matthew Mashinsky that goes way back. That's not part of this series where he talks about base money. But essentially speaking, the government can increase the monetary base at will. And the problem with that is it increases inflation and it devalues, it debases the money that we hold. Now, the thing about Bitcoin is that's not possible. Nobody can go and print more Bitcoin. Nobody can go and say, I want to create a whole bunch of new Bitcoin. And therefore, that predictable supply means you can trust the protocol, you can trust the monetary supply more. Now, where this is a. It's easy to identify where this is a problem. So I've just been out to Venezuela also where Zimbabwe and also Argentina, the countries that have gone through periods of high inflation or even hyperinflation. This is where the government has been printing way too much money, printing money at will and devalued the local currency so much that this causes real deep problems for people living in the country. I mean, I was out there in Venezuela, most people are living on $4 or $5 a month. Everything is expensive. People have had their entire savings wiped out. You had people who had, say, doctors or teachers have spent their whole lives saving. Suddenly the country's gone through a period of hyperinflation and this has caused their entire savings to be wiped out, which is an unbelievable thing that people have to go through. We don't suffer from it so much in the uk, in the us, Australia, it's more of a slower burn. We have slightly more responsible governments who print money at a slightly lower rate. But you talk to somebody like Max Kaiser, he will say all fiat currencies have a limited time span. So eventually, and I think also Parker Lewis covered this, he said this in the show with him. He talked about that we will eventually get to the point where know our money, whether it's UK or us, will hyperinflate. So the predictable supply or the fixed supply of bitcoin means we know there will only be 21 million. It's rumored that we actually think about 4 million have probably been lost. But there would. There can never be more than 21 million. And it's not the fact that it's 21 million. It could be 210 million, it could be 5 billion. It doesn't matter how many the total number is going to be. It's the fact that it is fixed. It's the fact, the fact that it is predictable. It's the fact that you know what the total supply will be, that you can base any decisions you make on that. How much you invest, how much you spend, how much you use. And you know you're not going to have this currency debate. And that is really, really useful.
- [19:58]
Danny
Okay, so 21 million coins will be the most that are ever in circulation. And in reality it's going to be less than that. At the moment, we don't have 21 million coins. So how are the remaining coins created?
- [20:11]
Peter McCormack
So coins have created a process called mining. I might get this wrong. I covered this in my show with Shinobi where we talked about the technique, technical side of things. But the process of mining is where transactions are added to the bitcoin blockchain and it's done with something that's known as proof of work. That was invented by my regular guest and somebody I've hung up with quite a few conferences. Alan back from Blockstream. He is actually also cited in the bitcoin white paper as creating this. But essentially proof of work is where miners compete on solving something which is a computationally difficult problem. You have these asics that are whizzing away trying to solve this problem, and they are expending energy and cost to do this. And at the point where they solve the problem, which is, you know, which is designed in a way that will happen every 10 minutes, this allows them to close a block, add the transactions to the blockchain. So and at the point where they solve a block, they are given a reward. They were given 12 and a half bitcoins. Now, this wasn't always the case. We're going to cover that in a bit. But also the role of mining actually is threefold. So there is the issuance of new coins. This is the way new coins are added to the bitcoin economy. Every 10 minutes a block is solved. Every 10 minutes, 12 and a half bitcoins are added. But the other thing that miners do is they confirm transactions. They are the ones adding the transactions to the blocks. And once they're confirmed, and people will argue about the number of confirmations, but essentially they are confirming the transactions in the blocks and they also are providing security because there are so many miners. Now, because there are so many miners competing to solve the blocks, this makes it very difficult to hack the bitcoin blockchain. This makes it very difficult to double spend and create fake transactions. So that, yes, they're providing three things, miners, their issuance of the new coins, the confirmation of transaction, and they're providing security. And the process of mining itself can be compared to gold mining. It's very similar. This is obviously where the design came from. Like if you want to mine gold, it is a scarce resource like bitcoin. You have to take on staff or you have to get the equipment and you have to expend cost to go and mine that gold. And if the cost that you have to expend to mine that gold is above the amount of gold that you can mine, then it's not a process you'll continue. But you know, if the cost of mining that gold is lower than the value of the gold that you can retrieve, then you will continue mining. So it's a very similar process. It works very well with a scarce resource. Now, if we're going to talk about the security side of things, the level of security comes down to the amount of confirmations a block has received. So confirmations is essentially the number of new blocks that have been built on that block. If a block has zero confirmations, the block exists in the blockchain, but there's been no new blocks built on top of it. If it has five confirmations, then there's five more blocks built on top of it. And what that does, that gives you a level of how secure those transactions are, how much you can trust them. Because there is something called a block reorg. We won't get into it right now, but blocks can be reorganized. But it's generally seen that six block deep reorg is almost impossible, very unlikely to happen. And also one of the things with confirmations we should really think about is related to value. There are some companies that do accept zero confirmations but for low value. And they do that because they want to instantly confirm the transaction, but in doing so they take a little bit of risk themselves. Most people tend to stand by six transactions. Once six confirmations are received, they trust that that will not be a reorganized block. So, yeah, so the way coins are issued is essentially through the process of mining. I've waffled on a bit. I've added a bunch more in here that'll be quite interesting. Some of the technical people, I bet, will dig right into that, Danny. They'll find something wrong there. They'll find a stutter around the subject. But I think I, you know, I know I understand how mining works. Do you? I mean, how about you these days? You got a good feel for it?
- [24:04]
Danny
Yeah, I think so. So basically what he's saying is the, the miners are basically securing the network and adding the transactions to the blockchain.
- [24:11]
Peter McCormack
Yeah. So the proof of work provides the security and the miners in providing the proof of work are given a reward and they compete to find that reward. I mean, that's, I think what the general thing is.
- [24:23]
Danny
Okay, so you mentioned there that the block reward is 12 and a half bitcoin at the moment. But from the genesis block for the first four years, that was 50 Bitcoin per block. So can you explain why that number has dropped?
- [24:34]
Peter McCormack
So this is interesting. A number of people theorize around why we have this thing called the halving. I should talk about that first, actually. So bitcoin goes through a halving every four years with the total supply which is issued the block reward for the miners halves. So when bitcoin launched, it was 50 bitcoins. After four years it was 25 bitcoins. And now we're at 12 and a half bitcoins. We have another halving this year. It's projected to be in May and we're going to go down to 6.25 bitcoins per block. Now, Dan Held, who I've mentioned a few times in this, somebody I speak to regularly, somebody I've learned a lot from, he theorizes that this was to create a viral loop, to essentially create rampant bull markets which would act as a marketing tool to create kind of the FOMO and the awareness of bitcoin. I don't know if he's right or not, but what this does is the way it is designed is that the majority of the issuance is front loaded to get the coins into the system and get them into circulation. And then once the hype begins and as we go through halvings, the issuance drops and you become more aware of the scarcity of bitcoin. So, yeah, I mean, there's not much to say about this, but apart from that it is a decrease in supply. It's projected that the last bitcoin, I think, will be mined in around 2140. And yeah, I don't know much more else I can say about that.
- [25:53]
Danny
So as you said then, the issuance is very front loaded. So I think by the time we get to the next halving, something like 87% of all Bitcoin have been created. So what happens down the track when the block reward drops to almost nothing?
- [26:09]
Peter McCormack
We're getting into an area that can lead to some fierce debates around this. So one thing we didn't mention is that whilst miners are given a block reward, the block subsidy at the Moment, which is 12.5 bitcoins per block, they also receive the transaction fee. So when you choose to, you know, make a bitcoin transaction, say, say, danny, I'm going to send you some bitcoin, I have to pay a transaction fee. I can choose how much I'm willing to pay to be in that block and that's a free market. You know, I can choose to pay a high fee and get to the front of the queue or I can pay a low fee and wait to be picked up. That becomes really relevant during times when the mempool is congested, when there's a lot of people trying to do transactions. I remember back in, I think it was like November 2017 when I was trying to take some bitcoin off Coinbase and I think I paid a fee of around $37. Now at the time I didn't care because it was a big transaction and bitcoin was worth a lot. Would I want to pay that now? No. No, I wouldn't. I mean the fees are a lot lower. You tend to pay. I mean, I've paid as low as 25 cents recently and I think I've paid like a couple of dollars. But it is a fee market, is it? It is a free market price, but that also goes to the miners. The miners also get the transaction fees. So what is the expectation? The hope is that in the future that a couple of things happen. So firstly, as we go through another halving, as the subsidy drops to 6.25 and then after that, what's half of that? 3.125. As that happens, a couple of things will be interesting. Firstly, we're hoping that the price of bitcoin continues to rise to reflect that. So the miners, whilst receiving less bitcoin in dollar value or yen value or whatever currency they're paying them their fees in to run their mining operation, they're still able to pay their Costs. But we're also hoping that the network becomes a little bit more congested, there are more people using it and the fees will go up. But this does lead to a couple of debates, and they're quite fierce debates, difficult ones to have and probably something I will cover on the show at some point. The first one is, will there be enough usage of the network? Will it generate enough in fees to keep the miners happy? Now, at the moment, if you're receiving 12.5 Bitcoin, I know we're just under 10k at the moment now, but you're receiving between 100 and $125,000 a block. You know, to get that kind of revenue from a one megabyte blockchain, you know, that's going to mean quite high fees. So that potentially could price some people out. Okay, but that might be fine. That might be that the bitcoin network just becomes a settlement network and the majority of use is on the Lightning network, which we'll cover as. So, I mean, what I will do, rather than answer this myself, I will definitely cover this on the show at some point. I'll get somebody on to talk about it. But there are these two key points. Will the fees be high enough to provide enough security to the network and will other people be able to afford to use it? And I guess it just depends on how the network is used. Does it become a settlement network? That will be interesting to see.
- [29:08]
Danny
Okay, cool. We covered mining and the miners are securing the network. So now we've not looked at node yet, and nodes are what validate the network. So can you explain the role of a full node?
- [29:19]
Peter McCormack
Yeah, this is another error. I might get myself into some shit if some people listen in and I get this wrong. And it took me a while to understand the relationship between, you know, the nodes and miners. And people still debate this. I've seen the debates happen and some people will come in with a very strong view. But again, refer back to Shinobi, the show I did with him. He'll explain exactly how it works. But a node, in its simplest form, it's just a computer program. It runs the bitcoin protocol. Anyone can run it. Danny, you can run it, I can run it, we can download it to our laptop and we can do that. You can also, you know, you can buy a node in a box. CASA have announced that, sadly, they're ending theirs. But you can get a nodal. Some people will build their own ones, some people will get a Raspberry PI and build one. But essentially it is a program which contains an entire copy of the blockchain and allows you to essentially it is an entire copy of the blockchain and it allows you to validate the network. So it does three things. A node, firstly, it follows the rules. These are known as the consensus rules. So these are used to validate transactions and blocks. And it's pretty strict, right? These consensus rules cannot be broken. If a consensus rule is broken, a node will reject either the transaction on the block. And a couple of examples of these, for example, and I'll tell you an interesting thing here that I found out recently. But one of the things, one of the consensus rules they will confirm is that a miner has not issued itself more than 12 and a half bitcoin when it is adding the block to the blockchain. If it adds 13 bitcoins, the nodes will reject it. But one thing I found out recently, you might not know, it can issue itself less if by mistake it chooses to issue itself 11 bitcoins or 10 bitcoins, that will still be a valid block. Did you know that?
- [31:00]
Danny
Ah, no, I didn't know that.
- [31:02]
Peter McCormack
Yeah, found that out recently. Another one is it will check that to see that someone isn't sending out more bitcoin than they own. So essentially a node enforces the rules of the network, the consensus rules. And the other thing nodes do is they share information with each other, such as transactions. And there are two types. So you have the fresh brand new transactions which have been created. They are shared out on the network, but they also can share confirmed transactions. But these are batched up in the blocks and this is the complete set of blocks of transactions that have ever been created. Now, now I've gone into a few debates with people about nodes. I think everyone should have a goal of running a node. Now you don't have to do it from day one, but I think everyone should now do it. I've run four, even though I declared I wasn't running a node, I've set up four. They can be a bit complicated, but yeah, everyone should at least try and attempt to it. And there's a number of different ones they can use. They can download Bitcoin core, they can download it to their laptop, they can buy a nodal, they can be brave enough. As I said, they can go and get a Raspberry PI and create one yourself. That one is quite technical. If you, you have to be pretty computer liter do it. But by running a node you are also supporting the network. So there are a couple of reasons you should do it that supporting the network, but also you can validate transactions yourselves. If you want to be fully self sovereign, you should be running a node.
- [32:19]
Danny
Yeah. So if you're not running a node and you are sent Bitcoin, there's no way that you can validate that the UTXO that's been sent to you has not been previously spent. Otherwise, if you don't run your own node, you're trusting someone else's to validate that.
- [32:32]
Peter McCormack
That, yeah. So if you are using a hardware wallet, which a lot of people do, a lot of people, that's enough security for them. You are trusting them to validate the transactions for you. Now, you know, with something like Trezor or Leisure, you would argue there is no incentive for them to operate or do anything, you know, out of hand. But it is a potential, you know, so the reason you would run a node yourself is to validate the transactions.
- [33:01]
Danny
Yeah. And without running a node, you're adding trust to a trustless system. So everyone using Bitcoin should really be running a node. Okay, so Bitcoin is now over 11 years old, but its blockchain is still relatively small compared to some other cryptocurrencies. So it's somewhere around 240 gigabytes at the moment. How has it managed to remain that small?
- [33:24]
Peter McCormack
Yeah, so this goes to the center of the scaling debate. We covered this in the history of bitcoin. Marty Bent talked about it a few times. It was a really interesting time. It was basically at the start of my Real Bitcoin Life, 2013. I first discovered bitcoin but didn't really get involved, didn't read about it and hadn't read the white paper. And then I got back involved in 2017 and there was this raging debate about scaling, which at the time I say there is a valid reason to understand both arguments. When they come fresh to you, it just takes some time to understand why bigger blocks are not a great idea. But when somebody comes to you with these big block ideas, you know, you can get more transactions in there. They'll be faster and cheaper. You know, they sell you an idea. It's only after time that you realize it's a terrible idea. Now, the bitcoin blockchain itself, at 1 megabyte, you could argue that's an arbitrary figure. It could have been half a megabyte or two megabytes. But the reason to keep it as small as possible is you want to maintain decentralization. The idea of Bitcoin is that you have Censorship and Caesar resistant money, money nobody can steal off you, nobody can stop you spending. But to do that it has to be decentralized. And for someone to be able to run a node, it has to store a whole copy of the entire blockchain. Now I know there are different versions and there are versions that are pruned, etc. But generally speaking you want people to run a node with a full copy of the blockchain. Now a modern day laptop can handle holding 240 gigabytes of data. We're in the air. I've just bought a new one. I think it's got two terabytes of space and the growth in hard disk space, it seems to be outpacing the growth in the Bitcoin network. I mean when you think about it, in 11 years only 240 odd gigabyte of data for the entire history of all transactional blocks. I think that's pretty amazing. But that's why it's so important to keep the blockchain small. Because if the blockchain becomes say like a terabyte, some people might not be able to store a whole copy of the blockchain on their computer. That might price them out if it was 2 terabytes that price a lot of people out. So it's very important to keep Bitcoin decentralized to make it as easy somebody as possible to run a node. And therefore it's important to keep the block size small. But yeah, I think it's super impressive and I think we can look to, you know, the history of other chains. I can't remember the show I covered it in, but one of the shows I covered it and we talked about examples of other blockchains which are bloated, where it's very difficult to run a node. So Ethereum, for example, God knows how big their entire ledger is, but I don't imagine it's going to be possible for me to run it on my laptop. And we know for a fact that Ethereum is becoming more centralized and if it becomes more centralized then it's not so resistant to change from central parties or things such as that. So yeah, it's really important that Bitcoin stays as decentralized as possible. It's really important that the block size stays as small as possible. So anyone can run a node.
- [36:32]
Danny
Yeah, and I think that show was the Nick Carter show in the Beginner's Guide. That's where you can see Ethereum and the EOS blockchain.
- [36:39]
Peter McCormack
Yeah. Next up, Danny, put some More tough questions to me about bitcoin. But before that, I've got a message from my amazing sponsor. And first up we have the mighty, mighty Kraken. The best place to buy, sell and trade bitcoin. The only place I use now to buy, sell and trade bitcoin. Love these guys. Every time I go to an event I'm surrounded by Kraken people. They always come up to me, see if I'm okay, tell me they enjoy the show. So big shout out and big thanks to Kraken for everything you've done to support the show. Now Kraken are consistently rated the best and most secure cryptocurrency exchange. And whatever your level experience, Kraken has designed and built a streamlined bitcoin exchange for newcomers and experts alike. Their platform provides world class financial stability by maintaining full reserves, healthy banking relationships and the highest standards of legal compliance. They pair their 247365 live chat with an extensive support center to ensure your questions are answered and your needs are met around the clock, no matter where you are or who you are. They offer an exclusive additional layer of real time hyper personalized support throughout their Kraken account management program. And with their newly released Kraken Pro, a beautiful mobile first app, you can trade Bitcoin wherever you want. There is no better place to trade bitcoin. I love these guys at Kraken. If you want to find out more, head over to kraken.com or download the app which is available for the iPhone and Android. Just search for Kraken Pro which is K R A K E N P R O And next up we have the amazing blockfi, the future of bitcoin and financial services. My longest ever sponsor. Been working with them for over 18 months. Massive shout out to Zach Flori. Love you guys. Thank you for supporting all the crazy things I do. They're gonna have a massive year now 2019 was great, they smashed it, but they're gonna have a massive year. They've just raised another massive round to expand their business to keep doing what they're doing and they've got some cool things coming. We know they have the best crypto backed loans product on the market. We know they have their really amazing interest accounts for bitcoin Ether Gust, which I'm a customer of. I hold some bitcoin with them and I'm earning interest, love getting that interest every month. But this year they're going to smash it. They've got a couple of very cool things coming. Firstly, they've got A mobile app, which I can't wait to get very cool excited about that. But even more than that, they are releasing a bitcoin rewards credit card coming later this year. A credit card where you can earn sats back on your purchases. I've told Zach I want to be front of the queue. I want this card, I want to be earnest sacks back on all my purchases. So I cannot wait to get this. If you want to find out more about BlockFi, I do recommend you do your own research, then head over to blockfi.com which is B L-O-C-K-F I dot com.
- [39:19]
Danny
All right, so I understand how the bitcoin blockchain works. I understand what a node is, what mining is. And I'm now ready to buy some bitcoin. I've gone to Kraken, I bought some bitcoin. What's a wallet? Why do I need a wallet? Take it away.
- [39:36]
Peter McCormack
Well, so if you bought some bitcoin on Kraken, you've probably already got a wallet, because Kraken will have a wallet for you. Now, the interesting thing about wallets is when I first got involved, there was a lot of talk of paper wallets. And I was like, what? How can you have a paper wallet? But the first thing people need to really understand is that bitcoin can't technically be stored anywhere. So when you have a wallet, you think, oh, I've got my bitcoin in my wallet. But you don't really. The bitcoin only ever exists on the blockchain. Your wallet is a way that you interact with the blockchain. It's the way you check your balance, look at transactions, it's the way you send bitcoin to people. But you essentially have that belief when you say you've got a hardware wallet, a ledger, you plug it in, you see your balance, you think that bitcoin is stored in it, but technically it isn't. That's the first thing to know. So wallet is really three things. There is your address, you're receiving address, and then your set of two keys, which is your public and private key. Now, I'll start with the private key again. This is an area I'm at risk of being found out. But your private key is essentially. It's a random generated string of characters which allows you to spend your bitcoin, but it's your private key. This is what you need to keep private and secure. If somebody finds this, they can steal your bitcoin, but this is your key which allows you to spend your Bitcoin. Now, now, your public key, some people confuse that with your wallet address. But this is what is used to ensure you are the owner of a wallet. And this is also mathematically derived from your private key. And now I'm not going to get into cryptography because I will be way over my head. But if you do want to research this, you can Google public and private keys and find out how cryptography works. But your address, the third thing, you know, if I wanted to send some Bitcoin or you want to send me some Bitcoin, I'd have to give you my address. This is a hash of my public key. Now, you can have multiple addresses for your wallet and you shouldn't ideally not be reusing addresses. That is bad for OPSEC and a number of reasons. But essentially your wallet is made up of those three things. Now, they come in a number of forms. Yes, there are the paper wallets. Some people create paper wallets, they laminate them and they hide them away. Kind of dangerous, kind of susceptible to fire or water damage. But the three primary ones that people use will be mobile, desktop and hardware. Now, I veer towards having a mobile and hardware wallets, but some people, people are happy to use a desktop wallet, but essentially that is a place where you manage your Bitcoin from. Now, as I said, the first wallet most people will interact with will be an exchange. We will always encourage you to get your Bitcoin off the exchange. So either get yourself a nice mobile wallet or go and buy a hardware wallet, a ledger or a Trezor, and then you should send your Bitcoin to it. Now, one of the great things about the wallets is you'll hear people explain them. You hear about these public and private keys and then you'll use a wallet and you won't really see any of this because it's all taken care of for you. It's all been abstracted away. So when I want to send you some Bitcoin, Danny, you just give me your address, I just punch that into my ledger, I send you some Bitcoin, clicks, clicks, and it's all done for me. But you should be aware of these are the components that do make up the wallet. One of the other interesting things about the wallet that people should be aware of is that there is no customer service for if you lose your private keys, right? If you lose your wallet, you must back up your seed. Now, this is tends to be a number of words which you write down or keep on something like a Cipher wheel, who are a sponsor of the show right now. And you keep those backed up potentially in a couple of places. And you have this security procedure should you lose that wallet so you can restore it. But yeah, your wallet is essentially, it's just a way of managing your bitcoin.
- [43:06]
Danny
And so what about these multisig wallets.
- [43:08]
Peter McCormack
That I've heard about you arse. That's all right. Okay, so a multi sig wallet. So essentially when I want to send you bitcoin, I provide a single signature and it sends it to you. Right. Now, if you've got a lot of bitcoin and you want to protect it, you might want to have a multisig wallet. Now, multisig can exist in a couple of instances. It might be in terms of a business. A business might have, you know, a whole bunch of bitcoin and they require multiple signatures to be able to send it to stop that single person attacking and stealing it. But multisig is also, it's like a higher level of security. Casa. You know, my friends over at casa, they have a multi sig solution. I believe they offer a two or three and a three or five. But essentially you have five keys and you have to use three of them to send from. So you might be a case that, you know, say you're one of these rich bitcoiners and you've got 10,000 bitcoin and you'll keep that in a multi sig wallet, but you also have maybe a mobile wallet. You want to keep one bitcoin in and you've spent it and you run out. So you want to send a bitcoin back to it. You essentially have to sign three of the five private keys and that might be a ledger in your house, a trezor at your office. It might be another one on your mobile, but you would have essentially five keys. I think I've got that correct. Yeah, let's hope I have.
- [44:24]
Danny
Okay, cool. Now we've sort of gone through sort of the base chain of bitcoin. Can we talk a little bit about layer two solutions like Lightning Network?
- [44:32]
Peter McCormack
We can talk about lightning. I can't really talk about any other ones, but let's go for for it.
- [44:37]
Danny
Okay, so what is the Lightning network?
- [44:40]
Peter McCormack
Okay, so we talked earlier about the importance of keeping the bitcoin base chain as small as possible to keep it decentralized, to allow people to run a node. But that does present a challenge with scaling. As the volume of transactions increase, the transaction costs go up. So firstly, that can get expensive and also the Bitcoin based chain can be slow and that's good and that's a good thing. But it doesn't mean it's a good retail experience for small value ticket items. So if you want to send five bucks to somebody or you want to buy the cup of coffee everyone talks about, you know, you do not want to pay in high transaction fees. You don't want to wait for some time. So the Lightning Network is a layer two solution designed to give Bitcoin scale. And I covered this on the previous show with Jack Mallows. You know, we did the intro to the Lightning Network. I'm not going to go into the technicals of it now because I'll be way out of my depth. But if you want to understand more about the technicals of how Lightning Network works, go and check out my previous show with Jack Mallers. He goes into great detail and explains it. I also did a whole series on the Lightning Network before. But essentially speaking, the Lightning Network allows Bitcoin to scale trustlessly. It maintains decentralization and it allows you to do quick and fast transactions.
- [45:56]
Danny
Okay, so as the volume of transactions on the base chain increase, the blocks will fill up up, which then drives the fee market. And people are trying to jump ahead of the queue, paying more to send their Bitcoin. So the Lightning Network will then take some of that load off the base chain and allow smaller transactions to be sent away from the base chain of bitcoin. Is that right?
- [46:17]
Peter McCormack
Yeah, I think there's a couple of scenarios here. You've got a kind of scenario plan. So we have the scenario where, let's go ahead 10 years. Bitcoin has become a settlement network. It's used for high value transactions. Lots of people are using it, but they're using it as a settlement network. That's going to be very expensive for the likes of you and I to do basic transactions on. So yes, we would probably more likely likely use lightning. But at the same time, you know, over this period of time, say you and I want to send money to towards each other. Danny, say I have a bet with you on the football and I owe you five bucks. I probably send you with the lightning because the cost will be so low. And also the Lightning Networks allows for other kinds of activity. A lot of people talk about it be great for exchanges, a great way for moving money between exchanges. So there are a number of different uses but I think we're yet to see fully how it'll be used. But the general idea is that you can Maintain low cost, fast transactions and also maintain decentralization.
- [47:17]
Danny
Okay, so the Lightning network offers a scaling solution for Bitcoin. Now, this was obviously a very contentious issue in 2017 when there was the block size discussion and we had the fork for bitcoin cash. So can you explain what a fork actually is?
- [47:36]
Peter McCormack
Yes. So there's two types of forks. There's a soft fork and a hard fork. The hard forks are a lot more scary. A good example though, let's start with soft forks. And the good example of that was segwit. I'm not going to go into segwit. That is beyond this. But essentially a soft fork is a backwards compatible way of upgrading the network. They happen occasionally there are upgrades that are wanted to the network, but a soft fork means it's backwards compatible. It means there's no need for upgrading the mining hardware. What is more contentious is a hard fork. I've heard some people say in doing my interviews, they never want to see a hard fork in bitcoin. Hard forks are dangerous. But essentially a hard fork is a change to the consensus rules. So we talked earlier about what the nose do the nodes validate the network? They validate the rules. You know, as we talked about it was say for example, 12 and a half bitcoins. So if you want to change the consensus rules, the only way you can do it is with a hard fork. And what this means is a potential change, chain split. So we talked about miners. They're mining a chain. If the consensus rules change and not all miners move to the new chain, we have a chain split which creates a new coin. And that can happen. You know, if we get to a point where there is a debate over scaling and there is like a broad agreement, actually, you know what, we need to move Bitcoin to two megabytes. We can do it. It's important. There will undoubtedly be a bunch of people that don't agree with that. And it is a change to the consensus rules. And if not all the miners upgrade. This will change, split this, create two coins. And that is a real big problem. So we do want to avoid hard forks. They do happen. People do it on purpose. Bitcoin cash, commonly known as bcash, that was a change to increase the block size limit. That was a hard fork that created two coins. So that's an important thing to understand. You know, when you look at the history of bitcoin, you look at the history of forks that hard forks are quite a scary thing. And as I believe it, we really want to Avoid ever having a hard fork in bitcoin if possible.
- [49:35]
Danny
Yeah, okay, so you mentioned bitcoin cash there. So if I'm a newcomer to bitcoin and I go to an exchange and I see bitcoin cash cheaper than bitcoin, why should I avoid it?
- [49:48]
Peter McCormack
Because it's a shitcoin. You don't want to buy shitcoins. So I mean, this is quite a contentious thing. But what I would say is that if you, if you are considering buying altcoins, I would hope you wouldn't. But if you do, have a listen to my show with Nick Carter. We talk about altcoins being a history of failure. Ever since the creation of bitcoin there have been altcoins. There has been, you know what we're talking probably seven, eight years of altcoins created and every single one has either failed or has a trajectory to forward failure. Now some people listen to this, some people are bored into Ethereum or bcash or whatever, they'll say no, they're not. They will say, no, we've got this wrong. These coins will be a success. Bitcoin is slow. It is MySpace. All these stupid arguments, you just need to ignore them. The history of altcoins is a history of failure. Bitcoin cash is designed in a different way. They have this belief that bitcoin is peer to peer cash and needs to be used as the kind of money that we use Visa for instant fast transactions. The problem is there is no demand for this. Nobody is using it. So avoid bcash. It is a shitcoin. It will rob you of bitcoin.
- [50:56]
Danny
Okay, so bcash, shitcoin. What about Bitcoin SVG?
- [51:01]
Peter McCormack
Yeah, that's a shitcoin.
- [51:03]
Danny
XRP?
- [51:04]
Peter McCormack
Yeah, it's a shitcoin.
- [51:06]
Danny
What about Dash?
- [51:08]
Peter McCormack
Yeah, it's a shitCoin. They're all shitcoins.
- [51:12]
Danny
What about MimbleWimbleCoin?
- [51:14]
Peter McCormack
Well, that appears to be the new mother of all shitcoins. Another shitcoin. They're all shitcoins. These are all attempts of people to enrich themselves. The incentive model. It isn't really about the theory of their version of bitcoin or their version of money or how blockchain should be used. This is about people's attempt to create money, to print money. The thing we're trying to get away from with central banks. There is only one use for a blockchain right now, pretty much, and it is bitcoin. There's some interesting things around identity. I did an interview a long time ago with Daniel Buckner. From Microsoft where he talks about entity. And Peter Todd's done some interesting thing with open timestamps, but essentially speaking, the only valid use for a blockchain right now is Bitcoin. And I'll get a lot of shit for this. I think the thing I always use as evidence is go and look at adoption, go and look at real world adoption because for the majority there's blockchains, they've got little to no adoption. If they were trying to raise money in Silicon Valley and they had their traction slide, it would look pretty terrible. Now some people may point at Ethereum and talk about Defi. I would suggest people go and join UDI's Telegram group. We'll include it in the show Notes where he talks a lot about the problems Ethereum are facing Defi faces. He'll do a much better job than I. But yeah, my advice is avoid shitcoins. Focus on bitcoin. Bitcoin is king. Stick to that.
- [52:35]
Danny
Okay, so Bitcoin is the most decentralized and the most sensitive resistant, which is all that really matters.
- [52:42]
Peter McCormack
Okay.
- [52:43]
Danny
I've also heard that bitcoin is immutable. What does that mean?
- [52:47]
Peter McCormack
Very good question. Okay, so you know if someone uses your bank card, if they kind of, you see like a weird transaction in your bank account, turns out someone's cloned your card and used it, you can phone up the bank and they'll reverse the transaction. Right. And also, I don't know what the rules are in Australia, but if you buy something online and you know, 30 or 60 days, you decide you don't want it, you can phone up customer service and have that transaction reversed. Yeah, yeah. You don't get that with Bitcoin. Bitcoin all transactions are pretty much final, unless there's some weird reorg, then all transactions are final. Once you sent money to somebody, there's no getting it back. If you make a mistake and you send it to somebody by mistake, it's gone. It is immutable. So, yeah, so important the bucking's with you. You have to be very careful about the things you do. Don't make a mistake. Interestingly, I've never made a mistake and I've done, I reckon I've probably done over a thousand transactions now, but I've never made a mistake. I've never sent anything to the wrong address. Address ever. And I'm quite proud of that. But you should be very conscious when you're sending money that you've got the right address, that you are sending it to the Right person. Because there is no recovery from this.
- [53:58]
Danny
Okay, cool. So is bitcoin anonymous? When I send bitcoin, do you know who sent it to you?
- [54:04]
Peter McCormack
Yeah, another good question. Actually, I used to think it was when I first discovered bitcoin I was using the Silk Road and I thought I was using anonymous money. And it probably was a little closer to Anonymous back in 2013. Right now we have what is known as KYC AML restrictions with exchanges. When you're buying bitcoin, if you've given your identity over at any point to an exchange and bought or sold bitcoin, almost certainly you're on a database somewhere. We have evil companies like chain analysis who are providing intel to the government on who has which bitcoin and where they've spent it. So, so people talk to refer to it as pseudo anonymous. Right. So what that essentially means is if you can get some bitcoin anonymously, if say for example, I get a brand new, fresh, clean wallet and I meet you in the street and you send that to me, you send some bitcoin to me, nobody is aware, nobody knows that I have that bitcoin that isn't tied to me in any way. But at the point you buy or sell on the exchange where you've used some identity, then that bitcoin is no longer anonymous, that is tied to you by your identity. Now some people are okay with that as a trade off, some people aren't. So some people will go out and they will on purpose try and buy bitcoin in person to person exchanges. That happens. Some people try and do that. Other people try and earn bitcoin in a way that can be sent to an address that can't be tracked. So that's a really important thing to know. If you're thinking of using bitcoin for some kind of illicit purpose and you're buying it on, on an exchange, almost certainly that's going to be tied to you. And we do have this concept now of tainted coins. There are certain places where by say if you've been buying coins on a dark web marketplace, they won't accept or allow those coins. And that's a really interesting thing. And some people try to use services such as coinjoins whereby you can essentially try and hide the identity of your bitcoin. But even some exchanges or some services are now rejecting coins that have gone through a coin join. So that's, this is where you get into the kind of complicated area of privacy. It's a hard thing to maintain in bitcoin. I covered this a lot with Matt O'Dell and I've also covered this with Jamison Lopp. They're the experts there. Go and check that out. But yeah, bitcoin is not anonymous. Do not think you can use it for illicit activities and not have someone maybe come and knock on your door.
- [56:26]
Danny
Yeah. I would just add as well, though, it's not just the illicit activities. If you're worried about your privacy, there are tools you can use. And that show with Matt Adele, the sort of Year in report review was brilliant for that. So that's what go back and listen to.
- [56:38]
Peter McCormack
You're entirely right. And if Matt O'Dell listens to this, which he will, he'll probably telegram me and give me a bit of a telling off for only referring to illicit activities, because privacy should be a right. David Chaum, originally, when he started out with Ecash, he foresaw this and he was one of the ones that says privacy is a basic right of freedom. So you're right, I am wrong. It isn't just about listed activities. It is a basic right that we should. Privacy.
- [57:08]
Danny
Yeah. So apart from going to a Kraken or a Coinbase and buying bitcoin on a KYC exchange, how else can you get bitcoin?
- [57:19]
Peter McCormack
Great question. There's a number of ways you can get bitcoin. One of the newest ways is that you can earn bitcoin with saxback services. So something like Lolli, where if you go and buy something from a certain website, they'll give you satsback. You know, it could be 2, 3, 4%. They may be with services like Hotels.com, they have a browser extension, but Y essentially you can get sats back Fold is another one that's worth checking out. But there's other ways you can earn bitcoin. You can earn bitcoin through mining. I don't recommend it. It's hard to get into. But it is a way people can earn bitcoin. The guys I met in Venezuela were doing it, but they're paying very low amounts of power, but they're earning bitcoin there. You can also earn bitcoin by asking to be paid like Danny, if you wanted each month, you could say, pete, pay me in bitcoin. That is a way of earning bitcoin. The other way is to purchase it. And there's a couple of ways you can do that. You can use ATMs. We've got Bitcoin ATMs now. You can use Exchan, which we've talked about and there are people who organize person to person exchanges. So there are a number of ways you can get bitcoin. They all come with different trade offs.
- [58:20]
Danny
Okay, cool. Well, I think we did a pretty good job there of breaking things down very simply. Well, yeah, I think we did all right. I think we did all right.
- [58:29]
Peter McCormack
How did you feel doing it?
- [58:31]
Danny
Not that comfortable.
- [58:34]
Peter McCormack
Me too, actually. It's really strange. I'm really comfortable asking questions. I'm really comfortable responding to questions. I'm also comfortable being interviewed, generally speaking. Now I just did one out in Latvia with the guys from hodo. Hodo and you know, asking about my experience, asking my views on bitcoin. But when we're covering these more kind of technical items or I'm doing a show on mine, this has made me very, very nervous. Well, we could get savage for this. But no, I think it's one of those things that's worth going through it. Like it'll improve my skills. Improves your skills Guild.
- [59:06]
Danny
And also like it's not an easy thing to break down in sort of absolute layman terms. And I think in some of the interviews we've done for this series there's been parts where it will go over. If it's an absolute newcomer, bits will go over people's heads. So I think it's good just to come and try and break it down just as simple as possible. So yeah, I think it'd be worth it.
- [59:24]
Peter McCormack
And I also think for me in doing this process of being questioned about the technicals, it's made me realize there's some gaps in my knowledge or. Or I'm not entirely clear on how I should explain certain things. So for example, I'm quite comfortable when you were asking me about mining, I'm quite comfortable explaining how that works. I'm quite comfortable explaining how nodes work. But when you ask me about lightning, it's like, oh yeah, do you know what? I don't think I can explain in a good way how it works. I can explain the benefits. But I think this for me has been a useful process. I'm glad I did it. It's made me identify some of these gaps in my knowledge. Knowledge.
- [60:00]
Danny
Yeah, absolutely. Okay, cool. So if anyone wants to go back and listen to some of the beginners guides, are there any particular episodes they should listen to? I mean obviously all of them, but if you had to cherry pick a few, what would you say?
- [60:12]
Peter McCormack
Well, yeah, hopefully they'll listen to all of them. Hopefully. In chronological order, I am going to create a separate website. Well, you'll have to help me. But a place where we can put them all in one place. And I think also I'm going to turn them all into single narrator narratives and create these animations whereby people can follow it more like a story. So they can. It's like chapters of a story. So that's something I'm going to keep doing just to refine them and make them a lot better. I would encourage people to listen to all of them if you can. But this is the one question I kind of wrote the answers down to in full because I wanted to get it right. Now I do think people should go and listen to the first one with Andreas. Why we need bitcoin. That's a really important show. He paints the picture of the world and why bitcoin is so important. That's a really good taster. But if you can't listen to all of them, then I would definitely go for these. I would listen to the Nature of Money with Parker Lewis. I think that's called what is money? That episode definitely go and list that one. It makes you understand about the history of money, what the different types of money are and what makes money good money. So that's a good show. I will also go and listen to the history of bitcoin with Marty Bentley. Marty is such an expert on bitcoin. All these questions we've done today, he would just be able to smash out the answers. He understands the technical. He understands money. He understands the history of bitcoin. But bitcoin has had a roller coaster of history. So many crazy things like it should not have survived. The things bitcoin has gone through. And it's still here. Incredible. It speaks volumes for its immune system. But we go through all those key events with Marnie Bent in that show. I then did a really great show with Shinobi where we talk about how bitcoin works at a technical level. We go into the technicals again, a really useful show. It does, you know, it's a bit high level at times, but it will give you a better understanding of how mining works, how nodes work. I would also definitely check out the monetary policy show I did with Dan Held. I love talking about this with Dan. Dan is a bitcoin fanboy. There's no. No other way of saying it. He loves bitcoin. He understands it on so many different levels. But talking about the beautiful simplicity of bitcoin's monetary policy and that was a really popular show. We got a lot of great feedb feedback. I would highly recommend People check out the Nick Carter show, the Altcoins A history of Failure. And the reason being, especially if you're new, you're going to have the temptation of altcoins. It's going to be there. You're going to see about crypto trading. You're going to have the temptation to go and trade and make money. You're going to see all these other coins that are offered in exchanges. But there is a history of failure here and it is an important lesson. So I would recommend people do go and check that out. Then there's an absolute monster show I did with Travis Kling about bitcoin and the macro economy. If you want to get a picture of what is happening right now in the world in terms of the increasing levels of debt, money printing and where bitcoin fits into all of this, and especially now, everything that's happening with coronavirus and we're starting to see supply chains break down and the risk to business. Bitcoin is a potential hedge against, against some of the crazy macro economy fuckery that's going on. So I would check that out. And then it's also important to go and check out the Jamison Lopp show. We cover bitcoin privacy and OPSEC because there are things you need to be aware of. You need to really take care of both your privacy and opsec. If you are, I mean, you should care anyway. But if you can become a bitcoiner, it's really important. I would highly recommend no one listens to this one. Really is a test really? Was it just a, like a test for me? I, I, I've, I've identified doing this the areas where I think I'm failing but use for me anyway. I think we've got. What have we got? I think we got three more to go. We've got Bitcoin FUD to cover the future of bitcoin and then I've got a roundup show that I'm going to do with John Carvalho which is going to be a monster. I know it. But yeah, I nearly listed every show. But if you can't just, just try and do those ones.
- [64:07]
Danny
Yeah, cool. Anything before we close out?
- [64:10]
Peter McCormack
Well, you should ask people where they want to find me. That's how we close the shower, dude.
- [64:16]
Danny
Peter, if anyone wants to get in touch, where can they find you?
- [64:19]
Peter McCormack
Well, you can find me on Twitter. I'm Peter McCormack. I'm generally quite annoying there, but just listen to the podcast. Look, I do have an email address. My email address is hellohatbitcoin, didt. Com. Happy to talk to anyone. I reply to pretty much every email. I get 10 to 20 a week. I get a lot from beginners, people who are in my shoes, who don't understand stuff like this, who have quite questions. I don't tend to answer the questions directly. I tend to point people in the direction of the resources where they can learn themselves. But anyone can reach out. To me, it's hello@bitcoin.com and I promise there won't be many shows like this. I'll go back to just asking the questions. But I did have to go through this process because putting myself in the hot seat helped me understand where I am in my own process of learning this. And if I'm out there talking to people and explaining bitcoin to people, I want to see where my gaps are. So I'm glad we did it. Danny. Probably a bit of a shit show. Yeah, probably a bit of a shit show. All right, man, well look, appreciate your help as ever with everything you do.
- [65:16]
Danny
Yeah, no worries, mate. Thanks.
- [65:19]
Peter McCormack
Okay, so what did you make of that one? Did my producer Danny crush it? Okay, so look, before I get into the summary, I do want to give a massive shout out to Danny. It really is needed and overdue. He emailed me a few months ago, I can't even remember like eight months ago, and offered to help me with the production and engineering of the show. And I was like, okay, so we tried a couple of shows out. He made my life so much easier. He ended up doing all the shows and then I end up saying, look, come and work with me, come and do this full time. And he has been amazing. I think we've done like 100 shows together now. And wherever I am in the world, whenever I send him a show, he pulls out of the bag. It doesn't matter what the time is. You know, sometimes we've had a really last minute show because of logistics and he's nailed it. So even though he supports Man United, who are absolutely shit, he's a great lad. I want to give him a massive shout out and a massive thanks to him. He also helped me with this show, so I'm looking forward to the feedback on this. I've always feel much more comfortable asking the questions. Being on the receiving end is really challenging and it's happened a few times recently I've been asked to do some interviews. Sometimes I'm a bit reluctant because I don't think I'm a great guest, but you know, I want to do this more. So I felt like with this show that I wanted to be on the receiving end. I wanted to be the one answering the question for quite some time. Now, in this schedule of shows I had, which was created a while ago, we had one listed, which was a recap, you know, recap of all the main topics. But I never had a guest listed. So I said to Danny, I said, you know what? I think I'm gonna do this one myself. I think I want to challenge myself. I think I want to see how I do. I think this will be a nice test. But it was challenging. You know, these are complicated topics, and I didn't want to make any mistakes. I didn't want to have. You know, I've done nearly 200 shows now, and I've had some great guests doing a great job. I didn't want one in the middle, which is me talking absolute shit. So here it is. Here is my first go at being interviewed about some of the more complicated topics relating to bitcoin. I would say also, this is more challenging than any interview I've done, but I felt it was a challenge I had to do. At the end of the day, when you're explaining something as intricate as bitcoin, it can sound overwhelming. So I took the approach of wanting to keep it super basic. In all the previous shows we've done, I've asked the guests to keep it simple. But even sometimes some topics are explained or some words that we use which are going to be complicated for people new to bitcoin. But I wanted to keep this as basic as possible. One thing I learned while doing this is knowing something in your mind and explaining it in an interview format is entirely different. And I realize there's some gaps in my knowledge which I will be working on. And I know someone like Matt O'Dell, if he listens, he'll give me some feedback, which I'm kind of scared about, but also looking forward to. But, yeah, I really enjoyed it. I'm glad I tested myself, myself. I do want your feedback. I don't care if it's good, bad, ugly. I want to know if I got things wrong, I got things right, whether I articulated myself well. I think this is an important thing for me to be able to do, as I want to ask better questions. And also I want to be able to explain bitcoin to people in an accurate, you know, factually accurate and articulate way. So, yeah, hit me up. It's hello@what, bitcoindid.com. whatever you got to say. Really do look forward to your feedback. Also I see this at the end of every show and I'm going to say at the end of every show I ever make a massive thanks to everyone who supports the show. If you come up to me at an event and you say you enjoy it, if you share out with your friends and family, if you send me an email, if you're a sponsor, a listener, a guest, whatever you are, whatever you do to support the show, massive thanks really really do appreciate it. Now if you do want to support the show if you're like Pete I enjoy what you do I want to help you out. It's all up on my website. Just head over to whatbitcoindid.com click on the support section it is all explained there. Anyway funny show for me to make this one kind of strange but I hope you enjoyed it. As I said any questions hit me up at hello or what bitcoindid.com.