← The Peter McCormack Show
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- [00:01]
Peter McCormack
Welcome to the what Bitcoin did podcast. Hi there, how are you all? Have you all settled into 2019? Welcome to the what Bitcoin did podcast. Simply the number one Bitcoin podcast in Bedford. I'm your host Peter McCormack and today I have an interview with Tudor Demister discussing his bearish case for Ethereum. But first, I do have a message for my show sponsors. So let's talk about BlockFi. Regular listeners will know these guys. They have been a long term sponsor of the podcast and what has been really interesting to know is that I've had a bunch of conversations with people recently about the podcast and people telling me that they've been checking BlockFi out. They're really interested in what they're doing. They maybe don't have a need for a loan right now, but they're interested in the products that are coming and they've been registering for their newsletter or following them on Twitter. So that's really cool. They've got loads of interesting stuff going to be happening this year, so yes, keep an eye out for them. But if you are interested in a loan, whether you're paying off a credit card or buying a house, BlockFi helps crypto investors use their Bitcoin Ether and Litecoin without selling. Blockfi is the leading crypto to USD lender in the US. They service over 46 states and their interest rates start as low as 7.9%. So if you visit blockfi.com whatbitcoindid you can learn more about using your crypto without having to sell. And also, have you checked out my other lead sponsor packs full yet? Come on, you gotta check these guys out. They have the most comprehensive options for buying bitcoin that I've ever seen. They accept the normal bank transfers, debit and credit, credit cards, PayPal, Western Union, but they have so many more options it's kind of mind blowing. If you go on the website you can see there's over 300 payment options for buying bitcoin. So go and check them out. They are also a true peer to peer bitcoin marketplace. They have a full service escrow system and they also offer 24. 7 support. These guys are awesome. They're a proper bitcoin company. Go and check them out. That's Paxful.com P A X F U L.com okay, so onto my interview with Tuure and this is my second interview with him. So a little bit of a background he's been on before. He was on episode 32 where we discussed Bitcoin, but also touched on some issues that Tua has with Ethereum. I wouldn't usually have a guest back so quickly, but recently he dropped a tweet storm explaining why he is so against Ethereum. Kind of blew up lots of discussion, lots of counterpoints, lots of counter arguments. So listen, I approached Tua, I said to him, would you mind coming on and discussing it with me? I think sometimes maybe with a tweet storm it comes across as like really in your face and kind of aggressive. But actually, you know, getting to know Tour. He's very considerate about what he writes, you know. So I said to him, look, let's come on, let's discuss it. Let's make it a kind of balance discussion around the issues he has because, you know, I don't understand it all and I don't agree with everything he has to say. So having the chance to debate it and, you know, knock it back and forth over the podcast, I thought would be a great idea. Now, while I agree with a lot of Tua's points, I don't agree with everything and I would happily have someone on to discuss it from the Ethereum side. So listen, Vitalik, not sure if you listen to my show. Preethy, not sure if you listen to my show. I'm not sure if anyone who loves Ethereum listens to my show. But look, if there's anyone who's entrenched within the community, they want to come on the show, discuss the counter arguments, more than happy to do it. Just reached out to me on hellohatbitcoindid.com I think anyone who knows my show knows I tried to do a balanced and fair interview, so would happily do that with you. Just a couple of notes though. If you haven't read the tweetstormed by Tua, please do read that before listening to the interview. I've added a link to that in the show notes also. Also the name for the show, I've got to say, the Bearish Case for Ethereum. This came from Vijay Boyapati when I did my interview with him discussing the bullish case of Bitcoin. He said he's looking to write a follow up, which is the Bearish Case for Ethereum. I approached him, I said, look, I want to title this show the Bearish Case for Ethereum. Are you okay with that? And he said, yeah, no problem. So listen, when he does write the article, you got to know that the title for that came from him. Okay? So listen, look, if you do want to support the show. There's a whole bunch of things you can do. Got so much support recently, so thank you so much, everyone. There is a section on my website if you head over to www.whatbitcoindid.com you can see there's a support section. There's all different things you can do. Even just leaving a review on itunes helps me out. Also, I do want to thank my first patron, top tier supporter, elite crypto consulting, your personalized trading teacher. Thank you guys for supporting the show. Okay, so onto the interview. If you have any questions, you know you can reach out to me. My email address is hellohotbitcoindig.com and I look forward to hearing from you.
- [04:16]
Tudor Demister
Hi there, Arthur.
- [04:17]
Peter McCormack
How are you?
- [04:17]
Arthur
Hey, Peter. How's it going?
- [04:19]
Tudor Demister
Good, thank you. Did you have a good Christmas?
- [04:21]
Arthur
Yeah, yeah, I had so much fun this year. Yeah, it was great.
- [04:24]
Tudor Demister
Excellent. Okay. I didn't think I would get to interview again so quickly after our last one, but obviously you've put out a tweet storm this week that's raised some awareness of yourself and put out some thoughts with regards to Ethereum. So obviously I approached you, I said, I think it might be good to record a discussion around this because I think sometimes people might take something too aggressively. So I thought it'd be good to get you on, have a talk about it. And also some of the things are quite complex. You know, I'm not the most technical and I always want to learn. So I think it'd be good to go through some of this with you. But I think it might be helpful just as a way to set up, if you could just give a background to why you did this tweetstorm and how much work went into it.
- [05:05]
Arthur
Yeah, yesterday I went a few times like, oh, my God, what did I do? Because it. I thought it would be, you know, people would read it, but it was a lot more kind of pro and con debate than I expected, which is nice, but it kind of. It was bigger than I thought it was gonna be. So, yeah, where it came from, it was really this tweet that I put out about comparing Ethereum with this utopian ideology of Marxism and not everything about that ideology, but in particular three aspects. And I just briefly highlighted that where I saw potentially some parallels. And it was a serious tweet. I was. You know, it just really grinds me. Rubs me the wrong way when people try to monetize ideas that are not viable and that present them as viable. And so that's. That's utopianism. And we've seen a lot of that in the crypto space. And so Vitalik's response to that, I was just, you know, I was really annoyed by. And it also fits in a pattern where he will like quip back as if. And so he basically said, oh, I could play that game too, and then proceeded with like three semi identical criticisms to bitcoin, which were factually wrong, logically didn't make sense, but on the surface it kind of, you know, was like, oh, he got back at me. And it just really, it just really got to me. I was just very annoyed and I didn't want to because the traditional way that people respond is like, oh, they'll get back to him and like, they'll have like a longer response to why he's wrong. But by then all his followers have like, mostly they kind of lost interest and they moved on. And the memory remains that like, oh, you know, he won this debate even though the only thing he did was dodge the question. And so that was really the, I don't know, it doesn't sound like inspiring, but it was kind of the emotion that was like, all right, I just, I want to put out something to put this into context. It's like, why, why am I annoyed about this? And I think that went into the tweetstorm and I wonder maybe that's why it got so much response. Because I think a lot of people have felt this way about. And I don't want to single out Vitalik, but like, you know, about the people that are carrying the torch for Ethereum, that there's a fair amount of what I would call opportunism or, you know, sloppiness and just a lack of dedication to really getting to the bottom and being intellectually honest and then also having healthy business ethics as well.
- [08:26]
Tudor Demister
And you're not just some self labeled bitcoin maximalist reading Twitter, read it all day, drafting tweetstorms, attacking non bitcoin people just to defend your bitcoin.
- [08:37]
Arthur
It's ironic because pretty much Vitalik called me a bitcoin maximalist. So it's kind of like, well, yeah, I guess you can just repeat that word. But no, I mean, I could have invested in Ethereum. I could have invested in like Master Coin was the original inspiration for Ethereum. It was going to be a way to issue tokens on top of bitcoin, kind of like a colored coin experiment. There's been so many things that have been available for me and anyone to invest in. And so it's also why, like, I feel some self attack if I read back the tweet storm. Like there's some tweets that I'm like, ah, you know, I should, you know, this word should have been a bit different or I should have used a different source to illustrate this point. But it's also like, I don't, I don't have any, anything going on this. Like it's, it's not like I have a big Ethereum short that I'm, I'm flat versus Ethereum. Like I don't have any. Except for. And I tried to explain this. The stake that I have is just that right now, people don't talk about the bitcoin space, they talk about the crypto space. And so in the eyes of new investors or people who are kind of looking at the space or institutions even, they look at the top five assets. And so Ethereum is in there and a number of other ones too. And so the reputation or the technology of those tokens are going to influence how people's perception of bitcoin is because it's all part of the same basket in their minds. And so anything is often described as a blue chip, like, oh, all these ICOs were launched on top of it. And so it must be exemplary in the crypto space as like a project that really shows what blockchain can do. And so in my mind, it doesn't live up to its original expectations, it doesn't live up to its current expectations. And a lot of investors don't know this, they don't know why. And I think it's kind of tainting bitcoin to some extent. Like, it's really. Yeah, so that's what I wanted to like and that's my stake in this game. It's just like, I don't like that bitcoin's reputation is being tainted.
- [11:13]
Tudor Demister
And interestingly, I noticed on Stefan Levera's podcast recently, he's been pushing the bitcoin not crypto narrative, which is a quite interesting follow on from bitcoin not blockchain. And I guess some of the damage has been done where people start to think about index of crypto assets. Right? Coinbase have an index and other people have an index. They're almost aligning these different currencies together and they should all be considered together. But you see such fundamental differences. It's very important therefore, for you to separate what is bitcoin from everything else.
- [11:45]
Arthur
Yeah, it's kind of like in the 90s, if you had an index of search Engine companies. And you know, say that you and I were like, we live in Silicon Valley and we know the Google guys and we know the other guys and of course people are working hard. Like I think that's, I could have acknowledged that in my tweetstorm. It's like, you know, there are people out there who are putting their heart and soul into their Ethereum projects and I admire entrepreneurship like I really do. And so I feel bad that I didn't like highlight some of that. But at the same time it's like I don't want people to, you know, I can only share what I think is true. And so I don't want to disparage people to be entrepreneurs. But at the same time, if I think a platform doesn't have any long term merit, I want to say it so that, who knows, it just contributes to the general discussion. But so yeah, like those indices where you kind of throw together 10 coins and then of course you are going to. Your results financially are to some extent going to reflect how the space performs because you rebalance and if Bitcoin gains traction, you're going to have a bigger portion of that. But I don't think that's the best way necessarily to invest. Or at least what I've been saying is that I think aside from your multi coin basket, I think you should have a basket dedicated to Bitcoin. Like it shouldn't just be like one of, just like if you are going to invest in search engines, I think it's important to acknowledge, and we're talking maybe like the year 2003 or 2002, like it's important to acknowledge that there's a qualitative difference between Google and Yahoo. For example.
- [13:43]
Tudor Demister
Right, okay. And there would have been plenty of times that Bitcoin has been written off in its journey over the last 10 years. It still is being so, but especially in its early days, people would have had their doubts. Maybe even people, high profile people who've been involved from the project from the start, maybe even yourself. Arthur, there were times where you perhaps had your doubts. Is it not fair that Ethereum also has doubters and therefore it deserves the opportunity to be experimented upon? Or is there something fundamentally different here that you think deserves analysis?
- [14:17]
Arthur
Yeah, I mean I'm a free market guy, so of course if people want to build something and they want to rally investors around them, that's great to me whether where I draw the line and of course the interpretation of that is difficult, but it's like it's dishonesty like, you know, are you being straightforward about what you're doing? Are you being transparent about them? The research that historically has been done in the field that you claim to innovate in, are your business plans somewhat realistic? Do you have internal accountability? What are your financial interests left and right? Like, maybe you advise. I'm talking as if I'm talking about an individual, but I think it can apply to communities and organizations as well. There's a lot of buzzwords that Ethereum uses, like decentralization, censorship, resistance, smart contracts. And the implication is like, we are the smart contract platform, for example, even though Bitcoin has had smart contracts from day one, even though right now, today you can issue tokens on Bitcoin and it's starting to happen. Even though Bitcoin has been genuinely censorship resistance, and Ethereum totally has not. So it's like, and the decentralization is that, I mean that in itself, you could talk for hours about how do you measure decentralization? And so to me, I'm looking for integrity. I'm looking for people that are really dedicated to principles and that I want to see that shown in their actions. And so, for example, from the Ethereum community, I don't see real research being done. And like, how do we keep this thing decentralized? For example, like, how do we prevent this one company infura from. Or even how do we measure, how do we measure the level of centralization? At this point, I can't find the data and, you know, it's a concern of mine. There's a lot of indicators that it's going the wrong way. I've actually asked someone at the sec, like, is it, you know, do you think it's possible that even though Ethereum started as security, which was, you know, the ICO was centralized and then it was deemed to be just an asset, no longer a security because it became decentralized? Well, what if, because of what we're talking about, this blockchain bloat stuff, what if Ethereum becomes centralized again? Could it then be deemed a security again? He didn't like, in depth. Agree with me. And in terms of like, in a lot of words. But he definitely did not tell me, like, no, that wouldn't happen. You cannot go from a commodity to a security anyway. So whenever I air concerns there, it's like, what if there's a judge who orders, you know, who says this big Ethereum balance is the balance of a thief, it's the result of a theft. We need to move these Ether back to where they came from. And so I'm going to order Infura, who runs most of the Ethereum nodes, to just start deploying this new client, a hard fork client that claws back all the funds to where they came from. Wouldn't that set a precedent? Wouldn't that be a precedent that Ethereum is centralized because it can be court ordered around? I've asked that question and people have like literally mocked me for doing that. And so it's kind of like, you know, those, those things and it's been, that's, it's been like this for years. It really makes me wonder like how, how dedicated are you to these principles? Or are they buzzwords that you use to, to kind of excite investors?
- [18:30]
Tudor Demister
And where do you feel you are with the, like, what's your view on securities laws? Because I've seen when people have an issue, say with Ethereum or Ripple, they will often bring up it's a unregistered security. But they are also the same kind of people who I expect find that securities rules also discriminatory. So I sometimes, I find it's a careful balance of, of using it being a security as an attack vector when you might actually yourself not agree with securities laws because, because they are discriminatory. Where are you with that?
- [19:02]
Arthur
Well, I mean, I think cryptocurrencies are decentralized. If they're not decentralized, they're not cryptocurrencies. And decentralized means censorship resistant. And so it shouldn't matter what the law says. But of course, if you are centralized and you're running like a startup, then you are going to have interference of judges and legal action and those kind of things. And so it's relevant in that sense, like from an investment point of view, you want to take that into account as a risk factor. Or if a startup is especially compliant with the law, then that's a plus. And you kind of take that into account and of course, sorry, but at the same time, from an ethical point of view, the way common law has been kind of grown over the years is there's a lot of common sense into that. Like the Howie test I think is very commonsensical. If somebody sells you an apple that's just a commodity and you buy the thing and then that's it. Like from there on out you are on your own. But if somebody sells you this magical thing which will produce income for you and it's going to grow and that income and that growth is coming from the efforts of these people that are running that company, so they're selling you security. Then of course it makes sense commonly that these people who sell you that have a lot more responsibility, even after the sale, if they've been lying about what this widget or what this token can do, it makes sense that they should have some liability there even in, you know, whatever kind of society you like. So that's why I don't like to dismiss kind of the spirit of securities laws. I think there's a lot of common sense in there.
- [21:04]
Tudor Demister
Okay, so before we dissect the tweet storm, I think my final question to you would be it's kind of a two sided question. The first bit is, is there any value in Ethereum, is there anything there you actually like? Anything you think if we get away from the dishonest behavior, is there anything you think actually that's worthy experiment, that's, that's worthy for it to exist, that can do something Bitcoin can't? I like that. And then how do you fundamentally see Ethereum as different for Bitcoin? Not a full critique, but if you had to kind of just very like in a, like a one sentence, summarize the difference between the two, how would you do that?
- [21:41]
Arthur
You might have to repeat that second question, but the first one. So the value I see in Ethereum has been, first of all, I was surprised that there was demand for a blockchain that could contain a very wide array of information. That is something that they've shown that there's demand for. I don't know if it's viable long term, but that's been really interesting. I think the value, economically speaking has been that they've demonstrated there is a lot of demand for token issuance in whatever form, if it's for securities or asset backed things or even just kind of loyalty points and those kinds of things. And I think it kind of shows that the system that we had was very bureaucratic and expensive. And so people really want to be able to have bottom up access to things like that. And then you could say smart contracts to some extent. I think we've seen because of Ethereum that there's demand for that too. I mean, you could say to some extent they've attracted young people that want to develop on top of this platform. But that's where I kind of have more concerns. Because if you attract people to crypto, quote unquote, and then they get disillusioned because your platform doesn't live up to its promises, well, is that a plus or is it actually a Negative. Right. Would you rather that they would have discovered you later on and then you had they had a solid platform to build upon? So that's where I feel mixed. But yeah, definitely the big merit has been that there's showing that there's a significant demand for asset issuance on blockchains.
- [23:40]
Tudor Demister
Well, there's a demand for asset issuance. There's still to be proven whether there's a demand for people to actually own those assets long term. But yeah, still interesting. So the second part of the question was not a critique of why Bitcoin is better than Ethereum. If you had to summarize the main difference between Bitcoin and Ethereum to somebody who doesn't understand much about either, how would you separate the two?
- [24:03]
Arthur
Well, I would say that the main difference is that the vision behind Bitcoin is to create a ledger that is the most secure ledger in the world for storing value. And it. The vision behind it is to create a financial system on top of that. The way that Bitcoin does that is by not compromising on the secure blockchain, it builds layers on top of that. Whereas from day one, the approach in Ethereum was to put a lot of things in the same layer and say, basically compromise on the security side and say, you know, we want a lot of functionality from day one and so we're going to have all these contracts run on the main blockchain. And so, and I think that's. And it doesn't create anything that Bitcoin cannot do. It just, it just gives you results faster. It's kind of like Yahoo who used manpower to index the Internet. They had interns and young people who were just going over the Internet and making these index pages, portal pages for everyone to browse. That allowed them to start up fast and to show some results fast, but it ultimately was not scalable. So that's where I see the difference, is that Bitcoin is scalable. I'm afraid Ethereum is not.
- [25:39]
Tudor Demister
Okay, great. So we'll work through the tweetstorm. I'm not going to go through every single tweet. I'm going to go through the main ones, the real kind of standout points for me. Obviously you started by explaining why it's important for you to point out the flaws. And I think I wanted a summary of what that was, but I think you've already covered that. Essentially it just comes down to honesty and ensuring that any investor, whether retail institution is fully aware what they're buy, aware of what they're Buying into which I think is fair. Is that a fair summary?
- [26:09]
Arthur
Yeah.
- [26:10]
Tudor Demister
Okay, so, and by the way, as I go through this, if I don't agree with you, I will say so let's start with you pointed out that the architecture and culture are different between Bitcoin and Ethereum, yet claiming the same solutions. Can you expand on that?
- [26:28]
Arthur
Yeah. And this is contested. Like people say, oh, that's not true, Bitcoin doesn't do smart contracts or. Well, first of all, the most backlash that I've had is that Ethereum has a different culture than Bitcoin. But I stand by that. I'm trying to think like, for example, the culture of embracing hard forks as a way to quote unquote, upgrade the protocol. The culture of, I would say poor peer review. Like Ethereum has had several attacks and has a long, in response to that, there were upgrades launched which are basically art forks in very, very short order that were not peer reviewed, that didn't go through a thorough process. And so, you know, I would call that recklessness. I think there is a culture of recklessness and a culture as well of promises that are just not held up and then a lack of internal debating culture. It's kind of like, you know, there's the leadership that, or perceived leadership and people follow that and they wait for the leadership to kind of tell them what to do. And then also there's this perceived idea of democracy. But then when you really look at how decisions are made, it's actually, you know, a lot more top down than what you, what you might suspect. And then in Bitcoin there's, you know, it's pretty clear if you look on social media or anything else, like there's a lot more above board debating happening. There's fears, you know, you could call it infighting, but it's, it's really kind of the war of ideas. It's, it's much more clear. And I would say that overall that's, that's more healthy. That's a healthier intellectual culture where people are really passionate about certain principles. Like, I mean, Luke Jr. I think is a good example. Like he thinks the current block size is too big. He thinks that the blockchain of Bitcoin is growing too fast. And he has arguments for that. And he's a very well respected developer and he's made major contributions, but he has a lot of viewpoints that a lot of people don't agree with. And he's, there's always debate going on, but he's not being silenced or Anything. Or it's like his voice doesn't get lost in the crowd. Anyway, so, yeah, cultural differences and then architectural difference is really. It's interesting because more and more Ethereum is actually going towards Bitcoin's architecture, which is a bit ironic because originally it was like we put everything in the main chain and we do on chain scaling, but now payment channels are being kind of put forward as the way to scale Ethereum. For a while it was side chains or a combination of those, and it's more clear to them that you can't do everything. You can't do a Dropbox on Ethereum or you can't do a Twitter on Ethereum on the main chain. I mean. And so the irony of that is that, well, because you opened it up to put all this functionality in the main chain, you made it less secure and now you're going to follow Bitcoin's lead in modular scaling. But in a way, the cat is already out of the bag because you have an insecure culture. You have a culture that doesn't know how to create this really solid infrastructure. And so how are you going to. Yeah, put. Put the genie back in the bottle.
- [30:20]
Tudor Demister
Yeah, it's interesting you should say that. I was about to bring up Luke's name as well myself as an example, because I saw a recent presentation of his from his patron where he was talking about protecting people's Bitcoin. Everything should be to ensure that people's Bitcoin are protected. And one of the things I've come to appreciate over the two years I've been involved myself is, is the. I've come to appreciate the slowness and the time people take to make decisions and the time people take to develop things. You kind of come to understand that it does come down to security and protecting people's Bitcoins. Whereas I have noticed with Ethereum there just seems to be more hacks, more smart contracts going wrong, more funds being locked up, and then subsequent to that, more discussions and debates around, you know, should there be a fork to recover funds, and therefore the impact upon immutability and things like that. But it's taken me nearly two years to come to appreciate that. Do you think Ethereum has more of a startup culture in terms of move fast, break things, move on?
- [31:25]
Arthur
Yeah, that's another example of the culture. Right. That's been a slogan that they've embraced from day one. And it kind of leads you to this problem where if it's a financial asset, what even is ethereum? Because Ethereum 2.0 is going to be very different. The serenity, if that even ever happens. But at least the plan is to make it really different. And so if you're talking about financialization, that's a huge problem. I know, I think it was on your podcast Trace Mayors talked about this, and it's obvious that it's happening at Bitcoin. Bitcoin is being financialized, ETF is coming and futures and options and all those things, but Ethereum has none of that. I guess internally they're trying to do some, there's some experiments with that, but nothing from the established financial world. And the reason is that it's even hard to define what Ethereum is. And so if you're going to create a product that pertains that it's going to offer Ether, what do you do if there's this big fork and the split or if there's these hacks that happen? And I think it's like the futures, futures and commodities I need to look at anyway. The entity that approves ctfc. Yeah, the cftc, sorry, cftc, yeah. They recently put out a questionnaire about Ethereum, which has some very relevant questions. And roughly speaking, they're asking what is this thing really and what are the risks of all these hard forks and how it's upgraded? So, yeah, that's another kind of thing that is going to hold Ethereum back because I think Bitcoin and cryptocurrencies and especially Bitcoin is going to shine in the next 10 years. The adoption is mostly going to happen by means of just it being part of the people's investment portfolio. And that means that large financial institutions are going to own it. And of course there need to be wrappers that they can understand and contracts that they understand, and that means you need financialization. And so that's, I think, where Ethereum is really underestimating the value of stability, predictability, being conservative and they call it kind of pejoratively the ossification. Maybe we'll talk about this, but like the ice age that they put in, it was like to prevent Ethereum from ossifying. So.
- [33:59]
Tudor Demister
Yeah, well, listen, as you know, I, as you know, I met with Hester Purse at the SEC to talk about a Bitcoin etf. And we've seen the difficulty that the likes of Vaneck and the Winkel Voss brothers have had in getting an ETF approved for Bitcoin. But my belief is going to happen at some point. It's just a matter of ticking the right boxes. I can't see a world where an Ethereum ETF would exist or be approved in its current state. With all the added complexities that Ethereum brings over. Bitcoin, therefore, as an asset class. I can't see why anyone would invest in Ethereum over Bitcoin now, over the next, maybe at least two to three years.
- [34:44]
Arthur
Unless, unless some government likes it and Infura kind of becomes nationalized and the miners become more or less nationalized and then we have, I mean the fiat money system is already proof of stake. The stakeholders are the central bank and the government and to some extent the larger business banks. They are the stakeholders and they decide on the money supply in a way they can decide on all the forks, if you want to put it that way. So it's not that alien for them to have a stake based currency. So that might be a future. Actually I did the exercise once looking at the money supply of Russia and I think it's about $200 billion if you put all the rubles together. So maybe that's like the high end possibility for Ethereum is that they could have a 200 billion market cap of some fairly substantial country decides to adopt it and kind of iron out the problems that they have and just make it a centralized system.
- [35:58]
Tudor Demister
Okay, I think if that happens, we're a long way from that. Another thing you put in your tweetstorm, you put that Ethereum as a science experiment, could you not argue the same about Bitcoin?
- [36:10]
Arthur
So the reason why it's a science experiment is that there's a difference between an engineering challenge and trying to create something that the world has never seen before. It's like trying to, you know, like alchemy, like trying to create gold out of whatever aluminum. Like that has never been done before. And so if you launch a startup that's like, hey, we are an alchemy startup, buy shares, we're going to create gold. I would call that, I would say, dude, that's great that you want to try that, but find a grant, go into a lab for three, four years and try and show some results and then do a startup. You don't ask funding for scientific experiments. And so it's the same thing. Ethereum, they're going to build this. I remember somebody early on in 2013 comparing Ethereum that idea with NASA. It was like, sure, exploring the stars, it's great, but I wouldn't invest in it. Maybe now slowly with the commercialization of space travel, but at least back in the 60s, would you invest in NASA if It was a startup. No, I don't think. I mean, maybe some people would, but it would be more like a philanthropic type idea. And I think that the challenge was really, really downplayed in 2014 and 2015. I mean, just all along, the challenge of scaling Ethereum on chain, I think that's been massively downplayed and I think that a lot of investors have been hurt by, directly or indirectly by that or will be. So the contrast with Bitcoin, in terms of science experiments or not, I would say is that in Bitcoin the components were proven to work and then they were put together. And logically speaking that should work as well. And there is never a promise that Bitcoin is going to switch to some ephemeral system that would work completely different. Like the main blockchain is always going to be there. It's the bedrock of the system. Whereas in Ethereum it's like, oh, we're doing proof of work now, but the promised land is coming. We're moving to proof of stake. That's a really big question mark if that's going to work out. Because proof of stake has never been proven to work in a decentralized way. And that's one of my criticisms in the thread, is that it's actually been proven that you can't do proof of stake without a trusted third party.
- [38:57]
Peter McCormack
Next up, I talked to Chua further about his bearish case for Ethereum. But before that, I have a message from my show sponsor, BlockFi. And listen, as I mentioned in the intro, it's been really great talking to regular listeners about the show, how they've discovered BlockFi, how they're interested in what they're doing. Some people have told me they've signed up for their newsletter or following them on Twitter because they're interested in what they're going to do. I, I think they're going to be such an important company for the future of bitcoin with the way they're integrating banking services with crypto. They also had this huge announcement before Christmas. They announced that they'd received over $4 million in funding which they're going to use to expand their team, launch exciting new products. They've got a crypto savers account which comes with interest rates. They've also got crypto backed credit cards coming.
- [39:35]
Tudor Demister
So that's super cool.
- [39:36]
Peter McCormack
I also interviewed Zach Prince, episode 51. Definitely check that out. It isn't just a big shill for BlockFi, it's actually talking about banking and crypto. It's a really great interview, totally worth listening to. So yes, I would recommend signing up to their newsletter. I would recommend following them on Twitter. Just keep an eye on what they're doing. You never know, they might actually release a product which is something that you want to use if you are interested in the crypto backed loan. Well, BlockFi is the leading crypto to USD lender in the US. They service over 46 states and they've got interest rates as low as 7.9%. They accept Bitcoin ETH or Litecoin as collateral. Customers can be funded in USD or gusd which is Gemini's dollar backed stablecoin and you can go from application to funding in as little as 30 minutes. BlockFi is the best way to get USD funding without having to sell your crypto and applying takes less than two minutes. If you visit blockfi.com whatbitcoin did, you can learn more about using your crypto without selling.
- [40:29]
Tudor Demister
Well. Interestingly, because of the market dynamics of trading crypto, it's almost unlikely that any early investor who invested in the ICO will have lost money. Most of them would have made decent money. It's. It's the people who've come later on. Whereas you don't tend to find that with traditional venture investing. Right. Because you don't have such liquidity early on for your projects before you've even released something. So it's more likely the later retail or not just retail, actually institutional venture funds that have come in in the last year, year and a half that will have the real ones who have been burned by this.
- [41:06]
Arthur
Yeah, it's true that, you know, in cryptocurrencies, if you were an early investor in the top 10 coins, in any of the top 10 coins, you've done very well. And it's mostly the later ones who get hurt. There are a lot of projects who flared up and died. Like if you were a master coin investor, you've lost money that is dead. Even though at some point I think it did like a 25x in Bitcoin back in 2013. So yeah, it is. And that's the problem is that later investors, they don't know the history of some of these projects and I think they're very vulnerable. I think that's where I feel a responsibility. This is a lemon market. There's lots of information, but it's unevenly distributed. How do you decide who to trust? There's no, there's no rating agencies for all their flaws.
- [42:03]
Peter McCormack
Right.
- [42:03]
Arthur
I mean obviously you can have critiques on that. As well. But there is no infrastructure to evaluate these assets. And so I think that's why if you're going to issue an asset, you should be extra cautious.
- [42:15]
Tudor Demister
Okay, so you also moved on and talked a lot about scaling and you talk about the times taken for sharding. It's taking so long. Is it not fair though to say that bitcoin has also faced long term scaling issues like scaling was discussed very early on. Lightning has taken a long time. Do you not think that Ethereum deserves a similar amount of patience?
- [42:37]
Arthur
Yeah, I think Eric Voorhees has said on Twitter, he's like, oh, Ethereum is less than half the age of bitcoin. Give it a break. My response to that is that bitcoin has never had the pretense to scale in previously unproven ways, like modular scaling. Literally how the Internet scales to this day, like from the 70s to today, that's how the Internet is scaled. But like sharding, that is, it's even, you know, experts in sharding because like, sharding is a way to store. To store. Basically what you do is you have a big file that you want to store and because you don't want to lose it, you need redundancy. And so you're going to store copies of it in different places. And the way sharding works is that you split up the file and then you kind of, you know, you put it in many different places, you put little parts in many different places. And that works today. Like a lot of data centers use that, as far as I know, but it's always with a central point of control. It's kind of like somebody has to know how the pieces fit together. And what Ethereum claims is that, well, we're going to do sharding in a way that's decentralized, where there's no trust needed to put the pieces back together. Somehow the pieces are going to know where they belong and they can kind of reconstruct themselves. And that is totally, totally unproven that you can do that. And so to claim like, oh, we are going to transition to sharding and it's happening. And I think that there's a huge caveat that was never mentioned. And so it's kind of like they put the plane up in the air and they're like, we're going to land without a landing gear and it's going to go great. And it's never been done before.
- [44:36]
Tudor Demister
But trust us, Vitalik claims they are making good progress.
- [44:40]
Arthur
Yeah, I mean, how do you measure that. There's even projects in crypto that are saying, like, oh, our models are verified. Like, they're verified. It's like, yeah, but by which standards, like, you choose what you're going to measure. And then. But Adam. Adam Back likes to refer back to this. I forget the name of the law, but it's basically, if you have not proven to be able to break other people's systems yourself and you build a system that you claim is secure, that's not a very credible claim. If you're not a hacker, there's not a lot of credibility in you saying, oh, this is proven to be secure. It's kind of like you or I, if we were to design a vault and we're like, this is secure. I've tried breaking into it and I can't. It's like, all right, well, now give it to a professional burglar. So, yeah, that's. You know, you need huge grains of salt. When people make these claims like, oh, it's happening. And it's. Because that's where I. In the thread, I also point at the failed projects that they've just kind of moved on from. It's always been this smorgasbord of like, oh, we'll do plasma or sidechains or. And all of them were presented as equally valid. And that makes me suspicious. Whereas in Bitcoin, it's always been the consensus has gravitated towards this, you know, like lightning, for example, that there's so much enthusiasm about that. And I don't see that in Ether, because I think they kind of. They still kind of don't know.
- [46:19]
Tudor Demister
So there's multiple different scaling ideas that Ethereum are working on, all unproven, all with unknown timescales. Do you see a potential scenario, therefore, with Ethereum, that we could be 2020 and still nothing is delivered and it's back to the drawing board for them.
- [46:35]
Arthur
Yeah, yeah. I mean, you know, it's kind of. We'll see. Because I think they are kind of trying to. They're kind of like, the word is that they're going to. Or the plan is to gradually ease into proof of stake. Like, there's going to be some staking, but still proof of work and then checkpointing. And I don't think they'll ever. I mean, I could be wrong, but I don't think they'll ever make the complete transition to proof of stake. And it's basically going to be like, you get a dividend paid out. It's a bit ironic because you're going to get an ether dividend but they're going to create ether inflation to pay out the dividend. So it's kind of like zero sum but at least I think that it was the appeal for a lot of investors. It's like we're going to proof of stake. It's free money, it's perpetual income and we don't have to work for it and we'll have a secure chain. And I think that's the free lunch fallacy. I think it's, it's not going to happen.
- [47:29]
Tudor Demister
So is proof of stake tied to scaling? They need proof they can't scale with proof of work. Is that, is that one of the issues? Remember, I'm not too technical.
- [47:38]
Arthur
It's not really, at least not that I've seen. It's not really. It's just a different way to validate transactions and I guess you could say actually no, it's just a different way to mine. And they say that you would waste a lot less electricity by doing proof of stake and you have even superior security over proof of work is the claim but it's not related to scaling. In essence, I think it's mostly part of the sales pitch. It's like you're trying to have a really sexy product and so you say we're doing away with this wasteful mining.
- [48:20]
Tudor Demister
How long has proof of stake been discussed for Ethereum? Because it's only something I've been aware of, maybe over the like predominantly over the last six months. I might have heard about it before. Has it something that's always been on the roadmap? Because what it feels like to me now is that the arguments that proof of work was a tool for bootstrapping Ethereum and now, and now that Vitalik doesn't believe in proof of work, is there a certain amount of post rationalization going on there?
- [48:49]
Arthur
What I remember is I saw Vitalik in 2013 on a panel in Amsterdam and it was like they were talking about mining and I remember him talking about thinking that proof of work is wasteful and I think he liked prime coin because at least the algorithm was doing something useful. I think it was calculating, you know, trying to calculate the largest prime number. And so this idea that miners should do something useful has always been there. I know that and that's part of why I've kind of. I've never. I thought that was, I thought that was flawed. There was like for example, the pro inflation point of view. I've never really bought into that. There was a coin who had perpetual inflation in the crypto sphere in 2013, but it never went anywhere because investors are like, yeah, why would I buy into something that's going to be diluted forever? But so, yeah, so there's these notions that have always been part of Ethereum and then staking. As soon as the discussions came up about that, I would say, yes, it's from the beginning it was there, this kind of plan to do proof of stake.
- [50:12]
Tudor Demister
Right. Okay, I didn't realize that. And what would you say is the main issue with proof of stake versus proof of work?
- [50:18]
Arthur
The way that you decide on finality. Right. You need the final version of the ledger. How do you decide that? Well, you got to vote somehow. And in Bitcoin, it's like whoever does more work gets more voting. And so there's no way to cheat that. You have to do the work. Doesn't matter where you are in the world, you have to do the work. And then there's all kinds of other variations possible in terms of how you're going to vote. And it could be like if you have an IP address, whoever runs the client, one IP address, one vote. But you can game that very easily, create a botnet and just have billions of votes, or at least millions. So proof of stake, the idea there is that if you can prove that you own the tokens, you have skin in the game. Why would you want to cheat the system? You're just going to vote honestly and then so you're not going to support double spending and you know, those kind of things. But it's a political system. Like, in essence, it's a political system. I've compared it to, you know, there's this theory that underneath the pyramids and underneath the Sphinx in particular in Egypt, there was a library, there was like very important knowledge that they were trying to store. And so they just plunked huge amounts of rocks on top of it, which in a way the amount of rocks that you pile on to something that you're trying to protect is going to be directly correlated with the effort that you need to get to the secret. So in a way it's kind of. It illustrates proof of work. So you can also imagine that the Egyptians, to protect that, they would have had a voting system and they would give an ownership to the guards, like, oh, hey, if you protect this treasure, you get a 10% stake in whatever there is. And so it's like, and the more, you know, and you get to decide how we continue to protect this treasure, I mean, that would have fallen Apart probably in a few decades. Political systems are very unstable. And so that's my main critique, is that proof of stake is just a political system and there's so many ways to game it. And the more rules that you try to embed in your system to game it, the more that you're actually creating obfuscated proof of work. Like, you know, it's just. You have a lot of hoops that they need to jump through. Well, that's just work that you build in. But in essence, there's always going to be an incentive for people to try and game it and steal things. And the big thing that frightens me about proof of stake is that once you do an attack, you can rewrite the whole system. It's like. It's like you've done a coup d'etat, like, you're in charge and you can just. It's like, oh, we have this wonderful constitution. The dictator is like, I don't care, I'll rewrite it. It doesn't matter how beautiful it looks. And so that's different in proof of work where you really have to. You can't. With a 51% attack, you can't. It's more like holding a bank hostage and you control what's going in and out. It's not that easy to just rewrite the whole chain.
- [53:33]
Tudor Demister
And with proof of stake in Ethereum, am I right in thinking the more Ethereum you own, the more you can stake, the higher rewards you can get? Or is there a more even way of distributing the inflationary rewards?
- [53:45]
Arthur
The more ether you own, the more income you will have. That is the promise.
- [53:51]
Tudor Demister
Right. So those who had a. Received a contribution from the pre. My aspect of the Ethereum ico, who have quite a bit of Ethereum locked up for Assam, for example, Vitalik, he would do very well personally out of this.
- [54:09]
Arthur
I guess so, yeah. I mean, I think 70% of the ether in circulation is still originated from the original ICO. Only 30% has been distributed to miners. And so, yeah, like, you know, those 70% original holders, they would do very well in a stake basis. And there's also, I think there's a minimum amount of coins that you need to be able to stake. So you could say, you know, that's going to benefit the early holders as well. It's like the more coins you have, the more blocks that you can put to work. And then, of course, they'll be trying to pool as well. There'd be like mining pools. But that's a huge centralization risk. Right. Because if you're a mining pool and you're staking in the name of other people, well, you could use that power to then just do in a way a hostile takeover of the network if you're big enough.
- [55:07]
Tudor Demister
But it also seems unfair and kind of antithetical to the way Bitcoin's monetary policy was designed in that it's seems to appear to be keep the rich rich. And the inflation, is it 20% inflation? I can't remember. But that is essentially a hidden tax on everybody else.
- [55:24]
Arthur
Yeah, I mean, inflation, you could call that a tax. I think it makes sense to me to phase that out. It makes some sense because you want to have some incentive for people to mine early on. But in the long run you can just have transaction fees. And that's what's going to happen in Bitcoin. Like a. It's going to be the equivalent of like a 1 or 2% annual tax spread out over everybody who's doing transactions. But I mean, I think there's always good, like people talk about the Gini coefficient, like, oh, it's. I think Roubini has leveled this critique against Bitcoin. Is that like there's more income inequality in Bitcoin than there is in North Korea. It's like, yeah. But I think Vitalik actually had a pretty funny counterpoint. He was like, yeah, amongst the Gini coefficient of the cello owners of the world is also like massively skewed. Like, you know, so few people in the world own cellos. Like, that's so unfair. It's just kind of ridiculous argument anyway. So I guess my point is just that there is always going to be disgruntlement with how the wealth is spread. And so I fundamentally, I'm not against rent. Like if I own a piece of real estate, I, I can rent that out. If I own money, I can rent it out and get an interest rate on it. To me, what grinds me or Rubens me the wrong way is that you pretend that it's going to create better security than proof of work. And so that's where I. And also that staking is going to be effortless and nobody has done. I've never seen any ethereum, like seriously kind of detailed descriptions of what that's going to look like and how. And I could be wrong. Maybe there's research I don't know about, but that's just, I just think that it's a way, you know, that's, that's kind of how Ponzi schemes work. Right. They Promise perpetual income. So that's where. Or pyramid schemes. That's not the same as a Ponzi scheme. I think a Ponzi scheme is a subset of pyramid schemes. So that's where I just kind of like, huh, like, why are you promising perpetual income down the road? That doesn't. I just, you know that. So that's the, that's the. And then you sell it as this eco friendly thing. So it just, I don't know. I don't like that.
- [57:49]
Tudor Demister
Okay, Is there any risk in the process of migrating from proof of work to proof of stake? Is there any risks to the whole system, to people's funds? Is there any known risks there?
- [58:01]
Arthur
Of course not, Peter. What are you talking about? No, it's gotta be a breeze. It's just hard fork and, you know, and proof of work. I mean, no, I mean, all joking aside, it's still unproven. Like proof of stake itself is unproven. So it's like saying we have an airplane in the sky and it's now flying on kerosene and we're gonna switch to nuclear energy propellants midair and it's gonna be great. It's like, okay, I'll believe it when I see it. And of course, I mean, they can hard fork anything. So that's the thing is like, the easier it is, the easier they make it look like the more that they're proving that it's actually centralized. Because if they say, oh, whatever goes wrong, we can just fix it right away. It's like, well, how are you able to fix it so fast if you're actually decentralized?
- [58:59]
Tudor Demister
Yeah. And I interviewed Brian Bishop recently and we talked about hard forks. And there's never really been a real hard fork in Bitcoin, right?
- [59:10]
Arthur
No, not really.
- [59:11]
Tudor Demister
Yeah. And it feels like every, every kind of idea that's been developed, they are looking at ways to soft fork. I think Luke Dutch Jr. Found the way. A soft fork in Segwit. Right. There's a real aversion to hard forks within Bitcoin. Yet it seems like with Ethereum and also other cryptocurrencies, tokens, blockchains, there isn't such an aversion to hard forks. Yeah, hard forks are a security risk, right?
- [59:36]
Arthur
Yeah, absolutely. Because you split the chain and all of a sudden you have two networks who use the same, potentially the same mining algorithm. And so then miners that are mining one chain, they can just switch and attack the other chain very easily. That's one of the risks of hard forks. And Then also, you know, you can spend the same coins on the, on both chains. Like if you have a private key, it can be valid on both chains. And so there's all kinds of ways to defraud people that way. Yeah, I mean, it's, it's. And then there's also the community aspect. Like, I did a, I did a few tweets last night about how in the early 90s, when the Internet was just in its infancy, there was the World Wide Web as a way to surf it, and then there was Gopher, which was an alternative way to browse the Internet and which was more popular than the World Wide Web for several years. And part of the reason why Gopher failed was that they had a lot of forks and it just splintered the community and they had fairly poor standards as well, like development standards. The World Wide Web was a lot better and that gave developers more trust that there is something solid to build upon if you're going to build an application on top of the World Wide Web or HTML. That's how it snowballed. I thought that was a really interesting potential parallel with the crypto space where Bitcoin people can be fairly sure. It's actually interesting that if you spin up a client, a bitcoin Software client from 2010, you can still connect with the network, you can still do transactions. And so 10 years from now, if you spin up a 2018 client, you'll still be able to, you know, so that's very clear. And hard forks make something no longer reverse compatible. Therefore you have to trust a source that's going to tell you what the latest version is. Like Microsoft 10. You always need Microsoft to tell you what the latest version is to be in sync with everyone.
- [61:50]
Tudor Demister
Do you think, therefore, there's a risk then when this hard fork happens that there will be a certain group of people or miners who will maintain a proof of work version of Ethereum?
- [62:00]
Arthur
Yeah, absolutely. And they knew that from early on. And that's part of my critique in the tweetstorm is that they built in this ice age, it was like, you know, or they called it a difficulty bomb. Like, you know, in 2018, Ethereum difficulty automatically is going to exponentially increase, therefore, and making mining useless. And it's going to force miners to switch, to agree to switch to proof of stake. That was the plan and it was built in and then they weakened it and then they removed it. So it's like, you know, it's like, it's like political promises. It really shows that there's a lot of politics there where. Oh yeah, we'll reduce taxes down the road. Look, we promise it. Here's a piece of paper that promises it. But you can always fork the loss. And so in the same sense they just forked the code and took it out. And so now there is no incentive for miners to do proof of stake. They'll have all these machines that mine ether. So there's somebody who's going to come up and say ether. I don't know how they're going to call it because we already have ether Classic. But yeah, they're going to call it something classic Ether Clash Ik or who.
- [63:14]
Tudor Demister
Knows, Ether Classic Cash.
- [63:16]
Arthur
Oh, exactly, yeah, yeah, that'll be it. Maybe we can start printing the T shirts already.
- [63:21]
Tudor Demister
But you know what, Arthur, the thing that really stands out to me here as somebody who does struggle a lot with the technical side of things, is that there seems to be a beauty in the simplicity, therefore, of what bitcoin is. And this, whether you call it entrepreneurial spirit or greed, but people have wanted to replicate bitcoin or the success of, I say the blockchain, and therefore they've tried to build other things and they've had to have some differentiators, right? They've had to do something different to stand out. But it kind of comes back to the fact that most of them have created either something that's highly complex and therefore runs into all different kinds of new issues with monetary policy or scaling, or it's too similar to bitcoin and therefore will have no use case. Therefore. This is where I kind of start to sympathize with bitcoin maximalism, in that the blockchain, I think it was in your tweetstorm, even that Gregory Maxwell thing, you said the blockchain really is there just for securing information, like monetary information, not for large scale computation. Do you see where I'm going?
- [64:30]
Arthur
Yeah, and I like the word. Maybe I should increasingly start using that. I like the word Bitcoin minimalism. It's kind of like saying that you can do this stuff with bitcoin. Like bitcoin is very inclusive. It takes more work to do it in bitcoin and kind of like live up to that standard. But like we're seeing it with lightning now. You can do payments in bitcoin. You don't need to create a new blockchain, a payments friendly blockchain. You can do micro payments in bitcoin. It just takes a lot of work to do it. The same with smart contracts, the same with Asset issuance, the same with privacy friendly applications. You don't need your own privacy blockchain, but it takes more work to do it. So it's this double edged sword. It's very inclusive, but there's a meritocracy and you have to work your way up. But that's the beauty of modularity as well. If you want to build a sidechain, just go ahead, nobody's going to stop you. If you want to build a lightning client, go ahead. Whereas in a lot of Altcoins it's a lot more like, oh, we want this functionality and that, and then you have to ask permission. Bitcoin is going to be ossified pretty much as a protocol in a few years. Like it's not going to change at all. So there will be nobody left to ask permission to at some point. But you can create modules that link into the, the main chain and then, you know, then the sky's the limit.
- [65:57]
Tudor Demister
So it's almost like, you know, a lot of people like to compare this crypto era with the dot com era. Sometimes it works, sometimes it doesn't. But one thing that does kind of stand out, it almost feels like therefore bitcoin is the, the Internet, right? We don't need people to create 15 different Internets. It's almost like bitcoin is the Internet. We have Bitcoin and you can build all your monetary products and tools and smart contracts within that, but have one kind of crypto financial system and therefore allow Bitcoin to focus on what the most important thing is, which is decentralization, censorship, resistance. It doesn't make sense to have lots of different Internets.
- [66:38]
Arthur
Yeah, exactly. I totally agree. And people forget, like Bill Gates was very excited about the information superhighway and that was not the Internet that we have today. The equivalent of that was private blockchains, permission blockchains. It was going to be corporate networks that were kind of going to link with each other, but it was all going to be kind of like walled gardens. And he thought maybe one walled garden would win out or there'll be a patchwork of them. That didn't happen. And the idea of like, oh, Gopher and TCP and the World Wide Web, that they would all kind of coexist, that didn't happen either. It's like this network effect is brutal. It just kind of, it just snowballs and it makes sense. Like, I mean there's not, there's not 10 different types of containers that dominate world trade. It's just one, one very particular format of containers. I think there's actually a few that might not be the greatest. The greatest metaphor. But, yeah, I agree. I think it's very powerful to think of Bitcoin as one of the core bottom layers of a financial Internet.
- [67:54]
Tudor Demister
Very cool. One thing I often ask people, and it feels relevant here, is why do so many seemingly smart people have this wrong? Or could you be wrong? But why do so many smart people seem to have this wrong? There seem to be so many people invested in different protocols, networks, coins, tokens, funds are doing it, different VCs. How can so many people who seem to be smart be wrong? Do you think some of them know they're wrong, or do you think they absolutely fundamentally believe in what they're doing?
- [68:27]
Arthur
I think it's a combination. I think if you get paid to be wrong, it's easier. And so that doesn't mean that they don't believe in what they're doing. But it's kind of like people see financial remuneration often as a validation that they're right. And so if you launch an altcoin and it goes to the stratosphere because you believe in it and people invest in it, then it's kind of hard to look in the mirror and be like, what if I'm totally wrong? Like, you have all these people around you who are cheering you on, and I think eventually you kind of. It becomes part of your identity, like, oh, this is who I am. And then it's kind of up to the market to eventually punish you and be like, hey, dude, I think you were actually wrong. Like, this thing is now down 95, 98, 99%. You're probably wrong. But until that comes, if you get rewarded for being wrong, it's very hard to then change your ways. And at the same time, I think there's also. It makes sense to see if there's a gap there. If bitcoin is going to be dominant but only 90%, well, what is that 10 other percent going to be? Because if the bitcoin space, if bitcoin is going to 10 trillion, then that 10% is going to be $1 trillion worth of value. And if you find one startup that's going to be even a small part of that 10%, you could take it from 5 million to 20 billion. You could write that up, and you will massively outperform bitcoin. So it does make sense that there's a gold rush for people to try and find what is that one niche that bitcoin does not cover. Can we do something there? Because bitcoin is already there, so I think that's actually a valid pursuit.
- [70:31]
Tudor Demister
Do you think it's a shame that Vitalik isn't involved in bitcoin?
- [70:35]
Arthur
I mean, it's hard to tell. He never was. Bitcoin core developers will tell you Vitalik was never involved in bitcoin development. Is it a shame? I don't know if it's a big loss because he doesn't seem to be like, those, like, boring standards. I think he may be just too impatient. Like, I think it's not. I don't know if his personality fits. So I don't know. And it's. I don't even know how good a developer he is when it comes to, you know, building these robust systems. I'm definitely glad that there's competition out there. Like, I love that people just, you know, put their money where their mouth is and go for it. I'm just trying to, you know, just kind of do what I can in terms of. To try to keep the debate honest and to try and help people be informed.
- [71:35]
Tudor Demister
Okay, well, I think this has been very useful to go through it in detail and discuss it with you. I understand a lot more. Just the last couple of questions for us to close out. So do you have a conflict of interest here?
- [71:50]
Arthur
Well, I mean, I've been known to short ether every now and then. I've shorted ether against bitcoin. I did that, and I think it was 2016 and then again 2018, because I see it kind of as a proxy for the whole altcoin space. It's kind of cool how it moves like that. But right now I'm totally flat. I don't have any skin in the game. No. I mean, obviously I'm known to be a bitcoiner, so I have bitcoin. So it's like you're damned if you do and damned if you don't. Like, you're damned if you disclose because people say, oh, look, you have something riding on this, or if you put up a trade. But then if you don't disclose, then people are also mad that you may have hidden interest. So you can't please everyone.
- [72:35]
Tudor Demister
All right, man. Any closing thoughts you'd want to add to this?
- [72:42]
Arthur
No, I just want to. I guess I would say that I want to cultivate, you know, being. Being precise a little more in the wording that I use. Like, I think sometimes when I reread things, it's like, huh, that was a little bit snarky. Like, I Could have kind of polished that out. So I just want to. That's kind of what I take away from this, is that I've noticed that there's specific words that people have noticed, seen, and that they're maybe angry or hurt about. So I want to do better in that regard.
- [73:15]
Tudor Demister
We could give that a name. We could call it Ture Complete. That's my dad joke. That's my Christmas.
- [73:25]
Arthur
As long as we don't do an ico, I'm totally fine with that.
- [73:28]
Tudor Demister
All right, man. Well, listen, so what are you looking forward to in 2019 and how can people get in touch, talk to you?
- [73:37]
Arthur
Oh, 2019. Oh, yeah. I'm so excited. I mean, I think we're in the accumulation phase of bitcoin. I think this is where the smart money is putting chips on the table. There's enormous amount of development happening in bitcoin. There's really interesting startups as well. We're going to see. I mean, one of the big things is institutional custody. Like that is really going to happen in 2019. It's so exciting. We're going to see a lot better insurance as well for deposits. So all these puzzle pieces are starting to come into place for bitcoin to really start shining eventually as a reserve asset, really, as, you know, first as a savings instrument, but long term as a reserve asset. And in a way, this, the water retreating, like that's kind of, you know, the Buffett metaphor is like, you know, if the tide goes back in the ocean, you see who's swimming naked. Like, I think this is a very healthy process where the money is drying up and we're kind of seeing who survives and who doesn't. It was very similar thing happened in 2014, 15. And it's just very healthy. It's part of the creative destruction and it helps people focus. And I mean, this period, it's so great to do business as well. Like, people have time, they pick up the phone. Whereas, like, you know, in December last year, it's like there was nobody, nobody was to be reached if you needed to get things done. So, yeah, I'm just super stoked. I think bitcoin could go sideways for a bunch longer. But in terms of value, I think, yeah, bitcoin is at fair value. So, yeah, just exciting times. I mean, it's just such an amazing community to just be part of. It's just so fun to talk to people and exchange ideas and it's bigger and stronger than ever.
- [75:35]
Tudor Demister
And I guess you're happy to debate the Ethereum Subject with people, as long as it's in a friendly, non aggressive kind of civil way. Right?
- [75:46]
Arthur
Sure.
- [75:47]
Tudor Demister
Yeah.
- [75:47]
Arthur
And I'm not, you know, I'm not the most informed person in the world when it comes to Ethereum. It's not my, my day job at all. So there's definitely, you know, there's definitely things that I can learn still and things that I might have gotten really wrong.
- [76:02]
Tudor Demister
Okay, cool. So how can people stay in touch? Who do you want to hear from?
- [76:06]
Arthur
Yeah, just I'm on Twitter pretty much every day, so you can find me there. Oh, and on Medium as well. I have a Medium blog.
- [76:13]
Tudor Demister
Yes, you do. I remember. I've read a lot of that. I read a lot of that for our first one, so. Well, listen, thank you. And also just personally thank you. We've spoken a few times offline since our first interview. Appreciate your support. Thank you for coming on. Wish you and your family a happy new year and I look forward to seeing you sometime in 2019.
- [76:31]
Arthur
Thanks Peter. Likewise.
- [76:42]
Peter McCormack
Okay then. So what did you make of that? Do you agree with Tour? Do you disagree with Ture? I do think it's right that we do challenge these technologies, especially when people can and have lost money not really understanding what they're investing in. And listen, this isn't just about altcoins and tokens. Bitcoin too should be challenged. I think anyone in the bitcoin community would agree with that. Everything should be challenged, everything should be debated. These are volatile markets. It's very easy to lose a lot of money. I know that not just from my own experience but speaking to other people. Listen, I'm not entirely sold on the Ethereum is a completely a scam. There's certainly things being built which people will use. I know DAI is making a lot of progress. It's gaining a lot of traction. So you may be ardently against stablecoins, but this is a free market. If people are creating things that people can use, then so be it. Like let's, let's see what can happen. But I'm not completely sold yet. So let's see. Also, as I said in the intro, I'm more than happy to debate this from the other side. Look, if someone in the Ethereum community, obviously I'd love Vitalik, but you know, he might not even care or know about my show. But I would love someone from the Ethereum community to come on and debate from the other side. I'm always here to learn. I think it's the only the fair thing to do. So listen if you do want to do that, if you're entrenched in the community, you're someone that would be appropriate for the show, please do reach out to me. My email address is hellotime bitcoindid.com if you haven't heard my show before, you can check out previous interviews. I'm always fair. I always give everyone a fair chance to try and do the most balanced interview I can. So, yeah, feel free to reach out to me. Okay. If you want to support the show, there's always a bunch of things you can do. Firstly, the most important thing you can do is listen to the sponsors. If you are a regular listener and you jump the ads, maybe in future just give them a listen.
- [78:14]
Tudor Demister
You know, the advertisers pay for me to do this.
- [78:16]
Peter McCormack
They want to get into your ear, so just check them out. Secondly, you can become a patron. I've got 61 now. This is absolutely insane. It grows every week. If you want to become a patron, head over to patreon.com whatbitcoindid there's a bunch of different options there. Also, feel free to reach out to me if you've got any questions. If you want to subscribe to the show, you want to get the ad free version, you want to get it early, but you don't want to use Patreon. I've got a couple of people who pay by bitcoin, so just feel free to email me. I can get you on the mailing list for that. That's not a problem. You can also leave me a review on itunes or you can click on the subscribe button. Both help with my ranking in itunes. When people are searching for shows related to what I'm doing. You can follow me on social media. I'm on Instagram, I'm on medium, I'm on Twitter, I'm otbitcoin did on everything. Also my personal Twitter is Peter McCormack. You can reach out to me. DMs are always open. Happy to talk to anyone who doesn't want me to shill something. You can check out my website. Loads of useful stuff on there. Always adding stuff to it, always adding resources to help people learn more. And you can sign up to my newsletter. Lastly, you can share the shout with your friends and family every time you do this. This is super useful. So look, I really appreciate everyone who does this. Anything to support the show. Okay, a couple of cool interviews coming up. I've got Matt O'Dell and Neil Woodfine talking about what we want to see for Bitcoin. 2019 I've got an interview with Mike Dudas from the Block talking about crypto journalism. I've got an interview with John Carvalho discussing defending bitcoin. And also at the start of February, I've got my series coming which is looking at the 10 year anniversary of bitcoin. Looking what we want to see over the next 10 years with leaders in bitcoin. So loads and loads of cool stuff happening. Feel free to reach out to me if you got any ideas you want to discuss anything. I pretty much will respond to anyone as long as you don't ask me to shield some stupid project. But yeah, feel free to reach out to me. My email address is hello@bitcoindid.com and I look forward to hearing from.