In this episode, Saifedean talks to Samson Mow, outgoing CSO of Blockstream and CEO of Pixelmatic, about why we should be “augmenting” rather than trying to change the bitcoin network. They begin by discussing Blockstream projects such as the Liquid Network that extend the range of options available to bitcoin users, while accepting the network’s fundamental protocol rules. They also discuss Samson’s role as a prominent “small blocker” in the 2015-2017 “Blocksize War” and whether – in retrospect – the victory of the small blockers was inevitable. Samson then shares his views on bitcoin adoption in Latin America, including El Salvador’s issuance of bitcoin-backed “volcano bonds” as a means of evading the debt-fuelled development model encouraged by the IMF. In the Q&A, Samson answers questions about bitcoin privacy, proof-of-stake and the issuance of securities on the Liquid Network.
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Saifedean Ammous: [00:03:01] Hello and welcome to another episode of the Bitcoin Standard Podcast. Our guest today is Samson Mow, who is the outgoing Chief Strategy Officer of Blockstream and the CEO of gaming company Pixelmatic. Samson has been in the Bitcoin space for several years and he's got some unique experiences and unique insights.
And I look forward to chatting with him about many topics in which he has been involved. He's helped Blockstream launch many of their products and initiatives. And he's also been involved with El Salvador's issuance of the "volcano bond" and the development of the Bitcoin city. Samson, thank you so much for joining us today!
Samson Mow: Thanks for having me on Saifedean.
Saifedean Ammous: Let's first of all begin with you and your background. How did you get into Bitcoin and what got you into Blockstream and what got you into all of this world?[00:04:01]
Samson Mow: So it's quite a while ago, I was previously the COO at BTC China, or BTCC known in the west, and it was one of the biggest Bitcoin exchanges and mining pools in the world.
It was the exchange that everyone went to after Mt. Gox was hacked. So there was a period of explosive growth where it was the biggest in the world. And then the mining pool, which launched I think in 2016, it grew to about 20% of network hash rate at the peak. So that was my original entry point into the Bitcoin world formally.
And I met Adam Back during the Scaling Awards, which I think we're going to talk a bit about today. And I got to know him and know what Blockstream's mission was. So Blockstream was founded in 2014 to extend Bitcoin technology through side chains and also secondary technologies like lightning.
But I thought it was interesting to move into [00:05:01] Bitcoin infrastructure development and work with Blockstream. So I left BTC China, and then I joined Blockstream in 2017.
Saifedean Ammous: Yeah, so tell us a little bit more about Blockstream. What is it that Blockstream does?
Samson Mow: So Blockstream was founded based on the Sidechains White Paper.
And I guess you could say the mission of Blockstream is to augment Bitcoin. So there's a number of products and projects at Blockstream that do that. The most famous one is probably the Blockstream satellite network. So it's a network of satellites in geosynchronous orbit that are broadcasting the Bitcoin blockchain all around the globe.
But we have wallets as well. Blockstream Green. Blockstream also does mining, so that was something I kicked off after I joined in 2017. So we started mining in Canada and then later expanded to the U.S. And of course, work on the Bitcoin protocol itself and the lightning network and the Liquid Network.
Saifedean Ammous: The [00:06:01] Liquid Network is one of the most interesting things perhaps happening at Blockstream.
What is the Liquid Network and what does it do?
Samson Mow: So the Liquid Network is a Bitcoin sidechain. A sidechain is simply another blockchain that's anchored to Bitcoin. And in my definition of a sidechain, a sidechain does not have its own native token or currency. It would just use Bitcoin, just like you use Bitcoin in the lightning network when you open a lightning channel.
So you end up locking Bitcoin on the main chain and unlocking it in the sidechain, and that gives you new capabilities and new properties. So there's always a one-to-one relationship between Bitcoin and liquid Bitcoin, but liquid Bitcoin is faster because there are one minute block times and you also have the benefit of confidential transactions, which I think in today's world, we're seeing that is becoming more and more important and necessary.
The other thing about [00:07:01] Liquid is you can issue tokens. So the base currency of Liquid is still Bitcoin, but you can create assets in the network like stablecoins, such as USDT, there's a JPY stablecoin that's done out of Japan through our partner Crypto Garage. You have LCAD from bullbitcoin, Canadian Dollar stablecoin, and you can do things like securities.
So if you use a Blockstream product called AMP, Blockstream AMP. You can create tokens that have the same net effect as something like a smart contract on one of those shitcoin chains. So there is a policy server that is managing these tokens, which are signed in a 2f2 format.
So the policy server we'll see if you're an accredited investor or qualified investor, which is managed through a white list by a company. And then if you are on that list, it'll let you sign off and send the transaction to another person. So in [00:08:01] effect you can do securities, you can do things like the volcano bond.
We have a blockchain, there's a blockchain mining note - BMN token, which is tokenization and securitization of Blockstream's hash rate. And also Pixelmatic is doing game called Infinite Fleet which has EXO token from the publisher, which is also a security. So it's a way to do securities and permissioned or tracked assets on a blockchain.
And the beautiful thing is all of these assets in Liquid are confidential. So when I make a transaction in Liquid, you don't know if I'm sending liquid Bitcoin or USDT or a volcano bond. So it's a really interesting technology I think, that is not paid that much attention to because there's no native token involved. So it's all about the tech.
Saifedean Ammous: Yeah. And I think if you look at the majority of shitcoin technologies out there it seems like if [00:09:01] you spend some time looking into them, you start realizing that the story about the kind of utility that is being offered from the shitcoin chain is really a fig leaf to cover up the fact that they're just issuing a security, really.
This is something that I'd always thought they're just issuing Ponzi schemes, but I think Michael Saylor's clarity on clarifying that all of this stuff is just securities, and I'm not very familiar with securities and also this is not something that occurred to me earlier, but after Michael Saylor, and when we hosted him here in this podcast and we had him in the second or third time that we had him here, we've had him three times so far.
And the third time we discussed these, and he makes a pretty compelling case that these are basically unregistered securities. And the reason that there has been such a huge market in alt coins is because they are a way [00:10:01] to offer unregistered securities. So the hype seems to be about the unregistered securities, but there's little utility behind that.
I think there's nothing really that shitcoins do that is really different from what Bitcoin does. And I think with Liquid that probably disappears entirely. And it seems like you can get all of the functionality of anything that you want, but Liquid makes a straightforward, there's no security there.
The Liquid network itself is just pegged to Bitcoin, if I understand correctly, so that you can't speculate on the Liquid token. The Liquid, token is always worth one Bitcoin. But it's it has potential for offering stablecoins and offering many of the other securities, but to do them in a way that is regulated, right?
Samson Mow: Yeah. So I think you're right [00:11:01] about the most shitcoins being securities or unregistered securities. And also the smart contracting theme or messaging for the shitcoins also is a way for them to obfuscate what they're doing too. Because if you look at a smart contract, all you really care about is the end result of that smart contract.
So you have to rely on some external thing, like a price oracle or some input that says the contract has been fulfilled, and all that really matters at the end is the output, right? It's either you pay or you don't pay and you can do that with Bitcoin. Bitcoin does have smart contracts, but that's largely ignored because it's not part of the shitcoin narrative. But it's the same for doing a security on Liquid. At the end of the day, can you transact it or does it pay out?
That is all determined by a centralized structure in some place. So you can have all this decentralization theater and you [00:12:01] can have as complex a smart contract as you like, on as convoluted and hand-wavy blockchain technology as you like, but at the end of the day, the only thing that matters is pay or don't pay.
And that's determined by inputs from an external party, it's not determined by the chain itself. You just need something like Liquid and a policy server, which is not on the chain of course, but it is scalable. It doesn't make sense that you would insert a copy of every single contract into every single node.
Because at that point it becomes centralized. Nobody can run that node and nobody can verify anything. You'd end up calling an API on Infura which is on Amazon, which makes it pointless.
Saifedean Ammous: Absolutely. This is I think something that I've been writing about. Before I wrote The Bitcoin Standard, I made my name because I wrote an article saying blockchain technology is only good for Bitcoin [00:13:01] and everything else is pretty much a waste of time.
And this was the idea, that if you're going to be putting anything on a blockchain, and if it's going to actually be useful as a blockchain, it needs to be decentralized. And if it's actually really decentralized, not decentralization theater, as is the case with most shitcoins that essentially just have basically a few people in charge, and then everybody's running their node on a centralized infrastructure.
Then you have an enormous computing load that is being distributed. Why do we need to have tens of thousands of computers registering real estate deeds or stocks or securities or whatever, there's no need for all of that stuff because ultimately the only person that matters, say in the case of real estate, is the local police.
They're the ones that are going to come and kick you out of the house if it's not your house. That's the [00:14:01] only node that really matters. There's the local police, they have the guns. And if they have a piece of paper or a digital record that says this is your house, then if I show up and I say this is my house, they'll come and they'll kick me out and it'll be your house.
And it doesn't matter what a million other nodes have to say. So you're adding a computation on many computers in a way that it doesn't really add any value because ultimately the thing that you're looking at, whether it's real estate or stocks, it is itself centralized. The house is a centralized, single point of failure.
There needs, th there's a police in that area and that police controls it. So you're already going with a trusted third party and distributing the ownership of the house over thousands of nodes doesn't give you any benefits added to that. It just adds computation. So there's [00:15:01] no logical reason for why this would take off.
And that's why we see, we've had so many use cases being offered for why you want to use a blockchain over the years. And on Twitter, we've had all of the newbs come to us and tell us, ha you think Bitcoin is only useful blockchain, what about real estate in India?
What's this guy's name? The famous shitcoiner Ari David Paul. What about blackjack, playing blackjack distributed in real estate in India. And they've been saying this stuff for what, four or five years now, and never comes to fruition. We don't see real estate in India being put on a blockchain for a very good reason.
And of course, the pitch is look real estate records in India are so bad, then blockchain fixes it. No, there are a lot of bad things in the world that blockchain can't fix. So in many cases it is decentralization theater. I think in the majority of cases, perhaps [00:16:01] the one exception might be, and recently beginning to really think this, might be the one exception is stablecoins.
I think they are to an extent centralized. And I think I'm surprised that governments haven't shut them down. I think if I were to revise what I said about blockchains, logically it makes sense to me that governments would shut down stablecoins. And Michael Saylor seems to suggest that they likely will shut them down and that they're not going to let random companies issue those stablecoins.
That they're going to have JP Morgan and these big established regulated banks issue them. And I think there's another case to be made which I also argued about with Saylor, which is that maybe why JP Morgan, why not just have the FED issue these stablecoins themselves?
So I'm curious, what do you think about stablecoins as they exist [00:17:01] right now and as they are on Liquid and where you see the space going in the next few years?
Samson Mow: Yeah. So I think my thesis is very similar to yours, that blockchain technology is really only good for financial assets. You could possibly do real estate, but you need a very robust system to do that.
You need something, basically some random guy can't do it. You need someone that has the know-how, the technological capability and the security processes in place. Almost like a stablecoin issuer. You can't just have some random company go and do it, but you need something bigger.
But creating securities does make sense. There are benefits to be gained from using "blockchain technology". If you have things like stablecoins, securities on a chain, you can get a lot more trading over time. You could also have peer to peer trading as well. So for example, the BMN token from Blockstream, [00:18:01] it's not listed on an exchange right now, but people are trading it in a Telegram group because it is on the Liquid chain and they can do that.
As long as they're both whitelisted, they can trade it freely. For things like stablecoins they just don't stop, they keep going 24/7 for things like volcano bonds or anything like that. Those can follow the same same principle. So you can get a lot more utility out of these things when they are on a blockchain and that blockchain could be a sidechain like Liquid.
Liquid is a federation, the blocks are assigned by 15 federation members. There's no excess amount of electricity consumed. It's probably the same as a fridge or a small fridge for a year. So when you have things like that decentralization theater for all the shitcoins, that is actually wasteful, right?
You're doing proof of work just to pretend to be doing something decentralized when actually you could get rid [00:19:01] of all that and just have one guy running that one node on Infura that everyone calls. And that is largely what the networks are for these guys. Cause when Infura goes down or Amazon goes down, then everything shuts down.
All the exchanges halt deposits. You just have to look carefully what's going on and you understand how incredibly centralized it all is. To the other point about stablecoins, I think a few years back I said stablecoins are a mid step towards hyperbitcoinization. So eventually we won't need stablecoins.
And I think that you're right, that governments will shut them down eventually. It's just a matter of when, and I don't think that they'll get JP Morgan or Chase to do them. They'll just go directly to the source, just have the central bank issue them. Why have a middleman?
They can collect all the data, they can monitor all transactions and you don't have to deal with a bank getting in the way. Because you'd actually need to do something like get a court order to get data from a bank. [00:20:01] But if the central bank is the issuer, they have all the data already. They can freeze every transaction if they wanted to.
And we kind of got a feel for that in Canada. If you didn't like a bank freezing your account, then you definitely are not going to like the central bank freezing your account. Cause that's even easier and closer to government control than the banks themselves. But there is a use case for stablecoins right now.
So if you're in an emerging market and you have suppliers and you're paying your suppliers still in Fiat currencies, everything is denominated in Fiat dollars or whatever. Stablecoin is useful and stablecoins are, they have similar properties to Bitcoin, even though they're centralized, which is you can move them permissionlessly and largely if a stablecoin, let's say USDT is out in the wild, then a normal average person could just get a wallet and get that stablecoin without having to go to an exchange.
And there [00:21:01] is a lot of value in that. If you think about it, even if JP Morgan or Chase wanted to do stablecoins and give them to people, they still would not give them to an unbanked guy with no address or identification. You're going to get to the same problem of would you give them a bank account, a proper bank account, and the answer is no.
So the only way that the underprivileged or un-banked, or people less fortunate have is to use a stablecoin. And I think if a government shuts that down, then it's largely going to impact probably the less fortunate people than the people that have the means to get a bank account.
Saifedean Ammous: I'm curious why you say that. If you're the central bank of the U. S. if you're the federal reserve, if Tether and Bitfinex can get a stablecoin to run and they can get it to run [00:22:01] securely enough that somebody in Lebanon or Venezuela can use it and trade with it, and it works well enough for them.
It works much better than their local bank accounts. Why wouldn't they just do that? Why would they need to make it so you need to have a banking license essentially or you need to have KYC.
I don't see why they'd want KYC on that beyond surveillance, which they can implement anyway. So I think they let the coins run and the more people use the dollar, the more people use the stablecoin, the more demand there is for it and the more they can benefit from inflating the supply. You want more users.
This is the trend that has been in capital markets for the last 50 years, which is all of the world's currencies are eager [00:23:01] to collapse next to the dollar. Because why would you want to hold any currency other than the US dollar? If you had a choice, everybody would choose the dollar.
The dollar is more liquid. With money everybody wants to prefers the thing that is the most liquid. The limit on why people can't just hold dollars is because they have local central banks and the local central banks force them to use their local currencies. But wouldn't stablecoins be a way for the central bank of the U. S. to basically run around all of the local central banks?
Samson Mow: I think it has more to do with regulatory pressure. So if a bank is the issuer of a stablecoin and anybody, let's say someone in a sanctioned country could access that stablecoin, then they would get an immense amount of pressure to do something about that. Or even societal pressure.
Let's say you have an Onlyfans page or something like that, and you live in a country that doesn't like that. [00:24:01] They would put pressure on that bank because there is an entity that they can go to that is very much wired into that entire regulatory surveillance framework, right? To reach the effect where a bank could issue a stablecoin that would be able to move freely, I think you would need to jump that first hurdle, which is you would be able to give a bank account to someone in Lebanon, like without any identification.
Saifedean Ammous: Yeah. I'm wondering here if online surveillance might just replace KYC in a sense that you'll download the wallet on a phone and then in order to have a wallet it has to be linked to your phone number and then that just access the KYC and then you've got global surveillance.
It's easy for them to, if you're in Lebanon and you're [00:25:01] suspected of being engaged in something illegal that the U.S. government doesn't like, it's easy for them to link the wallet to the phone number and then shut you down
Samson Mow: Possibly. There is a very massive surveillance network and it could perform that function, but I think they would still not be willing to give that up.
Like it's too much of a mental or paradigm shift to let someone create an account without knowing who they are. And it might overwhelm their systems too. I don't think the banks are capable of managing something like this to be honest. I think stablecoins are going to disappear eventually.
Maybe it's five years, maybe it's 10 years. I don't know. I think we'll end up trading Bitcoin against something like a commodity down the road. Maybe it's Tether Gold or some other commodity based stablecoin, not a Fiat dollar stablecoin because you're basically wrapping up some central [00:26:01] bank note.
And as long as you're doing that, they're going to be able to protest and put pressure to shut down. But if it's a commodity based stablecoin like gold, then what can you do? It's not under your control. You could pass some law saying gold is now under control, maybe it's like 6102 again, but yeah, you don't know, but I think it's more difficult to do.
So I think eventually the dollar based or Fiat currency based stablecoins will be phased out in favor of a commodity based stablecoin.
Saifedean Ammous: That's interesting. I think the counter to that would be that they do control gold almost as much as they do control the dollar. I think about a sixth of global gold supply is held by central banks, but I think more importantly is that all the trading, all of the global trading of monetary gold takes place over a a centralized blockchain platform, which is the London Bullion Market [00:27:01] Association.
And I discussed this in my new book The Fiat Standard. You can think about it as essentially being similar to an altcoin, but there's a whole bunch of physical gold that's in London and in a few other financial centers. And once a bar is in that system, once a bar goes into that system, it gets a serial number and then it's part of that system.
And then you can trade it around, you can move it around, but it has to stay within the LBMA network. And then if you actually want to cash it out, if you take it out, then it's gone out of the system and that's the only way that you can verify that it's an actual gold bar.
So you have to take their word for it. If you want to verify it, you are out of the system and then you need to put it back in. Pretty centralized, it's a very centralized system. And it's the only way that you can have a global market in [00:28:01] gold. So If you're going to be pegging Tether to gold, if you're going to be having something like that, ultimately you need final sentiment of physical gold in order to keep this moving.
And it's going to have to be something far more centralized than you could do with a digital currency. So I'd be a little bit skeptical about the idea of them letting something like that happen, because if they're going to let gold Tether survive, they're more likely to let a U.S. dollar Tether survive, that they control..
Samson Mow: It's difficult to say, but I would say Tether is already ahead of the curve, right? They already have Tether Gold and there's, I forgot how many, but there's millions of dollars worth of gold that they have in circulation already. And that's kept in Switzerland and you can take physical possession of it.
So unless there's a way to prevent taking physical possession, then I don't think it's possible to stop [00:29:01] a commodity-based stablecoin from taking off. So you'll have the London one, but you'll also have, Tether Gold or other competitors. Cause Tether is usually ahead of the pack when it comes to innovating these kinds of financial instruments.
I see a world in which you have multiple commoditized stablecoins, and they're all held in their own private vaults and with their own audits and attestations of the reserves. And, there might be a large centralized one that trades purely in paper notes on a legacy system, but we'll also have competing systems in different jurisdictions that are backed by physical commodities.
Saifedean Ammous: And what do you see as the likelihood that these kinds of systems are going to migrate to Liquid predominantly or maybe lightning? We'd have these stablecoins built on Liquid and lightning versus being distributed over many shitcoin networks [00:30:01] as is currently the case.
Samson Mow: That's what I'm advocating for.
I'm strongly trying to get more assets into Liquid because I think a Liquid or any Liquid-like federation that's using that same technology will be beneficial for society and human civilization because we have to restore money as money and not a tool for surveillance. And I think having confidential transactions is a key part of that.
And having these assets running on lightning is also beneficial in terms of privacy and scalability. So if you have a stablecoin on Liquid, Liquid will eventually become just a plain settlement network. Because right now usage is still relatively low, you can make transactions for 10, 15 cents. But eventually that's going to go up as block space fills up. So you'll still need lightning networks on top of liquid assets. And that's what I think a number of teams are working on, but to [00:31:01] have Liquid as kind of like the base layer for these things, like a commodity stablecoin or a dollar stablecoin, and then a lightning network on top of each one.
And that will allow us to achieve planetary scale and much more improved privacy on a number of levels. Because at the base chain you also have that privacy, and then you have the lightning network on top of that which also increases that privacy. So I think that is the direction where we're going to go in.
I don't think any of the shitcoin chains are focused on that use case or that privacy aspect. And most shitcoin chains are disincentivized to create second layers because why make a second layer, then you don't need the base layer and you kind of reduce the value of the base layers native token.
So that's why nobody's working on a second layer for Solana or whatever chain, because then you don't need the Sol token. You could have just done it on Bitcoin at that point. [00:32:01]
Saifedean Ammous: Yep. The more altcoins proliferate, the more they eat into each other's market share, and then the more they obsolete each other and strengthen the case for one network, which is the only one that is neutral.
The only one that is not centralized. So what do you see as the likelihood that Liquid will continue to grow? Do you see this as likely, or do you think maybe the project is stalling and that maybe it won't pick up? What do you think?
Samson Mow: I think it will continue to grow.
So one of the things I will focus on next is more nation state Bitcoin adoption, potentially more Bitcoin bonds from different countries. And I will advocate for them to do those on Liquid. So it doesn't matter that specifically Liquid succeeds, but that the side chain technology in the current [00:33:01] form succeeds.
So we could have more Liquid-like federations spring up, run by different federations in different mixes of jurisdictions. But the key is that this technology is adopted. Not that Liquid network is the only one, because then that will be a really central point of failure.
Saifedean Ammous: Yeah. Okay, before we get to the bonds what are the other things that Blockstream has been working on?
What are other projects that they've done? So I know they do mining, they have a lot of mining infrastructure, I think in Canada mainly. Yeah, Blockstream is a Canadian company, right?
Samson Mow: Yes, Canadian company. There is an operation out of Quebec and also in the U. S. in Georgia. So I think the bulk of the mining operation is now in Georgia.
Saifedean Ammous: Oh okay, interesting. And recently you've gotten an investment from Baillie Gifford, [00:34:01] an old Scottish money management firm. One of whom's members I'd say, or staff members is Allen Farrington who's been on this podcast before and is a regular in our seminars. So what does that partnership tell us about it, this partnership with kind of an old money, what is the significance of it?
Samson Mow: I think the significance is really that it's a vote of confidence in Bitcoin as the most important technology. So Blockstream is a Bitcoin infrastructure company and having this super old, I forgot how many years, 50-100 year old Scottish company invest a significant chunk of money into blockchains B round kind of validates that Bitcoin is the most important chain and the only decentralized one, but also that services, products [00:35:01] building on top of Bitcoin to extend Bitcoin are the direction to go in.
And a lot of the VC firms are, I would say, they're new money, right? They're looking for quick capital, quick wins, flipping companies and things like that. And just riding the hype train.
But if you look at Baillie Gifford, they have a long history and they invest in things that are for the longterm. I would say they have a low time preference. So them investing in blockchain kind of aligns the idea that the smart money, the long-term money is going to go into Bitcoin, not just for investing in Bitcoin companies, but also investing in Bitcoin as an asset.
Saifedean Ammous: Very nice. Okay, so you're leaving Blockstream, right?
Samson Mow: Yes.
Saifedean Ammous: And what are your plans moving forward?
Samson Mow: Really just to focus on nation state Bitcoin option. So with everything that happened in El [00:36:01] Salvador, there's a lot more interest now in Bitcoin. A lot more politicians are starting to look at doing their own laws to make Bitcoin legal tender.
I've been working with a Senator of Mexico Indira Kempis to try to get something through in Mexico. But there's a number of other Latin American countries and other countries that want to do things with Bitcoin, whether it's legal tender, or nation state Bitcoin mining. So I think it's a good time for me to step away from Blockstream and focus on this new opportunity, just because these doors don't open all the time.
I think everything that Blockstream is doing is incredibly important, but similar to the shift from working at an exchange to working on Bitcoin infrastructure, I just think this is the next step up for me to do something even more impactful than Bitcoin infrastructure, but getting nation states to adopt Bitcoin and to make Bitcoin even bigger.
Saifedean Ammous: Yes. [00:37:01] If there's a good career move, I guess you could take a step up from Blockstream and infrastructure then yeah, I guess nation state adoption sounds like a good one. What are your thoughts on El Salvador's volcano bond? I know you might not be at total freedom to tell us everything you think, but share with us, what you think as much as you feel comfortable with.
What do you think is the case for these bonds? What are the benefits to El Salvador? What are the benefits to investors? Before we get into that, maybe just give a little bit of an explanation for it, if some of our listeners haven't been familiar with it. So what's happening is that El Salvador, as most people would probably know, they've announced that Bitcoin is legal tender.
And since then their president Nayib Bukele has been extremely interested in what happens with Bitcoin. He's been very active on Bitcoin Twitter, and [00:38:01] Max Keiser suggested to him that instead of taking on a loan from the IMF, they should mine Bitcoin with their volcanoes because they have a lot of volcanoes in El Salvador.
So they should use those volcanoes to mine Bitcoin and issue bonds against those mines. And they started with a $1 billion bond issue, right?
Samson Mow: Yeah, I think Max Keiser and Alistair Milne both came up with the idea of the bonds and it was based on. It's based off of the volcano mining meme, right?
So I think that's a good way to monetize their geothermal energy. So yeah the bond is an important part of their future I believe. All the countries, especially in Latin America that are, I would say, under the heel of the IMF and can only borrow to refinance debt, this is a way out for them. [00:39:01] To get capital for the development of their country with Bitcoin and with Bitcoin mining.
So the only way previously would just be continued borrowing and the IMF would dictate and try to modify policy or change the politicians, have some impact, right? But what this gives countries is sovereignty. Bitcoin gives everyone back their sovereignty and that holds true for nation states as well.
So if El Salvador pulls off this bond, then it shows the world that you don't need to rely on the IMF or any central lending Institute that does not necessarily have your best interest at heart, but you can just fund everything with Bitcoin backed bonds.
Saifedean Ammous: Yeah. In in my book The Fiat Standard, there's a whole chapter, maybe the longest chapter in the whole book on the development industry, which I call the [00:40:01] misery industry.
And the book looks at how Fiat money works at the protocol level, in the same way that my book, The Bitcoin Standard looked at how Bitcoin works and then trying to understand the implications, the Fiat standard looks at how Fiat works. And the key idea is that Fiat is mined through lending, and lending is everything in Fiat.
Lending is not just borrowing, lending is also mining in the Fiat system. So every time a new loan is issued by an organization that is backed by the central bank, any financial institution that is protected and regulated and backed by the central bank, if it issues alone it's increasing the money supply, it's making the money supply increase.
And so naturally that's what gives such an enormous incentive for everybody to get into debt. So if you look around the Fiat world [00:41:01] individuals, municipal governments, corporations, national governments, everybody is up to their eyeballs in debt. Anybody who has any future income is borrowing against it.
And we're now at a point in which the world economy is basically up to its eyeballs in debt. It can't go any more. Everybody's borrowed up to the hilt against everything that they're going to be earning into the future. And the Keynesian idea is that the more you borrow, the more growth you get.
And so the Keynesians are just trying to get people to borrow more. And so they're lowering interest rates, but the capacity to continue to borrow increasingly is dwindling, just because there's a limit on how much you can borrow, which isn't the case with Bitcoin. The limit is in generating more debt for economic growth, but Bitcoin doesn't need to generate debt.
Bitcoin just is [00:42:01] equity in the sense that it just appreciates. So there's really no limit on Bitcoins number go up, but there's a limit on how much borrowing can take place. But the interesting thing in the whole chapter that I do on misery industries is that what the IMF and the world bank do is they have a credit line from the U.S. Federal Reserve.
So basically they can also print money. When Argentina goes to the IMF and asks for $20 billion bailout, the IMF doesn't need to go call Brazil and South Africa and tell them, Hey, give me some of the money that I lend to. I want to go lend it to Argentina. I found a better deal.
They don't have a budget. They don't have a restraint on how much money they have. They're not an actual real financial institution run by adults who need to be responsible about what they do with their money. If the politics is such that Argentina should get the next $20 billion, the next $20 billion are going to be made.
It's just a credit line from the Federal Reserve. And so 20 new billion dollars are going to be [00:43:01] handed out. So as you can imagine, this gives the IMF and the world bank an enormous incentive to get Argentina and Brazil and all of the planet into debt, because it costs them nothing to issue that debt.
They get paid that money back and they get it with interest. So if you work for the IMF and you work for the world bank, your institutional interest is to hand out more debt. And that's why if you look at their, what they call development economics, which pretends to be a field of knowledge when really it's just loan shark marketing material.
There are all these problems in the developing countries all over the world, and the one thing they all have in common is that they can all be fixed with debt. Whatever the problem is, if it's human rights or if it's poverty, or if it's woman empowerment, or if it's girl's education or if it's [00:44:01] healthcare or if it's malaria, whatever it is, whatever the problem is, wherever you are in the world, Africa, Asia, Latin America, Europe, wherever you are, whatever problem it is, the answer is for you to get into debt.
And there's of course a lot of very sophisticated literature about what the solution is and how are we going to spend the money and what we're going to do with the money and how we need to make sure that the money is spent with stakeholder involvement.
And there needs to be participation and there needs to be this and blah-blah-blah and all of the right buzzwords that you have to include, all of the human rights buzzwords, all of the gender buzzwords, all of the health hypochondria buzzwords that we are adding onto that list with COVID.
All of that is details. It's like shitcoin marketing pitch, what's really behind it is they want to make a new amount of money and they want to hand out a lot of [00:45:01] money. So it's no exaggeration to think that the IMF is a loan shark. It acts like a loan shark, because it has every incentive to, and unlike loan sharks, loan sharks need to actually get the money from somewhere and they have an opportunity cost.
The loan shark, if he's gonna lend you $10,000 today, that's $10,000 he can't lend to somebody else. But the IMF is a special kind of loan shark where it doesn't matter how many deadbeats come to it, there's always another $10,000 thing they can hand out, except it's not 10,000, it's 10 billion usually. And they're always just handing it out.
I think the idea that we could just witness countries break out of that through the use of Bitcoin, it's just amazing. It's one of those many amazing things that Bitcoin slaps you in the face with.
Samson Mow: That's why a lot of these organizations and I would say powers in the world, they don't want the bonds to succeed because that breaks their [00:46:01] entire model. If you looked at what IMF is doing, they're saying, El Salvador, Chivo is good keep doing that, but you need to stop the legal tender stuff. If you no longer control the money, you lose control over everything else.
So money is effectively control. Money from a nation state, say the Canadian dollar as a way to control the populace. If you have the protests in Canada and you freeze people's accounts, you can effectively control them, right? It's a more PC way to kill somebody. You kill them financially, stop them from eating, ruin their finances, get them evicted, whatever, right?
You didn't put a gun to their head and shoot them, but you have effectively killed them. Or in the winter in Canada, you might actually do that if you starve them out and they have no recourse. But at a nation state level, it's the same thing. If you can keep them in debt, if you're the one that's providing them with "money", [00:47:01] then they have to listen to you.
It's a way to control, just like controlling your own population, but now you're controlling another nation state. And that just is an erosion of sovereignty. You're no longer a sovereign nation if you're at the beck and call of one of these unelected clown organizations that have no responsibility or even ethics.
And everything is corrupt. The whole network is corrupt, right? So you have the rating agencies that are downgrading old debt from these states, which makes it. More expensive for them, right? Because now they're paying a higher coupon then the face value of the debt. So they need to borrow more money in the future.
So it's just a downward spiral that you can't really get out of. And Bitcoin is the only way out of that hole. So I think a lot is riding on the success of the [00:48:01] model behind backing initial state with Bitcoin. And I think Bitcoin mining is an important thing too. So I think president Bukele was very smart that he decided to go with the volcano bonds.
It's not just a funny meme and you're mining with volcano, but energy independence is also very key. So not only do you need to have Bitcoin, you need to have energy as well. And the best example, there's so many great examples that are coming out in the last month, why Bitcoin?
It's almost like the world is kind of realigning itself to show, look at this thing, look at Bitcoin, it's so important, you need to look at this. Germany wants to sanction Russia, but they can't because they rely on Russia for energy because their own nut heads shut down all their nuclear plants.
So they're energy dependent, right? So energy independence is just like another thing that you suddenly realize you need to [00:49:01] have. And energy and Bitcoin are deeply intertwined. If you have energy, you can get Bitcoin. You can get Bitcoin without relying on anybody else. You can't be cut off from any network, and your energy won't be cut off as well. So with El Salvador, having the Bitcoin legal tender with Bitcoin bonds and with mining, they're set up to be a real sovereign nation. An actual real sovereign nation out of the control of the IMF and world bank.
Saifedean Ammous: Yes, I think that's absolutely fascinating.
And these rating agencies you mentioned, they're going on about how El Salvador is being irresponsible. What's truly amazing for me is how they don't mention that borrowing from the IMF is actually what's really irresponsible because not only does the IMF have the ability to just make money out of thin air, the IMF is not accountable to anybody.
The IMF and the world bank, I think this is a very important point that is [00:50:01] blatantly obvious, but it's one of those very obvious things which people don't like to think about or don't like to mention and whose implications are not understood. So what does it mean that there's nobody that the world bank reports do and there's nobody that the IMF reports to?
There is no boss for the head of the IMF to report to. The IMF and the world bank have their own internal assessment departments. Those are the only people they report to. So basically it's a self-licking ice cream cone, as lots of things are in Fiat in that the IMF hands out tens of billions of dollars to these deadbeat governments that go and then use it in all kinds of horrific things.
And then nobody is going to go to the IMF and say, hey why did you give this deadbeat $10 billion that he then used to genocide his ethnic minorities and make himself leader for life and make his family and his tribe rule the country for a century. Why did [00:51:01] you give this guy $10 billion?
There's nobody outside the IMF who can ask them that question. They don't have to answer that question to anybody. If you're a journalist, you try and ask them that question. You don't get to ask them any more questions. That's it. If you're a government that wants to ask them that question, you don't get to ask them any more questions.
They have their money, they have their funding, they can pay lip service to Congress. They can turn up at Congress and say that we're doing our best and we're going to fix all the problems, but it doesn't matter. It's just noises. It's irrelevant because there's no real accountability.
Nobody's going to get fired in the IMF because they gave them too much loans to a corrupt government. Nobody's going to lose their job. Nobody's going to have to pay from their own pockets. There is no accountability. There's only an internal body in the IMF, which is hired by the IMF, paid by the IMF, career people whose career depends on the IMF.
They're the ones who write the reports assessing the [00:52:01] success of IMF programs. And guess what? They're always successful. Yeah. I mean the conclusion they always come up with is this saying, which is so frequent and so common in the misery industry, this idea that you can take the horse to the water, but you cannot force the horse to drink.
And it's just we did our best, and this is where like the colonial language begins to show up. Like we told those nasty third worlders here's how you build a modern government, we gave them all the money, we told them how to do it, but they just didn't want to do it, the president was corrupt, this or that or the other thing got in the way. We had cultural barriers, basically those are third worlders and they can't function. As if this kind of dynamic could work anywhere.
You could go to any [00:53:01] society anywhere, it doesn't matter whether it's a first or third world or anything, anywhere in the world that you'd go, you find a guy and you give him billions of dollars and you tell them here, you can centrally plan your entire economy. That's not going to work anywhere.
You could destroy any country in the world by doing that to it. But of course they never introspect. They never look at themselves and it's always the fault of the people that are taking that money. It's never the fault of the people that give them that money.
Bitcoin of course fixes this because when a president issues bonds backed by Bitcoin mining, he doesn't have any fallback option. There is no central bank for Bitcoin that can bail him out. So if he messes up, he's going to have to pay the price and then he's going to have to face his angry people.
There is no getting out of that by just going to the IMF and the world bank to bail you out. So if anything, it is far more responsible. But as you [00:54:01] said, these rating agencies and the media, they're all in the same Fiat, they're all eating at the same trough of Fiat money and they all benefit from it.
So what is the case then for the Bitcoin bonds for an investor? This has been unclear so far, but has it been decided whether this is going to grant you citizenship or residency in El Salvador, if you invest in those bonds?
Samson Mow: I believe yes. The president did say that would be the case.
Any investment would lead up to assistantship fast tracking, but I believe they haven't created the new laws that would enable that yet, but there is a raft of laws going to Congress soon, which will include the new digital securities laws, which will enable the bond issuance. So I think we'll get clarity on that in the coming weeks, but right now it's still [00:55:01] TBD.
Saifedean Ammous: Okay, excellent. All right, I want to go back to the block size war. You were pretty high profile in the block size war, and it wasn't just because you made the famous hats, although that I think was enormously helpful, it helped enormously. Speaking of which you scammed me out of a signed copy of the Bitcoin standard by sending me a bunch of hats.
And then after I got the hats I realized, hang on a second I never wear hats. So you got a Bitcoin Standard copy from me without me really getting anything out of it. But, well-played and the hats are pretty cool, so thanks.
Samson Mow: Well you could wear a hat one day if you needed a hat. It's really sunny outside or something!
Saifedean Ammous: Yeah, I guess. Tell us a little bit more, and there's a book that was published by the by BitMEX research, Jonathan Bier from BitMEX research, and the book is called The [00:56:01] Blocksize War, which does a good job of documenting the events of this war. Can you tell us a little bit about your role and just the war itself, what happened, what you think went down, how likely you think it was that this would be the outcome. Do you think it was just destined that the small blockers would win or do you think there was a real risk that the big blockers would win?
Samson Mow: I think long-term the small block camp would have won. It's just the question of how nasty that war would have been because you can't really change Bitcoin.
You might end up with a lot of hash rate potentially going with bigger blocks, but the small block chain would still continue. It's a slippery slope and that's why we preferred we didn't go down that route and that's why we [00:57:01] advocated strongly for the small blocks. Because if there was a split and there was a big block blockchain, which technically there was.
I mean, it did happen. It's called Bcash, or what do they call it, I think they rebranded it now. But they have their big blocks, but once they set that precedent that they can change whatever they want, they can keep changing whatever they want. So it would have died eventually, but I think the outcome was the ideal outcome, which was game theory all worked out.
Nobody was willing to make the first move and try to affect change and modify the protocol and everything I think worked out pretty good. It was better that we did that war when Bitcoin was about a thousand dollars then right now when it's, what is it now, 40 something thousand dollars.
It's better to have gotten through that phase in Bitcoin's growing pains. Come out on the other side unscathed and set the example that you cannot modify Bitcoin. And I think [00:58:01] the Ethereum hard fork also had a place in that, showing that you can modify it, but then what's the point.
Cause if you can modify the chain and change the rule set, then anything goes and there's no point to it anymore. So I think it was the right move. And I like to think I contributed to winning that war. Aaron van Wirdum says I was the only C-level executive at that time that was standing up and supporting the small block camp.
Because if you remember back then it was every single Bitcoin company out there saying we want bigger blocks, Brian Armstrong leading the charge, and now you see he's an eth head, it's BrianArmstrong.eth. So you kind of naturally selected away everyone else and got them out of Bitcoin because they're not Bitcoiners.
And they have no connection to the Bitcoin ethos whatsoever. And I think we have a much healthier ecosystem now because of that. And I remember when your book came out, I think it was just [00:59:01] after the wars had kind of subsided and I thought, wow it's good. Someone actually wrote something and now there's a body of material that we can look at and see why it's important to have Bitcoin as Bitcoin is right now, because back then there was not a lot of material.
I think a lot of material came after the war, but if that existed before it would have been great. I think Jonathan Bier's book is good too, documenting that history so that we don't need to go back and relive that in the future.
Saifedean Ammous: Yeah. I think when you talk about the Bitcoin ethos, I think this was the fire that forged that ethos.
And it was forged really, as you said, by just everybody who doesn't agree with it rage quitting and going into their own shitcoin. And I think before then we could say Bitcoin was immutable, but it wasn't very clear that was the case. And I think somebody like Gavin [01:00:01] Andresen, who was probably the face of Bitcoin up until 2016, I don't remember, I think it was in 2013 or so that The Financial Times had written something along the lines of, or maybe The Economist, one of these Fiat publications had said that Gavin Andresen was more important to Bitcoin than Satoshi. And that he's the face of Bitcoin. And Gavin Andresen was pretty clear from 2014 or so that Bitcoin needs to have its blocks increased.
We need to hard fork and that's just going to be straight forward. And there was even, he had some posts, some emails in which he spoke, I'm sick of waiting for people to come along, I'm just going to use my prerogative, can't remember what it was, something along the lines of if you guys won't just come along, I'm just going to do it myself and then you're going to have to join.
I think a lot of people did not understand the [01:01:01] immutability of Bitcoin as it is. And I think they thought that they could change it and it's difficult to tell in retrospect how likely they could have gotten to changing it. But I think this war and the way that it went, I think was enormously influential in just driving this point home that you can't change Bitcoin, you can only leave it.
And I think it was you who made the metaphor once about this, this is like a train that's heading out there and you're trying to change the direction by jumping off the train. I think it was you who made that at some point.
Samson Mow: Maybe, I've said a lot of things.
Saifedean Ammous: Yes. But I think it's an excellent metaphor because Bitcoin is just, the current consensus parameters are just headed in a certain direction.
And if you want to change them then jump from the train and see if that changes the direction of the train. It doesn't, it's just going to leave you in a bloody puddle on the road and the train is going to keep going and people are going to forget [01:02:01] about you after a couple of...
Samson Mow: The danger back then was a lot of people didn't know that though.
It's about educating them, and I think a lot of people forget how new Bitcoin was still back then. It's still new. And there's still a lot of people that have no clue what Bitcoin is, even though they'd been in the space. But back then, it was much worse I think.
Saifedean Ammous: Yeah.
Samson Mow: It was to the point where somebody like Bitmain and Jihan Wu could say, we are the miners and we're going to do this and sucks to be you.
Because we are in control of the protocol and that's not the case. So getting over that hurdle was one big thing. But I would say back then it was so early that nobody really knew how mining worked really. I think nowadays people have a much better understanding of mining and mining pools and everything like that.
And the whole dynamic of buying the ASIC, hosting the ASIC, pooling the mining and then getting Bitcoin. But back then, Jihan could stand up there and [01:03:01] represent that we have a 30% or 40, maybe 40 with both his pools of hash rate and we can do this. But people don't understand that he is just bluffing because that hash rate is not his, it's his customer's hash rate, which he may or may not be hosting that.
So it was just educating people very quickly about how things actually are and calling out bullshit when there is bullshit. And I think if nobody did anything back then maybe they could have changed it. Because everything was against Bitcoin.
You have Coinbase, you have blockchain info. Like a lot of these guys are less relevant today than they were back then. But back then, it was just like going off against this massive conglomerate of every single Bitcoin company almost, with a handful that were not party to that.
Saifedean Ammous: Yeah. Worth [01:04:01] mentioning BitMEX were on the good side of this one, one of the few big Bitcoin companies that made a difference I think, sticking out. But yeah I think 2017, Bitcoin was 2.5% of where it is right now. So 1000 versus 40,000 and the the vast majority of, so imagine the entire industry is a 40th of where it is.
And then all the companies that were there around then all the big ones, all the big miners, all the big exchanges, they were all on board with this. And I mean, I remember for instance, for some of my friends, some of my outside of Bitcoin friends who would follow me on Twitter at that time, they try and keep up with the drama and to them it just sounded insane.
Like all of these Bitcoin companies and all of the famous Bitcoiners, you have Roger Ver, Gavin Andresen, and you have all of the people that are on the media about Bitcoin going on [01:05:01] about, hey we're going to upgrade Bitcoin. And then we have this random university professor in Lebanon and a bunch of his friends online, many of whom have cat profile pictures or whatever.
And they're just standing there and saying, no, screw you, you're not going to get away with it. And it just seems so absurd that clearly you guys have no idea what you're doing. It's a little bit like, it looked to an extent as if it's McDonald's customers thinking that they can stop McDonald's from introducing a new menu item.
Like you just can't do it. I'm sure you would like the current sandwich, but they're gonna make a new sandwich and the CEO knows better than you, and you don't have an executive vote on the board of McDonald's. What are you going to be doing?
But we did! Randos shitposting on Twitter managed to get Bitcoin to stay as it is. I think it's a remarkable episode. [01:06:01] I got really personally, on a personal level, I got very lucky that was the time that I wrote my book. And my book was pretty much ready for publication around June 2017, but I had a publisher and the publisher needed time to go over it then.
So it took several months to get it, and then I still had time to revise it and I submit the final version of the book in January, 2018. So during those months in a sense, I got very unlucky that the book was published in early 2018 rather than early 2017, because Bitcoin was much cheaper in 2017 than in 2018. So I could have stacked a lot more SATs.
Samson Mow: Yes.
Saifedean Ammous: Maybe it wasn't a price worth paying, but there was a silver lining to it, which is the fact that by being late, I could write about the block size war in the book. And it was really the glue that got all of the book together because the whole book was all about Bitcoin's money [01:07:01] supply.
And the obvious question is, it's just code, people can change it. And no matter how much you try and explain that it can't be changed. It's not going to drive the lesson home as much as saying, look we just had this whole massive attempt to change Bitcoin where all of those people tried and all they were trying to do is it wasn't even changing the monetary policy, they're just trying to change the size of the blocks, and it failed.
Samson Mow: Yeah. It was a very innocuous change, which made it dangerous. And it's such an innocuous change that people outside of our circles or in the media might say, these guys are unreasonable, those guys they're nice businesses, and all they want to do is go from one to two, and make it cheaper for people.
It's a very nice messaging, but you get into that slippery slope. Then you get some idiot that might say 21 is not enough. 21 million is not enough for everyone to have one Bitcoin. We should have, 210 million Bitcoin so that [01:08:01] everyone in the world has a better chance of getting a Bitcoin.
But it's just these glad-handing nice sounding platitude type people that bring the world into ruin, right? The same thing with nuclear energy. Yeah, nuclear is so bad, we should use the power of the wind and the Sun and not have to deal with nasty things like split atoms. And there's like nuclear waste here, but you ignore all the other costs.
How much lithium do you need for batteries for solar? How do you get rid of the wind blades that don't degrade over time? You just bury them? It's just the same thing. It's like a common theme between the block size wars and what's happening with energy and the push for energy austerity.
It sounds nice on the outside, but people lack critical thinking skills. And they just go with whatever sounds nice. And that really bites them in the ass, which we're seeing again and [01:09:01] again and again today. Which is good for Bitcoin. But yeah, having your book out earlier would have been great, a great tool in that war, but I think we managed to pull it off, the ragtag band.
Saifedean Ammous: Yes, all because of the hats.
Samson Mow: Yes.
Saifedean Ammous: I'll add to what you said. I think if in 2014, 15, 16, 17, if I was tasked by somebody to try and take out Bitcoin and destroy it, or at least tame it and make it innocuous, I think the block size would have been the best angle of attack because everybody wants to scale.
Everybody wants number of transactions to go up. Everybody wants more people to get on Bitcoin. It's an extremely compelling case. One megabyte isn't going to cut it. What's the harm in just having two megabytes, like you're going to double the throughput. You can get more [01:10:01] transactions, more children in Africa will be able to clear their transactions on the blockchain.
It just sounds so nice and so well-intentioned that you could drive a wedge in Bitcoin with that. You could get a significant amount of Bitcoiners to want to support it. And then once you've, once you've popped that cherry of immutability for one thing, then of course it's just a matter of time before you do all the rest of them.
So I mean, I'm not saying that there were nefarious elements pushing this, but I'm saying if they're wearing nefarious elements, this is what they would have been doing.
Samson Mow: Definitely, and they had the power to do it. I just think they could've probably pulled it off. If I was fighting for the big block side, I think I could have made it happen because they controled so many different parts of the ecosystem that they could have just said this is the new Bitcoin, right?
If they had the block explorers, they could have made BCH BTC, the [01:11:01] exchanges could have changed the listing too. It would have caused a massive amount of confusion and damage. Maybe which it would take 10 years to recover from, they could have done something really bad.
And that's why at Blockstream one of the projects I pushed a lot was the Blockstream info explorer. Now you have mempool, but the ecosystem is much healthier than back in the day. Because if you look back then, what were the main explorers that most average people use to determine Bitcoin transactions?
It's Blockchain info, I think there was Blockchair, which was a Bcash one. I think they might've changed it, but I think there's another one from someone else too. Oh, btc.com, which is also BITMAIN. So they had every single resource at their disposal to really say, this is Bitcoin, not that one, not the decentralized immutable one.
But I think they, the game theory prevailed, they chickened out at the last minute because they knew if they go all in, they would've probably failed in long run. [01:12:01] And with Bcash you see that. Bcash is everything they wanted and it's useless now. No one cares about it.
I don't even talk about it anymore because it's so useless.
Saifedean Ammous: Yeah. I think at this point, both Bcash and BSV, which was the fork of Bcash. BSV was like the reductio ad absurdum of Bcash. If you're going to fork because Roger Ver wants bigger blocks, then you're just gonna get. It, another guy who's more of a riser of air, then Roger veer, and he's going to want to fork for other even stupid reasons.
And then you're going to end up with BSV, which I think is like the pinnacle of blockchain failure. And both of them today are worth less than 1% of Bitcoin and maybe a little bit more than 1%, but roughly the two of them are less than 1% of Bitcoin. Just complete insignificance.
And I think it's such a powerful illustration of, [01:13:01] it's not about the block size, it's not about the throughput, it's not about the on chain capacity, it's about the immutability. That's why Bitcoin matters.
Samson Mow: Yup.
Saifedean Ammous: Alright, Stephano has a question about privacy and anonymity.
Stephano: Yes. Thank you Saif and thank you Samson. It was very interesting to hear your perspective. So my question is the following, as you learn more about Bitcoin and I'm relatively new to this, maybe six, seven months, you realize that contrary to what you hear initially, Bitcoin is not really private. Together with the KYC and the public blockchain, all transactions are really public, and they're there forever.
Therefore privacy is really not one of the features of the Bitcoin network, at least the way it works at the fundamental level, but we realized in the last few months how privacy is important in all aspects of financial transactions. So do you think this is a major flaw of the Bitcoin network and how do you see [01:14:01] this privacy and anonymity issue being addressed?
You mentioned a little bit in the context of the Liquid network. I'm interested if you can expand on these a bit more.
Samson Mow: Right. So it's a difficult topic, it's a very complex one. So in theory, every Bitcoin transaction should be anonymous. You're making an assumption that coins are being sent to someone from someone else.
But in theory, any new UTXO should be clean coin, right? Because the transaction was made. But I guess we're applying a lot of our baggage on how we look at Bitcoin and we do make those links and say, this is from someone else, and this is from some exchange to some guy. And then that guy sent it to this guy.
Because you can see all that stuff, but in theory, every new [01:15:01] UTXO should be a fresh origin point. And that should be ideally the way that Bitcoin is looked at. And Bitcoin can be quite anonymous if it's used correctly. But if you're withdrawing from an exchange or some place where you're identified, of course that breaks that whole model.
But when you have peer-to-peer trading, if you're trading on a decentralized exchange like Bisq or something, then I think it's quite privacy preserving. And you should not need to worry too much about it, and if you can go from decentralized exchange to a lightning transaction, I think you have pretty good levels of privacy production. But in the state that we are at today, I think having something like Liquid and lightning is definitely important because normal ordinary people, like less technical people are not going to be able to figure out how to use Bitcoin properly.
They're just going to buy it on an exchange and maybe they don't even take it off exchange. Maybe they spend from exchange. So you do see that [01:16:01] sometimes, someone is paying an invoice and they're paying from their Binance wallet or something like that. And they're using Bitcoin in a very odd way, but it's what could be expected from a new user, but having something like Liquid, if you withdraw to a Liquid wallet, then you automatically have privacy.
And if you can withdraw off an exchange to lightning, then you also have that privacy. So I would say these technologies are more about evening out the playing field for new users or less experienced users. Bitcoin itself is decently private if you are smart enough to use it in a certain way.
But I think the important thing is that more people are getting more privacy benefits out of it, then trying to optimize the base layer.
Stephano: Okay, thank you so much. Very quick follow-up, how do you get non KYC coins in the United States? Cause that's really how most people acquire coins, right?
Are you [01:17:01] suggesting that we should not use a centralized exchange to buy them in the first place?
Samson Mow: If you buy coins from someone else, then they're not KYC coins. It could be said like, it's that guy. So it's a really tricky market, the way that everything works right now. And I think it's less than ideal.
Stephano: Okay. Thank you, Samson.
Saifedean Ammous: Ulf, you have a question on the block size war.
Ulf: I can really try to figure it out. Samson, you talked about block size war and about doing big box and small box. What's your opinion of something happens like another fork like proof of work blockchain BTC versus proof of stake blockchain, like BitcoinGreen.
What's your opinion, is this a possible outcome which may come in the future [01:18:01] and what's your opinion on this? Will this have a chance or will this be overrode like the train which goes straight to what we expect of Bitcoin?
Samson Mow: Sorry, the question is can we change Bitcoin to proof of stake or you're asking about proof of stake?
Ulf: The probability that there will be proof of stake or BitcoinGreen, and then what may happen in the future?
Samson Mow: The first thing we should talk about is that proof of stake is perpetual energy. I don't think proof of stake, there's a lot of problems with proof of stake, why it cannot work. And if you fix one of the problems, you create another problem. So the general trend is for proof of stake proponents to create a very complex system so that the flaws cannot be easily identified.
But [01:19:01] I don't think Bitcoin could be changed to proof of stake. And if you really wanted to say you have proof of stake Bitcoin, you could say the lightning network is proof of stake, and that it's green. You have lightning, you have Bitcoin in lightning if you prove that you have Bitcoin on the main chain.
So that's effectively proof of stake.
Ulf: Okay, great. Thanks for the answer!
Saifedean Ammous: Yeah, it's proof of stake but it can scale, that's the difference. And it's secure.
Samson Mow: The problem is like proof of stake systems, it's always, someone's got to create the stake to sell, right? And that whole process cannot be fair. So in the case of say Ethereum, they're going to make a big piece of the pie and pre-sell to insiders.
And then the large portion of the stake is largely controlled by a few entities. They may try to obscure it because they tried to get people to make multiple accounts for the sale, but it's still [01:20:01] controlled by a small group of insiders, which is basically the Fiat system. And that's not what we're here for.
So proof of stake is really just the Fiat system, but with the blockchain and some waste.
Saifedean Ammous: Yeah. It's the Fiat system, but without a military to force you to use the token. And this is, I think why it's ultimately doomed because it's only good for the insiders and you can't get the outsiders to join in unless you put a gun to their head, which is how the current Fiat's system works.
Yeah, I can't see it being successful in the long run, except in the short run to basically promote shitcoin scams as is the case. Alright, Peter.
Peter Young: Hi, Samson. I wanted to ask you a question about the issuance of securities on the Liquid network. You made a very eloquent case early in the conversation that there can be an advantage in [01:21:01] trading one-to-one equivalence of Bitcoin on the Liquid network, because this can increase transaction speed and also privacy.
But I wanted to ask specifically about the use case of securities. You mentioned that when you have a security, you still need to have an Oracle or a centralized party to issue a pay or not pay signal. So given this, why don't you just have the company that is issuing the security, sell the token or some kind of centralized service?
Why is there an advantage in using a blockchain for this at all?
Samson Mow: I think one of them is atomic swaps. So if you have a number of assets in the Liquid network, then you can perform an atomic swap. You could swap that asset for LBTC, for any stablecoin or another asset, and there is no need to have any counterparty risks.
There's no need to trust the other party. So I think one of the interesting things out there is this app called SideSwap, which is basically promoting atomic swaps on the Liquid network. So at the [01:22:01] end of the day, the whole point of having a blockchain at any point is to facilitate liquidity and freedom of movement and trade.
And that goes for securities, for stablecoins or really anything. So it's the seamless trading 24/7, the ability to trade peer-to-peer without an intermediary and the reduced need for a counterparty risk so that no one will scam you in the trade.
Nathan: Yes, you guys were talking about centralization, de-centralization and I've convinced myself plus Saifedean has beat me up pretty hard about being able to decentralize something physical, like the on offer Amps to Bitcoin.
And when you understand that you start thinking about it a little differently, [01:23:01] but I heard Jack Dorsey the other day made a comment about social media would have looked a lot different had it grown up under Bitcoin. And he didn't go any further, but I've heard him hint several times and I think that's of great interest to him.
At least I hope it is. I've watch things like Steemit, where they've tried to use coins and cost and value comments and all that kind of stuff. And it really looks pretty corny when you see it. My question is do you have any general thoughts, you're talking about promoting to sovereign countries and I'm waiting for the delusion of poor old El Salvador's too [01:24:01] stupid to get up in the morning and think for themselves.
Do you have any general thoughts about that and how things like lightning, and maybe to a lesser extent in that area, Liquid and Bitcoin might impact that? I also think, one last comment before you answer, I agree with Saifedean that George Gilder is not a representative of the libertarian community, but he does use libertarian tools to make some pretty good arguments.
Maybe I'm just being hopeful, so I'm wondering about your thoughts.
Samson Mow: Okay. There's a couple of questions packed in there. So I guess we can start from the first one. So I think decentralizing social media platforms is a noble effort. I haven't really thought too much [01:25:01] about how to do it because there's always the question of moderation.
I think you'd have to have something like the ability to run a full node of whatever platform you're using. Otherwise it just becomes centralized once again. And I don't know if people are willing to do that because it's a lot of work to run a node and to run an independent piece of software that would serve things up.
So I guess I will let Jack Jack Dorsey keep working on that, but it's not something I'm really focused on. I mean, we have things that are better than Twitter. Like you have Mastodon and other things like that. Adoption is not quite there, I think just because there's a massive amount of network effect. So whenever a new thing comes out, it needs to have some orders of magnitude better user experience than everything else.
And having it be decentralized, I think is a challenge for that. Just because people [01:26:01] don't want to run something, they just want to download something and have access right away. So the challenge is balancing that user experience with the actual decentralization. The other question was about more nation states adopting Bitcoin, right?
So most people are followers and I believe it's the same case for nation states. I think a number are already working on it. I think the vast majority are probably waiting for El Salvador to, to see something good come out of what they've done so far, and then they will make the case. But, nation states are typically not innovators.
We have a really rare opportunity and just a rarity in El Salvador, which is president Nayib Bukele is a forward-thinking individual with a lot of guts to do something. We just have to wait and see how it plays out with everyone else. But I know that there [01:27:01] are a number of others, at least politicians in other nation states working on this.
So it's just a matter of time. I think we just lucked out that El Salvador was able to move so quickly and I think that's not the norm and it's an outlier. Was there another part of the question? I can't remember. There's a couple of things bundled up in there, right?
Nathan: No, you covered it other than do you see social media playing a role in these?
I noticed Bukele in El Salvador, he's kind of used it to his advantage. He's savvy. I can see where others would really get in trouble, politically, social, just maybe not be as adept at it as him. Do you see that as part of the adoption process, [01:28:01] in other words, is there a plan? When I get up in the morning and look at the various newsfeeds, they're all the same. You can tell they originated at the same place. Government entities are using that masterfully. I wonder if there's some guerrilla warfare on the other side?
Samson Mow: All the media in all forms does have a hand in everything, but it's going to be up to who is more clever and who uses it more novelly. So I think president Bukele is great at social media, and he's able to leverage that to his advantage and build up a large following. And I think in the long run, that's going to help El Salvador because it's much harder to quell or to hammer in that nail that's sticking out if everyone's watching that nail.
That's also why in Canada I was suggesting, I [01:29:01] think I was talking to Rodofel and we were discussing Piere Poilievre's aim for going for Prime Minister. And I said he should take the same strategy, get international support, galvanate the international group of Bitcoiners and try to leverage that into something that he can use in Canada, because I think it's difficult to just work within a single country, especially one that's as backwards as Canada.
Saifedean Ammous: Alright, Boris?
Boris: Hi Samson, thank you so much for joining us. I was wondering how do you envision the bonds and stocks and other assets on Liquid blockchain? Are they going to be also tagged with KYC AML information? Because right now as I see it, it's pretty much bare instruments and those are being pushed out by the Fiat governments and they don't want to see these instruments. They always want to have them KYC, then AML, then that should do [01:30:01] identities.
Samson Mow: So with all securities on Liquid, current securities, they are going to be KYC'd and it is whitelisted. I don't think we're at the stage yet where you can have a security that is a hundred percent bearer, but these things are bearer-like.
So as long as you're on the whitelist, then you can trade it with anyone else on the whitelist. And there's nobody that can stop that process. So I think Bitcoin is the only real bearer asset, but it's also good to have other securities like stock, like assets or security tokens, or bonds that are traded in a similar way.
As long as you have Bitcoin, which is permissionless, decentralized and accessible to anyone, then it makes it better. Even though we can't go to full bearer securities.
Boris: Thank you.
Saifedean Ammous: All right Samson, thank you so much [01:31:01] for this. This has been extremely informative and entertaining.
It's been a pleasure reminiscing about our old days in the service of Bitcoin, like veterans in a war. And best of luck on getting all of these Latin American countries orange pilled and all of your post Blockstream adventures, I'm sure Blockstream will miss you, but I believe Latin America will enjoy you and your contribution to their cause. I hope so, yes. Thanks a lot!
Samson Mow: Thanks for having me on Saif, it's been great.
Saifedean Ammous: Cheers, bye-bye!