← The Peter McCormack Show
The Peter McCormack Show
Beginner’s Guide #5: The History of Bitcoin with Marty Bent - WBD186
01:23:59
Location: Skype Date: Wednesday, 15th January Project: Tales from the Crypt & Rabbit Hole Recap Role: Host Welcome to the Beginner's Guide to Bitcoin. Bitcoin can be intimidating for beginners. The protocol is complicated, the community can be...
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- [00:01]
Peter McCormack
Welcome to the what Bitcoin did podcast. Hello there. Welcome to the what Bitcoin did podcast which is brought to you by the mighty Kraken. The best place to buy and sell Bitcoin. I'm your host Peter McCormack and today I have part five of my Bitcoin Beginner's Guide. I've got an interview with Marty Bent from Tales from the Crypt where we cover the key events in the history of bitcoin. But before that I do have a message from my amazing show sponsors. So first up, let's talk to you about BlockFi, the future of bitcoin and financial services. And they made a couple of very cool announcements for their plans for 2020. They are going to be launching a Bitcoin rewards credit card where you can earn Bitcoin cash back on your purchases. I cannot wait to try this out. I'm going to be meeting up with the team soon. I'm going to be finding out the details and hopefully at some point I'll be getting my card and I'll be telling you all about it. They've also got a mobile app coming and they have just added support for USDC and Litecoin. This is on top of their already market leading products, their crypto backed loans and their interest accounts where you can earn interest on your Bitcoin, ether and G USD. I am a customer. I love getting my Bitcoin interest every month. 2020 is going to be massive for Blockfi. I'm looking forward to working with them. So if you are interested in finding out more please head over to blockfi.com which is b l o c k f I.com also this show is brought to you by the mighty Kraken. The best place to buy, sell and trade Bitcoin. But why? Why do I love Kraken so much? Why do I love working with them? Well firstly they are the most secure exchange. They put the safeguarding of your funds and your privacy as their number one objective. They also have the best account management in the business. 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Just search for Kraken Pro, which is K R, A, K, E, N, P R, O. Okay. And onto today's show, I've got Marty Bent from the Tales from the Crypt and Rabbit Hole recap podcast. One of my absolute favorite interviewers in the space. Love talking to Marty. He's got a very deep history of bitcoin, so he was perfect for the show. So, yes, we're on part five of the Beginner's Guide. If you've been listening to the previous shows and you've been following along. Now we're going to get into the last 11 years of history of Bitcoin since Satoshi dropped the white paper, which was on October 31, 2008, and I was actually out in Vegas. It was my birthday. I was turning 30. I was out there celebrating. I didn't know anything about bitcoin at the time, though it would be a few years after that till I found out about it, which is why I've spent so much time trying to understand the history myself. Marty also covers the history of bitcoin and his podcast. His very first two episodes of Tales of the Crypt were about this. So definitely go and check that out. Now, let's be honest, it's very, very hard to cover the entire history of bitcoin in one show. The history of bitcoin, it could be a series itself. Even individual stories themselves could be an entire series. I'm working on a series myself just for the Scaling wars, but we try and do it. We try and cover all the key events in the history of bitcoin in about an hour and 20 minutes. Because if you're new, if you've just come into bitcoin, you're going to hear about terms, you're going to hear about other coins, you're going to hear about things like the Silk Road, you're going to hear about things like the Scaling wars. And it's really important to try and understand these, to understand the context, what happened, what they meant for bitcoin, what lessons were learned. So, yes, I try and cover as much of it as I can with Marty. We talk about a whole bunch of things. We talk about the different people involved. The first transaction, when Laszlo bought two pizzas for 10,000. Bitcoin, the silk Road, which I've covered multiple times on my podcast. We also talk about Mount Gox, which I did a whole series on. We talk about the Scaling wars, the bull run of 2017. There is so much crammed into that. I think it's going to be helpful guide for someone who wants to get a quick snapshot of what's happened over the last 11 years. So listen, I hope you enjoy this. As ever, if you've got any feedback about the show, you can reach out to me. My email address is hellohotbitcoindid.com Marty Bent. How you doing, man?
- [04:49]
Marty Bent
Doing well, Mr. McCormick. How are you?
- [04:51]
Peter McCormack
Doing? Very well. It's a bit late here. I'm guessing it's like just after lunch for you.
- [04:56]
Marty Bent
Just after lunch. Just got a haircut.
- [04:58]
Peter McCormack
Yeah.
- [05:00]
Marty Bent
Still have to eat. But very, very happy to be sitting down speaking with you.
- [05:05]
Peter McCormack
And you always. So listen, I'm doing this bitcoin beginner's guide. You know, I've got friends, I've got people who talk to me and they always want to get into bitcoin. I just wanted to put together like 10, 15 interviews, go through all the key things to help them understand. So that can be kind of like a starting point for them. Put it all together. I've covered why we need bitcoin. I've covered what money is. I've done the prehistory of bitcoin. I've just recorded a show with Stefan talking about what bitcoin is. And now I'm thinking the next step is, you know, if people really go down the rabbit hole, they're going to hear of all these different stories or people or events. You know, things like the Silk Road or Segwit 2X. So I think it'd be great to go through the history, explain what happened, explain why it's important, the lessons learned. But I am also aware you've done a history, which I wasn't aware of because I didn't start listening on episode one. So I'm going to share out your history as well. Let people listen to that, because that goes into even more detail on some areas.
- [05:58]
Marty Bent
But you read to go, let's rip it.
- [06:01]
Peter McCormack
All right, so October 31, 2008. This is when it all kicks off. Funnily, Enough. I'm in Vegas. It's my birthday. I don't know anything of bitcoin. I don't hear about it for quite a long time afterwards. But, you know, the white paper drop in was a big deal. So let's talk about the white paper.
- [06:17]
Marty Bent
Yeah, so the white paper came out of nowhere on October 31, 2008. You were in Vegas, I was in Philadelphia. I was a senior in high school and the Phillies had just won the World Series and I was dressed as Lieutenant Dangle from Reno 911 because it was Halloween and we were allowed to dress up as seniors and we were celebrating the Phillies World Series. I was dressed like an idiot. And Satoshi was dropping one of the most important technologies, or at least the idea behind the technology, on an obscure mailing list on the Internet. The cypherpunk mailing list, run and operated by people who were building technologies that revolve around cypherpunk ideals, which revolve around using cryptography to enhance privacy, security and freedom in the digital age.
- [07:10]
Peter McCormack
And this wasn't the first attempt I covered this with Aaron. You know, there had been a bunch of attempts previous at Digital Money and nobody knew at the time whether this would be successful. And we're here 11 years later. So I think we can all agree it's probably been the most successful attempt so far. But the white paper itself kind of outlined a whole bunch of things about how the protocol will work. But one of the things that will keep coming up and people might hear reference to, is that bitcoin was a peer to peer electronic cash system. And that could be something that misleads people and drives them down some kind of altcoin dark alley, right?
- [07:44]
Marty Bent
Yes, yes. And particularly people get hung up on the word cash and the definition of cash. A lot of people basically allocate their understanding of cash as they use it in society today. When you go to a bodega and you buy a bag of chips and you give them a few dollars, it's a pretty quick transaction. You're not charged any fees for using that. It's pretty anonymous. So people hear cash and they think of those particular properties. But really, cash, what it really means in original definition, in a monetary perspective, cash just means a bearer asset, an asset that you own at the end of the day that you have complete ownership over. So a lot of people, a lot of the marketing that went on in bitcoin's early years was that it was a digital. Taking the digital cash meme and running with it, saying that it was fast, anonymous and very cheap to use. Which, when you actually understand the parameters and the, the limitations of the distributed system, which bitcoin is the network, those properties really probably aren't that marketable and it probably aren't, won't come to fruition, at least at the protocol level. But cash, it is definitely digital cash at the end of the day in the sense that it is a bearer asset that you own and, and you hold. So that's what people get hung up on, myself included, when I, when I was first jumping into this stuff as well.
- [09:12]
Peter McCormack
So if someone new is coming in, one of the things we want to say is, look, if you're new to bitcoin and you read the white paper and then you see somebody talking about an altcoin, say a bitcoin cash or so called bcash, and they're saying that bitcoin has changed and it's no longer a peer to peer cash. You want to avoid that fud, don't get distracted by it, just stay into bitcoin. That's, that's the lesson from the white paper for me. And then we're going to jump forward. Not far, just a couple of months. January 3rd, very important day. It's when the protocol launches and it has an interesting message linked to it in the Genesis block, which is as a British reference, the Times, 3rd of January 2009, Chancellor on the brink of second bailout for the banks. So that's not just the protocol drop in, but that's the protocol drop in with a message for all of us.
- [10:01]
Marty Bent
Yes. So it's twofold. There it is a way to timestamp and prove that Satoshi did something after a certain point in time. And then number two, a lot of people will debate this, but I think it's hard to debate how can it not be that it is a political statement to sort of embed the ethos of bitcoin into the Genesis block and let everybody know why this network was created. And fun fact about the Genesis block, I think, I believe it took seven days to mine. So it was initiated on January 3rd and it was officially mined on January 10th.
- [10:35]
Peter McCormack
Oh, interesting. I didn't know that the two banks it refers to as well is Lloyds bank and the Royal bank of Scotland. So they were the two main banks that were bailed out by the UK government. I don't know if they still own them now, but they held onto the shares for a long time. Both of those banks would have failed without the UK government stepping in. A bit like how the Lehman Brothers failed. You know, so this was kind of like a warning to all of us. And I guess a warning and a gift. A warning that, that the way the governments are currently treating money and the way they're running their monetary policies is kind of poor. It's kind of. And here is an opportunity. Here's a new way of thinking about money.
- [11:12]
Marty Bent
Yeah, yeah. And, well, and yes, a new way of thinking about money, but also a. I don't want to say reversion, because reversion almost connotates like a step back, but a taking back of the control of money away from the government and back to the free will of the market. It was Friedrich Hayek who said, we'll never have a true and free open market for money until we rest it from control of the government. And that's basically Bitcoin, in my mind, represents the first time that we've actually done that successfully, at least to an extent.
- [11:50]
Peter McCormack
And then we move forward. January 12th. And another important name in this is Hal Finney, Rest in peace Halloween, you know, put out the very, very important tweet that we all love to retweet and share out, like running bitcoin. But on 12 January, Satoshi sent him the first bitcoin transaction.
- [12:07]
Marty Bent
Yes. So this was the first transaction outside of the block reward. So anytime a block is mined, it comes the coinbase of that. That block comes with one transaction, which was the coinbase transaction, which includes the. The reward that the miner gets for mining the block. And those miners don't get access to that reward until 100 blocks have been mined on top of it. So up until January 12, the only transactions that had happened on the network were coinbase transactions, basically the creation and distribution, the creation of new blocks and distribution of new bitcoin to miners. And then, so, yes, HAL was the first person that Satoshi sent bitcoin to outside of the coinbase transaction. So an actual HAL spinning up a private public key pair, giving Satoshi a public key and Satoshi sending it that way, or they might have done a VIP addresses at that point. I'm not exactly sure how they did it.
- [13:00]
Peter McCormack
All right, I'm going to jump forward nearly a year from here. I know a lot would have been happening, a lot of conversations on the bitcoin talk forums. But the next key event for me was the launch of the first exchange for buying and selling bitcoin, which was Bitcoin Market, which I heard about on your podcast. And I didn't realize, I thought Mount Gox Was the first.
- [13:18]
Marty Bent
Yeah, yeah. Bitcoin market was a smaller one. I forget how long it stayed around, but yeah, it was in February 2010. It was one of the first exchanges. I think PayPal might have been involved or something like that. And yeah, another event like a few months before this. I think this market was created because Liberty Reserve, which was a libertarian leaning radio show out of New Hampshire, I believe they were in a bitcoin in the early days and they tried to put a price on it. And in like the end of 2009, beginning of 2000, was it then that might be. No, because the price would have had been determined before an exchange was created. So yeah, this happened before then Liberty Reserve price bitcoin based off of the hash rate and they tried to calculate how much energy was being expended. And I believe the first price before the exchange went up was like 8/10 of a penny or something like that.
- [14:18]
Peter McCormack
Wish I'd bought some back then. Hey, Marty.
- [14:22]
Marty Bent
If only we were on bitcoin market. I wonder how many customers bitcoin market ever got.
- [14:28]
Peter McCormack
Yeah, it'd be interesting to look into that. Okay, so then we're going to jump forward into May of 2010. Very, very important day. May 22nd. We celebrate every year. It's Bitcoin Pizza Day. Laszlo agreed to pay 10,000 Bitcoin for two Papa John's pizzas. And you know what, people kind of laugh and make jokes about this because of the what could have been the value of those pizzas. But we have to get a reality check here. At the time, this was a new network. You know, the coins had no real value. You know, someone had to start doing things with it.
- [14:58]
Marty Bent
No, exactly. Laszlo gets some heat from outsiders, but if you talk to him, he's still around, actually still contributing. So yes, number one, we stand on the shoulders of giants. And Laszlo is one of those giants who took the the leap of hey, I'm going to give you some of my bitcoin. I'm going to part ways with some of my satoshis for goods in the real world to prove that this thing works. And yes, he ordered two Papa John's pizzas. I believe a man from Europe purchased them. Just called the pizza spot in his local neighborhood, had to send them to his address. Not great for opsec, but whatever. We had to prove the use case here. Another little known fact about Laszlo which speaking about standing on the shoulders of giants, he actually created the first Mac OS implementation of bitcoin core before it was bitcoin core. I Believe it was when Satoshi was still around, like, so he made the first macOS compatible Bitcoin implementation, which goes underscored.
- [15:54]
Peter McCormack
Did he do the first Lightning pizza?
- [15:56]
Marty Bent
I think he might have, yeah. He was definitely buying pizza on the Lightning Network very early on as well.
- [16:01]
Peter McCormack
All right, well, salute to Laszlo. I mean, nobody knows if he would have managed to hold on to, held onto those Bitcoin and have the value 85 million now. I don't think many people would. You know, a lot of people talk about this, about, oh, if you'd held on for this long, this is how much you would have had. But you know, people buy and sell at different times and we can accept that. No one deserves shaming for any of that. Okay, so we're going to go forward and this is one you highlighted to me. And I didn't have this in my original list, but November 27, 2010, slush pool launches, which is the first bitcoin mining port. So why was this so important?
- [16:34]
Marty Bent
Yes, a slush pool. Before it was slush pool was known as Bitcoin CZ mining and it was started by Slush, who started Satoshi Labs, which is responsible for Trezor, which is a popular hardware wallet, as some of you guys may know. And on top of that, he started slush pool, which he's no longer a part of now, but it's run by Jan and Pavel and are doing an incredible job with it. It's still one of the strongest pools today and I think it's been the longest lasting, longest standing pool in bitcoin's history. And so Slush identified a need for individual home miners, who, I guess mining was getting more competitive and it was getting harder for individual miners at home to get a payout variance that was acceptable for their energy costs. So Slush, noticing this sort of pain point, decided to create the first mining pool. And mining pools are very important for bitcoin because they allow smaller miners to contribute hash power and to allocate disparate hash, pair together and sort of mine together and distribute the block reward accordingly. So it allows payout variants for smaller miners to be sort of steady and allow them to keep their operations going. So the emergence of a mining pool was very important for the infrastructure of bitcoin security and seeing it develop this early on is very promising.
- [18:04]
Peter McCormack
Okay, then we're going to jump forward to February 2011 and this is a really important story for me. This is, I would say, one of the biggest stories in the history of bitcoin, which is the Silk Road Marketplace and Ross Ulbrich. And coincidentally, I just received a letter from Ross today, the second one I've had from him, which is very cool. And that's awesome. Yeah. And I've obviously covered the story three times. I've interviewed Lynn. It's something that's very important to me. This is how I discovered bitcoin. I discovered Bitcoin in 2013 because of the Silk Road. But for those who won't know, tell us what the Silk Road was.
- [18:37]
Marty Bent
Yeah, so if you guys are just getting into quote unquote, crypto in recent years, I'm sure you've heard the word DAPP a lot. Distributed application. And actually, if you talk to a lot of bitcoiners, Silk Road is probably the first dap. A combination of distributed applications, mainly Tor and Bitcoin, that allowed people to come together in a marketplace. And a truly free marketplace with a sovereign currency and an anonymous browsing tool. Or the only way you could browse it was anonymously and it's completely made up of pseudonyms. No, kyc AML was again a marketplace where people would sell drugs. On top of that it was a forum, Drugs and other things. On top of that, it was a forum where people would discuss liberty and libertarian values, anarcho capitalist values. It was a very open and thriving community at one point and became obviously the first killer use case of Bitcoin was the ability to buy and sell drugs outside the purview of the traditional financial system. And obviously it became very popular when you have an anonymous DApp that allows you to buy drugs with a currency that can't be, or what people thought couldn't be tracked at the time. Bitcoin can be tracked. We know it's possible to make it so it's hard to track. But even so, those transactions would never have had the ability to be censored. So the money was able to be facilitated outside of the traditional financial system. And then, yeah, so it got too big. Ross Ulbricht, the founder who you were just describing, he wound up getting arrested, taken down by the feds. He's serving two back to back life sentences right now for creating a website that allowed people to meet, talk about liberty and others, decided to conduct P2P commerce on that, on that site as well.
- [20:34]
Peter McCormack
Yeah, he got a double life sentence plus 40 years, no chance of parole. He got a heavier sentence than El Chapo. He was hit with the kingpin charge. Now a lot of people coming in new might hear about the Silk Roads and think, well, you know, he's created a drug marketplace that's illegal. He's got what he deserves. But really there is a real alignment between Bitcoin and the Silk Road, between the kind of the ethos of what they stand for and how and what you know, and the kind of political alignments that people have who are involved in kind of Bitcoin and the Silk Road. Because, you know, they're all about freedom and freedom of choice and liberty. So it's. Sometimes I find that we have to try and help people understand this wasn't just some criminal mastermind, but he was actually somebody who was focused on freedom rather than personal gain.
- [21:20]
Marty Bent
Yes, totally. And that's what a lot of the people. Actually, I've actually had the pleasure of interviewing people who used to. A person, not people. A person who at one point was a pretty considerable mover and shaker on the Silk Road. And he described the vibe of the website of more than just a marketplace. It was a place to express ideas, to discuss ideas, more importantly, and freedom, most importantly. And it was very. From what I understand, I was never on Silk Road and I just never ended up on it. But from what I hear, the vibe on the Silk Road was very positive and intellectually stimulating. And it was all in the effort and in the spirit of exploring ideas at their core.
- [22:08]
Peter McCormack
Yeah. And I was a user, and at the time, I was an addict as well. And one of the great things for me on the website is they actually had two things. They had a review system, so you can actually see the reviews of buyers and sellers, which created a better buying experience and a better selling experience. You could create trust in the people who you are buying from and you could trust the product and see the reviews. Something which is. Comes with a lot of risk, buying on the street in a world of failed prohibition of drugs, where you have no idea what the drugs are going to be cut with. But secondly, also had these forums which you could support you. So at the point where I realized I was having an addiction problem and I was worried, I was able to go on the forum, discuss the problems I was having, actually get help. And it was from that I ended up going to seek professional help and, you know, recovering. So that was also. That was very interesting. But another interesting point was the Drug Policy alliance said the Silk Road actually led to harm reduction and less violence and sexual abuse on the streets. Which I think are very interesting points where we're talking about a world which is we have these state rules and we have state control of money. There is this As I just said previously, there is this alignment between the ethos of Bitcoin and the Silk Road.
- [23:22]
Marty Bent
Yeah. And it's all about removing violence. Right. That's what Bitcoin is, an asymmetric tool in the fight against the state's violence and the Silk Road. In the same way it let people. The combination of Tor and Bitcoin allowed people to skirt around the state and draconian drug laws and interact directly and decrease the amount of physical interactions they have with strangers to acquire the goods that they want to acquire. So you just from a probability perspective, like, yeah, that's going to decrease harm and violence. And it's a shame what happened to it, but it did. It is an idea that's not dead. The drug markets are hydras Silk Road. There was a Silk Road 2 and then we had the dream market. And there's a bunch of markets out there, but they are constantly getting shut down. But as is always the case with technology and human ingenuity, people are ideating on the idea and people are getting really creative with it. It'd be ideal if we didn't have to have a the legal drug market, but that's just the case.
- [24:32]
Peter McCormack
Well, so the stats are pretty interesting. So this will give people an idea of the scale and how important this was for Bitcoin in terms of driving a real use case. And I'm pretty sure if this was a legal company, they would have had no problem raising any funds from Silicon Valley VCs. But you know, there were approximately between February 6, 2011 and July 23, 2013. Interesting side note, that's the date I got married. There are approximately 1.2 million transactions completed on the site. The total revenue generated from these transactions was 9.5 million bitcoins. Commissions collected by the Silk Road for the sales amounted to 614,000 bitcoins. So these figures are equivalent of $1.2 billion in revenue and 80 have just short of 18 million in commissions. And that was from 147,000 buyers and 3,877 vendors. And so what that really says is that, look, it solved a problem. There are buyers and sellers. They exist already. And these people just want a safer and better to buy drugs. And Bitcoin enabled this.
- [25:35]
Marty Bent
Yeah. And it's insane what humans will do when given these tools. Again, going back to the tools a lot of people talk about dapps like Tor was an essential tool to make the Silk Road work, but it really could not work at all. It had a missing ingredient which was a value Transfer system outside of the traditional financial system. That was Bitcoin. And that's the beauty of these systems. Silk Road came and was built on top of Tor and Bitcoin two years after bitcoin launched, which is crazy to think now looking back, but it was. Again, we talked about Laszlo buying the pizzas, just as he was an example of somebody putting their neck out there and proving a use case. Silk Road really cemented that. Yeah, this works. People are using this and getting things delivered to their house.
- [26:28]
Peter McCormack
So free Ross. Big shout out. Ross. I'm going to finish with a quote from Megan Ralston. She was a former harm reduction manager for the Drug Policy alliance, but she was quoted as saying that the Silk Road was a peaceful alternative to the often deadly violence so commonly associated with the global drug war and street drug transactions in particular. I think that's a. That's a good way to kind of finish that off. People should look into the Silk Road more. I've got a bunch of shows about that. They can check that out.
- [26:51]
Marty Bent
Yeah, fuck the drug war.
- [26:53]
Peter McCormack
The drug.
- [26:54]
Marty Bent
It's terrible.
- [26:54]
Peter McCormack
All right, so I'm going to jump back a bit because that Silkgrow story spanned a couple of years. April 26, 2011. Satoshi leaves Bitcoin. Satoshi Nakamoto, the creator Bitcoin Leaves, leaves a message saying, I've moved on to other things. It's in good hands with Gavin and everyone. So why was it important that Satoshi left?
- [27:14]
Marty Bent
It was important because it was the sort of selfless self sacrifice needed to ensure that there was no figurehead that could be a central point of failure for the system. So now Satoshi, up to that point was the person or people, depending on whether or not it was a person or a group of people, we don't know yet, or maybe we'll probably never know. But up to that point, everybody, Satoshi was sort of running the show, merging everything, and he was slowly handing those duties off. But. But, yeah, after April 2011, he left. He has not been heard from. People have hacked some of his old email accounts and potentially some forum accounts as well. But for all we know, the last we've actually heard of Satoshi was again April 26, 2011. And this is important for Bitcoin's long term survivability as a distributed system, because there's no one central person to point to to say, hey, you stop this. You shut this down.
- [28:18]
Peter McCormack
And to add to that, one of the things that might have been a problem if Satoshi had stayed is that if there had been contentious issues, he might have been the person that everyone had looked to to make a decision. And nobody wants a benevolent dictator.
- [28:30]
Marty Bent
Yes, that as well. And his leaving started a snowball effect that would lead to us learning that lesson the hard way.
- [28:40]
Peter McCormack
Yes.
- [28:40]
Marty Bent
Which I'm sure we're going to talk about.
- [28:42]
Peter McCormack
Yes. Right. We are going to jump now to June 14, 2011 and WikiLeaks. And this is an important story because this was another key use case for Bitcoin and it proved a couple of things. It proved that censorship, resistance is important. So WikiLeaks under the threat of the US government were essentially censored, right?
- [29:05]
Marty Bent
Yes, yes, they were. They were censored. They were sanctioned. Basically. A company was sanctioned, told payment processors were told they were not to do business with WikiLeaks.
- [29:17]
Peter McCormack
PayPal, Freezer Account, Visa and MasterCard refused to do any more business with them. So Julian Assangerpunk himself changed WikiLeaks to accept donations in Bitcoin, which proved to be a master stroke for them.
- [29:29]
Marty Bent
Yes. No. And this was. Julian actually wanted to do it a year earlier. I don't know if it was Julian or bitcoiners and bitcointalk.org, were discussing whether or not they should reach out to WikiLeaks to begin accepting Bitcoin at some point in early 2011 or mid 2010. I forget exactly when. And Satoshi said something about we don't want to kick the hornet's nest. Like, let's not get WikiLeaks involved. But eventually they did get involved and that was huge. Yeah, it proved like they were. I forget the war cables were.
- [30:05]
Peter McCormack
Yeah, the war cables. Yeah. And with the footage of the helicopter shooting the journalist.
- [30:11]
Marty Bent
Yes, yes, it was that, that, that, that leak and. Yeah, so he had basically, Julian had ripped the curtains off and shown what, what the US Was doing behind the doors in, in Iraq and the Middle east. And the US did not like that. So they order that all the payment processors stop allowing people to send money to WikiLeaks. And then WikiLeaks was not allowed to move the money that they did have. So they started accepting Bitcoin and donations started flooding in, obviously at this point. And bitcoin's life cycle, I believe bitcoin was pumping a little bit at this point too. So I think there was a little bit of attention to it. And people bitcoiners, as you know, especially really early on, the evangelizing of bitcoin and giving it out, like in the early days, people were just Giving it out. So I think WikiLeaks came out big with a lot of fat bitcoin donations.
- [31:05]
Peter McCormack
Yeah, I mean, Julian claimed that he made a 50,000% return on Bitcoin as a direct result of the US government imposed financial blockade of WikiLeaks, which obviously gave them a long Runway. So that was kind of cool. And you know, having been a cypherpunk himself, I think there's a really nice alignment between what WikiLeaks was trying to do and you know, they were trying to avoid a censorship of content, they were trying to make information free and at the same time people were trying to censor them both in terms of their hosting support and finances. But, you know, they were able to get around that again with tools like Bitcoin.
- [31:39]
Marty Bent
Yeah, yeah. And it's, it's crazy though. Like, that's one thing, Bitcoiners, WikiLeaks as they prove to be that, prove that bitcoin does have a use case and it is useful. They also, in more recent years, in the last 12 months, the arrest of extradition of Julian Assange to the US should be a shot across the bow of bitcoiners and people interested in it that the state does not like when you come at their power. So if you're into bitcoin, just know that it is an affront to the state, at least to some level, at least into some people's eyes.
- [32:19]
Peter McCormack
All right, so we're going to jump to 2012. April 24th. Eric Vortes announces Satoshi Dice. The gambling with bitcoin, highly successful, ended up becoming, what Was it, like, 70% of transactions?
- [32:34]
Marty Bent
Yeah, it blew up. I don't know the exact percentage, but it was a vast majority of the transactions at one point. And Satoshi Dice was basically a site that automated. I forget exactly what the game was, the gambling game, but it was automated gambling. You put bitcoin at risk and you roll the dice and you get paid out depending on your role. And yeah, so that I forget if you used Opreturn for that or what do you use, but that was the first emergence of significant increase in bitcoin fees. So this service built directly on top of Bitcoin at the protocol level. I believe it used Opreturn. I forget exactly what it used, but it used a function that took up a lot of space on the blockchain. And so as more people used it and the fees start to go up and Satoshi Dice, some people, myself included, was the first sort of use case that proved that block space is Precious. And you can certainly build a game on top of bitcoin, but it could get priced out by other use cases, mainly moving money around the world.
- [33:43]
Peter McCormack
Yeah, not everybody loves Satoshi, right? Some people considered it was spam in the network.
- [33:48]
Marty Bent
Yes. Because there's arguably ways to put bitcoin in escrow and run a gambling application and still ensure privacy and peer to peer nature without spamming block space with operator data.
- [34:06]
Peter McCormack
All right, so we're now going to talk about the Launch of Coinbase. June 2012. It was founded. Now, Coinbase is an interesting one because someone new coming in, it's probably going to be their first place they'll go to. This most likely most people are going to Google and they're going to end up at Coinbase. There's a lot of people's first place. You know, back when I was using the Silk Road, I used local bitcoins. But then I kind of went, fell out of love with bitcoin, came back in 2016 and I went to Coinbase. And you know, if we, if I think you might agree with here, if we partition what we think of some of the people who work there and some of the decisions we made, it's very difficult to not give credit to Coinbase for some of the growth of bitcoin.
- [34:45]
Marty Bent
No, you got to give credit where credit is due. That's where I bought my first bitcoin was Coinbase and they created an impeccable UX at the time. Great experience and very easy way to buy bitcoin. They were working on ways for people to be able to spend bitcoin. Brian Armstrong in the early days was a great advocate. He had a great referral program where if you were signing up friends, you're going to get, I believe at one point it was like $50 worth of bitcoin per person. So, like, people are highly incentivized to spread it. And yeah, like the emergence of Coinbase being VC backed, Silicon Valley backed, is a huge signaling to the rest of the market that hey, whoa. And I mean like the VC startup world was like peaking or on its way to peaking at that time too. So Silicon Valley had a lot of clout that people were looking out for and had a lot of respect for. So getting that stamp of approval via Coinbase, getting funded was pretty huge.
- [35:45]
Peter McCormack
Yeah. And they've, you know, in their lifetime they've raised over 500 million. I think at their peak they were valued 8 billion. I'm not sure what they're valued at now with this more or less but you know, it's a real signal, as you say, to not only to the tech world, but to the rest of the world that, you know, cryptocurrencies are serious. This is serious business. You know, this isn't just a toy anymore.
- [36:05]
Marty Bent
Yeah. And even though I may not agree with what they're doing today, I mean, they still have services that other competitors don't have set up yet that are actually very beneficial for bitcoin, mainly Auto Buy Function. I think I met somebody for dinner a few weeks ago who explained that they set up their coinbase Auto Buy Function like a couple of years ago, completely forgot about the account and checked it and, and like had passively just accumulated a little bit over a bitcoin. And even though they're experimenting with shitcoins and all that right now, that Auto Buy function has a lot of passive buying demand that people users forget about. And it's like something like that. It seems small, but actually goes a long way.
- [36:51]
Peter McCormack
All right, so next up we're going to talk about Charlie Shrem, Bitcoin's first felon. And then, look, I know we talked about Ross Ulbricht, but the actual sentence of Ross Ulbricht came after Charlie's. But you know, Charlie's a good guy. I've met him, I've hung out with him. But yeah, he became bitcoin's first felon.
- [37:08]
Marty Bent
Yes. Charlie had the feds meet him at LaGuardia, I believe. LaGuardia or JFK. I forget exactly where he ran bitinstant, which was a processor. He was basically a conduit for getting money from US users to Mt. Gox. At the time that was, I think that was his main, main gig was getting dollars to Mount Gox or facilitating dollar to Bitcoin deals. And again, 2012, there were no regulations around the space Charlie. It was truly wild west, especially in New York state. He was definitely doing some risky stuff. But he did that in an effort to prove that bitcoin worked and people wanted it and he was trying to fulfill demand. But yes, money transmitting in the state of New York without a license probably wasn't the wisest of ideas.
- [37:58]
Peter McCormack
And I've also interviewed Charlie about this. You know, I've got a show about this if people want to hear it. But he served his time, he's proud of serving his time, but he's still here doing his work, serving the bitcoin community. He's a good guy. He's just done his 50th episode of his podcast as well. Untold Stories, which is worth checking out. Next up, I talked to Marty more about the history of bitcoin. But before that, I've got a message from my amazing sponsors. So today my show is also brought to you by the Amazing Drop Bit, the only mobile wallet I use for sending and receiving bitcoin. I take it away with me when I'm traveling around the world, I'm doing interviews, I've got bitcoin with me. I've got it in my Drop Bit wallet. But have you tried it out yet? So when I first started working them, they're like, pete, we want to work with you. We want to get our wallet out there. It is the Venmo for bitcoin. And I was like, what do you mean? I don't have Venmo. I'm in the uk. What the fuck is Venmo? And they're like, venmo. That's a way people in the state send and receive money. We have done the same for bitcoin. So you know what, I downloaded it, I played with it and I was like, this is kind of cool. I mean, it's got all the standard features you can send to addresses and QR codes, but you could also text bitcoin to people. Well, since then, they've crushed it. They've added the ability to tweet bitcoin to people. They've added support for Lightning, where They've killed the UX. They've added support for batch 32 addresses. They've even added the ability to buy bitcoin from within the wallet. This is going to be another massive year for Drop Bit. I love working with them. If you haven't checked it out, it's available for the iPhone and Android. Just head over to Drop Bit app, which is D R O P B I T app. And my last sponsor for the day, and no sponsor is ever the least, is Kelman Law. And I know if I get myself into some bitcoin bullshit, if I need some help from some lawyers, Kelman Law are gonna be the people I'm gonna be calling. Because Kelman Law is run by Bitcoin OGs. They're based out in New York. And unlike the other crypto lawyers out there that you'll find online, these guys totally get bitcoin and totally get the fintech space. And of course, and most importantly, you can pay them in bitcoin, they accept bitcoin for payment. Right? Come on. These are the law firm for you. So one of the partners, Zachary Coleman, he is known for drafting a bill submitted to the US Congress in 2014, which is aimed at exempting on chain bitcoin transactions from US Regulations. The other founding partner, his name is Daniel Kelman. You might know that name, you might not. Daniel's been on my show when I did my Mt. Gox series. He came on to help me understand the complexities around civil rehabilitation. The Kelman Law team is staffed with lawyers with expertise in litigation, dispute resolution, anti money laundering, and US international corporate structuring for fintech businesses or companies and individuals operating within the bitcoin space. So listen, if you are operating a fintech business or if you've got a dispute involving bitcoin, maybe someone owes you some bitcoin, or you just need legal advice related to bitcoin or fintech, open up your email and send a message to Infoelman Law. That's K E L m a n law Kalman with one L, not two. Or just head over to their website, which is www.kelman.law. all right, so now we're gonna move on to. Which is, I think, arguably the biggest story in bitcoin is the collapse of Mount Gox.
- [41:17]
Marty Bent
Mount Gox?
- [41:18]
Peter McCormack
Yeah. I mean, many, many people have PTSD about this. Did you use Mount Gox?
- [41:25]
Marty Bent
I didn't. I didn't. I came Coinbase. Luckily, I'd been built by the time I decided to purchase bitcoin for the first time. But Mount Gox, obviously I'd been following it, following the story pretty intently. I was big on Twitter back in those days. I wasn't actually. Wasn't big on Twitter. I was a lurker on Twitter. I was big on following Twitter and trying to stay with the conversation there. I stayed away from Mount Gox because I saw people tweeting that it was pretty sketchy. So step back. Mount Gox was the biggest exchange. Obviously most of your listeners probably know it because it got hacked. I believe 800,000 bitcoin were stolen at the time. Valued at $400 million, I believe, or something like that. I forget. Exactly.
- [42:15]
Peter McCormack
So it's 850,000 bitcoin valued at 450 million. But then approximately 200,000 bitcoin was found just hanging out in an old wallet.
- [42:24]
Marty Bent
Yeah. So close to a mil or over a mil. So basically the history of Mount Gox, it started as a Magic the Gathering trading card platform and forum. That site was sold to Jed McCaleb, who then turned it into the bitcoin exchange that it eventually became. So, yes, he took a shitty PHP CMS and tried to make it into A bitcoin exchange. Jed McCaleb did. Jed took it to a certain point and then sold it to Mark Karpelis, who was a Frenchman living in Japan. So whether or not Jed knew that Mount Gox was doomed to fail, a lot of people want to. It's an unknown. I think it's. Personally, I think it would have been hard to not know that it was a shitty infrastructure for a global bitcoin exchange. But that's a conversation for another day. So Jed sells to Mark Karpelis, and then over the course of a few years, there's a bunch of tremors that go on. Every once in a while, it's hard to withdraw your bitcoin. People's wallets are getting hacked. And slowly, over the course of 18 months, it just became harder for some people to withdraw their bitcoin. There were rumors of insolvency. At one point you had Roger Ver come out on YouTube and tried to calm everybody's nerves, saying that he's seen balance sheets to prove that they're solving that turned out not to be true. Apparently they were losing everybody's bitcoin. And again in January 2014, they officially got shut down by the feds and that was the end of that bullish bubble.
- [44:09]
Peter McCormack
Yeah, so I've met all the key players. I've interviewed them all. I've interviewed Jed, I've interviewed Mark, Went out to Japan and interviewed Mark. Actually, all worth checking out. Did a Mt. Gox series worth listening to. I believe that Jed knew he was handing over something that had problems. Whether he did it or not, because I had the problems, or whether he just wanted to move on to other things is, you know, only he will know. But there were certainly some issues around lost funds and some problems with the code. I think Mark Karpelis was just somebody who was massively out of his depth. But him being massively out of his depth led to significant amount of bitcoin being lost. And what happened was over the years, as the price of bitcoin went up and people hadn't recovered their bitcoin, the amount of money they felt they had lost had risen. And I think this is one of the key drivers of things that people will hear now. They'll hear, not your keys, not your bitcoin, securely store your bitcoin. I think the PTSD leads people to driving this message home to anyone new coming into bitcoin.
- [45:10]
Marty Bent
Yeah, it's one of bitcoiners favorite adage, you have to burn your hand on the stove. It wasn't mount Gox, I've got an exchange hack back in the day and it's not fun. And yes, going back to the beginning, very beginning of this conversation, talking about digital cash, a bearer asset. You do not hold the bitcoin until you hold your keys. The definition of a bearer asset is that you possess it, you hold it. And you truly only own an IOU on bitcoin unless you have it in your possession if you possess the private keys. And yes, it does take hard lessons like trusting Mark Karpelis to protect his keys that you have a claim to, and then once that goes bust and you realize your claim means dick, that's a very hard lesson learned pretty quickly.
- [46:01]
Peter McCormack
Yeah, but some people haven't learned their lessons. I mean, we had QuadrigaCX recently. Binance has been hacked. We had Cryptopia. You know, these exchange hacks keep happening. They keep happening. So. So if you are new, look, one of the things you got to do is if you're going to end up buying some bitcoin, you've really got to go and understand now about private key management, about your own security. It's one of the most important things because you know these exchange hacks will happen again.
- [46:27]
Marty Bent
Yes. And if you're, if you are just getting to the space and you are putting money into it before you move it, do the research. Practice, learn. Learn best practices. Practice by yourself with small amounts. Get comfortable, but do aim to eventually take possession of your keys, at least in a multi sig setup with a provider that can walk you through that. At the very least. At the end of the day, that's what you should strive for. At the most, you should strive to have full control of your stuff and only know how to access it. But yeah, it's a lesson that needs to be learned. And again, going back it. Bitcoin demands extreme ownership. So you have to put the time in to figure out how to. How to possess it.
- [47:14]
Peter McCormack
All right, next up, we're going to talk about G hash and the potential that they would have exceeded the 51% threshold for a mining pool, which becomes risky in the world of bitcoin. So I've been prepping for my next show. My next show is going to be with shinobi. We're going to go into the detail of the tech of bitcoin. One of the things we're going to talk about is the blockchain and we're going to talk about like a 50, what the risk is of 51% attack. But this came in because you told me about this. You know, when we started prepping the show, you text me and said, look, you need to include Ghash as part of the history. So tell me about it.
- [47:44]
Marty Bent
Yeah, so Ghash was a mining pool similar to slush. It was a competitor to slush. And at one point in 2014, I remember this vividly because I remember Peter Todd freaking out about it. And I think, I believe he was. I don't know if he did or if he was threatening to or if he did sell some of his stash because of this. But yeah, it was a. Just naturally, I believe it was something similar to what Nicehash is now, where people are just able to contribute. In the pool just drifted over 51% of the total hash rate of the network. Granted, that's made up of individual miners contributing to that pool, but that pool still to this day has the decision to decide how blocks are constructed and how transactions are constructed. That's changing with Stratum v2 and things like better hashtag still not there yet. But this pool hypothetically could have rewritten the blockchain pretty trivially if it wanted to. If the pool operators were nefarious, they turned out not to be nefarious. They said, hey, we did not want 51% of the network. We noticed this is a problem and they agreed to go below 40%. But naturally individual miners within the pool just started leaving the pool because they didn't want bitcoin to get 51% attack. So individual miners within the pool were going to others to distribute hash rate as well. But no, it was a first great example of something to watch and how that just happened sort of naturally nobody was paying attention and it drifted towards that way. And at least early on, we're lucky that Ghash was a benevolent actor and decided not to. 51% attack the network.
- [49:21]
Peter McCormack
Well, I think I talked to Jimmy Song about this. The game theory isn't always there anyway, you know, ultimately to attack the network, it is, you know, it is risky because they end up destroying the value. But, you know, it's a, it was like a wake up call to people that, look, this is possible, you know, the 51% attack is, is a huge threat to bitcoin.
- [49:40]
Marty Bent
Yes, yes. Well, I wouldn't say a huge threat. It is a, it is a threat. Something to pay attention to right now. I don't, I don't think again, like you just mentioned there, like the, the 51% attack. Yeah, it may be profitable in the short term, but is it More profitable than just being a benevolent actor. In the long term, I think the incentives are such that like we saw with GS Gash, sort of proved that they didn't attack the network. So I think it makes sense, but definitely something to pay attention to.
- [50:12]
Peter McCormack
All right, so still in July 2014, New York gets the bit license. So we're going to shout out to Ben Loski, fuck you, Ben Lorski. Let's talk about the bit license.
- [50:22]
Marty Bent
Fuck Ben Loski. Yeah, fuck you, Ben Loski had slimy, slimy. God, I don't know Ben. I've never met Ben. I don't like speaking bad, poorly about people I've never met, but he's one of the few people I feel okay because just the Benlowski. So for you, who listeners who don't know who Ben Loski is, he was at one point an assistant Attorney General, I believe, here in New York State and part of the New York Department of Financial Services and tasked with creating regulation for cryptocurrency companies in the state of New York. And he came in with the bitlicense, which is a overly draconian hurdle for companies wanting to start bitcoin and cryptocurrency companies in New York state to get over. It's a heavy sunk cost in legal and compliance and very burdensome. And so this guy, through all this compliance on the industry and then left and in typical state to corporate revolving door fashion, he's now on the board of Ripple as their legal advisor. So he basically created legislation that he could then go help other people work around. Dirtbag.
- [51:38]
Peter McCormack
So the lesson here is fuck you, Ben Lorski, and fuck the bit license. All right, so I talked about Mount Gox being the biggest story in history of bitcoin. Others would flat out deny that and say, pete, you got that totally wrong. The biggest story in the history of bitcoin is the scaling war. And this is a really important one because this is where people can go down the wrong path when they start diving into the world of scaling. Look, I remember when I first got back into bitcoin, you know, in 2017, I was hearing both arguments about the importance of small blocks and block space and then hearing, well, you know, if you want cheap and fast transactions, then you need bigger blocks. And, you know, somebody who's new in a small increase in the block size didn't seem too scary. And I also know, like, there's key people in bitcoin at one point who did support a bigger block size. You know, in hindsight, I get it. Now, but this is, this is a, this is a place where people could easily get lost and kind of dive, diverge away from bitcoin. So we, we got to be careful here. But one of the difficult things here is sometimes is the chronology of event. You know, I wanted to Talk about Sigwood 2X and the new York agreement, but you rightly raised, look, there's the Hong Kong agreement. We have Bitcoin xt, Bitcoin classic Bitcoin Unlimited. So talk to me about the scaling war, Marty.
- [52:53]
Marty Bent
Okay, so I've been thinking about how to approach this. The scaling war was a war disguised as scaling war, which really was a control war. So like we said, the importance of Satoshi leaving was that he gave up control of direction for the project. And obviously when he left, there was a vacuum, a void that needed to or does not need to be filled and should never be filled, but some felt needed to be filled, mainly Gavin Andreessen, other Mike Hearn, another developer, and then people like Brian Armstrong and other CEOs of companies that were leveraging bitcoin as well. And another thing about the fork wars too was a. It was also an eagle battle, ego battle, I think, between the stakeholders in the system. And it was really the first time that the network discovered how the stakeholders really interact with each other and who really has ultimate say at the end of the day, at least in my eyes, this is very debatable. A lot of people have other opinions on this. But my eye thinks the fork wars, when they were all said and done, prove that full node operators have control at the end of the day, the most control. And it. Well, the most control being not, I mean, just that they decide consensus. But the end of the fork wars also prove that no one person or entity of people or businesses has control over the development of the protocol. So the way, if we want to go back to the beginning, the Hong Kong agreement, in my opinion, like you mentioned, is where it first started. So In I believe, December 2015 or February 2016, a bunch of developers and miners met in Hong Kong on a scaling, quote unquote, scaling agreement. The developers were keen on getting Segwit in and the miners were keen on getting the block size up. So that's really where the conversation started. And it was probably misguided for these people even meet in the first place, like, who are they to decide what's going on? So that right there set terrible precedent for the conversation around these protocol updates. And so from there you had a bunch of people basically creating and Trying to get people to download other implementations of Bitcoin, mainly Bitcoin Classic Bitcoin Unlimited and Bitcoin xt.
- [55:25]
Peter McCormack
Yeah. And if people are coming due to this, what they're going to see is that the, the primary argument was, you know, about raising the block size. So the block size itself is 1 megabyte. So what that means there's a limited amount of transactions that can get into it. And the debate was, well, we want to raise it to 2 and maybe 4 and 8 in the future. Whereas, you know, a bunch of other people have said no, because it's important to keep the block size small so we have enough nodes to keep things decentralized. And there is so much to this. You know, you could, not only could you do a whole show on this alone, I'm going to do a whole series on this because there is so much to it. But like, if you had to kind of like simplify it down, it was an argument about block size, but also, as you rightly said, and I agree with you, it was also about control. And you know, what it felt like. And a lot of people have called it this, which I kind of agree if when we got to the New York agreement, it felt like a corporate. An attempt at a corporate takeover of Bitcoin.
- [56:21]
Marty Bent
Yes, yes. And the New York agreement was the crescendo of the propaganda that was being spewed online. So Brian Armstrong most famously is one of the leaders of the cabal of corporations that wanted to raise the block size and he has famously backed Bitcoin. He was trying before the New York agreement, just trying to throw his weight around to get people to download these implementations that would have forked to higher block size. And so let's just talk about the mechanics of why this doesn't make sense. Why, at least in my opinion, raising just arbitrarily doubling or quadrupling or octupling the block size to increase throughput and reduce fees doesn't make any sense. Again, like you said, you need everybody to be able to download a node in the future. And if you start raising the amount of data that could be held in each block right now, the burden that you put on future node operators is such that it will destroy the network. And then two, the fast transactions doesn't make any sense. Just the mechanics of Bitcoin and proof of work and how it works. You need to wait 10 minutes for a confirmation. And if you really want to ensure that your transaction went through and is not going to be overwritten, you should wait Six or more. So that the thought that you would ever have transaction finality, even if blocks are eight times what they are now, that doesn't make any sense. So just the framing again. And that's why I really believe that it was more of a control war than a technical war. Because the arguments they were making don't make any sense. They're not logical in the long term.
- [58:08]
Peter McCormack
And I'll put it in the show notes. But one of the most important interviews I think people should go and take a look at if they want to understand more about this. There's the interview between John Carvalho, Shinobi and Vinnie Lingham. And Vinnie Lingham very much was on the side of the signers of the New York agreement. And John and Shinobi were very much on the side of, let's say, the developers. Because what people should know, the New York agreement was essentially a closed door meeting between the miners, the companies and the developers. But the developers chose not to come. So therefore the developers weren't even represented. But that interview really reflects what, you know, what a lot of people who wanted to protect Bitcoin were thinking, that this is a corporate takeover. And something really stood out in that for me. And you might want to comment on this, but John Carvalho said, look, there is a process by which you can submit a request to change Bitcoin. There is the bit process. You know, if you want 2 megabytes, then you make the submission and then if you achieve consensus, it'll happen. If it's been rejected and then you're still trying to force it through, then this is what is known, let's call it, what it is, is a contentious fork you are trying to. And that's, that's, I guess goes back to your point that this is like a hostile takeover. And even Vinnie in that said, you know, people wanted to remove Core.
- [59:24]
Marty Bent
Yeah, yeah. No, it was the business. And it makes. If you're looking at it from the perspective of the business owners at the time, it probably made sense. Fees are going up. They. A lot of their expenses for their companies were based around fees. But tough shit. Just because your company is not doing as good of a job as it should be at working within the limitations of Bitcoin doesn't mean we change bitcoin. You need to adapt to it. It's not going to adapt to you. If we set that precedent in the first decade of its existence, what's going to happen in the future? What else are we willing to change? What other values are we Willing to to concede again. And this all goes back to precedent. That's why I like the bitcoin core approach of developing the conservative approach. Make sure everything's backward compatible, don't ever hard fork unless you absolutely need to, and do everything you possibly can before doing something like arbitrarily raise the block size.
- [60:24]
Peter McCormack
And what ended up happening? Correct me if I'm wrong, but there ended up being a compromise, right, because there were two things that people wanted to get into bitcoin. One was SegWit, which was a way of increasing the block weight so you could get more capacity from the blocks without increasing the block size. But the compromise was to double the block size to 2 megabytes. So that got to a point where it felt like it was going to happen. The miners were signaling for it. But then something very interesting happened, which was led primarily, as I remember, by Luke Dasher. And that was bip148.
- [60:56]
Marty Bent
Yes. So bit 148 was the user activated soft fork. Okay, so there's so many BIPs to remember during these soft fork orders. BIP 91 was the beginning of SegWit2.x, I believe so, yes. I believe to get SEGWIT in, some developers agreed to write a bip bip 91 that would activate segwit after a certain threshold and then three months later double the block size. But I could be getting that bit wrong.
- [61:27]
Peter McCormack
No, you're correct.
- [61:28]
Marty Bent
One of them was out there and then the other one, bit 148, which was a node that I ran the software that I ran when this was going on and said, fuck that, we just want segwit, there's no reason to double the block size. So bit148 was written by an anonymous dev. Luke Dasher was certainly an advocate of it, I believe, but he did not write it. Shall and Freud, some Anon dev. Still don't know who that is today, but yes, that was a way basically for users who wanted to download. It wasn't a bitcoin core implementation. Technically I don't believe it was a fork of it. You could run that and that would simply just soft fork in segwit. I forget if it was a flag day or no. It was a percentage of nodes running bit148. I forget what the the threshold was, but it met that threshold. And people debate on whether it was 91 or 148 that led to Segwit getting adopted. But yeah, that eventual. Or what the eventual doubling of the box size never happened. That was software. Bitcoin ABC I believe was the repository that Jeff Garzick and Crow, which was the cabal of corporations that went to change Bitcoin, that was their repository. And if you ran that code you actually never would have hard forked because they had a one off bug. So the code that they wanted to run wouldn't even have worked. If we put it, it would actually nodes crash. So it would have destroyed bitcoin. Thank God we did.
- [63:00]
Peter McCormack
And it was a very tense time. Look, I remember it all. I remember a lot of hostility, the Twitter wars, the Reddit wars, all the fighting that was going on. But eventually it got canceled. You know, six people signed the cancellation. But one of the important points that led up to that was actually the pricing of the bitcoin futures. Because what some people need to realize is that if it would have happened then there would have been a chain split which essentially creates two coins. So a futures market was created to price in the new chain and the futures price was actually started crashing quite, quite low.
- [63:31]
Marty Bent
Right, yes, I forget, I forget what for. Was that for bitcoin cash or.
- [63:38]
Peter McCormack
No, that was a B2X future.
- [63:40]
Marty Bent
Yeah, no, it was the. Yeah, see there's so much. So that four month period from May or six month period from like May to seven month period through, through November was like the most dense, intense time that I've ever experienced as long as I've been at bitcoin. There was so much going on, so many bips, so many storylines. But yes, that Bitfinex I believe did the futures and then. So it died, it just died. As soon as Segwit was passed, like, I think people were like, all right, we're running it, we don't want it. It's obvious because the bitcoin ABC repository, BTC ABC repository and there was like three people reviewing the code. Jeff Garzick was the only one making changes and I don't think anybody downloaded it, ran the implementation, so it wouldn't have forked anyway. But I think the next month when Roger Ver and crew and Jihyun Wu forked off Bitcoin Cash, that was also a very pivotal moment, but scary at the time as well. Extremely scary. But it really, again in the first decade of bitcoin's life proved to us how this network works and what the limitations are and where the shelling points are and where the network effects will accrue. At the end of the the day, while it was scary, don't hard fork if you Hard fork off, you're going to ruin bitcoin. A lot of people are afraid of that. It proved that it'll just fork off and wither and die eventually. I mean, it's not dead, but it's basically a zombie chain now.
- [65:09]
Peter McCormack
Yeah. And it's as stressful as it was for everyone. Like you say, in hindsight, perhaps it was a good thing for bitcoin to go through. Maybe an important early lesson in something that may exist for decades or centuries. Like a very important early lesson. One thing though, did that come out during the process is that Roger Vere launched Bitcoin Cash. I think it was October, no, August 1, 2017. He fought Bitcoin, created Bitcoin Cash. He decided, fuck it, I've had enough. I want to have my own chain. I want my own bitcoin. I want it to do exactly what I want to do. So we got the launch of Bitcoin Cash, but also created a divide in the community which still exists today.
- [65:46]
Marty Bent
Yeah, I mean, a divide in the community of people that talk about this stuff on the Internet. Right. Out of all bitcoin users, I bet most bitcoin users don't even know what bitcoin cash is if they're not paying attention to what's going on online. But yeah, no, it's created, again, it created a diversion between, or, excuse me, a delienation between the users that think you can scale on chain and those that think that's not advantageous. And again, yes, there's still a lot of butthurt bitcoin cashers and Bitcoin SVRs out there that want to say they're the true bitcoin or whatever. But again, those are just noise online. At the end of the day, just look at what the market's saying. Look at where hash rate is, look where price is. The market has decided that bitcoin in its current form is. Is. I don't even want to say, I'm not even going to say the true bitcoin. I just said it. Fuck it.
- [66:48]
Peter McCormack
The only bitcoin. But look, it's easy for people coming in to get distracted. You know, I've talked about this before. I've had people say to me, I've been to Coinbase, there's this other thing called bitcoin Cash. You know, should I buy? And you know, it's just a real warning to people, do not get sucked into the messaging. Look at the key measures. You know, it can be easily, you can be easily distracted, but you can easily lose money here you know, stay with bitcoin. Go down the bitcoin rabbit hole. Avoid these shitcoins. All right? Someone I'm gonna talk about, but I don't want to give too much time to. But people are gonna hear about this guy, right? And they should know a bit about him. So this guy called Craig Wright, full transparency. He's suing me right now in the High court in the UK for calling him fraud. But in December 2015, there were two investigations in parallel by Wired and Gizmodo that suggested that Wright may be Satoshi and then Craig Wright himself. Second of May 2016, there were articles published by both the BBC and the Economists claiming that Wright had digitally signed messages using cryptographic keys created during the early days of bitcoin's development. This was debunked. Security researcher Dan Karnisky said in his blog that Wright's claim was a scam. And Jeff Garzick, who we talked about previously with regards to the scaling wars and the fort wars, agreed that the evidence publicly provided by Wright does not prove anything. But we have this guy. He exists. He's claiming to be satoshi. He's doubled down recently. What do we think about this guy?
- [68:13]
Marty Bent
I mean, I don't think much of him at all. You certainly probably have more to say than I do about him, given your personal history. Yeah, he's trying to con himself off his satoshi. He seems to be a con man from everything. At least my intuition and experience on earth has taught me this man is an obvious con man. Again, like that evidence you referenced earlier, was a faked signature that he showed to Gavin. And Gavin, who was one of the early bitcoiners, who wound up turning out to be a false. One of the heroes that we had to kill, if you will, as Matt Odell likes to say. But, yeah, he duped Gavin. And he used Gavin's social clout to try to get legitimacy for his claim, which again, turned out to be false. But people are still hanging onto the idea that he might be Satoshi right now. I mean, this week, the last two days, the price of BSV has skyrocketed hundreds of percent. A lot of the BSV ers are hopping on and parading on Twitter, but what they're not mentioning is that the miners aren't mining transactions that are going to exchanges that would allow people to dump their BSVs. So there might be some inside dumping going on. All the people that own BSV miners are. I believe Calvin and Craig control an overwhelming majority. So they actually may be Exit dumping on everybody right now and only sending their own transactions to exchanges while not letting other people go. That's hearsay. What we can say is that if he is Shytoshi, all he has to do is use the private keys, assign a message or myth keys. And he hasn't done that. He claims that the bonded carrier showed up with a list of addresses and a key that will allow him to sign. He hasn't done it yet. He's way behind schedule. There's rumors that BSV is going to have an upgrade protocol upgrade in the coming weeks that allow him to move the satoshi's coins on that chain to make it look like he has control. But I wouldn't so look out for that. That may be a thing that they use and going forward, but yeah, I just think he's a quack. All you have to do is listen and watch what he says. It doesn't make any sense. It's all babble, obvious con man.
- [70:33]
Peter McCormack
Yeah. So if you are coming in and you've heard about this Craig Wright and you've been told that he's satoshi, be very careful. There's an overwhelming amount of evidence that he isn't, that he's a liar, that he's got a track record of bullshit. Just keep away from this guy and keep away from his shitcoin chain.
- [70:47]
Marty Bent
Yeah, and this is. Hey, this is what we. You have personal experience with them. This is what I think, based off the evidence I've gone over, don't take our word for it. Do your own research. If you. I have confidence that if you are a level. A person with a level head on your shoulders, you will come to the same conclusion.
- [71:04]
Peter McCormack
And every one of his actions feels. It feels like the opposite of what Satoshi would have done. Based on Satoshi's writings. You know, based on Satoshi leaving and why he left. So, yeah, basically fuck that guy. All right. A couple more things to go through. Another big event was just 2017 as a year. You know, it wasn't just an explosion in the price of bitcoin, but it was also an explosion in the price of altcoins or shitcoins. You know, and you should probably say why we call them shitcoins. But you know, bitcoin exploded to $20,000. Well, that also meant not outside the price is that this was the first real mainstream explosion. We had one back in 2013 when the price hits $1,200. And there was some press interest, but this was kind of global mainstream news interest. And it ended up leading to a lot of other things like the growth in derivatives, you know, growth in institutional grade products, you know. So 2017 was a big year for bitcoin crypto generally, you know. How do you feel about that year?
- [72:04]
Marty Bent
It was surreal. Yeah. So it was my second manual. I mean I just come like the first mania before the Mount Gox explosion. I was around paying attention, not as ingrained as I was in 2017, but like yeah, after going through the bear market of 2015, 2016 to see how quickly everything happened in 2017 was shocking. I had the pleasure of working at Barstool Sports which is a huge media brand, comedy brand, sports comedy brand here in the States. And I think they, they, they, their publication and their audience is a very good sample size of your average American, your average Joe, your blue collar worker, even up to your white collar worker as well. Just your average American in the northeast at least. And that's all they could talk about, especially in December, all day, every day. Dave Portnoy set him up with a Trezor. He went and made a video of it on Twitter. And like the mania was insane. I was, I felt like specifically at Barstool I was standing in the middle of the room saying everybody calm down. This is, this is only temporary. Do not go by Wan Chain, do not go by Tron. To no avail though. But that was again in the, in the mainstream, the biggest obviously to date, the biggest pop. And it really, I think drives home the nature of the open speculation that can happen in these markets. I think 2017, when we're going to look back, it's going to be looked back as a year of extreme and lewd greed where people sort of saw that you could take this open source software and pawn off tokens on people to make a quick buck. I don't know how much of that we'll be seeing going forward. But the maniac, it was just that, a mania that was very, very short lived. People, at least most people I know aren't even considering ICOs as legitimate going forward. I don't know anybody thinking of launching one. Ieos is the new thing, but they'll die out eventually too.
- [74:17]
Peter McCormack
And the SEC just announced they're looking at ieos. It was a very strange time. I mean it was new to me. Right. I joined late December 16th. So I got sucked into the whole altcoin thing. Got sucked back out, made and lost money, went through the whole process but come out of it in 2018. Very hardened around bitcoin. And we were hearing this line that people were putting out that it was blockchain, not bitcoin, that blockchain was the real innovation. But going through a bear market, going through 2018 and 19, we're now in 2020 and I think we all now understand that it's bitcoin, not blockchain.
- [74:53]
Marty Bent
Yeah, yeah. I mean, the amount of marketing, it's crazy. Until you experience it in an area that you are at least sufficiently competent in, you really don't realize how many snake oil salesmen there are out there. Like the blockchain, that bitcoin movement was one of the dumbest things ever. I mean, that was like. It still survives today to some extent at the enterprise level, but it doesn't. Like they're just taking the word blockchain and just trying to ride its coattails at the end of the day. And at the end of the day, none of these private blockchains are using proof of work or allowing anybody to plug in miners to contribute to consensus and contribute to the mining and security of the network. So, yeah, it's something we went through. We had to go through it. But one thing we should note too is that the price run above $6,000 was less than three or four weeks. So even though we went all the way up to $20,000, it was really a flash in the pan. And that's if you're just getting into bitcoin now. The price volatility is crazy and it'll hit these highs and fall very quickly, but it has been a pretty steady rise up and to the right over time. And even though it does have these crazy booms and busts, you have to take into consideration the amount of time that. The amount of time that these booms and busts happen within. And 2017 was the span of like six to eight weeks, I believe.
- [76:31]
Peter McCormack
Yeah. So if you are new, don't get sucked into blockchain marketing, don't get sucked into altcoins or shitcoins. If you do, you're gonna have to become some very, very shrewd trader who perhaps relies on a bit of luck. Bitcoin is king. Bitcoin is long term. That's why we love it. Just focus on bitcoin. Okay, so last one I'm going to throw in. You might have something else you want to add at the end, but the last one I'm going to throw in is. March 15, 2018, Lightning Lab CEO Elizabeth Starks announced the initial release of LND 0.4 beta for developers with the intent on making it available for testing. Purposes Lightning's now been out for a couple of years. We're all starting to play with and start to use it. But why is this so important for bitcoin?
- [77:12]
Marty Bent
Well, I think again, March 15, 2018, there's still a lot of high hopes of the ICO boom. And I think Elizabeth announcing the initial launch of LND is something. Yes, it was celebrated by bitcoiners, but again, the people looking in the space from the outside, this is something they probably didn't see or notice. And this is the signal through the noise throughout this whole mania. A lot of these tokens are ways to scale, were marketed as ways to scale Bitcoin and leverage Bitcoin and make it more or leverage technologies like Bitcoin to make them more functional, where Lightning Network actually does that. And so having that launch in 2018 again is a signal throughout all that mania. It is so Lightning Network is a second layer network built on top of Bitcoin that allows users to lock Bitcoin in time, locked contracts, and then that locked up bitcoin that they have, they can use on the Lightning Network send again pretty instantly, very low fees. And it is truly fast and almost instant transactions for very low fees. So it is what Bitcoin was being marketed as originally by people like Roger Ver. Lightning Network enables that. And so to see that what is that nine years in to Bitcoin is again when we're thinking about this very long term is extremely encouraging because it means that there's value at the protocol level and people are deciding to spend their time and energy building on top of this. So building it out and fortifying it. And Since March of 2018, I think lightning as a network has far exceeded people's expectations at that point where it is today. It's far, way further ahead than I think anybody expected.
- [79:02]
Peter McCormack
All right, man, well, listen, look, we managed to wrap up the entire key history moments of bitcoin in an hour and 20 minutes. Anything I missed out, you think we should throw in there?
- [79:11]
Marty Bent
We definitely missed some stuff. I think we hit most of the most important stuff.
- [79:17]
Peter McCormack
Well, I can send them to your history.
- [79:20]
Marty Bent
Yeah, definitely go check that out. But no, but it's important, not only in bitcoin, it's important to know your history, know your monetary history and do your research before buying and buying into this stuff. Know what you're buying, understand why you're buying it, why you would buy it. And knowing the history is very helpful in understanding the why behind all this.
- [79:39]
Peter McCormack
And look, Google is your friend. If any of These topics, you want to find out more. If you want to learn more about the Fork wars or have one the Silk Road, Google's your friend. You probably find out a lot more of them on my show on Marty's show. And I will say I'm going to give a shout out to Marty's show. So firstly, thanks to Marty's coming on here show Tales from the Crypt and his weekly recap with Matt Odell. Rabbit hole recaps, that's my go to. I can actually admit, I can actually tell you this now. There's two occasions in the US where I've hired a car rather than fly. So I can go back to back on your shows. Last time I was in New York, I decided to go from. I decided to drive to Ohio. So I hired a car and I listened to back to back Tales from the Crypt for about eight hours. Just as a chance to catch up. But not just that. Also, Marty's got his emails. He's got his two emails now. Actually, you've got Marty's bent where I'm like reading stuff sometimes. I've got no idea what the fuck you're on about, but I'm learning from it. But you've also got your. What's the Saturday edition called?
- [80:30]
Marty Bent
The SAT Standard.
- [80:31]
Peter McCormack
That's it, the SAT Standard. So there's two emails, there's two shows. It's the best content in bitcoin. It's in the show notes. Check it out. And Marty, how do people stay in touch with you?
- [80:41]
Marty Bent
Best way is on Twitter martybent. DMs are open if you guys have any questions. Peter, I want to thank you for doing what you do. Yeah. And just keep learning. It's important. And I'm happy I could have helped your boring ride to Ohio because I know you basically make a left and you stay on the same road for like eight hours.
- [80:59]
Peter McCormack
Yeah. Do you know, the funny thing is like, I do a lot of driving in the us. Some of the drives are amazing. This was quite possibly the worst drive ever. There's nothing to see. It was in autumn, so all the leaves are off the trees. It was a shitty drive. But I had your lovely dulcet tones to take me the hallway there. So anyway, listen, man, thanks. You've become a friend. I love your work. Appreciate you always helping me out, appreciate all your content. I wish you all the best, man.
- [81:22]
Marty Bent
You as well, man. Thank you for having me. Really appreciate it.
- [81:27]
Peter McCormack
All right. How was that? Did you enjoy that? Did you enjoy hearing about the history of bitcoin Listen, there is so much to the history of bitcoin. We couldn't cover it all in one show. We've done our best, we've covered the key events, but if you enjoyed it, if there are particular parts you want to find out more, then get on Google, start searching. Like I said, I've covered some of it on my show. I covered Mount Gox, I did a whole series about that. I've covered the Silk Road. But get on Google, search about the things you want to hear about more of, and also go and check out Marty's first two shows. He gets into a bit more detail about it himself. I find the history of bitcoin so fascinating and I think really it's quite important as a newcomer to come in, to go back and learn about these events, what happened, what they meant for bitcoin. I mean, I only got in really. I mean, whilst I was dabbling in Bitcoin 2013, I kind of left the space. I really came in and got in deep at the end of 2016. So I was in the same boat. I had to go back and learn this stuff and I made many missteps myself. There were things I didn't fully understand or couldn't really comprehend how important they were. The scaling wars are a perfect example. You know, without a deep history of bitcoin, without having spent years, you know, fighting on the trenches, you might not have fully understood what this meant. I mean, I didn't, you know, I knew there was a potential of a fork. I knew there were disagreements over scaling, but I didn't really comprehend how big a deal this was. Some of the stories in the early days are also. They're quite crazy. I mean, it makes me a little bit jealous I wasn't around back then. Anyway, I hope you enjoyed this. Make sure you come back next week. I've got a monster of a show. I've just recorded it. It's with Shinobi. We're going to get into the nitty gritty of how bitcoin works at a technical level and it's an absolute beast. Listen, as ever, if you've got any questions about the show. If you do want to reach out to me, I'm always available. My Email address is hellohatbitcoindid.com Also, thank you to everyone who supports the show. I say this every week, but I could not do this without the listeners, the sponsors, everyone sharing the show, people leaving reviews, whatever you do, you are helping me to continue to make this show. But if you haven't done anything if you're thinking. Come on, Pete, I want to help you. I love your show. Right, head over to my website. It's what, bitcoindid.com. click on the support section. It's all in there. All the different things you can do to help me with the show. All right. I hope you enjoy this. Check back in a few days for the show with Shinobi. And yeah, I look forward to hearing from. For me.