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Max, welcome for the first time to the Bitcoin Infinity Show.
Incredible.
Yeah, so one of the first things, um, you have made the best book recommendations
to me that I've ever gotten from anyone.
And one was The Ethics of Liberty by Murray Rothbard, and the other
one was Economic Science and the Austrian Method by Hans Hermann Hoppe.
And now you recommended another book, which I haven't read yet, called
the, which Grafton from Wechsel also recommended to me, which is
called The Lodging of Wayfaring Men.
And what is that book about and why do you recommend it so much?
It's a beautiful book.
It's, it's really, it's, it's incredible.
And it's written for, it's written for us and for Bitcoiners,
but it's over 20 years old.
Um, it was written in like 1997 to 2002 and that time period.
And it's loosely based on real events, um, which is fascinating.
And the book is crazy.
Like, uh, it, it, it goes about a group of cypherpunks who are, uh, Building
an anonymous marketplace, and the first attempts of an anonymous digital currency.
And again, this shit really happened.
And the story is quite wild.
With, you know, the freedom tech being built for very good reasons.
And people who understood the philosophical impact.
Uh, and, and the deep reasons for why freedom is important.
So they were very motivated, uh, and, uh, dedicated to make the world
a better place in their lifetime.
And so they got their shit together and got organized and
built something incredible, right?
And it took them a couple attempts.
Um, and eventually they, they rolled it out and enabled people to trade
right, to do their business, uh, online in cyberspace, um, and encrypt it.
And so that made a lot of people very happy because, you know, you get
to live life free and undisturbed, so it got adopted by many users.
So much so that eventually the government started to notice that somehow they're
making less tax revenue than before.
And something's a bit fishy, you know.
And then they started to investigate and You know, the NSA and FBI put a
decent amount of people on the topic and tried to de anonymize the users
of these services and infiltrate them.
And yeah, so the story is about this whole clash between the first and second realm,
you know, people who built FreedomTag.
And people who enslave others and how those two worlds kind of clash.
So it's quite fascinating and it's a book that's very inspiring.
What was the website called?
So, uh, this is the, the author's name is Paul Rosenberg.
Um, originally this book was published anonymously, right?
Um, and, uh, years later, uh, when it was a bit safe to, to talk
about, uh, this or associate their actual name with this, he did.
And he was, he's like a teacher, basically, an
electrical engineer's teacher.
He wrote like 30 books or something on that subject, and is a very eloquent
and practiced writer, but also a hardcore cypherpunk and freedom lover,
and very well read, and very well writing, or he can write extremely well.
So he has the freemansperspective.
com.
This is a newsletter.
You can go back.
It's going for, I don't know, 10, 20 years or something.
And every week there's one or two short pieces of articles that he writes.
And this book is actually also includes some writings that he
did in the past and published.
And so it's somewhat a collection of his thought.
Um, and so The Lodging of Wayfaring Men is a fiction book, right?
Like, in essence, right?
It's basically a fictionalized story with, you know, character arcs and such.
So it's not a technical book, but the author is very
technical, and he understands cryptography and how to apply it.
He understands distributed networks and like laying fiber
optic cables and stuff like this.
So there's, uh, there's a lot of real computer science in this fictional world.
And that makes it quite applicable to today where we're surrounded with
cryptography much more than at the time when this book was written.
Super cool.
So, uh, all right.
Uh, bit, bit of a jump here, but why is, uh, avoiding paying taxes the most
altruistic thing you can do in life?
This is, this is actually one, one thing that gets covered
in the book, right, where,
that was the case.
um, because there's, um, and this is also why this book is so interesting
to recommend to, to newcomers, uh, to, to this philosophy, uh, because at the
beginning, not, not, not everyone is convinced that this is a good idea.
Even the creators of this technology don't know the end result and how
other people will use this tech.
There's a lot of ambiguity there.
And so this book follows characters who reason through
these very difficult questions.
For example, I'm going to spoil this book a bit, but everyone should read it anyway.
So, um, you, there's one character who was a lawyer, right?
And, um, uh, he, uh, He works together with an ex FBI agent, you know, who
both of them share this common, um, like seeking of justice, like real justice,
you know, to stop bad guys from doing bad things, uh, to, to good people.
And, um, and, uh, the ex FBI guy is somewhat disillusioned.
With the institution of, uh, of, of the FBI to, to actually provide
and, and, and establish justice.
Uh, so now he is somewhat like, um, like walking this line in
between the, the institution and, and, and the, the actual like free
realm, vigilant justice basically.
Um, uh, and here then when, when thinking of.
this case.
And like, should I, like, is there a wrong being done by the
FBI trying to stop this project?
Right.
Or is this project actually good?
Right.
Do they have justice in, in doing what they do?
Um, uh, then, uh, he, uh, reasoned of, uh, is the avoidance of
tax, uh, of, of taxation evil.
And, and, uh, of course then walks through the reasonable steps of thinking.
No, if, if, uh, two people transact voluntarily.
Um, both people are better off after the trade than before, right?
Both people are happy, both say thank you and shake hands.
Um, that's trade.
That's the market, right?
Uh, and, and then you have coercion, right?
Where one guy says, give me that, and the other says, no, actually, I
don't want to give you that, but the guy hits him and takes it anyway.
And so that means afterwards that the guy who stole it is obviously better off.
He's happy, right?
He got the thing, but the guy who was the victim was being stolen from is worse off.
And so humans have the capacity to do mutually beneficial things, right?
To literally create value, make both of us better off than we were before.
And we also have the potential to destroy value and take from others.
Um, and one is beneficial and fosters the growth of civilization
and the other destroys it.
And so, you know, avoiding being stolen from is a good thing.
Yeah.
Reminds me of one thing we go into in the new book, uh, about the
difference between lawful and illegal.
I don't remember the name of the guy now, but some Dutch libertarian thinker,
who emphasized on the terms, made the point that something being lawful is
like lawful in an ethical sense, like the basis in Don't Steal, whereas legal
is the top down government imposed legal framework, and how the two don't always
align, or rather, they almost never align.
Yeah, this is the difference between natural law and man made law.
A natural law is one that is universal across time and space.
It's always present, and it's immutable.
It cannot be changed, at least not by us.
And, you know, physics, for example, is a natural law.
And arguably there is a natural law to ethics as well.
Specifically, as morality increases, freedom increases.
And as morality decreases, freedom decreases.
That's the law of gravity in the ethical realm.
Um, and, uh, that man didn't make it, right?
We just realize it because it is what it is.
And then we have man made law on the other hand.
Uh, this is depends on a certain territory, right?
The law in the U.
S.
is different from the law in Russia.
And it also depends on time.
I think the American law in the 1700s is very different from what it is today.
Um, and so there are these imaginary lines where these, these rules
apply and there's Other places or times where they do not apply.
So they're arbitrary, right?
And on a whim.
And so they can be designed, um, you know, to the benefit of some
and at the expense of others.
And that is ultimately what, you know, politics is about.
Yeah, I think this is one of the key points that that quote
unquote normies have such a hard time wrapping their head around.
Natural law and like what, what makes don't steal a natural law?
Like what, what is the, the very foundation of, uh, of, uh,
libertarianism or anarcho capitalism or absolute property rights or whatever
you may call it, consensualism?
And to my understanding, it has to do with homesteading.
If you're the first person that, that acquired something, then no other person
has a right to take that away from you.
And you can logically deduct your way to that being true.
Like, what's your view on that?
And what's your understanding of that?
And how would you explain that to a layman?
Well, the reality is such that we have limited scarce resources.
If we have one piece of steak on the table and three guys who are
hungry, like some are gonna go home on an empty stomach, right?
We literally don't have enough food to feed us all, right?
And one piece of something can only be used by one person at one time, right?
We cannot duplicate one piece of steak into many and satisfy everyone.
So this is a natural form part of reality, right?
That's just how things are, you know?
Um, but So there's a potential of conflict over who gets to
allocate these scarce resources.
And there's a couple solutions to it, right, that have been proposed.
Like one would be like, nobody owns it, right?
Nobody gets to eat it because it's natural and it's not part of your
body, so don't touch it, right?
But then we die, you know, all
that's the problem with that.
That's kind of a problem.
Yeah.
Um, so
view that as a problem.
Yeah.
So let's, let's rule that option out.
Um, another solution is, of course, we all own it.
Right?
And we all, like, get to use it.
But, I mean, that doesn't really work either, right?
Because, so, like, sure, we all own it, but who actually gets to eat it?
Right?
Because there's three different mouths and the food only goes into one of them.
So, uh, you know, they're, like, we can't all actually own
something if we cannot all use it.
Right?
It is limited and only a few can use it.
So, everyone owns it isn't the solution to the problem.
Because everyone cannot own it, because there's not enough for everyone.
So again, that's an issue.
Ultimately, again, we all starve.
We can't really make decisions on this.
And another option would be, we vote.
We somehow pick who gets to allocate these resources.
But then, I mean, we're 8 billion people.
How are we all going to vote on who gets to stake?
Right?
Like That's, that's going to be impractical.
Like, how are we even going to communicate, all 8 billion of
us, to get together in a vote?
So again, until we have the result of the vote, nobody eats the
steak, so we all starve again.
It's not really a good solution either.
And then we have one option that, like, Like some, a small subset of the
people gets to make the choice of, you know, how to allocate these resources.
And we can just pick them, you know, vote for them, for example.
But here again, now other people are allocating the
resources for others, right?
Like, and some bureaucrat, a hundred kilometers away, is not
gonna know, like, who of us is vegetarian and doesn't want the meat.
Right?
Um, and that just means that someone who's far off doesn't have
the knowledge to actually allocate the resources in a proper manner.
And that leads to misallocations, right?
We starve, again.
Because the guy who doesn't want the meat gets it and then it rots.
And the guys who would actually like it never get access to it and they starve.
So that's the fundamental problem of socialism, basically, of some priest
class allocating the resources for others.
So again, the solution doesn't work either.
So we're not left with much.
But one thing that seems to work is private property rights.
Again, as you said, the person who creates something, the butcher,
or the farmer who raised the cow, can now decide what to do with it.
Does he butcher it himself?
Does he sell it to a butcher?
Um, and, uh, then So the person who created something gets to own it,
and gets to decide how to allocate this, and then he has the right to
either consume it himself, or to abdicate the consumption of this good.
So to say, I won't use it, I will trade it, I will give it to you, right?
And he can make it a gift.
Just say here, half the entire cow, like, I like you, I like your family, you,
like, I'm happy that you're happy, right?
Great, that's possible, right?
Or, of course, he would want something from you in return, like, give me
a bar of gold, um, or, you know, a bushel of wheat, or something else.
Um, and this, so, meaning, you know, we now have a way that we
can allocate resources in a, in a clear, simple rule set, right?
To the person who created it.
can decide what to do and he can have a contractual agreement to transfer
this ownership to someone else.
And so the people who actually have the problem now have the power to
allocate the resources to solve those problems and not some guy far away,
but just you and me who created stuff.
And as you said, this only applies to scarce resources.
So what, what would be, uh, um, what would, would be an example of
a resource where you could eat the steak, but I could have it too.
And, uh, the, the thing that comes to mind, uh, is information, of course.
So, can you own information?
No, like, because that, that doesn't really make sense, right?
To own means to, to allocate, how to allocate these, uh, to decide
how to allocate these resources.
All right.
And then, uh, Um, that's a solution to a problem of a lack
of resource allocation, right?
Um, uh, or for a lack of resources that that need to be allocated rather.
But with information, there is no lack.
Like if I have a PDF, I can copy it to you and I can send it to you, and I can send
it to a hundred other people, and I still have the exact same high fidelity version.
Of the information that I shared with others, and of course it's
the same with words, right?
The words that I speak, they're not lost on me, right?
I still retain them and the information that they represent.
Um, and that that means we don't need to like, be, uh, stingy with information.
We can give it to everyone.
Um, and it doesn't degrade the quality quite on the contrary, right?
If, um, without information there is no, uh, there, there is no production.
Right, like imagine yourself on an island, and you have all the raw materials, all
the machinery, like everything there, but you don't know anything about physics,
right, or material science, or just like production stages of how to build things.
If you don't know any of that, the raw material is worth nothing to you.
Nothing.
Because you don't know how to allocate, how to shape this raw material into
other things so that it actually solves your problems in the end.
And so, that's, uh, we need information in order to produce things.
That's the theory behind it.
The blueprints, so to say.
But the cool thing is, we don't have to be stingy with the blueprints.
We can give every human on this planet Equal access to all of the
information that we as humans have accumulated, and now all of a sudden
you will never be stranded on an island not knowing how to do something,
because you can just look it up.
In the grand database of accumulated human knowledge, and of course, of
course, technology has made that much more possible and low cost.
Back in the day, in order to share an information, you needed
to speak verbally to it, right?
So you're limited to time and space, or you need to scratch it on some
stone or clay or write it on a piece of paper, but it's all quite expensive.
And then still, you have the scarcity of the paper, right?
There's only one book.
And there's a hundred people who want to read it.
So again, information is limited.
And it is a scarce resource.
Not because the information itself is limited, but because the medium
of the information is scarce.
And that was a big tragedy that we were never able to communicate at
a large scale, and remember these conversations and easily access them.
Until the cypherpunks who came up with computers, right?
And realized that we can build this realm of information That is so cheap
to transfer and store information, that we can just basically do it for free,
for anybody, for 8 billion people.
And all they need is a rather cheap form of silicon, and like, nicely arranged.
Um, but of course people try to hold on to the protection schemes that extract money
from others, and capital from others, and You know, nation states have enforced
intellectual property rights and patents and such, um, and that just harms people.
It doesn't bring forward the best out of humanity.
And that's a big shame.
Now, uh, very well put.
This, this has been Praxeology 101 with Max Hillebrand.
where I want to follow on, uh, follow up here is, um, Uh, how
does this apply to Bitcoin?
Because Bitcoin is only information, so how can anyone
theoretically ever own a Satoshi?
Do you really own it, or what is it?
Yeah.
What is it like?
What is actually a Satoshi?
Look into the Bitcoin code base.
There is no such thing as Satoshi, right?
The transaction has a field that is an integer.
But it's just an integer.
It doesn't even have a unit associated to it, right?
So, it's just a number.
Satoshis are just numbers in a database.
And you don't own the number 270, 000 just because you have 270, 000 bitcoin.
The actual number of satoshis, no, you don't control them.
You don't own them.
But information has another interesting thing that cypherpunks realized, right?
That, um, uh, once, like, when you have a secret, then you can
choose to share it with others.
And then once you've shared it with one person, however, you cannot
control how that person, what that person does with the information.
He can keep it secret for himself, or he can tell it to the entire world.
And so, um, there is such a thing as giving access rights to information.
And this is an important part in Bitcoin, of course, right?
Our secret keys should be secret, privately kept just for us, because if
you do share your secret key publicly, then all of a sudden anyone can, you
know, you know, Signed messages, um, uh, with, with this private key and
therefore spent Bitcoin in, in the transaction chain of, of Bitcoin.
Um, and well, that's, yeah, that's a critical part of it.
So Bitcoin basically relies on keeping information, uh, occulted, hidden from
others, uh, in order to ensure that we, uh, again, solve, like, basically Bitcoin.
It's just a piece of software, right?
So it is non scarce information, but it wants to be money.
And money needs to be scarce, right?
Because if I can spend a bar of gold first to you, and then the
same bar of gold later to you, we have infinite inflation, right?
The money system just dies.
Um, so scarcity is required.
It's a required feature for money and digital money therefore
requires digital scarcity.
And so what Bitcoin does is it establishes a set of computer code
that defines the access, right?
Two certain chunks of money, so to say, right?
And the chunks of money are Bitcoin UTXOs, unspent transaction outputs,
and the spending condition, so to say, or like the rule how to allocate
this money, who gets to decide it.
Where this money goes next is defined by a script and a small computer program
that evaluates either to true or to false, depending what input you provide.
And so the script is the lock, and usually it's a single public key.
And then the way to prove that You're actually authorized to spend this
coin is by creating a valid witness.
You know, the input to the script, to the program that returns it
to true rather than to false.
And usually, again, that's a signature of a single private key
over the transaction structure that you're actually spending the money.
Um, so, and, and Bitcoin's genius realization is that.
We just all have to check every transaction of everyone else.
And when we do that, then we can be sure that, that for one,
nobody's being stolen from, right?
That nobody is, is like losing access to his money, that someone is spending
the money with a wrong signature.
You know, he doesn't have the private key.
He cannot produce a valid signature.
So what we have to make sure that such a transaction does never make
it into the blockchain, right?
That's, that's the first important aspect.
And the second is we want to ensure that there's no inflation.
And that's Because if we can just create as many tokens as we want, then the
marginal, like the value of the token goes to the marginal cost of production.
If we can produce a token with the click of a button, then the marginal
cost of that token, or the value of that token, will be zero, right?
So we need to make it, well Difficult, or in fact, in Bitcoin, impossible to
create additional like units, you know, there's 21 million and that's it, right?
That's the set of rules.
And therefore, when we check each transactions, we also ensure that
there is no transaction that has one Bitcoin on the input side and 10
Bitcoin on the output side, therefore increasing the total supply of Bitcoin.
And so Bitcoin is a massive verification machine to ensure that
this computer system is this way of speaking to each other, uh, actually
balances the books of the system.
of how many units of money are there, and who has the right to allocate
these, and so it's, it's basically a system that creates a natural
resource, and then also manages the allocation of this natural resource.
Um, so Bitcoin is almost a parallel universe where, in fact, you do own
the, the, the Bitcoin, basically, right, in, in this specific, bubble,
so to say, um, but the ownership is, is not defined by you as a person.
It's defined by the knowledge of a secret.
Yes.
Um,
so you prove that you have access to it by, by having access to the
private key, which unlocks it.
So, is there anyone else?
On earth that can prove that you own a Bitcoin except you,
the holder of the private key.
In theory.
yes.
If the holder of the private key reveals information to others
that indicates such, right.
Um, and like one very common way that this would be is you have a mobile
wallet, you know, um, that it does not run a Bitcoin full node, right.
That connects to someone else's full node to check if that,
if you have Bitcoin, right.
Um, and.
You don't use Tor, right, so there's an IP address linked from you to the server, and
so the server operator knows that this IP address just asked that this money, that
this, how much money is on this address, and so we have, well, a very strong
indication, right, that this address owns, that this IP address owner owns
is at the core of the question.
It can be a very strong indication, but in my mind it can never be proof.
Because you need to sign with the actual private key to prove.
Otherwise it's boating accident time.
guy with the gun doesn't need proof, right, he just needs a good enough guess.
For him, he needs, like, there is a praxeology to violence.
Um, uh, uh, thieves are, are actors.
They live in a state of uneasiness, they have problems, and they try
to find a solution to that problem.
They don't have ethics, they don't have morals, and so their solution
to the problem harms other people.
But nevertheless, they are still actors.
And so they think that they will be better off after the action of theft than before.
That's a value judgment.
And it's an entrepreneurial one.
So they might be correct, they might not.
They break into a house, hoping that there is a bar of gold
hidden under the couch, right?
Turns out there's not, right?
So, if they spend a lot of money breaking into the house, and there's no
loot, they're not profitable thieves.
And this means that they destroyed their capital, right?
They spent 10 Bitcoin on getting the equipment, and they got 0 Bitcoin back.
So, that means they're 10 Bitcoin poorer, and eventually they will
run out of money and starve.
So, thieves need to be profitable in order to do their thieving, and that's
the genius that cypherpunks realized.
If we exponentially increase the cost of attack, and exponentially
decrease the cost of defense, then we make thievery unprofitable.
And that's the genius of private public key cryptography and encryption, right?
It's trivial to generate a private key and then generate a
public key or a signature, right?
Nano compute, like second compute, like nothing, right?
But to brute force a private key or to forge a signature without it,
like, requires more energy that would collapse into a black hole, you know?
So that's kind of a problem.
And for thieves, right?
It's really good for the people who want to defend themselves.
Because they can very cheaply do it, and it just doesn't make
sense to actually break, uh, like, attempt to break the encryption.
But nevertheless, computer systems are very complex, and there's
a lot of metadata associated with, with, like, computing and
communicating between computers.
And so, like, I don't know, there are, like, microphones and like radio frequency
scanners that you can point on computers and you see the computation that's that's
happening in the machine right because there's a lot of radiation outside of
the computer that can be correlated to which bits are being flipped here
um and then you can have all types of side channel attacks to extract secrets
from a computer while it's running and so um the the problem is that the
technologies the the holistic technology stack that we have is quite susceptible
to this to revealing information that should have been kept secret.
And again, that is a critical part, of course, to communication encryption,
but even more so for Bitcoin.
If we lose the assurance that only we know the private key,
the money system is broken.
And that's why Bitcoiners were so paranoid and started this whole thing of
hardware wallets and secure elements to Really ensure that we don't leak private
key material, but it's an extremely difficult task, um, because, well, this
reality is very observable, and the cards are, to some extent, quite in
favor of surveillance, unfortunately.
the guy with the gun in this case could be the government,
doesn't necessarily have to be.
Yeah, exactly, it can just be like a poor guy who needs to provide for his children,
you know, and, like, he sees a way for feeding his family for the next two years,
and that's a good trade off for him.
Yeah, momentarily.
Momentarily, exactly, right?
So, so, uh,
if we manage to do this, though, on a, on a grand scale, and if people in
general manage to do it, to, to have the,
To exponentially increase the cost of the attack while simultaneously
decreasing the cost of defense.
Does that lead to world peace at one point?
Is that like the end goal?
Yeah, I think so.
Oh, I mean, that makes sense.
If every economically rational thief will realize that he is worse off
if he does this stealing, right?
Like, actually, because he needs to spend much more money in an attempted theft,
and most likely he's not going to succeed.
And, I mean, this exponential difference has to be huge, though, right?
Because, like, we had castles, you know?
Like, castles are quite, like, quite extreme asymmetric protection.
Like, if you're behind castle walls, with a well staffed militia that actually
defends the walls, It's quite difficult to get to you if you just have, you know,
like, humans and swords and ladders.
Um, that's, like, sieges are, are quite in the favor of, of the defender.
But still, they happened a lot, right?
And people were able to overcome these defenses.
Because, I guess they weren't never holistically secure, you know?
There was always some backdoor that enabled the attacker to go
through, to get through, right?
Um, and that might just be brute force, right?
You just bring a huge army and You're fine with tens of thousands of your own
guys getting killed, but eventually, you know, after you throw a couple
hundred thousand people at the problem, someone will succeed to break through.
Quite a brutal tactic, obviously, but it worked.
Yeah,
You upgrade your RAM and you get in.
yeah.
But then cryptographers came around and were like, well, but there's math.
Yeah, we can use RAM in another way.
Yeah,
1 plus 1 is 2.
Like.
What?
Are you sure?
that might be offensive.
That's a different kind of worms.
Yeah.
. Yeah.
So, so, uh, uh, the, so Bitcoin being this perfect defense mechanism, because
all it does is increase the cost of the attack, can, can Bitcoin ever
be used for attack in your opinion?
Like, can it be used in an aggressive way?
I think directly not, um, because again, it, it is just, uh, speech and
such, but on the other hand, maybe yes.
Because, let's say, like, if someone hacked your machine, right, and
got access to your private key, and spends the Bitcoin, like, in
the context of Bitcoin itself, it's a valid signature, it's a valid
transaction, and it will be included.
So, in the legalities of Bitcoin, it is no theft, right?
It is a valid transaction.
Um, but, let's say on On the ethical realm, you worked hard to get these
Bitcoin and you didn't want to send them to the attacker, so he is
definitely stealing them from you.
So, let's say Bitcoin can be stolen, certainly, in the human analysis.
Not on a technical level, we've never seen a transaction confirmed with an
invalid signature, but on the human level, There have been a lot of people that
got separated from their Bitcoin against their will, right, against their consent.
Um, and, and that is theft.
So, thieves can use Bitcoin, thieves can get paid in Bitcoin, thieves can take your
Bitcoin and pay them to themselves, right?
Um, that's, that's a fact of reality too.
Yeah, so what if, say for instance, uh, this is an example out of thin air, but if
you had a money printer and you were able to, uh, store arbitrary data next to this
unitless, uh, Satoshis, uh, and thereby increasing the cost to, to starting up a
node for everyone, And thereby decreasing decentralization and finally breaking the
network when there aren't enough nodes.
Could that be used in an aggressive way?
Well, that's, that's difficult to say, right?
Because again, um, it is just the writing of bits and bytes, right?
It's just speaking words.
So there's, um, however, again, a limited amount of resources that are
available specifically in Bitcoin.
And not just do we have 21 million Bitcoin, we also have like, Two and a
half slash four megabyte blocks, right?
And so this, this means there's only a certain number of, of transactions that,
that can be fit into a single block.
And that, that means we have, again, a scarce resource and,
and we need to allocate it.
Uh, so this is why there is a price for, for Bitcoin transactions,
because that's how we solve the, the, the scarcity problem, right?
Um, by whoever pays the most gets in.
Um, that's a, or it's not even whoever pays the most.
It's like.
You can choose who goes in by mining a block, right?
You have full freedom of choice of which transaction do
you include into your block.
And if you don't mine, then you can propose to someone else, say, please
include my transaction into a block.
But again, there's a large demand and a limited supply.
Uh, so most likely people will start bribing each other and it's like,
yeah, if you include my transaction in your block, I'll give you sats.
And in fact, Bitcoin, the Bitcoin software launched with a anonymous
peer to peer marketplace for the scarce good, which is Blockspace.
And it had a payment mechanism integrated into the Bitcoin
transaction system itself, which by the way, was not a requirement.
Satoshi didn't have to do that, right?
Bitcoin would have totally worked, uh, if, if you could not, like, uh,
if every input sum has to be exactly equal to every output sum, right?
There cannot be that outputs are smaller than inputs and the leftover
goes to the miners, but that could have been a consensus rule, right?
But then most likely we would have seen some third party external marketplace.
Where people would do the bidding on please include my
transaction into the block.
And then of course they would have to figure out how do we actually pay the
miner to get our transaction in the block.
When the payment transaction will again have to be included in the block, right?
So it would be quite difficult.
So Satoshi had the genius to embed an anonymous marketplace.
Into the core essence of the protocol, right, with the rule that outputs can
be smaller than inputs, and the rule that we have this gossip peer to peer
network, which like the whole peer to peer network is kind of optional, by
the way, but it's just there to kind of make it easier so that we have this
anonymous marketplace for Blockspace that we can propagate offers, right,
and one person sends the offer and gets spread to the entire network.
So the demand side is no monopoly.
Anyone can broadcast a message to the peer to peer network hoping to be included.
And then on the supply side, the actual miners, there's also no monopoly.
Anyone can spin up his computer and start SHA 256 hashing.
On the most recent chain, right, with his own candidate block.
And nobody can stop you, right?
That's the definition of no monopoly.
New market participants are not hindered to enter the system.
And so this is the most radical free market that we've seen probably ever.
And it's been kind of hidden inside Bitcoin since the very beginning.
Yeah, you can of course also pay the miner in something else than
sats to get included into a block.
And if a mining pool does this, the individual miners doesn't necessarily
have a claim to a piece of the pie of whatever money was paid to
the mining pool owner under the table and not on the system, right?
They can't even see it.
So how big of a problem is that, and can you really, the core of the question
is, can you really call yourself a miner if you're just selling hash power to
a pool and the pool isn't transparent?
I mean, it's actually true that we, like, there could be in the future, A
alternative marketplace for block space that's not inside the Bitcoin Core client.
And by the way, arguably that's better, because we have a piece of software
that does one thing really well, and then, you know, we just specialize
and put the two modules together.
Um, architecturally speaking, this might be better.
Um, we see things like, for example, the mempool.
space explorer, or accelerator, right, is one.
Marketplace that is now establishing that that seems to work now quite well.
Of course, it has the issue of there's a central, like, order
book, so to say, um, and probably custodian for the money as well.
And so, um, I'm not sure, but like, it's, it's one approach of doing
such an alternative marketplace and there can be downsides.
Like here, it's not really public of how much Volume is going through here, right?
Like how much are people speeding up their transactions, right?
And I guess the same goes to too much earlier where, where we just had
mining pools offering this in their own API, you know, or, or a webpage.
Um, so at least now, like we, we have a dedicated service provider.
That's not a mining pool doing this, which I think is, is, is an improvement.
Um, but we could also, you know, build.
A, like, off chain peer to peer network, so to say, that's not related to Bitcoin
per se, but that has all of the aspects that we want just dedicated for an
optimized market book for this resource.
And Bitcoin should still work, I think.
Like, the marketplace inside Bitcoin Core is not essential in the long run.
It was just very convenient to bootstrap it.
But, you know, in 50, 100 years, I wouldn't be surprised if we have
Dedicated systems for, for these things that potentially are in different
repositories and such different softwares.
So, in your opinion, how damaging is a temporary fee spike over a weekend
or something where it goes up to like, 2000 SATs per transaction.
What, what impact does it have on lightning channels and
lightning providers and so on?
Like is, do you, do you consider it an attack or what is it?
Um, it's, it's, uh, it's an inevitability almost, right?
If you have a hard, extremely limited supply, right?
Of, there is only two and a half megabytes in the usual block, right?
Um, that, and you have extremely fluctuating demand, and there is no
way to speed up production of the good.
And so there is bound to be extreme, um, like, uh, differences of,
of we have way more demand than supply or way, way less, right?
But it will be very rare that we will fill just exactly
everyone who wanted to gets in.
That's, that's quite rare, I think.
So that's why we've seen in, uh, I don't know since how long is the
mempool full now, like probably a couple months at least, right?
So to actually clean out every transaction that wanted to be made
is quite rare already now and in the future, if Bitcoin continues to be
used, this is even more unlikely, right?
So then the question is just how, like, do you get into the top, like, the top
payers to get included in the block still?
And this is where just the technology is quite difficult, because this
is like, you're, you're, you're, it's an order book, right?
You're trading, basically, and you don't know if the price
goes up or price goes down.
And this is all at least supposed to be automated.
And so like Bitcoin wallet developers are basically building trading bots, right?
They're, they're, they're block space accountants charged to purchase
block space on behalf of the user.
And then the user just clicks send and that's it.
And, and the software does all of the complexities of, of
constructing a transaction that is of a size acceptable, right?
Because if fees are super high, you don't want to build a transaction with
a hundred inputs and one output, right?
That's, that's quite big, quite expensive.
You would want to have a transaction with one input, one output.
It would be way cheaper if the fee spike is currently high.
And so a smart robot should build a different structured transaction with more
or fewer inputs and outputs to accommodate the current fluctuation of the market.
And of course, the fee rate is another, like what's actually your bid
that you put into this marketplace?
And that's, again, that's trading like.
How much are you going to pay for the stock?
Nobody really knows, right?
And so it's, it's kind of good luck and you don't know if it goes up or goes down.
And sometimes you overpay, right?
And you pay way more than was actually needed to get into that block.
And so you lose money, you lose capital.
And sometimes you don't pay enough and you don't get included for, for months, right?
Um, but there's better software that can alleviate a lot of these problems.
Well, so I guess I guess another side to this question, because everything
you're saying makes makes total sense from the perspective of that this
stuff is definitely going to happen from from hyperbitcoinization side.
There's just going to be more demand than there is supply of block space.
But I think the issue that we've been exploring a lot.
Lately, uh, is, is that when there are transactions that aren't really being
made for the purpose of moving value from one person to another in the form
of Satoshis, they're, they're another form of value, subjective value that is
communicated through arbitrary data, or at least some other type of, of data.
Does that change the property of Bitcoin as money?
That's essentially, I think the, the root of the, the argument any, anyone talking
functionality as money.
Yeah, exactly.
the, the functionality of, of Bitcoin is
Well, I think.
There's a couple aspects to this, right?
We have again a scarce resource block space, and there's the problem of
how do we allocate this block space.
And there are very stringent rules on this, right?
You cannot have arbitrary data in blocks, right?
There needs to be, for example, the transaction structure.
There needs to be inputs that point to previous outputs, and there need to
be outputs, the sum of the inputs, sum of outputs, blah, blah, blah, hashes,
transaction headers, all of the stuff needs to be followed in order for
this to be considered a valid block.
So the Bitcoin developers have, from the very beginning, had a very, I guess,
authoritarian regime to, to, to allocating these resources, which makes sense.
If you don't put stringent, like, structure in a protocol, then
people just fill it with garbage and every software breaks, right?
So it's like a practicality thing that we need to have a
very opinionated, kind of thing.
Bye bye.
Set of rules and we need to pick one of them and and like just do it
because if we don't pick any then it won't work and also if we pick
the wrong one it won't work either.
Like, I don't know, imagine the rules would have been like a broken hashing
algorithm, for example, not SHA 256 but SHA 1 or something that's broken.
People can create collisions, right?
So there could be two transactions that have the exact same transaction ID.
breaks the system, right?
So if that would have been the set of rules, Bitcoin would have broken, right?
And now also, again, if we allow arbitrary things to be built, then people will just
use it as data storage, for example, and just fill it up with megabytes of images.
And again, limited amount of resources.
If all of it is used for, for pictures, then none of it can be
used for money transfer, right?
So this is again, an inherent conflict.
And so the, the, the tricky thing though is, now we have this.
Like, established set of rules in the Bitcoin consensus and
how do we change it, right?
And that's, that's the really tricky part of, you know, making up man made rules.
Like, Bitcoin is not Natural in the sense, right?
Like, humans came up with this shit.
Like, this is our creativity that that made this happen.
And, and so, like, it's not, like, it's not nature made, right?
It's man made.
Of course, men are part of nature and such.
So it's a bit, wishy washy here, but ultimately, we made it, we
can change it, we can make it better, and we can break it.
And that's a really scary position, because I think we all realize
that this is quite an important project, and we definitely have it
in our power to break this thing.
Um, so, I hope we do our best effort.
just a, uh, I I guess, uh, my interpretation of that is, is that,
uh, caution when making changes to Bitcoin is, is paramount.
Would you agree with that?
Well, inaction is an action too, right?
And that might be even more dangerous.
So, there might be critical bugs in the protocol that if not addressed will
break the system and potentially they are currently being exploited, right?
Um, And so, in such a case, we should do our best to fix it as soon as possible.
Um, again, changing the protocol is, by design, extremely difficult.
Satoshi knew that from the very beginning, right?
So, how exactly we do that?
Who knows?
Well, if it's, if it's up to the individual miners, which
it is, what blocks they want to mine, what transactions they
want to include in a block.
And it can be fixed that way, a sly roundabout way, if you will.
Well, if we could trust the miners with stuff like this, then
we could trust the miners with enforcing the 21 million, right?
But we can't, right?
We don't rely on anyone.
We verify it ourselves, right?
And so the reason why we don't have actual JPEGs in Bitcoin blocks is
because your node says no to any block that actually has a JPEG in it, right?
Blocks have to have transaction in it.
If not, you kick them out, right?
So even if there's valid proof of work And so Proof of Work doesn't solve the problem
of, of integrity of the block, right?
This has nothing to do with Proof of Work.
In fact, Proof of Work is one part of the rules of the integrity of the
block that is defined, enforced, and verified by the full nodes itself, right?
So, so your full node makes up the full set of rules of what is a
valid Bitcoin block or not, right?
And you can change it, right?
Very easily, in fact.
Just the question is, will you convince others to use the
same changes that you applied?
And there's many millions of people using this thing now.
It's quite hard to get people on a consensus for such drastic
things, especially to ensure that no one else is still using the old
rules that are currently valid.
Specifically, if you want to get rid of inscriptions,
that's certainly a hard fork.
Like, taproot transactions are currently valid, and if we make these
taproot transactions in the future invalid, that's a hard fork, right?
So, like, technically speaking, like, it's not that nobody
would want to have a hard fork.
It would be great to hard fork Bitcoin.
We could clean so much stuff.
It's just a practical reality that breaking the hard fork use of a
running protocol is extremely difficult and arguably, like, unethical.
Because people have signed up to the previous system, right, and built
businesses and, you know, stored their money in these types of scripts.
If we now make them unspendable, like, what is that?
No?
so, so, um, when it comes to mining, I mean, there's, um, minor incentives,
like, uh, the thing we talked about before, about, um, under the table
payments to big mining pools, like, uh, To me, the obvious fix to this
problem is to just make, um, get it into the brains of the hash salesmen,
that they ought not be hash salesmen, mere hash salesmen, but actual miners
and know what block they're mining on.
Because I think the ethos among the individual miners is, It's better than,
than maybe these bigger pools that might, might not be, be, uh, as, uh,
concerned with the longevity of the, of the Bitcoin experiment, but, you
know, more fiat minded and wanting, wanting a quick buck now rather than
save the system in the long run.
So, uh, right now it feels like we're trusting these bigger entities to,
to have as much of a disincentive to, to destroy Bitcoin so that
they won't, but, but it's tricky.
Like it's a gray zone, right?
What's your thoughts?
I think Satoshi's genius in designing the Bitcoin protocol was that he did
his best to separate different tasks that need to be done in the system into
different like conceptual entities, and then to ensure that each of these aspects
is distributed as widely as possible.
And this is ultimately what it means that Bitcoin is decentralized, right?
There is not one person that defines the set of rules, for example, or one person
that writes the candidate block, right?
Or one person that provides the proof of work for the candidate block,
or one person that provides the signature for each transaction, right?
Each of these things is distributed.
And in the ideal case, in the original Bitcoin client, to every user, right?
Like, the Bitcoin software in 2009 was mining by default for everyone, right?
So, literally the entire stack of the operation was at 100
percent of the users, right?
There was no non validating, non mining users.
In the beginning, right?
We had perfect decentralization, so to say, right?
And then if efficiencies kick in and economies of scale and division of labor,
and we start to optimize each of these things kind of on its own and split it
out into different branches of government.
Yeah, specialized entities, so to say.
And if you specialize on being the best hasher that you could
possibly be, you just give up on being the best block candidate
creator that you could possibly be.
Because if you do the one thing that you're marginally better at and
focus all your attention on that, you will be the most profitable.
That's the division of labor, basically.
Um, so, yes, it is.
It is an issue.
Um, and we, Bitcoin would be better off if we further distribute the risk
and responsibility of each of these tasks to as many people as possible.
And I think we've done a really good job, for example, of distributing
the ownership of private keys.
And like, there's, I don't know, many millions of private key holders
on the Bitcoin blockchain, right?
So that's, that's great.
Um, but, and we have.
Probably done this as well with hashers, right?
There's a decent amount of quite large independent hashing institutions, right?
Not so well with mining pools and actual block candidate
creation, like, that's pretty bad.
Like, there's two or three of them, so that's scary as fuck.
Right there we've utterly failed and we've made Bitcoin way worse than it was before.
And like, in this one metric of resilience, of decentralization, of
distribution of risks, we made it a lot more efficient, but we made
it much more vulnerable to attack.
And that is a problem.
Thankfully, a lot of people are working on fixing it.
It's a really difficult problem, right?
It's not that like, Like, there's some malicious, like,
attempt of trying to break it.
I mean, maybe there is, but the more likely answer is just bloody
difficult computer science.
And it just needs an insane, an insane amount of research and development
before we will have tools that are even coming close to being actually adequate.
Right?
I'm not praising Satoshi's 2009 code as being perfect, because
it was a pile of shit, right?
And you could break it in a million ways.
Um, so we've, we've improved a lot, but we're very far from done and
because just to some extent the, the realities of the difficulty of the
situation have caught on much faster than our ability to solve these.
Well,
Yeah, I mean, the, the problems that are currently existent in Bitcoin and,
and that now we're, we're at Nostriga today and talking about Nostr, this
sort of related communication layer in relation to Bitcoin, uh, you mentioned
at the very beginning, Freedom Tech.
So, we, when we last talked to you, you were, you were focusing on Wasabi
Wallet and now obviously that has, that project has just been made open
source, uh, essentially, uh, and so my question, my question to you on,
on that is, uh, what are you focusing on in terms of Freedom Tech now?
Nostr is definitely a highlight, right?
Nostr is just incredibly cool.
And it's so wild to think that Nostr is like two years old.
Like, it's, it's not old, but look at the amount of stuff that we've built.
In this short time frame, like how fucking powerful are we?
It's incredible, right?
If we get our act together and actually build on, on like such an open protocol
and get people excited about it and people using it, like, it doesn't
take us long to fundamentally change the pattern of speech on this planet.
Wow, that's incredible.
Like, we did that.
That's, that's wild.
And we're just getting started.
Right?
Like, think about where Nostr is going to be in five years.
It will be wild.
Absolutely insane.
Um, so that, that's very bullish and very encouraging.
And it's super exciting to work at such an early stage in the protocol, because
there's so many obvious improvements.
There's so many obvious use cases.
There's so many low hanging fruits of how we can make it
even better than it currently is.
Alright, so we have something that's already great, and we know a million
ways on how we can make it even better.
Right, and you can be part of making a meaningful improvement
in getting this to like an exponential blow off of awesomeness.
Meaningful improvement in improvement of humanity, really.
Yeah.
Yeah, that's the other thing, like, that's why Freedom Tech is so
exhilarating to work at, um, because like, like we're ending slavery.
That's kind of a big deal, you know,
Yeah, it should have been done at least 300 years ago.
Yeah.
No, it's, it's amazing.
And well, and actually, so, so a couple of things here.
First of all, we've talked about this a little bit, how Nostr seems
like it's the playground that people wanted as an alternative to Bitcoin.
In other words, people who went and started making shitcoins
were basically just wanting a playground to do all this stuff.
But now is, is, is Nostr basically the place where people can do that
and channel their energies in a way that isn't going to break money?
Yeah.
I, I absolutely agree.
So I'm, I'm very bullish on a lot of these use cases and, and one other area that
currently interests me a lot, um, is, is just a zero knowledge cryptography.
It's, it's, it's wild what's possible.
It's, it's absolutely wild.
Within the last five years or so.
The theory has developed.
And again, a lot of shitcoin projects putting zero knowledge
proofs on blockchains and such, and I'm not quite convinced that we
actually need a blockchain for that.
I think relays are just fine.
And so I'm quite bullish on having actual zero knowledge proofs much
more integrated in Nostr clients.
Like, you can do amazing things with this.
Like, for example, anonymous web of trust, right?
You could prove to me under an ephemeral anonymous identity, right, that you
are in fact, On my follower list.
Like, I'm following you, but I don't know who you are.
Right?
So, these types of things are trivial with zero knowledge stuff.
And we don't have any size constraints or computation constraints in Nostr.
Because it is not a global consensus system.
Only the people who are interested in this proof actually have to, like,
download it and verify it and such.
Um, so, it's, I think we can do a lot of amazing stuff here.
I still have to Kind of dig deeper in this rabbit hole, but
it seems pretty obvious wins here.
and do you think that driving these 180 IQ
young developers into Nostr instead of shitcoin development
is, is like moving them?
To do, to think more of what they should rather than what they could, uh,
because I think that's, that's sort of the main problem with this nerdy set
of shitcoin developers is that they, oh, I could do this if I just do this
and they, they focus on what they can do rather than what they should do.
And it's Nostr, uh, Changing the direction of that, are people
thinking more of ethical things while developing on this than
I hope so.
I mean, it's a, it's a big claim, right?
That like a piece of tech can
it's a bit of hopium
improve the morality of people.
Um, it's definitely a big claim, but it seems, it seems true.
Like, if you think about it in Bitcoin, like probably each of us,
um, our level of morality before we discovered Bitcoin and what it is now.
And our understanding of morality has substantially,
like insanely improved, right?
And I'm not sure if it would have happened, at least to this extent, without
being exposed to the Bitcoin technology.
And so, and Bitcoin is just money, you know, like, humans do a lot more
than, than buy stuff, you know, like, sure, money is incredibly important,
but it's far from the, it's far from everything of the human experience.
And I think Nostr.
We'll do a lot of the other stuff and Nostr has this freedom mindset embedded
into the protocol just as Bitcoin has.
And so I'm, I'm, I'm extremely bullish on seeing the people who get exposed to Nostr
and what it does to them in the long run.
So what happens first?
Hyper ossification or hyper ization and
both at the same time.
does one lead to the other?
Um, there's definitely synergies here, right?
Um, and, uh, yes, one leads to the other.
Um, there's, I met a bunch of people who got interested into Nostr first, and
then used Bitcoin for the first time.
It's a very common theme, actually.
Um, again, because Like, social, like, think of the, think of the, like,
average screen time of people, right?
Uh, how much is on social media and how much is in their banking application?
Like,
it, for sure.
you know, um, I think Nostr is going to be way bigger than Bitcoin in the
improvement of the human condition.
Then again, every time you press the like button or the retweet button
or whatever on your social media app, even the legacy system, you are
providing someone with some value.
That's why your account is valuable to, to, uh, Facebook's
and the Twitters of the world.
There is a value thing embedded into everything you do on the internet.
It's just, you don't get a tradable good.
No, no,
sell the like to someone else.
no, uh, not at this point.
Uh,
know, Telegram did that, actually.
Uh, I just saw.
They have now a star emoji.
If you send the star emoji, you can send the star emoji back to the
company, and they will give you money.
So, voila.
It's basically a shitcoin, but it's a star.
Well, so, so, is it more important to fix money or the other stuff?
Well, that's a big one.
Um
Both again, because like money is only half of every transaction, right?
And so like, maybe like, maybe the earlier example of the marketplace for, for, for
Bitcoin block space is perfect because why did Satoshi include the marketplace,
the other stuff together with the money?
Because it was kind of essential, right?
You, like, you need to have both at the same time in order to live, right?
You need to speak, you need to advertise your products, you need to
negotiate with the customers, right?
You need to convince them of the value that you will provide to them, and
then you need to receive the money and tell them that you've received it, and
ultimately hand over the goods, right?
So there's a lot of human interaction into every trade, and the money aspect
is just Like, one small part of this long interactive chain of protocol, basically.
Um, so, yeah, I think we need both at the same time.
And we're just discovering upgrades to each of them as we move along.
But this has always been in synergy.
Like, the internet is way older than Bitcoin, right?
So arguably, we need the other stuff first, right?
We needed like 20, 30 years of other stuff before we could
actually come up with the money.
so, so fix the money, fix the world that goes both ways, then fix
the world and you fix the money.
No, but seriously, we actually talked about this.
Uh, in that, uh, maybe an analogy to, uh, that the internet needed to
develop in a centralized way because the, literally the hardware and
everything, uh, the architecture, the client server model was literally a
centralized and centralizing system.
Model and that needed to exist first.
And then, but then the analogy is that is that gold was centralized
naturally in the sense that physically the physical constraints of gold made
it so that it naturally centralized into banks and then fiat solved that
problem to sort of decentralize it, but it, but it broke everything.
So now the mechanism of fixing the money and decentralizing the money was gold.
Bitcoin, but the corollary for decentralizing the
communication is, is Nostr.
So both things have kind of happened in a, in a parallel.
That's, that's what, what we were discussing.
So,
That is the alarm telling me I should go on stage.
Oh,
Oh, okay.
So, uh, but I still have a couple minutes, so we'll wrap it up.
can't we find you online, Max Hillebrand?
Because you can't be found online.
Can you?
Well, I'm
Nostr for sure.
Max at TowardsLiberty.
com.
You can send me mail, notes and sats to that, which is, by the way, crazy, right?
That we can have like this unique identifier to get, like, all
of your needs settled is wild.
Um, and yeah, like, uh, Check out, uh, lodging of Wayfaring Men.
That's, I guess the, the main shill of this video.
And I made the audiobook for it.
Uh, it's on a podcast.
The podcast is by the author, um, uh, um, Paul Rosenberg.
And, uh, it's called Parallel Society, right?
So check that out.
Um, right now we've released like the first episode.
The others will, or first chapter, the others will come shortly thereafter.
Um.
And the other book recommendation I should highlight, which we haven't mentioned
yet, is Cryptoeconomics by Eric Voskuhl.
Most of what I said here was very much inspired by that book.
He has the most rigorous understanding of Bitcoin.
It's by far the best Bitcoin book.
Sorry, Knut, but you have no chance.
So I also did the audiobook for that.
Just search for Cryptoeconomics in your
audio book though.
No, it's not.
When you have to, when you have to read tables of math formulas,
it's, it's starting to fall apart.
But there's a lot of verbal logic in the book that goes very well.
Just get the free PDF for the actual graphs and
And keep using Wasabi and fire up your own coordinators and whatnot, right?
Go
been the, this has been the Bitcoin Infinity Show.
Thanks for listening.
Now get on stage, Max.
Don't want to make you late.
Bye
the book, it's almost as good as Erik's.
that's not what I said.
right, that's it.