All right, welcome to the Presidio Bitcoin Jam.
Presidio Bitcoin Jam.
How are you guys doing?
Doing great.
How are you?
I'm doing awesome.
I definitely still on a high, a little tired, but on a high from the Quantum Summit, which has been awesome.
It's been a fantastic two days.
It's crazy.
Crazy.
That's why we're doing the show a little later than usual.
Not because we came into the office late, but because we wrapped up the Quantum Bitcoin Summit.
We're still out having a picnic right now.
Yeah.
We're skipping the picnic to come do...
Bummer.
Just for the, just for our audience.
We're going to hang out with all of you guys.
Yeah.
We've also been hanging out with these people for the last 36 hours, so it's good.
So what, what, what was the Quantum Bitcoin Summit at Presidio Bitcoin?
Who wants to tackle that?
Well, so Presidio Bitcoin was hosting the Quantum Bitcoin Summit.
And, you know, this question has been coming up a lot.
I think we've talked about it over the, over months and stuff.
Specifically.
With Willow.
The Willow thing.
In December, I think we covered it.
Wow.
One of our early topics.
That feels like a year ago.
But people keep asking, right?
People are like, well, what's the deal with quantum?
And is this a real risk to the future of Bitcoin?
And so I don't know if you proposed it or how it all came together, but there's a, you
know, at Procedo Bitcoin, the last day and a half has been a bunch of leading crypto
quantum computing experts have come in.
And then we've got a bunch of quantum Bitcoin experts and builders.
And we sort of got everybody together and learned a lot from the presentations, gathered together to discuss and sort of do breakouts and just a lot of just hanging out and meeting people in general, just conversation around this topic.
um so my i mean my kind of understanding from hearing what i heard was like certainly there's
a lot of good discussion going on probably need to kind of keep the cadence of this because
we're not in a problem state right now but we want to be we want to be aware and ready and kind of
like have some cohesion and network of how to discuss these and who are the experts and who to
bring together um so i didn't feel like it's like oh alarmist this is happening next month let's all
change but it's like hey if this were to happen over the course of the next two years or five
years or seven or eight years how do we think about laying the foundation and making the kinds
of changes and what kinds of compromises or changes will we need to make to make bitcoin
secure and safe in a world there's certainly everything's compromises everything's trade-offs
Let me ask you guys, I mean, there's several different difficult questions with this topic. One is if and when cryptographically relevant quantum computing will even exist. I'm curious for each of you having now attended this event, do you believe it's going to happen sooner than you previously thought or farther away than you previously thought?
or unchanged? Yeah. So I'll preface this by saying I'm obviously not a quantum expert. I think it's
fascinating. And one of my big takeaways from, you know, the whole, I guess, summit is I want to
learn a lot more about quantum in general. Not just quantum computing, which I think is a really
fascinating application, but also just, I had some very interesting conversations with some of the
folks around like, why does quantum computing even work? And I have a few physicists and philosophers
I need to go deeper on. And anyways, adding to my stack of books, but in terms of the short-term
stuff, you know, I would say I am leaving roughly the same in terms of my concern level, maybe
slightly, I would say I have a slightly more accelerated view of how quickly this thing
could go. So in general, I mean, for me, like the biggest sort of like alpha of the whole event was
the PsyQuantum CTO, the guy he presented. PsyQuantum, for those of you who don't know, is
apparently, I mean, it's a private company, but they've raised from like BlackRock and like all
of the major, major, you know, institutional funds, founders funds in there. And, um, it,
from, from everything I'm hearing, they're apparently the leader. Like I've, I've heard
credible sources claim they're even ahead of Google, which sounds pretty, pretty crazy to me.
But if that's the case, then we just got to hear from one of the leaders in the whole field,
which was really, really interesting. And one of the things that, you know, both he and there was
another quantum researcher for his show, I think, um, who was also very interesting. And, you know,
they both kind of seem to like converge on a five year ish timeframe, um, that like, okay,
we're probably going to have something that could break ECDSA,
which is the specific cryptography that Bitcoin uses for key addresses.
And both were kind of in that 2030 timeframe.
Show said five years.
I forget the other guy's name now, the CTO.
What's his name? Matt? No.
Terry.
Terry, thank you.
Five years one day.
Five years one day, exactly, which is a very...
Price is right.
Yeah, exactly.
So I thought they kind of converged on that,
which was interesting to me.
However, I chatted with Terry a little bit afterwards
And this is eventually a topic we're going to discuss later today, which is like, hey, Terry, imagine a world where energy is free, the marginal cost of electricity is effectively zero, and you could wave a magic wand.
How would you sprint to get there faster?
And there's two kinds of fields of quantum computing that he was most excited about.
There's the traditional cold cubic quantum computing, which requires what he said is a fundamental breakthrough in refrigeration that we don't have yet.
So you can't just throw electricity at it.
And then the other one, what they're doing, which is photonics. And with photonics, I was kind of asking, what is the big bottleneck? And one of the bottlenecks that came out was robotics to connect chips to fiber. And I'm assuming this is happening at a very, very small scale. And so that to me was very interesting because I was like, if that's the case, that seems like a solvable problem.
And if it's a solvable problem and it's a problem solved by robotics, I think one thing that no one was sort of like bullish enough on at the summit was how progress in traditional AI and robotics could potentially accelerate that timeline.
So imagine a world where Elon drops another new robot that can do the sort of chip attachment at a thousand X faster rate.
Well, then all of a sudden my sort of like gut intuition is that 2030 timeline, maybe that could be 2027 or 2028.
So anyways, long story short, I think I'm probably just from everything I learned,
I think it's going to happen sooner than we think.
However, I'm also not that worried because, you know, I'm sure we'll go into more details on this,
but like, I think we can have post-quantum, you know, address types.
Yes, they're going to be fatter, you know, whatever, thicker for the blockchain.
But like, it's not an unsolvable problem.
And I'm also kind of of the camp and remain of the camp that like the old addresses,
you just let it lie, free markets are going to free market,
and there's a bounty for people to develop a quantum computer.
So those are my takeaways.
Yeah, I'm kind of similar that, I mean, I think my default position is that it's always hard to predict the pace of technology adoption and sort of technology breakthroughs. You know, I think I remember back, was it like Craig Venter trying to map the human genome and they were saying this is going to take 20 years and then it was done like, you know, a year or two later or something, you know, in the 90s.
But that kind of pattern seems to repeat again and again. You know, Transformers, the paper came out in 2017. Nothing much happened. It was kind of slower than you might expect if you were really paying attention. But then when it happened, it was it happens and it happens and it happens again so quickly when it when a breakthrough finally occurs. And so I think like trying to handicap exactly when it is like I think it's not tomorrow, but it's far enough away.
um you know but but like five years still seems about right something in that range um the thing
that i was trying to get more clarity from is it is it sia the the guy who is the one ceo that you
mentioned show show okay um what was that company do you remember the name of it no block q block
q yeah so he was kind of starting from the point of like you know there are about a hundred thousand
physicists in the world who could do this kind of work or like maybe he said a hundred thousand
physicists in the world and so i was asking him are we mostly bottlenecked by like thinking
algorithms new approaches or are we bottlenecked by like the physical like the refrigeration the
photonics the connectivity and like physical world stuff and he had not really sort of imagined what
happened if we had a million physicists and it's like on the information side of it right and so
if we had a million physicists,
will we get that special move from AlphaGo
where it actually, it doesn't
quite make sense to us intuitively, but once you see it,
you're like, oh, I get it. Okay, that's how it's done.
And where might we get a million physicists from?
Yeah, exactly, right? So, AI.
Million physicists
are coming from Jensen Huang.
So,
I think it's
hard to handicap these things. Five years
feels about right, but I actually am
quite happy that we
all got together and heard all the people who would know the most about this and i didn't feel
like anybody was panicked but everybody feels like they're well you know networked now and able
know who to go to to get feedback on stuff and to discuss so i i would say like i'm i come out
with more confidence that like we've got our best people kind of engaged in it i think the
five-year timeline is like
hyper-aggressive.
So I
thought before and still think
it's going to be much longer
than that. Certainly acknowledging
A, not an expert on quantum
computers,
and B, just we're all
uncertain. I mean, I agree, it could
happen fast.
I just don't think that
happening fast moment
is going to be in five years,
I would still think it's 15 or 20 years away.
If it does happen in five years...
I'm glad we have this recorded.
Yeah, exactly.
We're on the record now.
If it does happen in five years,
then that'll be very disruptive for the whole world,
even beyond Bitcoin,
but certainly disrupt Bitcoin.
I don't think the world would be prepared for it.
it'd be quite bad.
And then for
Bitcoin,
I definitely feel way more confident
today
than two days ago
and much more confident than
six months ago
in terms of like
the level of thought,
the quality of people thinking about
this problem.
At least from my own
awareness has gone from like almost no one
to some people I already know
and have respect for that are thinking about it,
developing good proposals.
And like what we covered in the event
is like outlined all the big questions and problems.
And each one, we have several proposals,
none of which are fully fleshed out.
That's why if we need to do something
in the next five years,
it's going to be chaos.
And as long as we have enough,
if it happens as soon as five years,
but we have enough of it,
head start to like start making decisions.
I think we'll get to the other side,
but it'll be like a very hamstrung Bitcoin.
Like we'll lose, you know,
we'll lose multi-sig and like HD wallets
and like these just foundational things
that we use today,
but they weren't in the original Bitcoin either.
So it's almost like a reset in many ways
of Bitcoin, the network and technology.
That doesn't necessarily reset the,
price or the market that's developed.
So I think we can get to the other side.
But what would be much better and smoother
would be we get another 10 to 15 years of
post-quantum cryptography R&D
so that we're not having transitioned to
relatively clunky cryptography.
And when I say clunky, relative to what we're using today in Bitcoin
and be able to utilize all that progress,
which I'm sure is inevitable.
Because there's going to be progress
and AI is going to help us there probably.
Energy's going to get really cheap, right?
So, yeah, anyway, I still think it's like,
I would be pretty stressed if it's five years away.
But one big takeaway I would say,
you know, seemed to be how do you get to consensus,
which is a topic you've written about a lot
and thought about a lot.
but like how do you convince enough people that it is a problem at the right time so that you can
make the somewhat painful changes required it's not like we don't know how to do it it's like it
comes with trade-offs and we all have to agree that like quantum's a big enough deal now or it's
going to be a big enough deal six months from now that we should start implementing and agreeing
so summarize some of the decisions that need to be made which we just got we covered in the event
but just for our audience.
So one is simply moving to new cryptography.
Post-quantum cryptography means,
which means cryptography that can withstand
a quantum computer in like Shor's algorithm
and algorithms applied to a quantum computer.
And to be specific on that for people listening,
like when we're talking about actually signing a transaction,
we're no longer going to be able to use
the old form of cryptography.
So it has to be post-quantum.
Yeah.
Yeah. And so there are a number of post-quantum cryptography solutions today. They all have major drawbacks compared to what we're used to in Bitcoin today, ranging from their signatures are much, much larger. The keys are much larger.
So that just means you can fit less transactions in a block. It slows down the velocity of being able to move money. It would increase the fees a single transaction would need to pay to get mined. So it hurts scaling.
and then
or the
to generate a signature
requires
dramatically more
it's more computationally intensive
so all of a sudden
everyone's like
Ledger and Trezor
and Vicky
they couldn't even sign
a transaction anymore
they don't have enough
it would take
you know like years
for them to sign a transaction
maybe the compute
on like a hardware device
yeah
so that's
that's a trade off
and then you know
you can pick different
cryptography
which gains
on one
and you lose
on the other
there's trade offs there
And then...
It's also worth mentioning on those cryptography types.
So I came away with kind of three big buckets
of potential signatures we could move to.
One, which I thought Lalo gave a great presentation,
I think everyone should check out,
I think was called NIST, I forget that.
It was NIST?
Sphinx.
Sphinx, sorry, yeah.
Not Sphinx chat, but S-P-H-I-N-C-S plus.
And that was interesting to me
because that seemed like the most established.
He claimed there was a light version
that could get down to two kilobytes,
which that seems promising,
but obviously is not as secure.
Then there was the lattice-based cryptography,
which that's the one I understand
that seems like a really, really fat signature.
I forgot the exact number of kilobytes,
but I think it was like around 100
or something like that, like pretty fat.
And then there's like newer forms of cryptography,
but I think it's worth mentioning
that those newer ones,
like I don't think there's any chance
we're going to use something newer.
I don't think, I think it's basically
the Sphinx or the lattice
because all the other stuff,
it's not like battle-tested enough
to even think about using it, in my opinion.
To be clear, the signature,
much more than 100 bytes, thousands.
Oh, okay.
Because the current ECDSA is around 70 bytes.
Schnorr is 64 bytes.
So 100 would be...
100K, right?
Yeah, 100 kilobytes.
100 kilobytes is probably more.
Yeah, I know.
Because he was saying two kilobytes for the...
The abbreviated thing.
The abbreviated thing, which that sounds like, okay, it's more, but doable.
100K, yeah.
So one question is just like which technology to transition to or multiple.
Because if you've got like one option that's really good for space efficiency, but bad computationally and another that's the opposite, maybe add both the Bitcoin and then different applications based on their needs will choose one or the other.
So there's that decision.
And then there's like the timing.
Like, do we do it now to be safer against quantum computers?
with relatively inferior cryptography
or do we wait until it gets better?
So that's one bucket of questions.
Then, and obviously that question gets,
it's much easier to reach consensus on that over time
as the cryptography improves.
I mean, we have a magic wand
and like in 15 years we have post-quantum cryptography,
which is the same size, the same speed.
It supports hierarchical wallets.
It supports multi-sig.
There's like no drawbacks.
Well, it's easy to get.
It's an embrace of that.
Yeah, of course.
Kind of like Schnorr signatures were easy to get consensus because there's basically no drawback and they had a bunch of benefits.
Right, right.
That's one bucket of questions.
Another is, I think, the thorniest question.
And this is not really a technical one.
It's more philosophical.
But what to do with coins that don't transition to post-quantum cryptography, assuming we add that.
So assuming we add that, and it's possible.
And then let's even assume we have a large window of time for people to become aware.
Whether intentionally or unintentionally, they move to new safe addresses.
there are undoubtedly
many
lost keys
to coins that literally can never move
due to lost keys. We don't know exactly
how many, but it's
clearly more than zero.
So they'll never move.
So what to do with those coins?
And right now there's
an estimated
6 million Bitcoin
that's exposed to
quantum attacks.
And I guess for our audience to make sure there's a couple, there's a long range attack and a short range attack. A long range attack is if coins have had their public key exposed in a variety of different mechanisms, then it's considered a long range attack.
Because if I possess a quantum computer, I know that public key, I know how much money is behind it, I go to work on it, create the private key, I steal the money.
Whereas, I guess, all but 6 million coins don't have their public key revealed.
So the only way a quantum computer could steal those coins would be as you go to spend those coins.
the legitimate owner goes to spend them,
part of that process when you broadcast a transaction
is to reveal the public key
in which you need a much faster quantum computer.
That's a short range.
Because it would be like
while you're submitting it to the mempools,
you have like 10 minutes or so to crack it.
Yeah, 10 minutes to an hour.
Okay, I want to add two thoughts in there
that I did come away with from the summit
that I think are more of everyone understand.
Number one, if you want the simplest TLDR
on like how to be safe, don't reuse addresses.
Like one of the big things I walked away with
is like really like we all know don't use reuse addresses but like really don't reuse addresses
and if you have old coins at addresses that have been reused probably good idea to move them
to an address you never use again so like that's like the tldr several million coins
are from reuse addresses including so the two things that i came away actually slightly more
concerned on because again i'm not all that concerned in general but i think it's fair to
like show both sides honestly one all the freaking exchanges that are reusing so you're talking like
Binance and all these guys that are sitting there with a million,
I mean, I guess that is most of the six million coins.
That to me is just like insane.
Like, how is it, you know?
Couldn't they fix that in like one fell swoop by just moving it?
They could, and hopefully they will.
But like that requires-
Hopefully they're listening right now.
Yeah.
They decide to prioritize it.
And that's the other thing is like, yes, they could.
But then, you know, in general, I'm assuming it's not just simple.
It's like, hey, man, can you move those coins?
Like when you're talking about that, that quantity of coins,
there's probably like 10 people that need to sign off and like
stakeholders and all this crap.
And so that to me was like, whoa, like I can't believe Binance
is just kind of like raw dogging their keys out there.
The second thing is,
there's something else.
Oh, Peter Rulli made a really interesting point.
And his point was,
yes, there's only the 6 million coins
that we know of that have publicly exposed pub keys.
But like how many more are you exposed to someone?
And so he made that in the case
of if you're opening lightning channels
or potentially if you're sharing your XPUB
with someone, you know,
someone that's helping you do multisigames.
If you're like a BDT Bay merchant,
you share your xpub you i mean unless you you run a bt space server yourself you would share your
xpub with someone else running a bt space server and so in all of those cases i mean like most of
these companies are probably great actors whatever but like i think you know in adversarial thinking
and you're thinking about incentives it's like you know as the price gets higher and higher who's
within those organizations who has access to the data at what point does it become like you know
like we've talked about with like the the potential for some crazy big hacks it's like you know okay
maybe certain companies have great security practices, but as a billion becomes 10 billion,
becomes a hundred billion, becomes a trillion. At some point you're going to start having
majors, even state actors coming in and getting people on the inside. And like, anyways, I did
come away thinking there's probably a lot more than 6 million that have like real attack factors.
Yep. So I think, um, but with a sufficient window of time for people to become worried and move
their coins, we can get it down to less than
2 million coins that would be exposed. There's something like 1.7
million coins that are locked up with pay to pub key.
In that particular script, the pub key is
exposed. Most of those are
very early Bitcoiners.
There's analysis that suggests
anywhere from 750,000 to a million of those are Satoshi's coins.
Almost all of those addresses have exactly 50 Bitcoin in them
because that was the Bitcoin reward for mining a block back then.
So these are mostly early miners that have all these coins.
I believe someone who done analysis on the coins only like 10 addresses using PayDeBubKey have more than 50 Bitcoin And I think the most was like 3 Bitcoin Those are the ones that most likely
a large percentage will never be moved.
They have, people are dead or that's lost keys.
Yeah.
And so that's where the philosophical question lies.
Even if we assume,
we introduce post-quantum cryptography,
even if it's perfect, it has no drawbacks,
everyone's excited everyone who can move coins moves all the coins if we assume all that happens
and it's officially a large enough window that can happen um what about these coins that literally
can't move what do we do with them um so one camp is let the quantum computer steal it and you
already said that that's like at least the camp you're in right now right um some people might
find that to be a crazy camp, but it's definitely not a crazy, it's a completely rational view.
There's substance behind that view, that position. But the, well, I'd state the reasons behind it
are, one is that we're never going to reach consensus on burning people's coins. And we
don't want to violate people's properties by changing the software. And we all agree, whoever's
coins that are, we don't even know if they can or can't spend them, but we're going to make it
sure that they can't spend them. And we'll never get consensus on that change.
And I would say as a corollary to that, to me, the whole point of Bitcoin, the one sacred cow
that cannot be slain is inviolable property rights. The whole system is inviolable property
rights. And in my mind, you know, it's a very slippery slope. And like the discussion of,
well, to your point, trying to reach consensus, well, which ones are dead, which ones are not,
it just starts to get very Ethereum very quickly in my mind.
But the reason why this is a very difficult problem is because no matter what choice is made,
a right is being violated. Because if like, I signed up for Bitcoin because I have a private
key and no one can take my money unless they get my private key. Well, now all of a sudden,
And the quantum computer steals my money.
So I violated my property rights of Bitcoin.
I disagree with that.
You said, unless it can get your private key.
And in that case, got your private key.
Correct.
To me, I want to be very sort of explicit when I think that, and I'm not saying it's not nice.
It would be unfortunate.
I'm not saying I don't feel bad for people to get caught up in that.
But to be very clear, the whole point of Bitcoin at that base layer in my mind is code is law at that level.
There are plenty of other things where code is law is insane, which again, the whole Ethereum project.
but like at the level where a bare asset like ownership of the bare asset to me is private key
now the sort of inviolable right you're given with that private key in my mind is the right
to hold that private key in the state that you received it and so if the state that you received
it gets hacked by a new technology i mean that was not that was not the agreed upon state yep
so that's that's one position um as i said it's like valid position um now another position is
freeze or burn the coins.
And I say,
to me, the difference between freezing and burning,
to me, implies permanent loss.
Freezing, there's like an option to unfreeze in the future.
So what would that option to unfreeze look like?
It would be the rightful owner can prove later on to the world
in a public fashion, these were my coins,
and do so in a way that a quantum computer cannot prove
and no one else can either.
And it's already been demonstrated,
like if you have the seed phrase for your coins,
that is one way to do it
because the quantum computer cannot take a public or private key.
It can't take the private key and reverse engineer the seed phrase
because the hashing mechanism is between them.
Right, so the quantum computer can go from a public key to a private key,
but can't go from a private key
to the seed phrase
that is fascinating to me
and that's a very interesting nuance
who would be the arbiter
like how would that work
you'd take it off
I think that's what the ZK stuff is
you need a zero knowledge proof
but again who's like saying
because it could be added
you do a calculation
so here's how it would
like let's say we had to make an imminent decision
like okay quantum computer's here
it's going to steal.
We have to make it.
And let's say we get consensus
to freeze.
And we do that.
We don't have to have
a solution yet
to do this social proof
that, oh, these were my coins.
We don't need that.
We just need the optionality of it.
So we freeze.
So we change the code
so that no one can spend
those coins,
even the rightful owner.
And then in the future,
whether it's six months later,
six years later,
or 60 years later,
we develop a system
which is fair, which is
cryptographically
sound, which is part of the protocol
and upgrade the system again, the software again
and then now I can take my
seed phrase,
zero knowledge, prove it,
prove to the network, these were my
coins and I get them back. So the assumption
there is there can only be
one set of seed words that led to that
private key, is that right? But that's
not true either, right? Because couldn't you have
when you're generating a seed it could be
12 words or 24 words.
Is it the case
with this? I guess with the hash function, there's only
one thing that leads
to the private key.
Whether I have 12 or 24 words,
I can prove that they
lead to that private key.
I guess what I'm saying, just to clarify, is
if I have 24 words that lead to that key, there's not another
cell of 12 words that lead to that key.
In cryptography like this, it's only one
to one mapping.
uh i mean i need to go study it either way like so what i mean it's just like can't get either
yeah okay even even if there's a collision there like no one's going to guess the other
option because it's like a huge number yeah there was also this discussion of the hourglass
have you that was interesting yeah right i thought that was yeah so there's and there's like a couple
variations of the hourglass proposal but the with the hourglass um concept you allow
the quantum computer to steal the coins, but you apply a throttle.
And the first proposal for Hourglass
would be each Bitcoin block
would allow for one paid above the key
transaction spend. One per block.
And with that kind of throttle, it would take
eight months to spend all of them. So if someone
possessed a quantum computer, instead of taking three hours, if you
allowed full blocks to be mined
this way, they'd all be spent and
stolen in three hours.
You apply this throttle and then
it's eight months. So it gives the whole
space
time to
react and come up with a plan
while limiting
the damage of the theft.
And like
one theory behind that is like
I'd say one benefit to this approach
is like by giving us more
time, that would
it would be easier to get consensus like oh shit this it's real now it's a real problem
so it's just easier to get consensus on do we freeze or do we introduce post-quantum
cryptography etc um and then but you know it still gets it's still tricky like how do you
at what point do you believe a quantum computer is stealing the coins like we just we just saw
thousands of Bitcoin
what was it?
80,000? 80,000
Bitcoin just moved from
an era that
would, in fact, I
think they were paid a pub key coin.
And I think they were assumed loss. I think there was
one of those organizations.
And no one's,
I mean, I saw someone claiming maybe it's
quantum, but no one's
taking it seriously that a quantum computer
did that. But it's certainly possible.
And now it's 80,000.
So how many have to move before we start believing it?
And then more people believe it.
And it becomes, you know, so it's still unclear.
But that's the hourglass idea.
There's an hourglass V2 proposal, which is way more, I don't know if I'd say more aggressive, but had very different parameters.
Instead of just paid a pub key, it would throttle all 6 million.
like if it's a coin that's
exposed to a long range attack
it gets throttled
and it takes like
120 years to spend all of them
I mean like instead of 8 months it's 120 years
it makes this a huge window
um
that starts to mess with property rights though
that starts to mess with property rights right
it doesn't start
like if I can't even like
if I'll be dead by the time I can spend my coins
like
um
because
the reason why the window of time
was increased so much is that
it was limited to
an amount of
one Bitcoin per
one BTC per block.
So much
more limiting. And then
you have to start considering fees.
So whether
it's one
address or one
UTXO per block or one Bitcoin
per block, either way,
there's going to be competition for that.
There's only one per block.
Right.
If you have one of those,
you have one of those,
and I have one of those,
I want to be in the next block.
You want to be in the next block.
How do we decide if there's contention?
I believe markets might help with that.
Markets.
Fees.
We already have that built-in.
Are we going to have another block war?
Block size war?
But then,
no, but I mean.
What if we just created a DAO?
No, but I mean,
the fee market.
So then, okay.
How much are you willing to spend
to be in the next block.
And the proposal is that it limits the fee
to match the amount you're trying to move.
So in Hourglass v2 proposal,
you can move a maximum of one Bitcoin
and you can pay the miner a maximum fee of one Bitcoin.
But one thing that was great about this event
is that after hearing this proposal,
then we broke out into breakout groups
of around six or seven people per group.
And there are like eight different breakout groups.
And in my breakout group,
we talked about what prevents out-of-band fees.
So like the protocol in this,
if we move forward to this proposal,
I can only move one Bitcoin.
I can pay the miner a maximum of one Bitcoin.
But one question that gets raised is like,
all three of us want to do this, right?
We all three max bid one Bitcoin.
Who gets chosen?
Well, so the protocol could be random.
It randomly selects one of us.
but what prevents me from going to the miner and be like i'll pay you even more money and that
already happens today to select me and not don't don't follow the protocol because the miner gets
to choose what goes in the block so the protocol might say it's randomly chosen between the three
of us but i ensure that i'm the one chosen because i pay even more fees to the miner and then it's
kind of a race to the bottom because like if i have if i have one of these um blocks that i mined
back in 2010 or whatever, and I have 50 Bitcoin in it, I'll end up just spending 49.
I'll be like, here, Mr. Miner, here's 49 Bitcoin to move on Bitcoin.
And it just-
You got a deal.
Right.
Anyhow, that's the hourglass idea.
Yeah.
There are a lot of different parameters that have to be-
I mean, that alone needs to be studied a lot to think of all the adversarial impact.
And because it's all, it basically, it might simply just be in the end a tail emission.
And like, if that's really, if it is the case that everyone just ends up paying 99% fees to get a little bit out, then that's basically a tail emission.
So let's just be honest and call it a tail emission.
Can you just define tail emission?
um well tail mission in general is like right now the way the bitcoin network works is that the
the subsidy goes to zero the only way miners get an economic incentive will be transaction fees
but if you add a tail emission some people propose we add a tail emission like which is like rewards
that continue beyond forever and it could be something like in monero it's always like
a fixed amount so it's like one percent then it gets less so it's asymptotic with zero but never
zero so so what like one idea is take all these coins that are either thought to be lost or didn't
move to post-quantum and we don't want it's better to give it to miners than to a quantum computer
thief then um come up with a formula for how to give them to miners over what time period
how to make that fair with the miners.
That's a whole nother question.
I mean, so a couple of things come out.
I mean, for me, the thing that I keep coming back to
is I think any changes ever made with Bitcoin
should be the kind of changes
that you as a user can opt into full stop.
Like I love the idea of creating new post-quantum,
you know, signature schemes, amazing.
But I should still have the right to choose,
like in the future, do I want to use that or not?
Anything in my mind that goes back and touches old coins
and tries to like have any kind of paternalism
about who may or may not be using them
that we just don't know,
It's a slippery slope to Ethereum.
This is like what went wrong with Vitalik and all these guys,
thinking they understood complexity,
thinking they could outsmart the system.
And then of course, it blows, it breaks,
and it's a slippery slope.
So that's my kind of high level view on this.
I'm not saying it's bad or good.
I just, I think that like,
you could do all these crazy things
and like maybe it works, maybe it doesn't,
or you could just do nothing.
And like often the like,
kind of like Taoist approach isn't the right approach.
In fact, I think that's what Bitcoin is.
So that's my high level of thought on that.
I thought something that was very interesting to me though,
that I think is worth discussing is in one of my,
actually not my breakout group, my lunch group,
two very interesting things were mentioned
that I actually thought was very important.
So the first was someone mentioned at the table,
they're not worried, that worried about quantum itself,
the threat, they're extremely worried
about the recursive fear.
So they're worried about the worry about quantum.
And I was like, yes, and that makes total sense to me.
Someone else at the table is our mutual friend
who's a major public investor.
and it seemed he kind of validated
that the biggest thing holding a lot of just huge pools of capital back
is that there isn't an answer.
So I do think it's extremely important.
To me, the most important thing is less like,
okay, what do we do with the old coins?
And like, yes, the post-quantum cryptography matters,
but like, what is the education and the talking points?
Like, how do we educate the big public guys?
Because even if there's like very little like risk
and like, yeah, maybe a couple million coins get lost forever,
if they start thinking,
well, what if everyone else is about to get out quickly?
And then, oh shit.
And then it keeps going back on itself.
Well, then I should get out before they get out, before they get out.
I think that is a much bigger concern.
And I guess one question I'll pose to you guys is, if you were presenting some of these
giant pools of capital, how would you tell them to like either assuage their fears or
like not worry, or maybe they should worry?
What would you tell them?
Well, one, I mean, you mentioned earlier, David, like how did this event come to be?
the unnamed investor you just mentioned kept nudging me over the past two years and i kept
blowing him off and finally i'm like i got sold on the point that even if i am not worried too
worried about this right that others are and we need it we the bitcoin community need a better
answer than like it's not a problem right so i'm totally sold on that and so well one thing led to
the next and we have this event. So I think the event itself is one answer for investors. We've
recorded all the content, it's all available. We also had people attending who are going to write
summaries. That's awesome. But you know, people from Bitcoin Magazine, but also research analysts
at major firms. Yeah, that's great. So we'll see. And you know, these are high quality people. I
expect really good summaries and analysis from them. So looking forward to that. I think
that'll come out the next month or two.
Um,
and one thing I suggested when we wrapped up the event is that maybe that comes
from the people I'm that I just mentioned,
but if not,
I think there.
So again,
even though we don't,
there's a lot of open questions,
still a lot of big problems.
We have a better answer than like,
it's not a problem.
Right.
And so like,
let's at least write down like,
okay,
here are the five big questions.
and we just reviewed some of you, most of them.
And then like, you know, if something happened in five years,
literally what would happen?
Yeah.
What, what would happen?
What could, what would happen?
What could happen?
What's the best, what's the best case outcome?
Right.
If it, if it happens in five years, write that out and say like,
here's the best thing we can think of that would happen here.
It'd be the plan.
Here's the ramifications.
We wouldn't have multisig, like the wallets.
we'd have like had to restart reset the software development but um you know there there would be
and then but we could we could freeze coins whatever and basically like there there'd be like
very limited collateral damage in terms of theft from a quantum computer um or option b is we we
can't get consensus on that change and then it's like they they are available for theft and you
have to be prepared as an investor that there's, you know, two million coins that were just stolen
and that adversary can dump them on the market or play other shenanigans and games. I think
writing down that in accessible language to investors would be a very valuable exercise.
And this continually unnamed investor, one thing he mentioned he was going to do,
which I'm actually very excited to see, is compare. And these are different things,
but at least take some of the danger out of that is compare what's happened with like every major
public tech company, you know, was like by definition, a hundred percent insider owned
from employees, founders, and investors. Then they went public and over 10, 20 year period,
it goes from like all insider owned to the vast majority public owned. And so IE insiders have
dumped, which I actually don't think they've dumped. They've just sold shares over time,
just like Bitcoiners have. And so I think that was very interesting to see, like,
and I'm going to be very interested to read when he puts this out, to see how quickly some of those
shares were sold to the public and how that impacted price. And the TLDR was, except in
very brief windows of time where maybe you got a couple percentage point downtick, it didn't really
impact price. There was always demand to keep taking that new supply. So I'm not that worried
if two million coins get quote unquote dumped. I also think that an attacker is sophisticated
enough, motivated by economics. They're not just going to dump all at once. They're going to figure
out how to try and time that and maximize their own return over time. I do think the one thing
that's a little different with this though is, one, if it's Satoshi coins, does that somehow
just spook the market in a way that insider selling of Facebook or Amazon didn't? Maybe.
And the other thing is, well, I forgot the other thing, but yeah.
Anything else to wrap up on the event?
I think we're pretty wrapped on the quantum. Yeah, we're almost an hour in.
no maybe not that
how long are we
42 minutes
okay
oh wow
okay okay
a little timer
in the bottom right
oh there you go
oh hey
beautiful
nice
42
Steve dropping
we've got a
high tech setup here
yeah we've got timers
yeah
well we have
some other topics
I don't know if we have
the topics
listed
I know one of the ones
that we want to talk about
was the
AI companions
but I don't think
we have that
companions
I don't really remember
I haven't heard of companions
is there another name
I know it's a topic that we have maybe disagreements on,
which I actually wanted to hash that out
because in the group chat, we never quite-
Hopefully we didn't get fired from this conversation.
Alex, we got to stay HR appropriate with this conversation.
We're definitely HR appropriate.
Okay.
Thank God.
But David, you kick us off
because you're saying that Elon and XAI's new companions
could revolutionize the interface to AI.
Well, yeah. So I want to be clear about what I said because you're misrepresenting it already. So I said that this is a disruptive interface that if it were to become popular, it would not be easy for existing providers to kind of to adopt.
And the point I was making is, if you think about, you know, like most of information retrieval over the last decades has been web search, has been mostly Google.
And so when, you know, the Transformers invented and ChatGPT becomes very popular, it's an independent app, independent experience, but it's like this text-based, chat-based experience.
and google has i think very effectively incorporated its own llm technology into
ai overviews that are part of the web search results page you look at the web search and
then you get ai overviews like oh that's interesting and then there's this button that's
dive deeper and then you enter effectively like a chat gpt like chat interface so there's this
very natural glide path to go from like my old habits that billions of people use which is type
in a term to kind of this new experience which is this like chat thing with its text and it kind of
all flows nicely there's a very nice glide path my point is not that waifus are the future maybe
they are maybe they're not but if that behavior becomes popular and if you're in the existing web
search world or chat gpt world it not clear how you sort of upgrade a gentle glide path it just a brand new starting point could you tell us more about this waifu glide path so so the so so the
waifu thing i've used it for all of 10 seconds so i'm not an expert at waifus um i in so you have
to enable it we've seen the movie her though right yeah that's right so so you you flip a switch on
you're super grok right you have to be subscribed to to grok and super grok and you flip a switch
for companions and you're this is even legal to pay money for this at what point does that
cross the line but you're talking to like a virtual girlfriend type experience right is
but i think the thing i took issue to like a statement was made about how like um porn has
been a driver of technology historically. And like that, I agree with it. I mean, you can look
up history and like, whether it be VCRs or DVDs or even the browser and internet itself, like one
of the first early adopter use cases that drove people to buy a VCR was porn. And so that definitely
like catalyzed those technologies and then people found other uses for them. So there's no disputing
that and that that's like historical fact um it does but it doesn't so so having like
a sexy guy or girl visually as the interface for ai though i don't see that as the equivalent
because in the case of like vcrs or whatever like i mean there's the use case of like i want porn
that's my use case but then there's all these other yeah tell us more about this use case there's
other use cases of like i just want to search for information or i want to book travel and i don't
want like some kind of sexual interaction in the middle of that of that use case right so i would
find it super annoying to have like anime in front of me like within lingerie like stockings when i
want to like book travel or like ask like a question about quantum computing okay so i i will
go on record and say waifus are the future. And I got waifu pilled in 2019. Steve, I hate to say it,
you're not the target user, my friend, which is fine. I got waifu pilled because when I was living
in what I would call sort of a nerdier MIT house with a lot of the early OpenAI people, one of them
is, let's say, the smartest guy of that whole group. Like this guy was an alternate on the
US national math team. That gives you an idea of what we're talking about here, okay? And he did a
company and they were doing without giving away all the details. I don't know if he wants everything
on the internet, but- You probably already said too much.
I already probably said too much, but whatever. They were using AI for graphics and animation
and stuff like that. And it got a little traction here and there. And then they had something,
I'll just say it, whatever, go viral. So Waifu Labs. And Waifu Labs exploded in 2019. And there
was all this talk on the Hacker News and people were calling them horrible and perverted. And yet
the users just kept pouring in. Now, a lot of it was from Asia. So I think that's a huge thing
to understand is what you're really going after here is like Korea, Japan, China, like that's,
that's like, that's a thing over there. Um, but it's also in the United States. And I would say
this is where, you know, um, to, uh, to sort of give a bit of a nod to autism capital thing.
They get this right. You win the autist, the autists have the culture because they're the
ones that are programming everything else. And so my, like, I think that Elon Musk,
what makes him so amazing is he's not only an incredible engineer, he's not only a great
a business person, but he understands the internet and he understands who these people
are. And these are the people he's got working for him at places like XAI. And I would argue
that for so many of those people, this is precisely what they want.
Help me understand. You said it exploded. What was the use case?
You created your own virtual girlfriend.
Yeah, but you...
And then their number one business model off of that was selling pillows.
But that's... Okay.
But Steve is saying that doesn't translate to broad-based information.
Yeah, it's not the new, it never became the new UI for how I obtain information, communicate with people, a complete task.
Maybe what I would say is it's about like this visual audio entry point to the internet instead of a text-based entry point.
and if you're living in all your ui and your browser and everything is oriented around a text
based input and kind of interaction then this having an audio visual starting point you know
much like the movie her which doesn't have quite the same visuals but it's a very disruptive entry
point you can't glide from a google search into that thing very easily i think that's like the
main point i'm making not that everything has to be done with the waifu but that's just like a
a showy kind of a surprising starting point but this but the idea of like i could imagine a future
where i'm issuing my travel prompts to an audio interface and doesn't have to have a
animation of a person it's just like in her didn't have an animation of a person i think it was right
it was just like vibes and then audio but i think that's a very disruptive interface and i want to
be clear i think it's going to go sort of out from here like the experience i ultimately want
is just like, personally, is just like AirPods.
Like I'm just talking.
I don't even care about the fucking screen.
I do want to be able to talk and be like,
hey, can you, whatever, book my flight for me?
Can you take care of all these things?
I think that's the way we're headed.
But I think if you look at adoption curves, right?
The early adopters are going to be,
and we may not understand these people necessarily,
but the ones that are chronically online
are the ones that will use the waifu for everything.
Now that's whatever, 1% of the population,
whatever it may be, but those are the ones-
Early adopters of what though?
I mean, ChadGBD already has 800 million users, right?
We already have early adoption.
everything in your life. We have late adoption of AI. Yeah, but that, I would say that's still
very like, that's like, if you're still having to go to a screen and type something like that's like,
like imagine you never turn this thing off. It's literally 24 seven. It is your new friend.
Everywhere you go, it goes. And I think that's like, maybe that's kind of what you're getting
as well, but it's a jump from like, oh, like I have a question or a query. I go and type it out.
And so the people that are going to adopt having 24 seven on friends, and to be clear,
I think it's going to grow out of waifus.
I think that's the early adopters.
But then from there,
maybe you could imagine like,
I don't know,
you'll have for the Bitcoiners,
like the Bitcoin guy,
and you'll have all kinds of characters and whatever.
Steve is unconvinced.
No, I mean,
we already have AI.
People already use,
hundreds of millions of people use AI.
People speak to AI,
audio,
there's no dispute there.
The movie Her,
I think will come true.
People will develop emotional attachments to their AI.
I agree with all that.
I just don't think
porn is the interface for everything.
And to be clear,
the companions thing is not a porn thing,
but it's a little sexy.
And I think it's more just a surprising
departure from the utilitarian feel
of everything on the internet.
It's more like an entertainment-like feel.
I would call it more so than a porn feel.
And again, I would stress the point
that this is aiming for people
that play eSports or watch Twitch.
I'm not that audience.
You guys are not that audience.
But that's the audience that is chronically online.
And that chronically online audience
will be the first adopter of a 24-7 AI agent.
There's also phenomenon,
you've probably never seen this,
but there's, what's called Famify?
Have you seen Famify?
Famify is an extremely popular iPhone app
where you live stream yourself
as if you're an influencer
and you get likes and comments and stuff from bots
and you feel like a celebrity.
And you'd be like,
nobody would ever do that, right?
This is how society ends, ladies and gentlemen.
Obviously not something people would do.
Why do you see Famify?
It's all over.
I just popped on it the other day on the App Store
and I think it had a hundred.
I had myself in the back.
You're doing great, man.
I'm beautiful.
Oh, yeah.
Absolutely.
I'm so smart.
Stunning.
I'm so good.
So dumb.
I mean, it really is.
But it kind of goes into that point.
It's very dystopian.
What does it mean when you want likes and admiration from a person versus a bot?
I think everybody says, oh, I want it from a person, not a bot.
The bot's not valuable.
A person's valuable.
But if you're never going to meet the person, if it's just some random out there, why does it matter?
Yeah.
Well, I mean, to me, the value is if it's authentic.
Yeah.
So if like a really smart AI, like if value in my work and said, good job.
And I'd learned over time that like, it doesn't always do that.
It also is critical.
It has a high bar.
It rarely gives praise and it gave me praise.
I would, I would value that.
So it's not like human versus AI.
It's just like, is it authentic?
And it sounds like this game is like just complete nonsense.
Steve is giving the roadmap for the wife.
I think, I think this game has like 180,000 reviews or ratings on the app store.
so it's not small. I think we can zoom out
like I agree with you 100%
for better or for worse this is what's
going to happen. Now
I can put on my like human hat
that's kind of my investor hat like there
will be money to be made here Elon doesn't fuck around
my hat that I put on as a
human being though is kind of going to
think some of your points which is like this is really
this could get very dark mirror
very very very sad
very very quickly because it
I mean a lot of ways what it's accelerating is more
of like people isolating from the rest of the world.
It's like, you know, instead of having a real world relationship,
you have this virtual girl.
And like, instead of like, I don't know, like playing sports,
you first, then you play video games, then you play,
then you watch people play video games.
I don't get that either.
Like, like, to be clear, I think it's absolutely fucking insane.
And like, I'm trying to get off of screens as much as possible.
But, you know, I think you said before,
maybe that is the new luxury of this new world.
And it's like, you know, I have mixed feelings on this.
The luxury being off screens, not the wife.
Not the wife.
just to clarify it's not the 20 a month but like you know the kind of like bitcoin freedom
perspective in me is like i don't want to see everyone in the pottying bugs like that sounds
horrible and like i mean but then it's like well shit what do we do because like the forces of
technology seem to be you know it's like i feel like we're very much which way western man like
the the forces are pushing really fucking strong that way even though in general in a lot of ways
I like Elon.
I like what's going on with X
and a lot of the models and stuff.
Like, I mean,
what they're all doing
is harvesting attention.
Full stop, full stop.
And like, then I say,
well, what chance do we have
in this digital world?
And I think the best chance we have
is the Bitcoin community,
the Nostra community,
like as much saw
or just fucking throw your phone
in the river.
But I don't know
if that's really an option.
I mean, like it's like,
I mean, soon we'll have
social credit scores.
And like, if we don't have Bitcoin
ready to rock and roll for that,
what are you going to do?
I noticed no one is chatting
with us today.
I know.
I'm surprised people don't have views on this topic.
Especially the quantum stuff.
Or the wife business.
It's because we're at a different time.
I'll chalk it up to the time.
I asked her AI.
She said we're doing great.
Alex, if we're not getting audience engagement,
just add comments yourself.
Yeah, exactly.
Can you sock puppet stuff in there for us?
Can you give us some likes?
Maybe a couple of Bitcoin.
Thank you.
Should we talk about mining and AI?
Oh, yes.
You've been excited?
I'm very excited.
Talk about that.
I am as well.
Are you going to announce your new mining and AI venture?
Sure.
I mean, at a very high level.
Did Steve want to take us in a different direction?
I have a couple of things to talk about.
I want to hear what...
I'll frame it a little bit.
So, you know, I've been telling you guys this.
You know, I've been a solar maximalist longer than I've been a Bitcoin maximalist.
I've been obsessed with the curves.
So as a piece of context here, as an investor and just as a general enthusiast of the history of technology, one of the biggest lessons I've learned is when you see a natural law or order emerging, don't bet against it.
It's that simple.
Just trust the curves, man.
And Moore's Law.
How many companies made whatever, billions at that time when a billion was still worth something, dollars off of betting on every two years, we're going to get a lot more transistors on here.
It's going to get a lot faster, a lot cheaper.
Just bet with the curves.
And similarly, you know, the early AI people.
And I, you know, lived with a lot of these people.
And I was also very excited about this is you just look at like, how many flops are we
getting?
What's the relationship between flops and, you know, model size and data training?
Like there are laws that emerge for all of this stuff always, or maybe not always, but
in most technological trends, right?
And so, and by the way, I think that's something, you know, I mentioned to another one of our
mutual investor friends here is something that I would also love to see come out of this
quantum summit is what exactly, I'm still not sure, what is the Moore's law relationship we
should be tracking? As we think about how to freak out, the thing I want to know is what exactly is
it flops per qubit or I don't know what that relationship is. Air rates and then connecting
the different nodes. And whatever the size is, right? So I'd love to see this chart on a few
things versus qubits versus, I don't know, perhaps like total computational or energy spend,
whatever it is. And so anyways, so that's all there. Now I found one of these curves and became
obsessed with it in the, I guess, early 2010s, maybe a little bit later, maybe like 2014,
excuse me, era. And basically what I started seeing was that solar, which is, you know,
by the way, I heard a fantastic podcast. This needs to get, we need to rebrand solar panels
to quantum converters. I agree a hundred percent. You're taking photons and creating electricity
with it. You're literally creating a shift in a quantum state and it's magical. And solar panels,
basically, you know, it's very similar to semiconductor. In fact, it is a semiconductor
technology. And as you, you know, deploy more solar panels, the end-levelized cost of electricity
has just gotten, like, it's fallen at a consistent rate. Every double-level cumulative capacity,
the end-levelized cost of electricity falls 40% full stop. Now, you can debate a little bit on
those numbers depending on your data set, but, like, that's generally the relationship. Now,
people will come in, they'll say, yes, yes, yes, but, like, solar will never solve the problems
because the sun only shines during the day.
What about at night?
What about when it's cloudy
and we need firm power?
It's like, look,
there is another curve to follow,
which is the battery curve.
And every doubling of cumulative capacity
for lithium ion batteries,
and this is particularly at scale, right?
There are new technologies.
First, you have a breakthrough
and then you have the scaling.
And the scaling is where,
as an investor,
I can just look at the curve
and trust the curve.
Every doubling of cumulative capacity
of lithium ion batteries,
price per kilowatt hour,
falls roughly 20 to 25%,
again, depending on the data set you look at,
like clockwork.
Now, the good news is
these relationships critically
are not time relationships.
They are functions of units deployed.
So what that means is
if you deploy this stuff faster,
you get the cost falling faster.
This was the core thesis
of the 2021 Bitcoin paper.
Bitcoin is key to an abundant clean energy future,
which at the time also sounded crazy,
but like you just follow the curbs.
Faster you deploy that stuff,
cheaper it gets.
We're seeing this in China, right?
Exactly.
And so this sounds kind of horrible,
but whatever.
This is PBJ.
We keep it real.
I've heard from certain solar enthusiasts who have tried to explain this to people and people
just don't get it. They're like, oh no, that'll never work. Natural gas. The one thing that is
getting them traction on this argument is a little old fashioned xenophobia. When they show a chart
and say, hey, did you realize that China has deployed, there's many numbers you can use. The
one that I remember very clearly off the top of my head is they are on track to deploy over the
next three to four years, just in solar, forget nuclear. And there is a place for nuclear, but
it's much smaller than like mainstream would have you believe. There is a place for nat gas,
much smaller than mainstream would have you believe. There's basically not a place for coal,
but that's a separate story. Just the amount of solar they're deploying on the world today,
just solar, in the next three to four years, the current rate they're on will be more than the
entire generation capacity of everything in the United States. Natural gas, which is our like big
bread and butter, coal, solar, wind, all of it, even though we're deploying solar very quickly too.
So the Chinese are on top of this. They're literally paving their country in solar panels,
and China is leading far and away on batteries, lithium ion batteries. That's why they have
electric cars now that are like, you know, they can charge them faster than you can even charge
a Tesla, which by the way, the only person that really seems to get this in the United States is
Elon Musk. And thank God, because that gives us a shot to compete with China. So that's all what's
happening with solar and batteries. What are the bottlenecks? In terms of what? Well, if you can
look at all these curves and figure out as an investor that it makes sense, is there anybody
else who's looking at those curves? Oh, yeah. So what are the bottlenecks? Why do we not have
the whole of the Southwest painted in solar panels right now? Is it like regulation? Do we need tax
incentives? We're not in the right point. The curve. Yeah. We're getting to that point.
like we're like right at that point and so there's many ways to answer that one is sort of
philosophical which is why is everyone in the world not all in on bitcoin there's like understanding
and diffusion and like people are busy and like people are used to an old world and like we're
going through another thing that came away from the quantum summit is like phase shifts that the
world operates in phase shifts it's not linear growth it's like no there is a phase shift we're
going through a phase shift in energy we're going through a phase shift in money those things are
the same. By the way, Bitcoin, quantum computing, AI, all of it comes down to joules, always joules.
Energy is the base, full stop. And so why have we not deployed a lot more? Well, to be clear,
we're deploying a lot of solar and we're starting to deploy a lot more batteries. So to Steve's
point, we're right at that point on the curve, which is why this is my current obsession. I've
invested in a few companies. I'm extremely bullish on Satoshi Energy. I'm extremely bullish on
Crusoe, which I'm not an investor in, but oh my God, those two companies are going to kill it.
I'm extremely bullish on Tesla and Redwood Materials, which is phenomenal.
David and I are in bed.
I'm jealous.
I'm super jealous.
Chase is actually an investor in Highmine, and I'm hopeful maybe there'll be some stuff
to do in the future with all that.
But you guys are in a good spot.
That company is fucking killing it.
And so what's going on here?
Well, the reason we haven't deployed even more is, number one, the grid itself, regulation
and the grid itself.
right so let me just give you guys a quick there's so much swimming in my head here and i'm i'm hopeful
i'm going to be able to put this together and like i need to put out like a long essay that just goes
in this and like excruciating detail but let me try and get this high level the other thing that's
changing right now is demand right in the past we haven't also had to do this crazy shit i'm about
to talk about because there wasn't the real demand it's like yeah we could always a little bit more
electricity but like the electricity industry and the powers it's a very sleepy industry the
Utilities are mostly government grants and monopolies and like don't really care.
And these guys kind of collect their paychecks and they set rates and it's not really free
market capitals, right?
Now, what's happening is that the shift, the reason the curves were crossing that point
in the curves faster than a lot of people expected is AI.
And so what's happening is the demand for power is literally going parabolic.
And so to give you guys a little sense and shout out to Brock Peterson, co-founder of
Satoshi Energy, one of the companies I'm most bullish on the world.
very, very, very lucky to be an investor there. Oh my God. You guys know what's up. And by the way,
kudos to them for coining the term energy backed money because they understood where this was going
a long time ago, many years ago with Bitcoin, right? But Brock said in a recent podcast,
which if you go to my Twitter feed, I shared the podcast on there, that in Texas right now,
okay, there's a peak demand of about 80 gigawatts, 80 gigawatts. That means that for the whole state
of Texas, like if you're running your refrigerators and your air conditioners and there's an aluminum
smelter and industrial everything, it's about 80 gigawatts peak demand. That's the amount of power
you're pulling from the grid. Okay. Guess how much there is right now. I may have already told you,
there is just to build AI data centers demand. 140. Okay. So almost double all of the humans. So
the big story here is that humans are becoming a rounding error. The AI wave has barely even
started and we're already trying to double all of human capacity in the most free market in the
United States and therefore probably the world in Texas. And we haven't even started. And now you're
looking around, you're seeing like fucking Mark Zuckerberg is coming out here dropping, oh, I don't
know, unlimited money, hundreds of millions and billions of dollars on researchers, has confirmed
plans to build multi, multi gigawatt data centers right now. One of them, five gigawatts will be
footprint of Manhattan. And that's one company. And that's a company that's playing catch-up to
a company that's going to absolutely smoke him on that front, which is Elon Musk, XAI, because
they're the only ones that have access to all the elements that you need for this, the solar,
the power walls, the batteries, and in the short run, the natural gas generators to back that up.
I'm not saying natural gas and nuclear will have a short-term place, but they can't compete on
costs in the long run. Elon understands this. So when you look at all these things coming together,
it's no surprise that some of the stuff you were sharing in the chat, which is a lot of the old
companies that started off as Bitcoin miners, and we're all in on this now, effectively are taking
those sites that they were brokering for Bitcoin miners and just giving it to big tech to build AI
data centers because the demand, like they will pay any price for it. I'm being a little bit,
you know, whatever. I'm being a little ridiculous that of course there is a price, but like-
But it's not as, it's not as mercenary. Like you can look at the dollar flow and the,
and the, you know, what you can sell it for.
Yes.
In the case of Bitcoin, in AI,
you're always investing for a further forward future.
At least 3X more in AI and often way more.
Now, and Bitcoin still has a role in all this, right?
I'm still extremely bullish on Bitcoin mining
and it's going to go up too from here.
But anyways, but the TLDR, my current obsession,
if there are Bitcoin and or energy entrepreneurs
or people that are thinking about entrepreneurs,
maybe you're, I don't know, about to leave Tesla
and you're interested in this.
My number one goal right now is,
basically how do we build all of this?
The grid can't take it.
The regulation is way too slow.
There's over 400 gigawatts of solar and storage alone
in the interconnection queue in ERCOT, which is Texas.
It's not getting approved.
They're moving way too slow.
Even if the government comes in and says,
hey guys, again, xenophobia at play.
China's racing ahead slash all regulations.
Build, baby, build.
We cannot keep up full stop The grid too old The machine too broken So my new obsession is I got a couple of people I starting to idea it with here I definitely want to make a few investments on this trend I may incubate a thing or two here as well is how do we build all this off and then
reconnect it later, probably settling over Bitcoin and Lightning, into a new, eventually,
Buckminster Fuller-style intercontinental solar and battery-powered grid? That's where we're
headed. One last data point, and then I'll let you guys jump in on this. The most important story
of the last month, in my opinion, is Redwood Materials, which founded by J.B. Straubel,
co-founder of Tesla, current board member of Tesla, spun out of Tesla. And they were basically,
they are recycling lithium-ion batteries from Tesla's, now with GM. That means they can get
the cost of batteries low enough where it starts to make sense to go totally off-grid.
Late last year, one of the DR dudes, I forget his name, microgrid dudes, he put out a paper with
some of the Stripe people saying, hey guys, it could make sense in theory to build a totally
off-grid solar battery-powered data center.
And everyone's like, oh yeah, that's cool in theory, but it's not happening.
And if it's not happening, it means it's not real, right?
Because the market builds what's real.
Well, Redwood now announced Redwood Energy, and in conjunction with Crusoe, has built
the first operational, not theoretical, it's live today, with Crusoe's data centers.
Shout out to Chase, that man is on top of this stuff.
and they have built the first totally solar
and battery powered data center.
It's 12 megawatts to give you a sense
that's small in the comparison of things I'm thinking about,
but it's not nothing.
In fact, it's 20 acres of solar panels.
It's a lot, right?
My new sort of like fantasy and where I'm going
is how do you go from 12 megawatts to 12 terawatts?
And that's-
And you want to do this as a totally brand new grid,
not like the existing stuff.
If you want to do totally brand new infrastructure.
I think you go off-grid first
and then you rebuild a new grid.
And then if you're feeling-
And does off-grid mean you're,
you are interconnecting with,
with like end consumers or industrial applications?
Are you doing it all with Bitcoin mining
or how do you sort of-
Well, to be determined,
and that's why I'm looking for the right people
to partner with on doing this
because I think there's a couple of ways you can go.
I'm still figuring out exactly what the play is,
but primarily you're just powering data centers.
So it's like totally off-grid AI compute.
I think Bitcoin mining-
Solar plus battery.
Bitcoin mining can play certainly a role here for sure.
And I think that like,
there are certain advantages
you have with things like Bitcoin mining
that you don't have with the AI compute.
For example, the Bitcoin miners,
you know, you can just like turn on and off
at a moment's notice.
With the AI compute,
you might be able to do some of that for inference.
If you're doing a big model training run,
you can't do that.
So I think there's probably something
in kind of combining these things,
potentially even eventually combining them
with, you know, some of the like longer term stuff,
like the green hydrogen,
like the desal, desalination water,
like all kinds of crazy things.
But I think where Bitcoin is going to play a big role
is you kind of have each of these nodes pop up.
And I think there's also something very interesting
around how these data centers could potentially be
a sort of linked up, uncensorable cloud as well.
And I think that's a necessary ingredient
for the digital life stuff we've talked about.
But that's its own rabbit hole.
But eventually you could link these different nodes
in the grid up.
And the way you would have to do that
if you're going to get around
a lot of the old school regulatory and like,
you know, basically,
I don't mean to shit on the old grid and stuff.
What I'm saying is the old world is dying.
and in order to feed the bots in this new world,
we need a new paradigm for energy
and the old grid ain't going to cut it.
The main thing I wanted to add to the conversation,
many episodes ago,
you brought up the topic of like,
you know, what's the impact of Bitcoin mining
when a lot of these Bitcoin miners
or their sites are transitioning to AI
and high performance computing
because there's like more money to be made there.
And at the time I'm like,
no, whatever.
Mine will just pop up elsewhere.
Either there's profits to be had or there's not.
And I still think that's true.
But the new insight is that
companies driving AI and data centers,
it's not necessarily incompatible with Bitcoin mining.
Because what Bitcoin miners have done well at historically
is identify low-cost energy locations
and begin building them out.
Because as we know, Bitcoin mining,
there's really only two primary cost components,
buying the equipment and low-cost energy.
So once you have your equipment,
the only thing you optimize for as a business really
is low-cost energy.
So site surveys and identifying that's important.
The other thing is,
Bitcoin mining doesn't need as much infrastructure
as most other applications of energy.
So you can be,
I've been to remote locations in Kenya.
They're like six hours from Nairobi.
It's like out in the middle of nowhere,
but there's water flowing there,
cheap energy,
and they added Bitcoin mining.
So Bitcoin miners are very good
at identifying those locations,
begin Bitcoin mining,
but those locations don't yet
have the infrastructure for AI,
like high-speed internet,
because Bitcoin doesn't require
high-speed internet and other infrastructure.
So what companies that want to do, you know,
use these locations for AI with low energy,
they have to wait until it matures
so that it has stronger infrastructure,
more robust infrastructure for AI.
Although one data point on that is that
Crusoe is lowering that barrier
with their new sort of off-grid compute cluster.
Yes, still fiber and all those things make it better,
but like both things are happening.
The bar is getting lowered.
So there's always going to be a need to develop new sites and find cheap energy.
And so Bitcoin mining can be that scout.
Yeah, the tip of the spear.
And also the economic, and it reminds me of the paper that you wrote and worked with Block on four years ago, because the idea there too is like, well, there's all this energy, renewable energy that can't just waiting to be connected to the grid or, or it's built, it's built out for a city.
And it, the, the supply was built out for a 25 year plan, but for many years, the city's not creating the demand.
Yeah.
so you have all this wasted supply well guess what
plug in bitcoin mining for the supply
that's not used by the city yet
and it reduces the economic cost
for the project so it's a similar
dynamic here I think
as a site goes from
nothing to
has energy to has all the infrastructure you need for
AI that takes a period of time
and bitcoin mining can be plugged in then
and I think it's important and honestly it would be awesome
so Alex I don't know if we can get this in the show notes
as well but that paper bitcoin is key to an abundant
a clean energy future. It's interesting, not only for the sort of arguments, but ARK built a model
with that paper, which allowed you to kind of see when does it make sense for solar batteries to go
fully powering Bitcoin miners. And of course, there's nuance to that, right? It's one thing
if you're using the sort of deprecated S9s versus newer miners, because then you could do it without
the batteries, et cetera, et cetera. But I think one thing that's changed since then, it'd be
interesting to rerun those numbers in the model, which I actually haven't done yet. But again,
is the fact that Crusoe and Redwood have built a 12 megawatt site that pencils enough, at least
for them to show it as a demo, is, again, the secret is trust the curves. As I said, this is
super, super important point. It's not time dependent, it's scale dependent, volume dependent.
So if you start deploying that stuff like crazy, and the other thing that I'm always looking is
look at XAI's public filings in Memphis, right? And there's like through like a latticework of
different companies, but they're buying up a lot of land. And so I fully expect Elon to pay you
Yes, and around Memphis, which, by the way, represent. It's no surprise that-
How is that?
It's not a coincidence. It's not. I stopped making a coincidence a long time ago.
He's a Memphis guy.
Oh, okay, yeah.
It's my birthplace. It's going to be the birthplace of yours truly and EGI, or whatever we're calling it now, superintelligence.
Um, so, so the, the thing that the important point is as, and your point, like this is where
you have to get kind of in the nitty gritty and why I'm looking for the right people to
work with on this idea.
Um, we're right around where it's starting to make sense.
Like it could be a few more months in some cases, but the faster the Elon and co start
paving the world and solar panels, everyone gets that benefit.
The faster China starts paving that benefit, like Bitcoin flows through to anyone that
wants to be an entrepreneur in the space.
And to be clear, it's going to be cut through it, right?
because, I mean, you're literally competing against China.
Not necessarily competing against China,
but like they're out there buying the panels.
They're also making the panels.
The more they deploy them, the cheaper they get.
But anyways, the point is like mining,
it probably is going to be a very tough business.
Is most of the manufacturing of the panels done in China?
Like all of it basically?
Yes, and there's a whole,
well, there are some that have moved out of there,
but effectively, yes.
And that's another whole topic
and very sort of potential issue for concern.
I think that's another thing
that needs to be reshored to the United States
or to US allies like Mexico
is there's concerns around
even the inverters
in the solar panels alike.
Can that be hacked
and listening to us probably?
So anyways,
point is,
it's a really, really exciting space.
I'm going to be obsessed with this
for the next couple of months.
I know you guys both may have some ideas
on who these entrepreneurs could be,
but if you're listening to this.
Yeah, I already found your CEO.
Let's fucking go, man.
Get ready.
I'm in.
All right.
I'll make the intro after the show.
I love it.
All right, I'll write an angel check.
We had so many exciting topics
cued up today.
I'm just going to throw us into another one.
Okay, it's good.
Which is probably a short one.
Okay.
But so many people in Bitcoin
love that how numbers go up
and they get excited about the price
and it hits $100,000
and now it's $120,000 and whatever.
So it's always relative to US dollars.
That's what people typically quote.
US dollars is what most people,
certainly Americans,
but people globally,
like generally understand what a dollar is worth um it's extremely rare to quote the price of
bitcoin relative to gold right and um and i really haven't thought too much about that but then just
the other day you um mentioned like danny gave you gave a shout out to danny for for um uh i forget
exactly what but i mean basically relating it to that metric so then so then i i
I was curious about the history chart, you know, because I'm aware gold has increased from the neighborhood of, it's basically doubled in the past four years or so.
Yeah.
From like 1600 and something to 3300 and something per ounce.
So I was just curious about how does that match up to Bitcoin's rise?
And obviously you can cherry pick various timeframes to pick your story.
But I was just surprised that you, because usually Bitcoin outperforms like everything.
If you zoom out to four plus years, obviously if you zoom into less than a year, then it's all that's off.
Yeah.
But if you zoom out enough and usually it's four years, it's just a guarantee that like wildly outperforms anything you compare it to.
But when I looked at gold the past four years, it actually was flat.
Now, in the intervening, meaning four years, it went up and down.
But it's basically hasn't, Bitcoin has not gained value on gold in the past four years.
That took me by surprise.
So the main thing I think-
In gold terms.
Yeah.
BTC measured in gold.
Yeah.
It surprised me because the most, I'd say the most common-
uh, elevator pitch or anchor to convince people like, oh, what is Bitcoin's TAM or market value
is, is gold. Cause it gold is kind of indisputable in terms of like, what is this market cap? It's
been around thousands of years. It's, I mean, there's a lot of people who don't believe in it
or don't like it as an investment vehicle, but you can't dispute that it's worth this much money
and it has a long, long history. It's just indisputable. Right. Um, so
So Bitcoiners have, the similarities between Bitcoin and gold are quite, there's a lot of overlap.
Bitcoin has almost every property that gold has.
It's only missing one or two.
It only has really one or two drawbacks to gold.
Primary one being just it's not windy in the same way, like gold's 5,000.
No, it needs the internet as one, and then it can have software bugs.
Like gold can't have software bugs.
So I think those are like the two inherent drawbacks.
It can't be,
but it has tons of advantages over,
over gold.
Right.
So Bitcoiners,
like that's pretty like,
once you see that it's hard to see and then you're like,
well,
obviously Bitcoin is going to eat gold lunch.
And that doesn't mean gold goes to zero.
Cause again,
it has these inherent advantages over Bitcoin.
So I think it'll always have value,
but the relative value being Bitcoin and gold,
you know,
we all expect Bitcoin to rise and probably just far surpass gold.
And then you can get, you know, you can compare it to real estate and bonds and all this other stuff to size the market. But because it's still much less than gold, I would have just expected over the past four years, and we're kind of in a bullish market, it's not like we're in the trough of a bad winter or something, that it wouldn't have been flat relative to gold. And it has.
So my advice to us and everyone else is we should talk about and look at the price of Bitcoin relative to gold as much as we do the US dollar.
I agree.
I think it's way healthier.
And I think that actually was your point.
Or Danny was making that point or whatever, right?
So I think we should.
So like we should develop the discipline to, you know, celebrate milestones relative to gold as much as we do US dollar.
And I think there's another piece of context to add there, which is, you know, Danny was making some crazy price predictions. And I have also made some, you know, I don't, whatever, care too much about the price, but made some predictions around price over the next whatever year that a lot of people are like, that sounds pretty wild.
And I think the key, you know, one of the key pieces of logic, at least for Danny, and maybe I just kind of got this a little bit intuitively is, you know, when you're pricing in dollars, the dollar, the whole reason we have Bitcoin in the first place is I always think about Bitcoin as sort of like the metric unit or value.
And I think one day that'll be measured in joules once we're fully monetized.
But the point is, like, if I told you, like, hey, like, how tall are you today?
You know, I go from being, well, hey, guys, I'm actually 6'5 now.
I'm like, what?
When did you turn 6'5"?
It's like, oh, and I changed the definition of an inch.
It's like meaningless, right?
If I'm telling you, like, hey, guys, you know, it's $120,000.
It's like, cool.
But like, what is the purchasing power of a dollar today versus in 2020 if we printed,
you know, 50% more dollars or 25% more dollars?
and I've seen, you know, reports you need to earn 25% more to be competitive.
What if I told you there are 2.1 quadrillion Bitcoin?
Yeah, fair enough.
So anyways, but the point is gold, obviously, even though it's not perfect
and there is some, you know, whatever, 1, 2, 3% increase in supply every year,
it's much better than the dollar.
And so it's much more interesting to measure that.
And Danny's point was the bull market and all-time high actually just happened last week.
I'll read the tweet.
So the tweet from Danny says, looking at Bitcoin priced in gold, we've only just reached the previous cycles high.
Correct.
A historically proper cycle move up could put us at a ratio of 137, which at current gold prices would be $479,765 by the end of the year.
Yeah.
So another mental exercise I did after seeing that data and thinking about it more.
like given that the price of bitcoin relative to gold today is basically the same as it was four
years ago if we knew that then or gold has been a better investment the past four years
that's the assertion i make because like obviously it performed the same
and is less risky because that's thousands of years of history um obviously anyone investing
in Bitcoin relative to gold today
expects it to outperform
because that has way more risks.
It has a quantum computing risk.
Does gold have quantum computing risks?
No.
So Bitcoin still has a number of risks.
Obviously, every year it gets de-risked,
but there's still a number of risks with Bitcoin.
Gold doesn't have them.
So if we knew right now
that over the next like eight years,
Bitcoin's going to a million dollars
and gold is going to $30,000,
is like a 10x the both 10xing roughly that if we knew that for a fact over the next
eight years 10 years whatever which would you invest in obviously gold because that has less
got a regular peter shift here i mean like guys hold on like i did i mean if we knew that's the
performance surprise performance why would you not invest in gold what does it matter right yeah
But anyway, that's why, I mean, I'm not predicting that's what's going to happen.
I'm saying if we knew that was the difference, obviously gold's a better investment.
So my main learning is that we need to monitor that metric way more often.
And that's at least as healthy of metric to look at as the dollar, if not a better metric to look at as a health metric for the adoption of Bitcoin.
So there is one really important piece of color.
I don't have the data in front of me and I haven't done thorough analysis, but I seem to recall this guy, Charles Capriol, puts out some really nice charts, including the Bitcoin energy value of money, which is what I chart pretty closely, which is basically the cost of Bitcoin measured in joules.
And I think I remember reading this on one of his charts.
It basically, his takeaway is that gold pops before Bitcoin does always.
I don't know if that's true and I'd have to go back and check that.
Maybe I'm wrong, but I think that's what I remember of this.
That's not the case?
I definitely don't think it's the case.
Because they're quite uncorrelated, actually.
So, well, at least in this market,
what he was claiming is that, you know,
give it whatever, three to six months
after gold starts popping,
Bitcoin's going to start ripping.
And it seems interesting to me that if that's the case
and we're just starting to rip
and we just touched all-time high
and this whole thing is extremely reflexive,
that the bull market literally hasn't started.
And so that all of the crazy FOMO and reflexivity,
like basically the argument is like
things are going to be more or less the same
as it was every other cycle,
maybe a little bit dampened as it does every cycle,
But like, it's just the size is bigger and people are like, oh, but that's impossible. How do we get the kind of capital influence to get to half a million dollars a coin? And the answer is, well, from institutions and countries.
So I agree overall with the point that we should be using gold as a better metric or kind of better yardstick to try to understand truth here than US dollar. So overall, I'm on board with that idea. I think the one thing I would say that is a risk to gold is the existence of Bitcoin, because Bitcoin is so much better in so many ways.
not to suggest that bitcoin has to go to zero but it but you know i think sorry not the bitcoin
not that gold has to go to zero but just as like people is people who are born today never knew a
world without bitcoin it's just a thing just like we've never known a world without gold and i think
you know people will update their expectations around how you know they want internet native
tools instead of the offline stuff and so i think there is some risk to gold because
because bitcoin is a better version in most along most kind of uh assessments doesn't mean it's
going you know it doesn't mean one wins the other loses it could both you know they could both grow
or might one might grow and the other might shrink a bit but i just i would say that there is a risk
to gold that we should be cognizant of which is the bitcoin now exists and it's a credible competitor
that's why i expect bitcoin to outperform gold over time yeah so let's keep looking at that metric i
I mean, the reality is,
I mean, the reason why I don't think
there's that gold pops for Bitcoin
is because I have the gold price chart in my head
pretty well from like 2010 on.
And like from 2010 until 2021 or so,
it's pretty flat.
Something like 16, 17, 1800 per ounce, maybe.
Flirting with 2000 a little bit,
flirting with 1500 a little bit,
but pretty tight range for over a decade.
and then a big doubling.
So, whereas obviously
Bitcoin has had
multiple cycles
and an incredible appreciation
over that entire time.
And even if you look
prior to 2010,
there's just like,
there's fewer pops in gold
than there is in Bitcoin.
Yeah, fair enough.
But they're big movements.
And then it tends to hold them,
but then it kind of feels,
or it's like moves sideways
for like a decade.
so probably moving forward
we'll see
the 10x appreciation
in Bitcoin over whatever
something like 8 years 10 years
and we won't see 10x in gold
it might be
flat the next 10 years
or maybe it has one more
pop the next 10 years but that
doubles
so like in 10 years Bitcoin's a million
gold is 6 or 7 thousand
and that would
kind of line up with most feels intuition i think about the uh risk reward of each investment
but let's look at that metric and see how it plays out let's keep watching cool someone should make
it really nice uh danny if you're listening to this i know you're you're trying to vibe good a
lot more be nice to have just like a simple like btc and goal.com or something like just easy chart
i like it it can speak uh for every like movement i mean he's and he vibe coded the
according to US dollar
and he could even have a waifu
it's the bitcoin speaker
shall we then
I think we shall