Angela Walsh (3:22)

Hi, Peter.

Unknown (3:23)

You alright?

Angela Walsh (3:23)

Yes, I'm great.

Unknown (3:24)

Thank you for taking me for a cruise around San Antonio in your minivan.

Angela Walsh (3:28)

You're welcome. My minivan's famous.

Unknown (3:30)

I thought we might have gone out on bird scooters.

Angela Walsh (3:33)

Yeah, this is San Antonio, not Austin. So we might find those here, but not out in my neck of the woods.

Unknown (3:39)

You're not a fan, are you?

Angela Walsh (3:40)

I am not. How do you know?

Unknown (3:42)

Could you put it out on Twitter?

Angela Walsh (3:44)

Yes, I. Okay.

Unknown (3:46)

It's public first line research.

Angela Walsh (3:49)

Yes.

Unknown (3:49)

Three months of Twitter.

Angela Walsh (3:50)

Okay.

Unknown (3:51)

Then, then, then, especially with you. Then the academic work.

Angela Walsh (3:54)

Okay.

Unknown (3:55)

Because that's harder.

Angela Walsh (3:55)

Okay, perfect. Yes. I don't like bird scooters.

Unknown (3:58)

I've just been to Los Angeles and the streets aligned with, I think it's five companies now. Bikes. It's unbelievable.

Angela Walsh (4:04)

Yeah. They've actually, I've seen some on campus here, and we don't know where to park them, so they end up on the sidewalk. So that's kind of why I dislike them.

Unknown (4:11)

Right. Okay. So I said to you when we had lunch, I said to you, there's Nouriel Roubini, there's Francis Coppola, and there's Angela Walsh.

Angela Walsh (4:19)

Okay.

Unknown (4:20)

And three notable critics of Bitcoin.

Angela Walsh (4:23)

Okay.

Unknown (4:24)

But when I look through the responses, you have the least abusive responses. People will argue with you, but I think you've managed to garner some respect where maybe Nouriel and Francis haven't. Why do you think that is?

Angela Walsh (4:39)

First, thank you for putting me in a category. I've never been put in a category with Nouriel Roubini before, and I've met Frances and she's very sharp as well. So thank you. I'd love to be in that category. I think I have tried very hard to treat my conversations on Twitter as being about substance, largely. And I do think that these are really hard issues, and you can disagree about them. Like, reasonable people can have different perspectives on these things. And often I think in the discussions I have, maybe people just are defining their terms differently. So they're kind of screaming at each other, but it's hard to hone in on the part they're actually fighting. So I don't dismiss the whole phenomenon as a scam. I think Professor Roubini has been very clear that he views a lot of it as a scam. Right. That there's no redeeming features to this whatsoever. And from the people that I've met and the. The work that I've seen done, I don't view this as a scam. I don't. I mean, certain ones are scams, but I don't think the human. The movement as a whole is attempting to be a scam. I think that there are some very serious people involved who are genuinely trying to create technology that will Enable the world to change in certain ways, and you can disagree whether the world should be going in those ways or not. But I think it's not necessarily helpful to just dismiss it all as a scam. I haven't perhaps gotten as much. I've gotten some personal attacks recently that I blocked someone, I think, for the first time. I only block generally when someone seems creepy. Right. But I've blocked people recently when they were just attacking me personally rather than the arguments. So I want Twitter to be about the arguments.

Unknown (6:47)

Yeah. So, interestingly, I was really excited to see Nouriel's Senate testimony because I think it's good to have an opposing opinion. I think we learn from it, and I think maybe sometimes people within Bitcoin and the crypto kind of space, they're a little bit nervous about it or a bit defensive. The real shame about his testimony was that he grouped everything together and grouped a lot of scams and nonsense projects with Bitcoin. And that was a real shame. And when I was watching it again, I was like, do you know, I actually think Angela would have been better up there.

Angela Walsh (7:17)

Thank you.

Unknown (7:18)

Did they ask you?

Angela Walsh (7:19)

They did not ask me, but I would love the chance. So, you know, if you're listening, anybody, I would love the chance to talk about these things with regulators, because I think they're critically important that we. And with not just regulators, but policymakers like Congress, making decisions about the technology, both how to regulate it, and also whether they want to use it in government systems, important government systems. I want multiple perspectives to be heard. And it's funny because I saw Peter van Valkenburgh in D.C. after the testimony, and he said, yeah, I was kind of wishing that you would have been on the other side. So that was a nice thing for him to say. And I think Peter and I could have a really good discussion.

Unknown (8:02)

I agree. And what was quite interesting is the point you made about Coincentre is that it's very difficult for them to be impartial whilst being an advocate. And is there confusion about their impartiality amongst cryptocurrencies?

Angela Walsh (8:16)

Well, so I think they're in kind of a strange place. So there's several different groups within the crypto space that have been both trying to serve an education function and an advocacy function for crypto. There's Coin center, and they are a think tank, and I believe their mission is to advocate for permissionless innovation. I think that's how they couch it. And then there's the Digital Chamber of Commerce, which tries to advocate. It's a bit hazier to me. Are they advocating purely for, like, the crypto side? But they seem, they don't seem to be doing that. They seem to also be wanting to push the more general blockchain side. And that's interesting because within the crypto space. Right. There's a rejection of blockchain. Right. As a real thing. So that's. That's a bit odd, but. And then there's several new ones that have been formed. And I just, I'm worried that policymakers are getting a single perspective on the technology, its capabilities, its risks, and they need to be getting a more critical perspective as well. So I think that's what they were trying to do with the Senate testimony, but I. I don't think it was as useful as it could have been. I wish. Well, I think Coincentre tries to be transparent, but they are an advocacy organization. And while they turn themselves a think tank and they put out some very good research, the research is funded by the industry, of course.

Unknown (9:54)

I think actually a debate between you and Peter would be good. Peter's pretty healthy with his outlook, but you're right, he's supporting it. Okay, so today we're obviously going to be critiquing bitcoin. I do a lot of pro bitcoin shows, do the occasional non bitcoin show, but today we're going to be critiquing it mainly from a legal perspective due to your background and your work. So for the people who don't know you, who do listen to my show, it probably be useful if you tell them your background and the work you do now at St. Mary's okay, great.

Angela Walsh (10:23)

So I am a law professor now. This is my seventh year in that role. Before that I was a corporate lawyer, transactional lawyer. I practiced for a while in a big firm and then I practiced in house several places. I was in the general counsel's office at Harvard for a few years, and then I worked in London in house for Sainsbury's, grocery store place and a big events company. So I came to bitcoin. When I started my research as a law professor, I had a strong interest in just money generally and how money works, who gets to make money, who gets to control money, and thinking about how law. What role does law have in shaping what money is and how people use it? And bitcoin was, you know, on the scene at this point. This was in like 2012. So I think I started looking at it in 2013, early 2013, and became very intrigued by it as a Potential new form of money, but also then got very interested in the governance of it. Just. I met people at a bitcoin conference that I went to, I think the summer of 2013, and they were talking about forming the Bitcoin Foundation. And I could not figure out how this foundation was supposed to be the voice of something that was decentralized. And I just. So I started to hone in on these questions about who are the people behind the curtain kind of very early on. And I have a lot of ideas that there are people behind the curtain.

Unknown (11:55)

Well, yes. So I've been through your two most recent academic papers, as I said to you. I mean, for me, it's too much brain space to try and cover both today. I mean, we might talk about developers as fiduciaries. Towards the end, I found the decentralization. I basically read the intro to both. I thought the decentralization I found a lot more interesting. And as I said to you beforehand, I think it's quite important that people get some perspective here because I think reading just some of your tweets, people might see you as anti Bitcoin or anti crypto. And my take from it after reading the full piece was that you are not. It doesn't feel like you're opposed to Bitcoin itself in isolation.

Angela Walsh (12:37)

It.

Unknown (12:37)

It's more. You are wanting to raise awareness of issues relating to Bitcoin when it starts to integrate with the legacy financial and legal systems.

Angela Walsh (12:48)

Yeah, yeah, I think that's, that's. That's pretty true. It's. People often react to me on Twitter that I'm, you know, anti crypto. I am a no coiner. Right. I don't own crypto. And the reason for that is that I, you know, I think it would compromise my ability to be fairly objective in my research. I want to be as objective as I possibly can. Now, of course, my husband is mad that I'm the poorest person in bitcoin, but that's okay. So I understand. I feel like the place that these systems are coming from, the privacy issues that a lot of them are trying to address, I think are really critical questions, and I don't think there are easy answers to any of them. But I want us to make sure that we're actually in these new systems. I want us to make sure that we're thinking of them as infrastructure and the important role that they can play in our society. Money plays a critical role. We've seen that with Venezuela, seeing it play out right now, how important it is. And if we don't truly understand how if technology is being money now, we need to really understand how that technology operates. And I feel like our understanding of these systems, even though we're a decade in with Bitcoin, is still pretty shallow. There are many, many questions that have not been investigated yet. Academic understanding of them is in its infancy. So it's interesting to me and kind of scary that people are building on these systems and thinking about ways to make financial products that build on these systems without us actually having gotten a good understanding of how they work and then that connects to the financial system. And I mean I've been interested in systemic risk issues and money collapses and the paper that I was, I presented to get my job as a professor, you have to give a job talk. It was actually about thinking about the global systemic risk of the US dollar and the potential of a US dollar collapse. I think about collapses of systems and I think the governance questions around Bitcoin and all the other cryptocurrencies are really poorly understood. They're experimental. So using them in significant systems in our society, that's very consequential. So I want us to understand them.

Unknown (15:26)

It's quite interesting. So I read through it all and I agreed with a lot of what you had written. Some I didn't understand naturally, but I couldn't help but think if the cypherpunks read this, they're probably thinking great, who cares? This wasn't designed to be part of the legacy systems. And this for example, there's one point you talk about these decentralized systems can enable rule breaking. And that to me it's like, well that was kind of the purpose, free trade, open trade, separation of money, estate, etc. So I kind of got in this weird kind of position. I was like thinking, well firstly I want bitcoin to grow. So great, let's have institutionalization and accept there's some regulation that comes with this. And then I thought, oh actually if this doesn't work, maybe this is great because this is the cypherpunk dream. And then I got lost and I don't know where I stand.

Angela Walsh (16:20)

Yeah, well I think there is. I think your conflicted thoughts there are mirror the conflicts that bitcoin is experiencing right now, right, with the whole rapid push now for defi or whatever they're calling it and the debate about rehypothecation. I'm trying to learn more about that, but it's a big debate and you know, whether these things are good for Bitcoin or bad for Bitcoin, the debates are about. Well, this exactly what you've noted here, right? If Bitcoin is intended to sit outside the standard system and be useful outside the standard system, then maybe we should just leave it completely separate from the mainstream financial system. But, you know, if it raises the value of it to get more investors in, like, it's just weird. I do see there being kind of an undermining of the core goal of having it be an alternative system by linking it quickly to the financial system.

Unknown (17:24)

I've actually thought of becoming no coiner like yourself. I mean, I don't. I have a materially small amount of bitcoin I'm not worth kidnapping for. But at the same time I have some, you know, but I have wrestled with the idea of becoming a no coiner to try and. To try and sit with a more impartial view than I currently have and to not be conflicted by it. Because I think there is certainly, like I say, if bitcoin grows by growing through the legacy financial systems I set to benefit. So I kind of feel like I'm incentivized to have that view. But I have this kind of fantasy of the cypherpunk dream of saying, yeah, excuse me, but fuck the traditional systems. This bitcoin wasn't meant to be part of that. And interestingly, I was with Eric Voorhees yesterday and I've brought it up in a number of interviews. And I don't have the quote on me now, but it was by Tim May who sadly passed away recently, and he was saying, he's pretty much to conclude he was saying that if Satoshi was seeing what we have now with KYC and account locks and essentially a dossier state, he would probably ditch it and work on something else. So now I'm starting to think, well, hopefully Angela's work will stop the integration of bitcoin in the financial system. Do you see my conflict?

Angela Walsh (18:42)

Yeah. Oh, wow. So maybe bitcoiners should be supporting me because it's too dangerous for the financial system. My argument that it's too dangerous might actually be beneficial to bitcoin.

Unknown (18:52)

But the counter argument is that, and we're going to get into the centralization of power in certain areas in Bitcoin. But a lot of people would argue no, by using the legacy financial system you do grow bitcoin, but you still are keeping it separate from control by government. So it's a conflicted area. But anyway, so I'm going to go with your conclusion to start with. Okay, so the Goal really is the term decentralization. We need to ditch it. You quoted Tony Shang, who I talked about being a fan of his work, essentially. That's the conclusion you come to, right?

Angela Walsh (19:29)

Yes. Yeah. All right. We're good.

Unknown (19:31)

We can go now.

Angela Walsh (19:32)

Yeah, I think we're done. We're done. Let's just get rid of the term. No. So the paper is called Deconstructing Decentralization, Exploring the core claim of crypto systems. And I mean, it is intended to kind of be a critical analysis of this term and how it's used in the space, because it is perhaps the term that is most ubiquitous. Right. Everyone talks about, we're building defi. Decentralized finance, decentralized everything. So I think it's important to kind of hone in on what we mean by that. And I think it's very unclear. My conclusion when I started looking into it more, I mean, my gut feeling about this, just watching the space and being on Twitter and talking to people and being in it, is that we're imprecise about decentralization. And my thought, my gut feeling was that these pockets of power that I perceive, how are they consistent with a description of these systems as decentralized? And I think that. I think that the concentrations of power that we see, which is. This is absolutely a debatable point, People, many people disagree with me that there's power being exercised at all by small groups of people in Bitcoin or in other systems. But it's. But if we're misunderstanding it and overlooking these concentrations of power and describing the systems as decentralized, we're potentially making a lot of bad decisions, and people are exercising power without accountability. They're exercising power that no one is acknowledging. And that kind of undermines the whole principle of it, right, that people think they're going into a system where humans are not particular humans or not running the show. And there are some people behind the scenes pulling the strings potentially.

Unknown (21:22)

And Bitcoiners should care.

Angela Walsh (21:24)

I think so.

Unknown (21:25)

But the reason I think they should care is because decentralization is touted as a strength. But if there are. If there are areas of power, centralization of power, that is actually a weakness.

Angela Walsh (21:34)

Yes, absolutely. Yes. And so decentralization, like, you can view it in a number of different ways, and I look at that in the paper, and, you know, it can be. You can think of a system as decentralized if it. You know, if you're looking at just at the network structure, for instance, how many nodes are there? Where are they in the world, Are they concentrated in a particular jurisdiction or could they be subject to a common natural disaster or something like that? So you can look at it that. Like that structurally, and that's thinking about the. The good characteristic that a decentralized network in this way would give to Bitcoin is that it's resilient, right? It's hard to knock all the nodes offline at once. So there's a resilience aspect to it. But then people use it as something much more than that. They use it as saying that there is no power at the core, right? There's not a central power. And it makes us feel like there's really no power. It's diffuse. It's kind of one of the terms I use in the paper is it's accountability, I think, floating freely, which people feel good about. I can't pin it down anywhere. So it doesn't exist.

Unknown (22:49)

Interestingly as well, the term decentralization is. It's almost like a fantasy term, right? It's like fantasy future of decentralization of power. But the reality is, when I was going through it, I came to the kind of conclusion that you did at one point. I was like, it is impossible to define and it is impossible to create binary rules about certain aspects of decentralization because then you just create arbitrary lines in the sand. So it almost becomes. I feel like decentralization is like a nice marketing term and it's a nice descriptive term for like some kind of goal, but it isn't particularly useful when you come to legislate because I'm assuming the law prefers binary outcomes.

Angela Walsh (23:33)

Well, so the law is. It's very interesting. There's a whole big debate in the law about whether you. It's called the rules versus standards debate. Okay. Do you try to set up a black line rule where things are very clear? It's binary, right? Where you're either on one side or the other. And it's going to have. The goal is to have clear consequences, clear outcomes. The alternative is to set up a standard, right? So a fuzzy standard might be that you have to use reasonable efforts or good faith efforts. Well, how do you know what those are? Right. And it only. It's kind of like a feeling that you have and you can look at other things like, well, how much money did you spend to accomplish something? You had to use reasonable efforts to achieve, right? How hard did you work on? How many hours did you spend? What did you actually achieve? How many people did you talk to to try and make it happen? So in standards when you have a standard in law, there's often kind of an underlying set of factors that you look at that try to be more concrete, to add, to add color to the standard. But here. So thinking about decentralization, right, A lot of people talk about it, and I just had a conversation with Jimmy Song actually last week at south by Southwest, where his argument was that decentralization is binary. It's 1 or 0. And Bitcoin is the only one that can say that it's decentralized and everything else should just give up and call themselves centralized. So he sees it as binary, I see it as more of a spectrum. And I also see it as incredibly fluid. And what I mean by that is that if you're attempting to measure the decentralization level of any given cryptosystem, it's arguably changing by the second, right? It can change with the number of nodes that enter and exit the system. It can change with mining concentrations. How many people join one pool? Are these particular miners joining together to collude? And it can change with developer composition. Right. If some of the core devs are found, or if the people think that certain core devs are compromised or something and they take away their commit keys, then that has changed the decentralization level of it. So it's very fluid. And if you try to characterize systems in a legal way according to a decentralization level, you're definitely going to have to be doing frequent measurements. And if the decentralization of a system determines a particular favorable or triggers a particular favorable or unfavorable legal outcome, people are going to want to game it. That's what always happens with legal rules. This has come up with most obviously in the discussion that we're having about whether Ethereum is a security under the US securities laws.

Unknown (26:26)

So Bill Hinman's made this all difficult for us.

Angela Walsh (26:28)

Yes, exactly.

Unknown (26:29)

So it was kind of a vague, kind of. It was almost like I felt he wanted to test the waters, see what the response would be. But it was kind of like a vague, he said a coordinated group that's working actively to develop or guide the development of the infrastructure of a network. So he used that as his kind of, kind of guideline of whether something is centralized, decentralized, and made the point that something could start centralized and become centralized. So this is why we care, right?

Angela Walsh (26:56)

Yeah. Well, this is one reason why we care is because a crypto system's level of decentralization appears to be relevant to whether the SEC is going to consider the token that sits on that system to be a security. Okay. So in June 2018, Bill Hinman gave a speech that was very heavily watched in the crypto space. I'm sure all of your listeners are, you know, have heard about this speech and essentially in it he, he said that both Bitcoin and Ethereum seem to be sufficiently decentralized such that they should not be treated as securities.

Unknown (27:31)

But sufficiently. It's vague again, right?

Angela Walsh (27:34)

Absolutely. It's a standard. Sufficiently decentralized is what we just talked about. Rule versus standard. Right. That would be a definition of a standard. Right. It's. It's a vague thing. What is sufficiently decentralized mean? And he tried to give some more color to it. Right. He gave us. He gave some things that you could look at to think about whether a system is sufficiently decentralized and just what you were talking about. Right. It's sufficiently decentralized where purchasers would no longer reasonably expect a person or group to carry out essential managerial or entrepreneurial efforts. Right. If you don't expect that, then it may not be a security. It may be sufficiently decentralized. A lot of it has to do with. He talked about information asymmetries as well. Right. Do people, do certain people in the system have information that other people in the system don't and can use that information that they have in ways that benefit them as opposed to the rest of the people?

Peter McCormack (28:33)

Next up, I talked to Angela Moore about the issues with integrating Bitcoin into legacy financial systems. But before that, I've got a message from my show sponsors. And as I said with blockfi, I said it in the last show. I'm going to say it for a couple of shows. There's been a lot of interest with their new interest accounts, but there's also been a lot of debate about it. Zach being the amazing CEO he is. He's just opened up the floor. He said to me, pete, look, put it out there. If people got questions, I'm willing to answer them. So the floors open. If you've got any questions, feel free to email me. My email address is. Hello? What? Bitcoindeer.com Tell me the questions you have. I'm going to get on the mic with Zach and we're going to record it and we're going to look into the issues you have. I'm going to put that up probably up on SoundCloud. So yes, email me any questions you got for Zach. If you are interested in this new product, you can check it out on their website. That is blockfi.com, which is B, L, O, C, K, F I.com and also I've got a new sponsor that signed up for a few weeks. So I just want to say a big thanks to Flu Bit. I've used it. It's a website like Amazon, which allows you to buy a range of products. They've got loads on there, but you can do it with crypto. They accept Bitcoin, Ether, Litecoin and Mew Mew. I don't know and I've not used it. But I went on and I bought myself five copies of Andreas the Internet Money with Bitcoin to see what it was like. And, you know, it's pretty damn cool. It's pretty damn easy. Once those books get delivered, I'm going to do a giveaway on Twitter, so keep an eye out for that. And one of the coolest things about the site is they've got this little checkbox when you do a search that allows you to check for items that are cheaper than Amazon. I thought that was pretty cool, actually. So if you go to flubit.com, you can get cheaper than Amazon and you can pay with your Bitcoin. So check it out@flu bit.com which is flu bit.com.

Unknown (30:11)

So what are the reasons we really need to care about the use of this term? Obviously, we said here with regards to a security abuse of power and front running are potentially other options. Any other reasons we need to care about why this term is being used?

Angela Walsh (30:25)

Okay, so, yes, it has to do with. So in the paper, I talk about, I think the term, the way that we're using the term, the way that everyone in the crypto space uses it. But then what we're seeing with, you know, mainstream normal people, non crypto people using it, people in the financial system, and then also legislators, policymakers, regulators using it, is that I think we're using it to say there's no power here. Okay. And if you use it in that way, then you feel like there's nobody there that has power to hold accountable for anything. You can't regulate it. Right. It's almost as if law says that's off limits, you don't have to worry about it. There's a nice shield there. It says decentralization on it. This is a decentralized system. You don't have to look behind it to worry about law having a role there because it's decentralized. So I actually see that shield kind of functioning as what I call a veil of decentralization. Okay. And in, in law, there's a concept called the corporate veil. Okay. And there's. You can form a legal entity like a corporation or a limited liability company. And one of the perks of forming those legal entities is that you get limited liability. Okay. And I. So piercing the corporate veil is said to. What happens when a court does that is that they say, nope, we're going to disregard the corporate form and go after the people actually in the system. They didn't maintain the corporate form properly. So we're going to pierce the veil. I think there's a similar veil being created just by categorizing a system as decentralized. And that's problematic to me because that means we're not thinking about it properly from a legal perspective.

Unknown (32:15)

What I'm trying to get at is where will laws be broken that we need to care about? So I understand the securities laws. I think I'm pretty comfortable saying it's very difficult to define Bitcoin as a security. And I'm quite comfortable with the name, isn't. I think there are questions over Ethereum.

Angela Walsh (32:30)

Still, but certainly where is it in the bigger context?

Unknown (32:32)

But yeah, but certainly with regards to other ICOs, almost certainly their securities. Right. So I get that.

Angela Walsh (32:37)

Yeah.

Unknown (32:38)

With regards specifically, say to Bitcoin, where else will laws potentially be broken where the term decentralization may be used as a, as a veil.

Angela Walsh (32:49)

Yeah. So, okay. I think that it can come up really, in any legal determination or policy determination that you're making about these systems because you are fundamentally misunderstanding how power works in the system. If you just view them as decentralized and don't look through that veil, then every decision that you make about them, legal or otherwise, is flawed because you're misunderstanding power. Okay, so that's, I think the big picture here, misunderstandings about how power operates makes every decision you make about it flawed.

Unknown (33:23)

Okay. So what you're basically saying is there are people or entities that have power within Bitcoin but are almost acting outside of the law because they have no fear.

Angela Walsh (33:32)

Well, they could, they could act outside the law. I'm not accusing people of doing so.

Unknown (33:38)

But there's a potential.

Angela Walsh (33:39)

There's a potential to do so and to. And to get away with it because the law can't see them through the veil.

Unknown (33:47)

Right. Again, the cypherpunks celebrate.

Angela Walsh (33:50)

That's the whole point. Right.

Peter McCormack (33:51)

Okay.

Unknown (33:52)

So I think it would be useful to start looking at where you've talked about there are kind of entities of power and how that can be used. So firstly, I think the one that stood out to me most is with developers. And you put a very interesting quote in that every line of code is an exercise of power. And I mean, you can certainly see how there are many contributors to the core code and anyone can come and join and be part of that. And there are certainly hierarchies within, within the programmers. But I never thought of a line of code as an exercise of power, but of course it is.

Angela Walsh (34:29)

Yeah, I, I mean, I think we're recognizing that more and more. Right. As code performs more significant functions in our societies. Right. You're every. If code does something, there was a policy choice behind it about whether or not that code should do something, and you're implementing that policy choice. Same as maybe, you know, you could view it as passing a law, taking any other concrete action through writing that code. So Bitcoin doesn't come into effect unless there's software code that runs. Right. So I don't think we can overlook that creating software is power.

Unknown (35:04)

Is that an overlap with your other paper of developers as fiduciaries?

Angela Walsh (35:08)

Yeah, there is definitely an overlap there. I am very interested in understanding how power with software works. It's a larger interest that I'm hoping to continue to explore. One of the reasons my arguments that developers function as fiduciaries, meaning there is high trust placed in them, is there's a worry that if you in blockchain systems view them as fiduciaries, then what does that mean for other open source software? Is every open source software maintainer or core dev, are they potentially a fiduciary? So I don't have an answer for that. I think it absolutely matters how significant the software is and what it's doing before you can answer those questions. But that's one reason why it's controversial.

Unknown (36:01)

So what was quite interesting then is you talked about the forks or the CVE bug, where a very small group of lead developers, maintainers, recognized the threat that had to the protocol and designed a process to fix the bug and communicate that with the miners. That, to you, is a very clear example of a concentration of power.

Angela Walsh (36:23)

Yes, absolutely.

Unknown (36:24)

And I was like, yeah, I don't disagree, but at the same time thought, I can't think of any way to do this which is safer.

Angela Walsh (36:32)

Okay. My argument that it's an exercise of power has nothing to do with whether it's the right thing to do to keep the system safe. That's probably absolutely the right thing to do to keep the system safe is to limit the disclosure. So the issue Was this bug in September was. It was reported to a very small group of people. I think it was like four or five initially. And those core devs realized that actually the bug was a lot worse than had been reported. Right. It was potentially catastrophic inflation bug. So they essentially hid the fix to the inflation bug in whatever upgrade that they proposed to fix it and didn't tell the people who they asked to upgrade about the more serious bug. That's probably a good way to fix a very serious bug and not have the system collapse and. But that also at the same time, they were making a decision on behalf of all the other people in the system. Right. And that's not consistent with a characterization of the system as decentralized and no concentrated power. Right. So something can. You can still have power being exercised. And I'm not arguing that it wasn't exercised in the right way, but I am arguing that there's power.

Unknown (37:54)

Yeah. And interesting. I've interviewed core devs, I've met core devs I implicitly trust every single one I've met that they act honestly for the best of Bitcoin.

Angela Walsh (38:05)

Yes.

Unknown (38:05)

But it's not for you. I'm seeing. The point you're making is that if Bitcoin is just some cypherpunk project with people around the world sending bitcoins back and forth to each other, that's fine. But if it is to integrate with a legacy financial system, with financial products, integrated with companies investing futures, various other derivative products, that if there is a centralization of power or there is a group of people who have knowledge of things like bugs, then that is something that the legal system and the SEC have to be aware of.

Angela Walsh (38:39)

Well, I think certainly being aware that there is a possibility for that and that it can have consequences. Right. So, I mean, I think that it would be. I think that probably most bitcoiners would have an issue if they found out that one of the core devs with this, when they found out about the bug, they tipped their friend about it and their friend was able to buy some sort of derivative product. Right. And make a ton of money on that knowledge before it was disclosed to the rest of the world. Right. And I'm not accusing anybody of doing that, but that doesn't mean that the opportunity is not there. And it's, it's. It's interesting to me that there's such strong resistance to this idea of developers having duties to, you know, not improperly profit off the system, as that would be. Right. I think most people would see that as that's not right. Or to. And also to do their very best and make the best decisions for the system, which they were doing when they fixed the bug that particular way. Right. So I think they're actually already abiding by what would be fiduciary duties. Right. They are doing their best. They do copious amounts of research generally before they. And they test out cold, right. Before they, before they release it, they are on it. When there's an emergency situation, they respond and they really try hard to fix it in a responsible way. They act as fiduciaries already. So it's interesting to me that there's such pushback and I almost think like the system would be, it could be a selling point of a system. Right. If you said, yeah, our devs are fiduciaries, we fund them. I think the funding component really complicates this because with open source, right, okay. It's. I'm doing it in my free time, I'm doing this development in my free time. I'm not necessarily going to be compensated. And there's been a lot of questions and complexity and how Bitcoin core devs and now Ethereum are compensated. Now Ethereum is looking at potentially having, integrating like an automatic payment. Right. Or creating a fund for maintenance of the protocol. So these are all wrapped up together, the funding and the accountability.

Unknown (41:08)

So if a core developer was aware of the bug, told a friend, a friend took out a significant short position, the core dev disclosed the bug, the market crashed, the friend made a profit. Has a law been broken there?

Angela Walsh (41:23)

I don't know. I'm not an insider trading expert and.

Unknown (41:26)

It feels like an insider trading, doesn't it? So I guess what you're saying is there needs to be some kind of framework for developers to. Or there needs to be at least a conversation and an understanding if there is a fiduciary duty. Because otherwise if something like this does happen, there may be a test case.

Angela Walsh (41:45)

Yeah, well, so if I were a dev, actually I would be concerned about the ambiguity of my accountability. And actually some devs in, I think a core dev or two in Ethereum has quit because of that. They didn't. They were concerned that they could be held legally liable for what they were doing. So if you at least get your, you know, accountability cleared up and know what it is, then you can say, well, the system needs to compensate me X amount so it can get me liability insurance and you can, you can set up a system that is going to give the devs comfort and maybe would ensure the longevity and stability of the protocol. Rather than like people think I'm attacking open source software generally, but I'm asking whether the practices that have come from open source software, the, you know, the, the rough consensus ideas, the, the ambiguous governance, whether those are suitable and something that is money, but certainly in something that could be infrastructural in the financial system and tied to many different assets.

Unknown (42:53)

So these are things I've not heard the SEC talk about under consideration of ETFs. They are concerned about wash trading, they're concerned about the way the markets operate. I've not heard them talk about this side of things. But if we're going to, let's say if we, if the SEC are going to eventually approve an etf, if this becomes a problem, you're going to be saying, look, I told you so. Right? We should have been talking about this before.

Angela Walsh (43:15)

Yeah, I'm concerned about. Right. Governance at the core. And if you have flawed governance for this asset that sits at the core of many different products, potentially an etf, then it's rotten at the core. Right. And it can, that, that rot can proliferate to everything. You build on it. So I think perhaps the problem is, is, is that there's not necessarily the clearest mandate in our regulatory agencies to address these systemic issues. Right. So I think my concerns are about systemic risk really. And some of the regulators, like the SEC does have some mandate to think about systemic risk. And there's a group, the Financial Stability Oversight Council, that has a representative from a bunch of the different regulatory agencies that is supposed to be thinking about systems systemic risk. But it's not the most obvious question. Right. It's much easier to say, is there this particular type of bad trading? And I think we're missing all the infrastructural issues.

Unknown (44:18)

And you say using decentralized as a term to make legal decisions is difficult and complicated. And I'm starting to see that now because you're talking about should something happen, are we ready? Right. So if an ETF is a, and something should happen, we should have the legal standards in place that all other ETFs exist for. Right. So when you've put this out into onto Twitter, crypto Twitter, let's ignore the trolls. You've obviously had people debate you and discuss with you what's the general feedback on the negative side? Where are they disagreeing with you?

Angela Walsh (44:56)

Okay, so there are, there are different areas of disagreement. And one of them, the most interesting one to me is when it's disagreement about the facts. Okay. And by that I mean that they don't see the same pockets of power that I do. They just, they don't see them existing. So they're. I think they feel like there's enough, there's enough sort of backstops in the system like that devs can't force people to upgrade. Right. They can't force people to run any particular software. That's true, they can't.

Unknown (45:37)

And there can be multiple implementations.

Angela Walsh (45:39)

There can be multiple implementations of software. That is another one. And I think I need to clarify that in my writing as I continue to move forward. But that's absolutely one. So, yeah, so there's those aspects, but I don't feel like those. They don't overcome my points about power being exercised.

Unknown (46:00)

No. And you added there was two other ones that really stood out as well. One specifically for Ethereum where you talked about the secret meetings where essentially a monetary policy was.

Angela Walsh (46:10)

That's what I see happening. Right. It's fascinating. So Ethereum is in the midst of this really heated involve discussion about the governance of the system. And you know, you've seen someone quit because the discussion was essentially about whether there was a conflict of interest for one Ethereum core Devry. I can't remember his name. Yeah. Working on the core Ethereum protocol and also working for Polkadot or someone else. Right. And so is that a conflict of interest? Conflicts of interest are only relevant if you think these people have fiduciary duties and a duty of loyalty to work. I mean, it's what I'm watching in the Ethereum world. The questions that are being asked about, you know, does this have to be done in public? Well, I don't want to have to do it in public necessarily. These discussions about bugs or how the, how the policy should shift, etc. I don't want to necessarily have to have them in public because people will mischaracterize them and it will cause reactions that shouldn't happen on the system and the price may spike or price may plummet. Well, that's governance. Right. And it's hard. And when you're dealing with a system that has real implications for people. Right. Value embedded in it and also serving as infrastructure to all the smart contracts, etc. Those discussions have to happen. And you see why I make a clear reference to this in the paper that you're discussing there. You see why something like the Open Markets Committee for the Fed does these discussions behind closed doors and then releases it later. Because what they're talking about is market Moving stuff. What the core devs talk about at their meetings is potentially market moving stuff.

Unknown (47:58)

It's potentially market moving stuff for people who hold a significant position in Ethereum.

Angela Walsh (48:03)

Yep.

Unknown (48:04)

Does that concern you?

Angela Walsh (48:07)

Say what you're.

Unknown (48:08)

So for example, the closed door meeting for Ethereum where so the monetary policy was changed recently. I can't remember the details because I didn't research it after I read your paper.

Angela Walsh (48:17)

Yeah.

Unknown (48:17)

But I remember something with their. They changed the, the minor reward.

Angela Walsh (48:21)

Oh right, yeah.

Unknown (48:22)

But the people making that decision likely hold very significant Ethereum positions and that can move the Ethereum market.

Angela Walsh (48:28)

Yep.

Unknown (48:29)

Now I'm pretty sure regulators who work in other markets cannot regulate on companies they hold positions in.

Angela Walsh (48:38)

So. Right. There's absolutely conflicts of interest all over this. Right. And if you. Right. If the core devs have their hands in different pots interest in different projects, then of course you would want to think about whether their involvement in other projects is going to determine their decision, affect their decisions on this particular one. That's all about the duty of loyalty. I mean that's what that is, that you can't, it's. You can't self deal meaning you can't do things that are solely to your benefit. Right. That you don't tell them about that you don't disclose these things. So it's fascinating to me how there's, I mean it's, it's just. To me it looks like a denial of the facts but people truly think that I'm way off when I say that there is information asymmetry and power differential.

Unknown (49:32)

So what now then? I'm going to tell you what I think you're trying to say not just to put words in your mouth but I don't think you're saying stop. I get a feeling you're saying slow down, there's more things to resolve it.

Angela Walsh (49:43)

Yeah, I mean my biggest message is slow down. Right. I haven't figured out whether these systems are going to be good or not and I don't think we can know yet because they are highly experimental and it's impossible to stay on top of all this stuff because a new thing comes out every day. The pace is so quick but we are, we are rapidly integrating them into the financial system and that's what I would say is slow down. The kind of related to this but not necessarily crypto. More blockchain esque but it's same kind of, you know, hyper pace. Legislators are passing laws requiring the use of blockchain technology to keep government records and stuff and. Are you kidding Me. Right. We don't know if this stuff works at all. We don't know if there's a There, there. So you're going to say that we are mandating to put government records on it. Give me a break. Just slow down.

Unknown (50:36)

And your favorite topic, Voting on the blockchain.

Angela Walsh (50:38)

Oh, God. Yeah. Well, I'm not the super expert on that, but the experts that I trust are horrified by the very idea.

Unknown (50:45)

Yeah. I'm kind of happy with voting as it is. It doesn't bother me to go and. Right. On a piece of paper.

Angela Walsh (50:49)

Yeah.

Unknown (50:50)

Okay. So another interesting point that came from is like I read. I don't know if this was your quote or somebody else's, but this feels like a second chance to get the power dynamics of our digital activities. Right. So that is a reason to slow down because it is interesting.

Angela Walsh (51:04)

Yeah. So I see so many comparisons of this phenomenon, the permissionless innovation, the crypto phenomenon, to the birth of the Internet. Okay. And you know that it's. We can't even imagine what it's going to create, just like we couldn't at the early stages of the Internet. So that's fine. It may be, I don't know one way or the other yet, but people are viewing it as. That was my quote that you were talking about, the chance to fix it. Right. Because we're seeing, you know, strong pushback and kind of at what we've built on the Internet with these very big concentrated platforms like Facebook, like Amazon, like Google, et cetera. And we're finding out that they have been doing things to us that we are not aware of. Right. Using our data, all these huge privacy violations, manipulating politics potentially. So, oh, my gosh, that was bad. It was utopian at the beginning, but it turned out bad. So we can, we can improve it here. So my, my plea is that slow down, think about it, don't be in denial about power, where power lurks or where it is. Describe it properly and then make decisions based on the truth rather than hype.

Unknown (52:20)

And your two kind of pieces of advice was that we need to actively interrogate how power operates. And the second one more importantly. But it's actually quite scary to do at times. I'll explain why. Is to push back on the think pieces from thought leaders that fantasize about a better world because it's decentralized. It is very hard to push back against hardcore bitcoiners and look outside of bitcoin and to challenge them. It often comes with. It can be quite intimidating to do. But you Think we need to be doing this?

Angela Walsh (52:49)

I think we have to. I mean, I don't think we're serving anyone by refusing to ask the questions. And there are plenty of people in the bitcoin space who encourage these questions and think that they absolutely have to be asked and answered. So, I mean, Rusty Russell at Blockstream is someone I, you know, met at a conference and, you know, absolutely within the bitcoin space, working on Lightning. He doesn't mock my questions. When I ask these questions, he's like, yeah, we need to be asking him. So I think there are plenty of people in the space asking the hard questions. It's very hard to kind of push aside the unwillingness, I guess, of people to engage with them. I'm just concerned that the people asking the hard questions are not the ones who have the ear of the regulators and the policymakers. So I think the people who have their ear are more pie in the sky and less about the risks.

Unknown (53:52)

Okay, conscious of time, there are a couple of other areas I wanted to get into with you. We won't spend too long on them. But firstly, you said many people fail to understand the risk from crypto assets and you've talked about in relation to the previous financial bubble. I'm trying to understand your fear here. I mean, there's obviously a lot of volatility in bitcoin and as bitcoin and crypto grows, the impact on that volatility reaches wider and further. So this latest bear market, a lot of people have lost a lot of money. If it keeps having these wild swings, it can keep happening. Now I know you aren't just talking about that in isolation, but is that what you're getting at?

Angela Walsh (54:32)

Well, so thinking about the last financial crisis, I view one of the causes of it, right? In the US at least, it's viewed that subprime mortgages were one of the big causes of this. Right? So people bought this asset believing that it was not as risky as it was that mortgages, house values across the US could not simultaneously fall. And based on that belief, subprime mortgages were put into these mortgage backed securities and those were sold widely, integrated into countless other financial products. Right? Like the financial system works its magic basically by creating infinite derivatives based on what ultimately you would boil down to a subprime mortgage. Okay, so that subprime mortgage was a poorly understood asset from my perspective. Right. But yet integrated widely and had many different chains in which what happened to that particular mortgage could have a consequence. So I see, I see crypto assets potentially Having the same potential in that Bitcoin or whatever crypto asset that you're putting at the base of like trading futures based on them ETFs as collateral for loans, as we're seeing now, all the lending and synthetic this and whatever that. Right. What happens with the underlying asset then triggers many, many, many different consequences for people. So if we poorly understand the risks of this core asset like Bitcoin at the base and don't realize that, well, gosh, the Chinese government can shut it down because they just shut down the Chinese miners or something. Or they can. Or we're underestimating the risk of a 51. The ease of a 51% attack because someone, you know, a government, a state actor can buy a 51% attack.

Unknown (56:35)

Or a bug is found. Another one.

Angela Walsh (56:37)

Or another bug is found. Yes.

Unknown (56:39)

Which, which does allow the activation of inflation. The market panics.

Angela Walsh (56:43)

Yes.

Unknown (56:44)

Sells off cascading effect across the financial system.

Angela Walsh (56:46)

Yes. And I think it would probably, if that were to happen in a Bitcoin, it may also have cascading effects across all cryptocurrencies because there would be suddenly doubt. Oh, we didn't understand those as, as well as we thought either, if we didn't understand Bitcoin, and that was the oldest. Well, maybe we don't understand Ethereum at all or any other crypto asset.

Unknown (57:06)

I'm starting to feel like, because I'm a bitcoin fan.

Angela Walsh (57:08)

Yeah.

Unknown (57:09)

I'm just starting to feel like Bitcoin is better outside of the legacy financial systems.

Angela Walsh (57:13)

Well, I mean, I think there is that and I'm much more comfortable with it as an idea outside of that. As long as you do it in your own little walled garden, great. But once you start linking it to the financial system, then I'm sorry, but you're not just having an impact on yourself. So this was something that also that came up in that discussion with, with, with Jimmy Song, actually. His, his points were that if you don't like it, don't invest in bitcoin. Right. If you don't like the way it's run, don't invest in it. That is absolutely fine until it can start to affect other people because of the links to the mainstream financial system. And, you know, if they're big enough, is there another bailout? Does it cause a financial crisis that requires a bailout? And then even though I didn't invest in bitcoin, Right. I can be strongly affected by it because of its links.

Unknown (58:08)

That's a very fair point. I think Andreas said he doesn't want ETFs. I'm going to go back and have a look at that and see why.

Angela Walsh (58:14)

I think you're right.

Unknown (58:15)

I wonder if there's a link to what you were saying. Okay, the final thing, it's kind of putting you on the spot. We spoke about it briefly and I'm going to point to the fact that you said you need more time to look at this. But we did speak about it in the car and made some good points. Dai, make a dao, I said to you. I don't really get it. I mean, I understand what it does, but my big fear of DAI is that it relies so much on Ethereum. You know, protocols and other cryptocurrencies have died or become materially worthless. It feels like DAI is beholden to Ethereum and that worries me.

Angela Walsh (58:47)

Yeah, so I agree with you for that reason, like Ethereum in that sense is functioning as infrastructure, Right? Financial infrastructure. And any other systems that build on Ethereum, all the ICO tokens or whatever that were issued on top of Ethereum, they're using it as infrastructure. So therefore, all of these questions about the governance of the underlying protocol and what the software developers do at that protocol level are critically relevant. Right. To MakerDAO and every other system built atop it. So I just don't think you can escape that. I think we need to be looking very carefully at systemic connections between all of these different things. And that's why experimental governance at the lowest level, at the base level, in the foundations, makes me very nervous.

Unknown (59:40)

So I'm going to conclude our interview by saying I think what you're leading towards, and I kind of. I think I agree, is that. Slow down more discussions. Let's have open discourse. Let's not. Let's not fear these discussions, because there is systemic risk here.

Angela Walsh (59:57)

Yes. Okay. Can you come be my mouthpiece?

Unknown (60:00)

No, no. I've got enough people shouted at me already. Angela, this is wonderful. Thank you so much. And tell people how they can follow your work. I will share, obviously, the academic work you've done in the show Notes, but tell people how to follow you and tell them how to be respectful on Twitter.

Angela Walsh (60:16)

Okay, so you can find me on Twitter, angelawalch W A L C H. And then you can also follow my work on my website, angelawalch.com and on there I have things like my speaking engagements, media, and also the teaching materials. I taught a course in blockchain.

Unknown (60:34)

Brilliant. Fantastic. Thank you so much.

Angela Walsh (60:36)

Thank you.

Peter McCormack (60:43)

Okay, what did you make of that? How was that? What do you Think of Angela, to be honest, I think she was awesome. We had a lovely Mexican beforehand. We went for a ride in her minivan before we did the interview and had a good chance to kind of get to know her, understand her perspectives, where she's coming from. So I recommend you review her work, go read her reports. As I said before, they're in the show notes. And if you do want to discuss it with Angela, please just be respectful. Don't go on Twitter and start being rude or aggressive to her. She's not anti bitcoin. She's just recognizing that there are potential issues with integrating bitcoin within the current legacy, legal and financial framework. So I definitely think she raises issues that should be debated. But what do you think? Do you think her points are valid? Do you think there are central pockets of power? Do you think we need to care about them? Do you think there are conflicts of interest? It's really, really important that we discuss these issues. So I'm wrestling with it. I'm also wrestling with that desire to grow bitcoin through institutionalization. But again, that being against the cypherpunk dream of, you know, screw the system. This is separation of money at state. We don't want to be part of the system. Definitely wrestling with that. Would love to talk to a cypherpunk about it at some point. So, yeah, hopefully we'll do that in the future. But as ever, I'd love to hear from you. Tell me what you think of this interview, Tell me what you think, what Angela has to say, and feel free to email me about that. Also, big thank you to everyone who supports the show. Anything you do, if you just listen to the ads or you leave me a review on itunes, everything really, really does help. So thank you to everyone who's done stuff in the past to help me. If you haven't yet and you want to, there's a whole bunch of things you can do. I always say, check out the sponsors, so definitely listen to them. And if you don't like the sponsors, you can become a patron. I've got 89 now, which is crazy. That's it. Patreon.com whatbitcoindid if you don't wanna use Patreon, you can subscribe to the ad free version, paying by crypto. Drop me an email, I'll give you an address, add you to the deposit list. You can even do it with Lightning. You can become a show sponsor. I've got one slot available for April, which is Lightning month. If you want to take that get in touch with me. Email me on hellohatbitcoindid.com March is looking like I'm going to crack 200,000 downloads, which is utterly ridiculous. So thank you to everyone for that. You can leave me a review on itunes or click on the subscribe button. That helps with the rankings. You can follow me on social media. I'm on Twitter, I'm on Instagram, I'm on Medium. I'm at what Bitcoin did on everything. My personal Twitter is at Peter McCormack. DMs are open. You can check out my website, whatbitcoindid.com and you can sign up to my newsletter and you can share the show with your friends and family. I'm getting used to firing that out pretty quickly now. Sorry if it annoys you having to hear every week, but you know, sometimes there's new listeners and it definitely helps the show. As I mentioned, I'm off home today. Can't wait, can't wait to get back see my kids. It's been such an amazing trip. I've met so many cool people, so many new ideas, so many new show topics I want to cover. I've had some really amazing interviews. I've got a few to get out this week before lightning month starts. I've got Chris Spinitsky, which is really, really cool interview, and I've also got my doubleheader show looking at the issues faced by sex workers. I know I cover that with people from Spankchain. You're just gonna have to get over that because I still think they raise some really interesting points. And also look, there's an additional show on SoundCloud, an interview I did with Shinobi, just talking about maximalism and responsibilities within journalism. And you know, it's a real back and forth between what I do and his opinions on it. I thought it was pretty cool. That's up on SoundCloud, if you want to listen to it and if you want to reach out to me, my email address is hello@whatbitcoindid.com.