LETS TALK BITCOIN

Episode 127 The Realist and the Experiment

Participants:

Adam B. Levine (ABL) Host
Tim Swanson (TS) Self-described economic realist.
Tatiana Moroz (TM) Singer and owner of Tatiana Coin.

Today is the July 15
th
2014 and this is Episode127.
This program is intended for informational and educational purposes only. Cryptocurrency is a new
field of study. Consult your local futurist, lawyer and investment advisor before making any decisions
whatsoever for yourself.

ABL: Welcome to Lets Talk Bitcoin, a twice weekly show about the ideas, people and projects building
the digital economy and the future of money. My name is Adam B. Levine and today were pleased to
bring you, part three of our 51% solution series. On Todays episode, Tim Swanson, self-described
bitcoin realist lays out the facts on mining, bitcoin, 51% attacks and some of the proposed solutions. Tim
provides another perspective on this multifaceted topic. Then we lighten things up with a visit from
Tatiana Moroz, who recently launched Tatiana coin, which full disclosure Ive been involved with, since
the beginning, failed to meet its funding goal, but taught some valuable lessons that lead to a rethinking
of what tokens can be used for. That resulted in a new system were pioneering called TCV, thats Token
Controlled Viewpoint. I am not gonna get into it too much here, but basically you have an account with
Letstalkbitcoin.com, in order for us to give you, your weekly LTBc rewards, we ask you to give us an
address that you create and maintain yourself at counterwallet.co. We can then look at that address or
another private one and if you have any LTB coin on your account, we can have a page load- a special
forum for you thats invisible to anyone else who doesnt have that LTB coin on their account. Its of
course is very much larger than forums, the idea can be applied to any type of permission, role
enhancement or restriction and individual tokens can be made more valuable by other systems
honoring them for use within their system. Itll be out on the front page of Lets Talk Bitcoin in about a
week and integrated into the website by next. I call it, Token Control Viewpoint, the work with Tatiana
coin was the genesis of the idea, but we dont actually talk about that in the interview. I dont usually
like to monologue, but I am trying to be more open and not so time delay with communicating whats
happening with our ongoing experiment, but first, were talking about mining centralization. 51%
attacks, risk, realities and proposed solutions, Ladies and Gentlemen, Tim Swanson.
TS: Hi, its great to be here. Thanks for having me on Adam. Again my name is Tim, I do market research
in the space and were gonna talk about, some the issues revolving around centralization and mining. I
know Adam and Andreas have talked a little bit about the basics, just to go again, may be a slight
different way of seeing what the financial costs are, any given day, at current token price, about $2
million is spent on mining. Most people, unfortunately think mining is magical, that its cheaper, even
free, but its just none of the above, so if you do it all together, so at the whole given year, at $600 token
value, you spend about $730 million in capital and operating costs spent securing this network and
thats really a lower bound number, the upper bound is probably 2 to 4 times that amount, because you
have people operating at losses, peoples externalizing costs to botnets and so on. There is a funny
statement I saw on reddit, a few months ago, somebody was bragging about the fact that $600 million
worth of irreversible money or $ 600 million worth of capital has been destroyed essentially that are,
they cannot be reversed and this is not exactly a good marketing tool. You dont have automobile
companies like Lexus bragging about the fact that, their parent company spent a billion dollars burning
fuel, or whatever to make their new engines. This happens in any depreciating capital area, in any
industry where, the actual capital ends up being used, such as fans, some of these data centers have to
replace every two-to-five year, still thats the lifetime of the actual CPU at the data center. In ASICs its
much more significantly fast; its about four-to-six months, not less.
It cost real money and investors want to recoup their costs, so they will end up gravitating toward
solutions that provide a reliable rate of return and this leads industrial scale mining in centralized
location. What miners are faced with, is then this incentive to create more lottery tickets for the chance
of actually winning, so miners again are, they are committing their nodes in hopes of getting that lucky
number. The listeners are interested in hearing; Manny Rosenfeld had actually had a good explanation.
Ill probably write an article about this and post some of these links that Im talking about, but his
explanation basically is, once youve run through these values of nodes that youve to reset it. This
continual scratch-off lottery, thats another way of referring to this process. Youve an incentive to
throw as much as hashrate as possible, we would semantically refer this economies is a scale, so
whoever gets to the fastest amount of hashrate for the lowest amount of money, they have the
incentive to continue on doing this, -so you have this hashrate war going on in the last 4-5 years.
The problem however is , theres an equation that represents what actually happens , its called Mv =
Mc, so the marginal value of the currency or in this case the bitcoin, essentially in the long run equals
the marginal cost of securing it. Collectively most of the mining labor force will not achieve any
accounting profit, let alone an economic profit. Economic profit means, the opportunity for cost forgone
in mining is actually greater then actually mining itself. What else could you be doing besides mining?
Obviously, I am not going to win any friends by saying something like that, but thats pretty much what
the bottom line looks like. What ends up happening is most miners actually just rely solely on the
appreciation of the token to pay for the cost and where they would be just be better off, if they just
bought tokens and expected them, just held them as speculators. Coupled with the automatically
adjusting difficulty rating, Proof-of-work, through HashCash and scrypt, by the way these are not the
only two, but those particularly ones along with the automatically adjusting difficulty rate, ensures that
basically the marginal value of the token in the long run equals the marginal cost of securing the
network. Thats why I was saying, at the very beginning, it cost about $730 million to secure the network
this year, based on the current token prices. Satoshi actually himself, he saw this early on and in original
FAQ, he mentioned When bitcoin starts having real exchange value, the competition for coin creation,
will drive the price of electricity needed for generating a coin, close to the value of the coin, so again
Mv = Mc.
Theres actually a really cool chart, Ill try to link to it, in this subsequent article is an engineer named
Dave Hudson and he runs a website called hashingit.com and if listeners are interested, theres a
particular entry called The gamblers guide to bitcoin and he explains how he ran a Monte Carlo
simulation 10 million times and he found out that, you need to be a gambler to want to bet on the odds
of basically either solo mining or running in a small mining pool. Basically theres financial incentives
based on the simulation, that show that investors what they want, they want a stable reliable flow,
again you need to go see the illustration itself, but the ideas is this, anything lower than the specific
odds make you less likely to win that special number, so theres a built-in financial incentive for
professional miners to coming in, build these industrial scale centers to recoup those cost in the most
efficient and reliable way, which leads to the incentives making centralized locations and so on.
With all this said, I have a list of solutions that people might be interested in looking at, again Ill try to
have these in links later on. First two people I am going to mention actually are going to be in a debate, I
believe on this show at some point Mike Hearn and Peter Todd. Mike Hearn is a Bitcoin core developer
and his big and notable thing now; he is working on Lighthouse, which is a Crowdfunding system built
onto the Blockchain. He had an interview back in April on Money & Tech and he explains the
centralization problem and how, this is the same thing that I just mentioned, theres incentives to trying
and pool together as much hashrate as you can, because of variance and so on.
Peter Todd, he actually had a lengthy thread about this idea, he says how a floating block size limit
inevitably leads towards centralization, Ill link to that later on, but his solution, I am sure you guys
have, listeners have heard it at some point is, a Tree Chain is really clever and that was in episode 104.
He also had a recent interview with a group called I am Satoshi and in part two, he talks about how
when block sizes get bigger, so right now if listeners are wondering, the block size on any given day,
average block size is about 500 K- 400 K and max. built into to the codes, 1 mega and that could be
changed just arbitrarily, you could move it up to a gigabyte or whatever it was, but in practice the actual
network has less like one transactions per second, if you actually look at the actual, how the
[inaudible]goes through, but his point on this is as, if you want to compete with an RTGS or Real Time
Gross Settlement, you need to increase the block size, so that way you could do a 1000 transactions per
second or 2000 transactions per second, but in order to do that, you need to have large, gigantic block,
that would squeeze out all the marginal players who dont have, for example big fat bandwidth at home
or large disks and so on, so his solution was tree chains and somebody has to pay for all this obviously.
Heres some other, listeners are interested in actual, solutions that are proposed for last few weeks.
Two phase Proof-of-work from hacking distributed and the author of that are Ittay Eyal and Emin Sirer
or Sirer, I am horrible with the names, sorry about that guys. They actually got a lot of attention and
theres actually several others, let me go through them real quick, just the name of whats going on.
Proof-of-Activity is a new paper, from four different guys, Charlie Lee who created Litecoin, Alex Mizrahi,
he did the chrome wallet, which is a color coin project, Meni Rosenfeld, hes been on the space for a
long time, he actually came up with the first idea of the Proof-of-Stake, and Iddo Bentov, he an
academic in Israel and the full title of the paper is called Proof of Activity: Extending Bitcoins Proof of
Work via Proof of Stake.
They identified three different areas where we have tragedy of the commons that take place within
bitcoin in the proposed solutions, we could talk about that may be a little bit later. Another person to
look at, if listeners are interested is a guy name Andrew Miller, his handle is socarates1024, he is really,
really deep into the space, he is a PhD student at University of Maryland and he has some solutions, one
he has proposed several since the Ghash incidents last month, but one of the thinks hes been pushing is
Permacoin, the ideas is a 2-for-1 basically doing this decentralized cloud service in tandem with bitcoin
itself, Ill explain that a little bit later on. Another potential solution, Stephen Reed has something called
as Bitcoin Cooperative Proof-of-Stake; its got a long thread on Bitcointalk about that. He is funding that
out of his own pocket, so its actually got some money, apparently.
Delegated Proof of Stake is from Daniel Larimer. Daniel Larimer and his brother have been working on
something called as BitShares. By the way, i dont endorse any of this things, I just saying this is whats
out there. Anyways, Daniel he published his paper on explaining how you could use a Proof-of-Stake
ledger to create consensus and it wont be centralized, at least thats what it says on paper, on theory.
Vitalik Buterin had a long, excellent post about a week ago, explaining the challenges of mining and how
a Ethereum could potentially fix this, I am gonna try and see if I can get him to agree to, let me to repost,
I had a long conversation with him about this, but the problem is, you wouldnt be able to get miners on
board with that here on bitcoin, Ill explain that in a minute. Greg Maxwell is another guy who has
proposed a very interesting solution, so the listeners who are interested in Greg Maxwell is a Bitcoin
Core Dev. and he has been talking about this idea for three or four months at least, basically ideas this
is: each hardware, each ASIC piece of hardware, is assigned a private key that basically activates or
resides within a kill switch inside ASIC hardware, so its soldered on this hardware and its made in a
tamper-resistant package, so that the outside rogue agent or whatever, tries to break the hardware
that, hardware actually gets itself breaks, that piece breaks disabling some of it, so it cost money to
repair it, the ASIC cannot be used during that time, so theres incentive not to break these things.
Anyways the ideas this is, in his view and I dont wanna put words in his mouth, so you definitely check
with Greg with this, but this is what he was telling me, I met him a couple of months ago, and told the
idea this is, even I you had all this ASICs in one datacenter, all these ASICs that are hammering it right
are all the submissions, if they all have these devices, at least in his view, they can enable some kind of
decentralization, in the sense that you could destroy these pins, so the idea he has a base of the crypto
eviction, so if you dont the private key to work with this hardware you cant use it in the pool, so you
need a sign that, I am not sure what the time preference is, I am not sure if you have to sign every day,
every week or whatever to show that you still own the ASIC hardware, maybe thats not the issue
altogether, but the idea is you could be evicted physically from that location since youre cut off, your
machine cant work, so even if you have all the machines in one place of the world, in his view this could
work. He said, he has talked to some hardware manufacturers and again I am not sure how much I can
talk about, probably should talk to him, the idea goes back to TPM modules, Trusted Platform module, if
the listeners are interested these are crypto processers basically, Google that.
One other possible solution, out of all these is another, exchange the code of the Poisson process, so the
way bitcoin works, the block rewards is that, it doesnt happen every 10 minutes, you could actually
model this in a statistical or a probability chart called a Poisson process, its a French name, you cant call
it poison, even though it spelt poison, its named after a French mathematician. Anyways, the ideas is,
its very random today, so you might get a block in 1 minute or you might get a block in 10 minutes and
Dave Hudson has a great article on that called Hashrate Headaches, I recommend listeners to look
that up and you could actually, if you wanted to, you could change that in bitcoin, but again theres
drawbacks to these, let me explain like this. It all boils down to this, what incentives do the miners have
to these? And right now theres really no incentive to implement anything thats not profitable to them,
so they are, remember miners have some costs, they have to pay back their investors, they have to pay
back themselves and so on and theres no incentive to upgrade to software, even if these things can
actually work.
In fact most miners today, if you pull all the miners out there or the nodes out there, the vast majority
are using software thats over a year old, version .85 or .86. Even if you could technically code all this
stuff, youre still running into the fact the miners themselves wont necessary hast that code or protect
that code with their equipment. Even if Proof-of-Stake works for example, that would actually destroy
the idea of using seneord subsides, right now I am not sure if listeners can understand this, the vast
majority of the miners are paid by block rewards, these block rewards are paid out in 25 bitcoins, thats
it.
Today based on the information on the web, its 99.8% of all of the revenue, comes from block rewards
and about 0.20% comes from transaction fees, so its really important, if you wanna get the bitcoin
miners on board to keep incentive structure in there. Proof-of-Stake as cool as it sounds, even if it did
work and wasnt compromised in some way, is unlikely to be implemented because it just destroys the
seneored subsidies which leads to this issue, the only people who says this is really not an issue are
probably, this is again, this is my opinion, this is from what I have done, all this research on, is people
who are not really involved core developments team, theres IRS channel with visitors, I actually dont
do it much myself, Id talked to some of these people outside of it and these are where the actual
developers hang out and where Greg Maxwell and Peter Todd hangout in the room and almost without
a doubt, would say that there is centralization issues, I am not gonna put words into mouth, they all
have their own opinions about it, that explains some of the once above. There are people who have
never mined before, if you have never mined you dont understand how it works, probably the vast
majority people who says this is not a problem, are the Cool aid drinkers, who wanna just basically free
ride upto $2 million without actually having to do any works, so again theres a real issue. If there wasnt
an issue we wouldnt all be talking about it.
It doesnt need Hollywoods size of budget, it costs Ghash with the price structure they had, less than
$90 million in hardware to achieve that level last month, so you dont need a billion dollars or a trillion
dollars or anything like that. In fact its actually even cheaper, thats just the brute force, you could also
do all sorts of social engineering things, itd be much cheaper, you could get on an airplanes, since its
centralized, beat somebody on the reanch.I dont recommend that by the way, I dont endorse it.
Theres another paper Id recommend looking up, another developer named Andrew Poelstra, he is
another graduate student in, I think its Canada actually, I dont have a doc, he sort me out with the
paper. He has a paper on decentralization and once you hit the thermodynamic limit in his view, where
you have the chip fabrication, basically theres an S-curve in technology, in bitcoin you see it, and
actually Dave Hudson has an article on this and you see it was CPUs to GPUs to FPGAs to ASICs and
once you run into the fabrication wall and what I mean by that is, basically the amount of transistors you
can place in within a given space, so right now Intel chips are the furthest along, at like 14nm, but TSMC
which is where most ASICs come through are just now hitting 20 nm and the idea is of this is, once all
this ASICs manufacture hit the same wall, roughly at the same time, were not going to have this
gigantic, magnitudal jumps in performance.
Like the last couple of years, youve have 10, 100, 1000x performance going from CPUs to ASICs or GPUs
to ASICs and thats going to hit a wall and actually you could see that happening right now, with the
transition from 28nm to 20nm. In his view, Andrew was saying that, what happens then is then is that
you end up decentralized, you have commoditized ASICs, basically youd have players like Nvidia or ATI
really big semiconductor companies buying this technology, commoditizing it, so essentially the same
and then everyone would just want to own a phone or own a routers, just like that. Not making sense,
please check.
The problem again with this though is, you end up having energy arbitrage actually, again if youre an
investor and you have a hundred million dollars in equipment, you want to be able to recoup that cost
and so what then becomes a linchpin is energy costs, which Satoshi mentioned at very beginning, with
operating cost essentially equal the value of the token, so you end have centralization taking place in
certain geographies like Iceland, Finland and China, i actually wrote an article if people are interested,
its called Bitcoins Made in China. Its based on this arbitrage going on; they have the cheapest
electricity basically in eastern Asia.
Some other solutions, if listeners are interested in you could change the hashing algorithm, scrypt
obviously, if you guys arent familiar with it here in bitcoin, bitcoin uses something called HashCash,
which was developed by Adam Back, 10-15 years ago and thats the Proof-of-Work mechanism used in
the bitcoin, and Litecoin is slightly different, something called scrypt and since you have this Cambrian
explosion of the Altcoins in last couple of years, you had a bunch of different Proof of Work
mechanisms, ones called Scrypt-n, Scrypt-jane, Groestel (Grestl), Keccak, Quark and you have a
combination of these kind of being pulled together into what we called these like melting pot, Proof of
Works batches, one is called X11, another one is called X13, what this 11 and 13 mean are basically that
batch or just like 11 different ways to hash the algorithm, so its a combination of SHA256, of scrypt,
different ways to change the difficulty, in so ideas this, for example Darkcoin and again, I am not
endorsing any of these coins or project or anything like that. Darkcoin for example, they are using X11
and theres like this community buy in, its kind of like a social contract if you will, of understanding that
once one of these algorithms becomes compromised, in the sense that it becomes economically feasible
to make it ASIC and therefore leading centralization, rapid centralization, that the developers would be
basically allowed to introduce more Proof-of Work mechanisms within it, so maybe it will X11 to X13
and X15, X towards 16 or whatever.
The idea is that, its a losing battle in the end, you continue to do this cat and mouse game and now
whether or not, you could string this out for many years, thats debatable, obviously with SHA256, its
lasted for, I guess five and half years now and itll have legs up until you hit the top of the S-curve,
another presidential solution is, Getblocktemplate its BIP 32 and its from Luke-Jr. Luke-Jr is a Bitcoin
Core Dev. who also does handle the Allegis mining pool which has about, any given day about 8%-10% of
all hashrate, this is actually been around for 2 years, but its not the standard, its not I should say
each pool has its own way of handling transactions and handling blocks and what they propagate, what
they insert the blocks, and this a way for him to standardize it and its hasnt been adopted industry wide
and there a push to try and push people to do that, but obviously if this a volunteer decentralized
community, it seems kind of counter to that idea.
Another solution and this is what my current proposed, so in April there was a company called BitUndo,
still around and what they did is that, they created a mining pool that does, what called double spend as
a service. If you want to, the simplest way to understand some of this is pause and go Google, what the
double spend is, that what the big issue that bitcoin was trying to solve, is trying to prevent is, this ability
for chargebacks essentially, in an actual network, up until you have 51% of the hashrate, it was believed
that you couldnt double spend, but there might be ways to get around, without 51% of the hashrate
and there is a company called BitUndo, which advertises what is just said, it double spends the service
that serviced, that you actually pay money and reverse transactions and so on, unspent transactions
that are waiting at the numb pool.
There was a big fight on the Bitcoin Core dev., Ill post the links to it, in the article and my current
actually proposed basically blacklisting and whitelisting pools and propagating blocks and obviously,
some people are okay with that, some people are not and I am not gonna particularly put my foot down
anywhere, but you guy be interested in carrying his solution, I know Peter Todd might also have some
interesting thoughts on that.
The last thing Ill mentioned with this, before I go into some other quotes from some other people I have
been talking about this is, ultimately who is going to pay for this code, getting miners to hash is one
think, getting developers to actually build reliable code for this and tested it and make sure it has no
security leaks is another issue. Its a public goods problem and there many of this public goods problem
in bitcoin and maybe theres a way to solve it with, maybe Lighthouse from Mike Hearn, but you see this
kind of misunderstanding with some of the community like example Jeremy Allaire, he is the CEO of
Circle, today he was quoted in an article from Coindesk, but apparently it took place on July 2
nd
in
Dublin. He told the devs to step up and create more inclusive process for development and basically he
wants developers to do stuff but he doesnt explain how they are going to be paid for, so its easy to
complain and tell people to do stuff, but you need to come up with a solution for it, so thankfully Mike
might be helping out with the Lighthouse idea. Its a public goods problem and unfortunately Jeremy
met then he tells how investors are going to secure network, basically outside venture-capital going to
come in and build these mining pool and they are gonna demand to make sure this 51% doesnt happen,
but the truth of it is, its going to probably lead to centralization, because if youre a venture-capitalist or
someone with a lot of money, you wanna be able to recoup that, so you want have reliable cash flows
and if you have reliable cash flows, you need to build centralized facility or something as significant
percentage of the hashrate and you wanna do that, so that you can lower the variance in payouts and so
that you could have lower orphan rates, again listeners if you are not familiar with orphan, orphan in
this is going back to the beginning, when youre hashing, when these machine are hashing, they are
looking for, they are implementing the nodes, and they are specifically going through these calculations
and they might end up working on the same thing, end up propagating the same block solution as others
in their own network or outside the network and what would ends up happening is, the network has to
decide or a consensus is built upon one of those blocks, a block that isnt built upon is called an orphan
block and you are not rewarded for that and as a result you lose money essentially, so you wanna
reduce your orphan rate, if possible, as a result, you actually have what we called peering agreements
between pools.
Pools are voluntarily entering in peering agreements with one another, in which they propagate blocks
to one another, as soon as they find it. I am not saying, this is always going to happen or that everyone
always aint going to be in a peering agreement, but it really defeats all purpose of decentralization, if
you know exactly who youre gonna talk to and its no longer decentralized. Its the centralization
without the benefits of centralization. Decentralization is a real issue, now Greg Maxwell, he is a Bitcoin
Core dev., he has a calculator and what he did is he came up and you could go and just type Greg
Maxwell probability calculator, he found that with 40% of the hashrate, the attacker success
probabilities around 50% so, if you control what Ghash did last month, and right now actually they are
like at 41% again, they have a 50% chance of doing double spend attack and if you have 49% of the
hashrate, your success probabilities is at 96% and if you have 51% of the hashrate, its successfully
probable at a 100%, so the ideas is this that any rate above 25% is pretty much would be considered
dangerous in terms of double spending attempts, but theres a financial incentive to centralize, there
just an incentive to centralized, even after 25%, because you want to reduce the variance, which Dave
Hudson has shown with the simulation and Ghash has proven as well as other big mining pool has
proven, there is incentive to lower variance and to reduce orphan rate.
Ill give you three quotes from different observers within this industry, but they are not miners, so I
wouldnt say theres any conflict of interest. The first solution is one from Robert Sams, for those of you
who dont know Robert Sams a former interest rate trader, he worked for a hedge fund for like 11 years
and now hes got a bitcoin startup doing liquidity and basically this is his solution that he emailed me, it
said Choose your own difficulty, which goes something like this A miner can choose what difficulty he
mines at and the reward is some nonlinear function of the difficulty chosen. This will allow people with
inferior hardware to mine some coin, even though theyll be paying more in electricity for them, than
the market rate. Basically thats whats happening today for most miners, this is me interjecting by the
way, most miners arent mining profitably, they are essentially holding on their tokens with the belief
that itll appreciate in value. Robert continues The miner can choose the difficulty that he mines at and
the reward is some nonlinear function of the difficulty he chooses, most miners, at least marginal miners
are not actually making enough money to pay for their operating capital cost, basically they hold onto
the bitcoin hoping that it appreciate, so that they could sell it later. Robert continues saying that I
think people would do that as virgin coins had an anonymity value, this scheme would likely lead to, the
marginal cost is greater to marginal value, which is good according to Robert, mining will no longer be
profitable, you cant sell virgin coins and retain the anonymity value. Robert continues saying To my
knowledge this approach hasnt been explored in detail by anyone, but I have a gut feeling that its
promising, the essence of the ideas is that, the coin base is actually more valuable, than coins with the
history, but its the value that isnt tradable, if you make it feasible for people to mine some coin in a
reasonable period of time, even if the mining costs are greater than the market value of the coin, so for
example all the guys buying drugs and naughty stuff, acquire the coin by mining under this scheme,
feasible, if you get commodity hardware, you could have mining economics that make it unfeasible for
people to mine on a scale. Anyone wants who wants to sell the coin to pay for electricity bills, capital
expenditures, etc. Thats what Robert Sams provided as a solution and I can post that, basically the
ideas is to make it, so that its so unprofitable, that only people doing the mining are these marginal
players.
The two other solutions, one is from Jonathan Levin. Jonathan Levin, he is the co-founder of
Coinometrics, which is an analytics company in this space. Theres two that he mentions, the first point
in his view is, to ensure that for any new solution, does not to make it botnet friendly, basically listeners
if you are not familiar, botnets are zombie computers, basically computers that are infected with
malware that externalize the cost of mining, basically they. ash, but they are not very efficient at it
compared to ASICs, so theyll be like CPUs or GPUs based and as a result you end up destroying the life
of the computer, that cost is externalized onto big companies or mothers at home or government or
whatever.
The other point he makes, the Jonathan says, Another simple thing that it is unsurprising that the
Bitcoin network got into this mess, as it is economic rational to join the biggest pool, is this minimize
variance and ceteris paribus reduces orphans rates, increasing expected returns per hash. he other point
is that there is still hardware bottlenecks so designing the theoretically most robust system may fail due
to market imperfections, Implicitly in many arguments I hear about mining people assume perfect
competition and this is what Jonathan continued saying that, Do we need to remind people that, what
are necessary conditions for perfect competition: perfect information, equal access to markets, zero
transportation costs, many players, this is clearly not going to be a perfectly competitive decentralized
market, but it certainly should not favor inherently big players, so those are his two solutions.
The last one Ill just mention is Dave Babbitt. Dave Babbitt, hes completing his thesis at Northeastern
University and hes been modeling, he has something called Agent Based Modeling, which is a little bit
different than Equation based modeling, which mostly econometrician or economist use. What his view
is, this probably wouldnt have been a problem if they modeled bitcoin before it launched, he keep on
saying, looking at the huge number of man-hours required to get it done, Agent based modeling was
mature enough in 2007 to do it, even certain Equation based models would have projected it. In his
view the problem though is ABM requires cross disciplines, you could say that cross disciplinary field of
Agent based modeling was mature enough, again back then to predict the centralization problem that
we have with bitcoin. He has some solutions that he feels to come out about, Agent Based Modeling, he
figures once you have this ABM in process, you could actually build a perfect cryptocurrency or several
currencies built around the scheme, again this is not published yet, but these are some three people to
check out on, Robert Sams, Jonathan Levin and Dave Babbitt.

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and also a merchant directory, who knew a wallet that tells you stuff and sells you things. Check it out at
KRYPTOKIT.COM
The high sponsorship number on episode 127 is Shinybadges.com, 23,042 LTB coin and brokered by
Bitofthis.com LTBs sponsor services.
Shinybadges.com is at first glance a store selling; shiny badges and you get a free pin, if you pay with
bitcoin. Click the causes button and youll quickly recognize some noteworthy campaign of the past year
like the Hoody the Homeless fundraiser, Ross Ulbricht Legal Defense Funds Green Camel Pin as well as a
variety of other tokens ranging from an anonymous pin, in support of the Electronic Frontiers
foundation to Anti-war.com. I think the frays goes you can wear your ideology on your sleeves, if thats
something you want to do, Shinybadges is for you. Man these are fun.
Okay sponsor number two is CoinFire, I think this is our first repeat, COINFIRE.cf is a news source in the
bitcoin space that i recently discovered and have since gotten into Mike, the guy who runs it a bit. In the
last few days, theres been a bit of a fluff where a writer from Medium, basically did a string operational
on a bunch of Bitcoin media sources, asking how much it would cost to get an unbiased article
published, which in reality means an advertisement or press release disguised as piece generated by
merit. This is a problem that Ive noted a number of times privately, but this just sort of an embarrassing
thing, I cant control that other platforms view editorial discretion an asset, that in the words of former
Chicago Governor is a valuable thing, this is relevant because CoinFire.cf. is one of the small handful of
outlets, who did not have pretty embarrassing results, but rather than receiving accolades it led to a
shower criticisms, that they mustve paid for the story to be planted. It been pretty hilarious to watch
this and I want to throw my weight behind Mike and congratulate them on not failing the are you slimy
test, that was in on sponsor segment but I think is the first real endorsement Ive given, so I guess thats
something - so that it, if you wanna hear an update about LTB coin listen after the credits, back to the
show.
*ADVERTISEMENT*
ABL: Hey, everybody Adam B Levine here from Lets Talk Bitcoin, we are checking in again with Tatiana
Moroz. Tatiana and Ive been working on her Tatiana coin project now for, I guess about, are we at a
month now Tatiana?
TM: Amm we are a little bit over a month since the initial, yea.
ABL: Its actually been a little while, since weve caught up about this, can you kind of update people on
what you been doing for the last, well a little while since we have spoken.
TM: Its been really, really exciting, but I am a little sad that i havent been able to keep in touch with
everybody, because basically where I have been, there been terrible internet. I was in the DC for the
Bitcoin and the Beltway conference, which is wonderfully, and Seans outpost and my friend Elizabeth
Ploshay and they were kind of all hosting it. I spoke on the altcoins panel there and people seemed
really receptive to Tatiana coin, they showered some questions and it just seemed like people really
liked the idea, then went up to PorcFest, where i sang and did performance for everybody. I also spoke
on a panel with M.K lords, Lyn Ulbricht, Stephanie Murphy, Paige Peterson which I though was really,
really informative and very diverse prospective, Emberlea McCullough was also on that one and then
after that I went out to the National Libertarian Party Convention in Columbus, Ohio and that was really
cool, because I did my singing thing and people liked that, but I got to be on a panel with Jeffery Tucker
and Ben Swan and this may have been in my opinion the best panel I have ever been on, although the
womens panel at PorcFest was excellent. It was really cool because I dont feel that any of us are
particularly technical and we had a room filled with people that basically, didnt know anything about
bitcoin but were interested in it. I thought it was a really engaging talk and by the time we were done, I
am convinced that everybody in there went out and at least did some more research, if not flat out just
bought some bitcoin. That was really, really cool to steer a wider group of people accepting it, you know
the Libertarian Party is a little bit more conservative than PorcFest , I mean PorcFest was bitcoin
everywhere, so that was really, really fun, and after that I started my job at Bitcoin magazine it was just
announced today, I am there new sales director, so thats been keeping me very, very busy and I mean
my to-do list, I have like 5 of them, on my to-do list its all things to do, which I know how that feels with
the launch of LTB coin, and then here right now broadcasting from Las Vegas, I am here for Freedom
Fest. This morning there was a panel with bunch of folks about bitcoin and it was sort of the same thing,
I dont think its about as good as our panel, at the end they asked for questions and everybody flooded
to mic. Even though there are a lot of hard core gold bugs here, I think they are realizing that you can
actually store value in bitcoin as well.
ABL: It always seemed like the, people who see the value of hard currencies in terms of monetary
metals, should also see very similar value in bitcoin and yet its kind of been a slower walk, so you think
that were now, its gonna be easier from here on out with that weve just been around long enough.
TM: I think were heading out like rocket shift point and thats why I am happy about the bitcoin
magazine thing, because I feel like in addition to being there sales director, theres really welcoming to a
lot of my ideas in terms of outreach and content creation, were gonna be doing some videos and stuff,
between my ability to kind of utilize that plus Tatiana Coin, plus whats already going on in the space, I
am just so thrilled with how things are going on right now, I couldnt be happier.

ABL: Well, I wanna share with you a little bit about, what we've been working on with the CoinPowers
platform, because again Tatiana your coin was the first one that we launched, i really appreciate you,
helping us figure out, what works and what doesn't. One of the things that we thought was really good
about the campaign, was the type of user engagement and that was just in kind of the backer comments
area, where if you had supported and had an account, then you could post a comment essentially and
talk with you directly and so this is something actually we've taken in kind of repurposed a lot of what
we're overdoing around, with the idea that CoinPowers in the future is actually less of a Crowdfunding
platform or crowdsales platform and more of a user engagement platform, so basically once the
campaign is over, you're going to be able to continue to maintain your page and use our tools on the site
to actually manage your relationship and your communications with various types of backers, so if you
want to say, have something, you have a song that's gonna come out early and you want to preview it
by your biggest fans, then you could set it up, so that people who have more than a 1000 Tatiana coins
in their wallet have access to it, but other people don't, they just see it in, so thats like an arbitrary
number, if you want it to be 999 you could do that, if you want 1 you could do, you want it to be none
you could to do that and so like there's this idea I think that, really the point of what we are doing here
isn't so much trying to raise funds for you, as it is trying to connect you with your fan, because that the
part I think ultimately, that was the most important thing, when we were initially talking about this, was
being able to cement that connection and make it so that, i mean once you've got that connection, you
can do all kinds of things, if you wanted to do a fund-raising thing, well it actually helps a lot to know
who your biggest fans are already, so that something over the last couple weeks is really crystallized for
us at CoinPowers in a couple different ways and yea, so right now actually if you haven't been to visit
the CoinPowers site for Tatiana's campaign you'll notice that there's actually a number of different
features there. In the near future we're gonna have an onsite wallet and also we've been listening to the
feedback, when you place an order, when you actually support something like Tatiana's campaign,
instead of just waiting until the very ends of the campaign to actually be able to feel like you have
something, we are gonna give you a credit for it on sites, so that you can start doing this type of
communication on a per state basis immediately, Tatiana instead of having to wait until the end like
we're doing now, I really appreciate you letting us figure out a lot of these things with your campaign
and I think that this is been a really great experience for us
TM: One thing that i am most grateful about with this experience is realizing what a cool team i have
and everybody i think worked really well together and little bumps on the road when you're learning
something, but totally happy to be your Guinea Pig and i was gonna say that, one of my favorite thing
about doing this coin is, that interaction with my fans, i feel supper guilty, because i have been offline,
like oh I am bad person. I really like that engagement, i like that daily kind of check ins, as soon as Vegas
is over, i am gonna be posting a lot more frequently, because i really liked that habit, seemed like i was
getting a lot more closer with my fans and they seem to really like it, i thinks its a win-win for
everybody, now that we raised some money, i am gonna go into the studio at the end of August, i mean
we still need to raise more of course but teaching people about Tatiana coin, especially because i am not
only dealing with the bitcoin space, i have a different fan base as well and the Libertarian community,
which is you know obviously right for bitcoin and cryptocurrency in general. It takes a minute for people
to really understand what it is, i like that we kind of took the time pressure of off it, i am a little sad that
some people were sad about the loss of that model. Of the varying pricing structure, but i do think other
folks were having a little bit of trouble understanding that, so i don't know, i am just happy to continue
to be able to tell people about it and not have that pressure of, well my teaching moment is going to be
within 30 days span, now we can kind of extend it and grow it organically.
ABL: Thats really keen, and you know that model, I really like that model, I really like that, the price
figured out basically by how many people want it, that given day, thats a fun thing, if your guy like me
or some of the other guys who like it, because we view this all kind of, as a game, right. Its trying to
figure out how to play the game the best, in order to maximize your effort, and so if you create stuff like
that, then you can do that, but for other people, who are just looking to literally support you, its asking
them to play a games, so thats the thing, its like some people who want to play a game and view this
like that, they are like that, its great because it lets you play to win, but on the other side, this is just a
much simpler model. I think that were probably going to wind up using both in the future with other
projects, really it just kind of depends, but yeah I think that, when we launch your project everything
was manual, everything was manual! We did the distribution, the other day the first 1.5 million, half of
the Tatiana coins going out to those people who contributed during the first part of the campaign, I
literally had to sit there and we had a print out and I mean it was in a comma separated spreadsheet, so
it wasnt by hand, but its a pretty manual process and just couple months from now, even in a month
from now, since youve done that, weve seen Swarm launch and they have this vending machine set up
basically, where you just send funds to an address and it automatically sends you back the token. Thats
kind of where I see your campaign going, Tatiana by the time youre done with the rest of yours, you are
probably going to be wind up with like 1.4 million Tatiana coin left, to figure out what you want to do
with and thats kind of what I am figuring, you want to do is, just put them into a vending machine, that
lives on your webpage or on the CoinPowers page for that matter or both and the money would just go
directly to you, of course wouldnt go through CoinPowers at all in that circumstance, you essentially can
just build this out.
TM: People really are starting to catch on; I am going to be doing some meetups in the Bay Area
actually, so Ill be visiting you and Crystal. We are doing the Palo Alto, Alice is throwing the party, she
run the Palo Alto meetups, so we are doing a party at her house. I am gonna give an acoustic concert
and talk about Tatiana coin, the following day I am gonna perform at the Paige Peterson Spa in San
Francisco, so thatll be really, really fun and Ill play a little bit and hang out and talk with people about it
and then Ill be at Coin Congress and then there is another event, I am planning with Catherine Nicolson
in San Francisco and then I think theres a Silicon Valley meet up, that same timeframe, so people kind
of have to check on my website and see where Ill be.
ABL: Which things the Tatiana is going to? All the things.
TM: All the things, the only thing that I am missing which I am sad about is the Chicago conference, I
keep getting messages from people saying, You coming to Chicago? and Im like I have two gigs that
weekend, I cant make it, but thats a good problem to have.
ABL: I do have a question for you, Tatiana, I supported your campaign and Im curious are there any of
the rewards that are available now, because you have some things on their that require the album to be
produced, but on the other hand you also have, like Skype with the Tatiana and these other types of
things, so are you planning on making those available for people to use their Tatiana coin at some point
in your future, do you have a date in mind for that or you are just gonna see what happens?
TM: Actually, people really can be using those right away, I dont know, it hasnt even occurred to me to
inform them of their purchasing power, thank you for letting me know. Yea, people can start cashing
them in and taking advantage of everything right away, if they do. We should talk about how to
implement that, but yea I mean I am available for Skyping, I am happy to be performing, I am actually
setting up a tour, depends if I have enough time, but I kind of wanna do, I am playing at Nashville,
August 15 and 16
th
, Night of Clarity with my friend Bob Murphy and I digging of doing some regional
meetups and some tours around there, I mean I am on the road constantly, I dont know why I dont
have more frequent flyer miles, I have to look into that. I should be getting something for free by now.
ABL: You can see that posted rates that, those things are available for at the CoinPowers page and
Tatiana, I guess were also gonna have to just kind of update your page with would some this stuff and
began putting in an interface there, where people can interact can with you directly. Like you said we
launched LTB coin, a couple weeks ago and Im doing things like were auctioning sponsorships on the
Lets Talk Bitcoin show for LTB coin to the highest bidder and were doing, I am also auctioning
consulting time two hours a week, and also again all of that is super-duper manual, its all happening on
a forum or by an email. There are tools that, if nothing else, we are developing simply enough because
we need them in order to do this, that kind of what I imagine whatll happen, itll be on your site and
CoinPowers.
TM: Well you know, Ill be visiting you guys in about week and a half, two weeks, so maybe that is a
good time to do it, because I know that you are swamped, but if we wanna talk about it sooner Id love
to get that info. out to the people, but I thought that was just gonna be for once fun, visit versus like fun
plus crypto, but I guess we could never get away from the crypto.
ABL: Too much work to do Tatiana
TM: I agree, I am looking forward to lunch over there, because I know its how to keep people happy.
Are there any questions in the chat that people have or you think theres anything that people might be
wondering about? Oh! I started a Womens Crypto Association, so we are still kind of revamping this
site, but if people go to womenscryptoassociation.com, its WCA, its like our nickname, we havent
really launched it, but I am putting it together and sort of more like a bitcointalk leaders that are women
and that are kind of trying to shape the conversation about bitcoin and maybe relate to people in a
slightly different way and also there have been some issues in the cryptospace where guys are all too
frisky and it can be a little be uncomfortable for women, so I wanna make sure that those lines are really
clearly drawn and that people know, this a safe space and were going to make effort to kind of help
insure that, not to scare people off, its not like this place is crazy, but anything in the tech world, this is
been something that Ive learned is supper male dominating can be a little bit challenging to feel
comfortable in, so thats what we are trying to kind of modify. We have a women in Venture Capital, my
friend Alyse Killeen, she is one of our members and she is going to be offering advice on how to pitch,
eventually Id love to see us having a board of women Venture Capitalist, Bit angels but Bit angeles, I
dont know what would you call them but.
ABL: Well, so tell me whats the difference, what you think the differences between a standard venture
capitalist, which I guess you are defining here as a male venture capitalist firm versus a female venture-
capitalist firm?
TM: This is actually something Alyse educated me one. In the world of Venture Capitalism theres only
4% women, so if you think about that, lets take sexism aside, either way men still value projects
differently. Men see things differently then women, so my thought is that, if youre going to have people
pitching and its always the same type of person that they are pitching to, theres less diversity and the
types of innovation that become available, the entrepreneurship is sort of limited, so I think if you have
women venture capitalist, you have a different group of values associated and also I think there is a
something a little bit intimidating about pitching to a room full of men. I am not was it all, but Ill admit
that can be a little bit daunting, not that women are pushovers in any way, but I think that there
feedback can be a little bit more like motherly, I know I am gonna get in trouble for saying that, because
you know everybody is up and arms about how women talk about womens issues, I mean I know that I
take it advice a little bit better from women in certain regards and I thing that theres just certain
comfort level and thats not to say that our organization is not very friendly with a lot men for example
Andreas M. Antonopouloss supports our efforts and Will Pingmen is a big fan and so we want to kind of
open everything up and I think that VC is definitely a really important aspect from that.
ABL: Dave asked, if the campaign doesnt ends now? And thats actually kind of a two-part question, yes
the campaign will end, basically it was supposed be 30 days and then it was extended to another 15
days, so the total campaign is gonna be 45 days. I dont know exactly what date were on right now, but
I think we have about 10 days left or 11 days left, something like that, on before the end of the
CoinPowers campaign, but what we are saying earlier is that at the ends of the campaign, in this new
model Tatiana is going to get all of the coins, there will be claimed essentially by a backer beforehand,
so at that point shell have the ability to do whatever she wants with them. Tatiana, is it safe to say that
you probably are gonna put them into, a kind of vending machine and then as you tour and as you meet
people, youll just pointed them to that as they want to get, they can get involved.
TM: It gives me more time to, get people to catch on. I mean its the first one, a lot of the people I know
they barely understand bitcoin, I think that having less time pressure and just having it be something
that everybody can participate in continuously and as they keep selling and eventually sellout then, their
values is gonna go up, hopefully. Actually, not hopefully, I know it is, because I know what I am gonna
create, I am really excited about August, I am 98% turning down Burning Men in order to record the
album that same weekend, over the course of those two weekends that it falls on. I think that once
people see the content been created and they see how many more videos I am gonna be putting now, I
think that the Bitcoin magazine job sort of gives me, a little bit more of a street credit kind of thing.
ABL: Before you were not full-time in the bitcoin space, and now you actually have a full-time job in the
bitcoin space, in addition to your music.
TM: And a cool job, I mean the team over there is so awesome and there is such, I dont know there is
just like a really great environment where its like a safe place for launching ideas and we are just
thinking really creatively. I havent pitched something to them ones that theyve said No, thats like
too radical or no we dont wanna do that. I mean they are really open to growing and improving the
magazine experience, and I am looking forward to, making alliances with other groups and helping them
getting involved with us and having us get involved with them like Liberty.me is at my table downstairs
that I am squatting at, but luckily me and Jeffery and the Tiffany and team over there, were really tight,
so hopefully Jeffery will be writing something, before we got on the air, we are talking with you about
the potentially, talking about what you all are doing, so with LTB coin. Yea, theres a lot of great
opportunity to branch out and to work with other, which is really wonderful.
ABL: Well, I think that, this is been pretty good catch up we tend to generally go quite long on these, so
Tatiana is there anything else that youd like to talk about, is there anything else we should hit here?
TM: Na, I dont think so, I mean I just hope that people, if they have questions, write them in, makes
sure that you are commenting. Please if you are an enthusiast, share this campaign, tell people about it,
I think its really only gonna go up from here. I am really excited, and I just wanna say Adam thank you
so much for your help, I definitely could not have done this without you, youve been infinitely patient
with me and a wonderful friend, in addition to a wonderful colleague. I noticed that you guys are doing
that Skype consulting sessions, I couldnt recommend it enough to people, I mean Adam is amazing and
ethical and the way that his mind works, while being technically sound is really creative, so I dont know
he could work with a variety of people and they can get a lot of out of it. I think people do need that
help in order to get into this, if they want to be creating their own coins, I think there needs to be some
sort of the hand holding, still we are not quite there where you just press a button and boom you got a
coin, well in certain ways I guess there is, but.
ABL: Well it just means that the coin is the easy part, right?
TM: Yes, exactly. Thats totally true that what I found out, I thought it was just going to be like, Oh! Yea
lets just make a coin, but no there a lot of work that goes into it and Alsyse and I was still doing some
consulting on that, I am available for consulting, but if you want the really consulting, go to Adam and
Anams at CoinPowers been awesome too, so I just wanna, I guess finish up with thank you everybody,
thank you to all my backers, thank you to all the people that have given us press and support and even
the critical feedback has been really awesome. I love how this is, been an experiment and something
that weve shared with everybody, theres a great feedback loop, there is a great community growing
around this and I cant wait to see more artist coins come out there.
CREDITS
ABL: Thanks for listening to episode 127 of Lets Talk Bitcoin! Content for todays show was provided by
Adam B. Levine, Tatiana Moroz, Tim Swanson.
This episode was edited by Adam Levine and Denise Levine
Music for todays show was provided by Jared Rubens and General Fuzz.
The LTB network is becoming the platform Ive hoped much faster than I thought it would. Dozens of
people have jumped in and are already creating projects. Weve offered and filled several development
roles, that grant you compensation in LTBc and in general you can expect both more content and better
technology very, very soon. Were preparing a pilot episode of our new game show, Name That
Blockchain, which for now must remain a little mysterious - If you think you can identify altcoins based
on clues given faster than the other team, find a partner and send an email to
apply@letstalkbitcoin.com.
There is still time left on the Five Forum Posts promotion, another two weekly distributions going out
each Saturday totaling nearly 5 million LTBc remains, so sign up today! All you need to do is head over to
the forums at Letstalkbitcoin.com. Register for the account and start talking. The new Magic Words,
listeners rewards program is still on schedule, I hope well be able to try it out together on the next
episode, although my desire is not always the limiting factor on our progress. We recieved feedback on
the forums that 48hrs from the release of an episode was too little time, so were going to expand it to
four days, or about as much time as there is between episodes of the LTB show. What do you think of
these updates? What do you think of what were doing? Head over to the forums letstalkbitcoin.com
and earn LTBc for expressing your opinion and adding to the conversation.
Thanks for listening.