Let's Talk Bitcoin

Episode 57 Protoshares & Selfish Mining Participants

Adam B. Levine (ABL) Host Andreas M Antonopoulos (AMA) - Co-Host Dr. Stephanie Murphy (SM) - Co-Host Daniel Larimer (DL) founder and C ! of "nvi#tus "nnovations "n#orporated

ABL: Hi$ and %el#ome to episode &' of Let(s )al* Bit#oin$ a t%i#e-%ee*ly sho% a+out the ideas$ people$ and pro,e#ts$ +uildin- the di-ital e#onomy and the future of money. .isit us at letstal*+it#oin.#om for our daily -uest +lo-$ all our past episodes and of #ourse$ tippin- addresses. My name is Adam B. Levine$ and today %e(re tal*in- a+out the future instead of the past$ and the theoreti#al instead of the pra#ti#al$ in that order. Daniel Larimer is the drivin- for#e +ehind /ro,e#t 0eyhotee$ +itshare(s future(s mar*ets and the protoshares de#entralised C/1-mina+le #urren#y$ that he hopes %ill po%er it all. !ur tal* on episode 22 a+out /ro,e#t 0eyhotee$ the se#ure identity money #ommuni#ations platform %as one of the most popular %e(ve ever run$ and " #au-ht up %ith Daniel a fe% days a-o to #at#h up %ith %hat #omes ne3t. )hen$ you mi-ht have heard it4 Bit#oin is +ro*en and selfish minin- is to +lame. (Hair on fire( headlines aside$ Andreas has a +ee in his +onnet on this one on$ and %e not only +rea* do%n the pro+lem$ +ut %e -et a -reat e3ample of ho% the #ore dev team has fe%er +ut +etter options for dealin- %ith thin-s li*e this in your standard #urren#y. Stephanie$ Andreas$ and " really di- into this one$ and there(s meat on those +ones. n,oy the sho%. "n the past$ %e have tal*ed a+out identity solutions that utili5e +lo#*#hain-li*e systems in order to -et %here they are -oin-. !ne of the most interestin- ones that(s under development ri-ht no% is #alled (/ro,e#t 0eyhotee$( and Daniel Larimer$ C ! and founder of "nvi#tus "nnovations ,oins us to tal* a-ain a+out /ro,e#t 0eyhotee and *ind of %hat has happened sin#e %e last learned a+out that pro,e#t. Daniel$ than*s for ,oinin- us this mornin-. DL: )han* you for havin- me$ Adam. ABL: 6or those %ho didn(t hear$ " thin* it %as episode... DL: 22$ " +elieve. ABL: of Let(s )al* Bit#oin. Can you -ive us a +rief overvie% of %hat 0eyhotee is all a+out$ %hat the point is7 DL: 0eyhotee #om+ines your money$ your identity and your #ommuni#ation into a sin-le appli#ation. 8ith the -oal of providin- a ne3t--eneration internet that(s se#ure. ABL: So the last time %e tal*ed$ %e tal*ed a+out ho% you #ould essentially mine for these names. "t %as

a %ay to prevent people from ,ust #ampin- on names +e#ause you #ouldn(t sell them and there %as this %hole au#tion +ased me#hanism system set in pla#e. So all of that$ that(s still the plan$ ri-ht7 DL: 8hat %e have is a 0eyhotee "D +lo#*#hain. "t is a +lo#*#hain for reservin- usernames$ li*e email addresses. "t allo%s you to #ommuni#ate %ith other people. )hese names are mined into e3istan#e and you +uild up investment points. )he more you mine on your o%n name$ the more investment points you -et on your name. And this is used to prevent so#*puppets for spamfilterin-$ for prioritisin- posts on forums$ to de#ide %ether or not to allo% someone to #reate an a##ount. 0ind of li*e a %ay of filterin- out 9":A1D"BL ; a##ounts from real people$ +e#ause it ta*es a lot to invest in #reatin- a name for yourself. )here(s a hi-h pri#e you have to pay to sa#rifi#e your reputation ,ust +e#ause you %ant to #heat someone out of ten dollars or somethin- li*e that. So$ you %ant to *eep these names 9":A1D"BL ; and the more you invest into it$ the more faith that people %ill have that you(re not ,ust -oin- to thro% your name a%ay at the first opportunity. ABL: So this is that pro+lem a-ain$ a verifia+le identity %here you(re tryin- to ma*e it so the identity is verifia+le +ut it doesn(t ne#esarily have to tie +a#* one to one to your real life finan#ial identity. So you are a+le to maintain multiple identities %ith a system li*e this ,ust as %ell as you are one$ ri-ht7 DL: <es$ you #an #reate multiple identities. )hey #ould +e anonymous or pseudo-anonymous or they #an +e tied to your real-%orld identity 9":A1D"BL ;that %ill si-n your identity and say4 =yes$ you are indeed %ho you say you are>$ and this system %ill handle all those thin-s eventually. "nitially it(s mainly for pseudonyms$ althou-h %e have plans in the future to add support for tyin- it to your real-%orld identity. ABL: <ou had *ind of a pu+li# rollout and reveal of this pro,e#t and a lot of the other pro,e#ts that you are %or*in- on at "nvi#tus at the ?eor-ia #onferren#e at the +e-innin- of !#to+er. 8hat(s -oin- on sin#e then$ and %hat are you %or*in- on no%7 DL: At the C@ #onferen#e %e started tal*in- a+out releasin- 0eyhotee in :ovem+er. 8e started mininfor +itshares in :ovem+er as %ell. 8e have spent the past month %or*in- to%ard those -oals and %e have made -reat pro-ress. 9":A1D"BL ; announ#ement %e have on the 0eyhotee side of thin-s. 8e(re 9":A1D"BL ; preorders for names in the -enesis +lo#* of 0eyhotee$ and these names are names that last forever and %ill +e -iven an honored position. So every time someone emails it or enters your name into 0eyhotee it %ill sho% up in a spe#ial %ay. )hey are lifetime names$ you never have to rene% them. And %e(re havin- as many other +enefits as %e #an thin* of to these names. But they should have a lot of default trust +e#ause to +e in the -enesis +lo#*$ people %ill *no% that you didn(t invest in minin- po%er +ut you did provide some +it#oin to help for the development and motion of 0eyhotee. ABL: So this is +ein- done as a %ay to raise funds7 DL: <es. <ou *no%$ "nvi#tus started to develop +itshares primarily and alon- the %ay %e #ame up %ith the 0eyhotee and the mail system$ and %e(re tryin- to raise funds to #ontinue the development and enhan#ement of our de#entralised #ommuni#ation platform. 9":A1D"BL ; %hat %e found to allo% a lot of people to -et involved to have a name that if this ta*es off and -oes %here %e hope it(s -oin- to -o$ it %ill +e li*e havin- your name in the -enesis +lo#* of +it#oin$ you(re famous. ABL: 8hat does it #ost to have one of these early a##ess names7 )hey are not a#tually early a##ess$ you(re reservin- one$ ri-ht7 DL: <es$ so the +enefits of reservin- is that it(s a hi-hest +idder for the -enesis +lo#* and more of a donation. So the more you donate$ you -et priority pi#* on %hi#h name you(d li*e.

ABL4 Ho% mu#h does it #ost to preorder one of these names7 DL: 8e are a##eptin- preorders %ith our ne% #rypto#urren#y #alled protoshares and the minimum amount is ABB protoshares to -et a name. And these are set that you #an mine %ith your C/1 or +uy them on our forums. ABL: So %hat is a protoshare7 Be#ause %e(ve +een tal*in- a+out +itshares to this point$ %e have tal*ed a+out the 0eyhotee +lo#*#hain$ +ut "(m not familiar %ith %hat protoshares is. DL: /rotoshares is our %ay of ,oinin- an "/! for all of the different DACs that %e are -oin- to #reate here at "nvi#tus. "t is +ased on +it#oin. "t uses a ne% C/1-friendly proof of %or*$ and for every protoshare you a#Cuire %e %ill honor that many shares in the ne% future DACs. So %hen +itshares does #ome out$ you %ill -et one +itshare per protoshare. 8hen other DACs #ome out$ %ether it(s domain shares or other variants you #an read a+out on our %e+site they %ill also already +e in position in protoshares. So protoshares is a %ay of -ettin- a sta*e in everythin- that %e are doin- here at "nvi#tus. ABL: " *no% that you have +een %or*in- on doin- entirily ne% #ode for li*e the 0eyhotee #lient and thin-s li*e that that(s not +ased off of +it#oin. "s this +ased off of +it#oin7 DL: <es$ this is dire#tly +ased off of the most re#ent version of +it#oin. 8e did that +e#ause it %ould +e faster. )here(s a lon- development time to do thin-s ne% and #lean$ so %e opted to ,ust use the latest +it#oin #ode+ase so that %e #ould raise money li*e you said in a ne% de#entralised %ay to help us +etter ideas and prove that there is interest. ABL: So$ %hat e3a#tly happens %ith the protoshares7 Do they eventually -o a%ay7 " mean$ %hat happens to them7 "s this a short term thin-7 DL: /rotoshares mine out over t%o years. Most of the minin- %ill +e done %ithin the first year$ +e#ause that(s the +i- development fase$ %hen %e are -oin- to +e +uildin- most of our soft%are. But their lonterm use is +eyond that$ +e#ause %e %ill +e releasin- variations on +itshares for different e3#han-es$ %ether it(s for a #ommodities e3#han-e or a sto#* e3#han-e. /rotoshares %ill #ontinue to +e a %ay to spe#ulate on the value of any future DAC that "nvi#tus releases. ABL: So you mentioned a forum$ %here #an people -o to see that7 DL: 8e have a forum at +itsharestal*.or-. Depla#e +it#oin %ith +itshares and it(s ,ust li*e +it#ointal*. <ou #an visit our %e+site at invi#tus-innovations.#om$ you #an read all a+out it and the +enefits of 0eyhotee "D %hi#h are -oin- to +e used. And there(s a form you #an fill out that %ill allo% you to provide the information$ your email address$ the name you %ould li*e... "n a %ee* or t%o %e %ill +e allo%in- the do%nload of the 0eyhotee #lient. <ou(ll +e a+le to 0eyhotee at that point in a time at a manner very similar to +itmessa-e$ %here if you share your pu+li# *ey %ith someone$ it %ill %or*. )his is -oin- to +e our +eta test period. Durin- this time you #an -et an idea of %hat 0eyhotee is -oin- to loo* li*e$ %hat these uses are -oin- to +e li*e$ E )hen on Christmas eve$ %hen the preorder period stops$ and %e laun#h the -enesis +lo#* of the 0eyhotee "D on ne% year(s eve %ith everyone(s preordered names in the -enesis +lo#*. ABL: 8hen you release the 0eyhotee #lient ne3t %ee*$ the test$ is that -oin- to +e for every+ody or is it ,ust for the people %ho have reserved names7

DL: "t %ill +e for everyone. ABL: :o%$ " *no% that you have raised funds in other %ays. "s this partly fundraisin- and partly a+out sort of startin- to -et the %ord out a+out this system$ is that ri-ht7 DL: <es$ there(s a#tually t%o -oals. 8e(re tryin- to raise money to -et revenue into the #ompany so %e #an *eep deliverin- on these ama5in- produ#ts. )hat(s one aspe#t of it$ the other aspe#t is4 %e %ant people to find a+out %hat %e are doin- a+out our mission to ma*e the internet se#ure and prote#t it from the :SA spyin-$ %ether it(s throu-h your #ommuni#ations or throu-h your e-#ommer#e. 0eyhotee is -oin- to +e the -ate%ay. "(ve a#tually posted some youtu+e videos des#ri+in- in -reat detail ho% the #urrent internet is inse#ure$ %here %e need to -o to a#tually se#ure the internet$ and %here 0eyhotee fits into that. 0eyhotee +e#omes almost the ne3t -eneration %e+ +ro%ser. And your 0eyhotee "D repla#es your email address and your online identity. ABL: Ho% does that %or*7 " mean$ %e(ve tal*ed a+out it$ 0eyhotee in the #onte3t of +itmessa-e there are a lot of similarities +ut then you(ve added an additional layer on top of it %ith the names system and the dire#t #onne#tions. <ou *no%$ a-ain$ for the people %ho didn(t #at#h that earlier episode$ #an you tal* a+out %hat it is that you(re a#tually tryin- to do$ %hat the pro+lem you(re tryin- to solve is7 DL: )he primary pro+lem %e have is tyin- a name to pu+li# *ey in a %ay that #annot +e spoofed. )raditionally this is done is you have #ertifi#ate authorities$ li*e .eriSi-n$ that %ill si-n the pu+li# *ey for your domain names that you(re visitin-. )he pro+lem is$ the :SA #an for#e these #ompanies to for-e si-natures and you #an(t really trust it. "t(s a #entralised solution. So %e have repla#ed the #ertifi#ate authorities %ith a +lo#*#hain. )he other %ay this is done is %ith /?/$ %here people see ea#hother(s *eys and you *ind of have a %e+ of trust. But there(s no real #entral server$ you don(t *no% %here to -o$ there(s no authority 9":A1D"BL ; or %hat name is asso#iated %ith the pu+li# *ey. So if someone -ives you the %ron- pu+li# *ey$ you #an end up sendin- a messa-e to the %ron- person. And %ith the 0eyhotee "D +lo#*#hain %e solve that parti#ular pro+lem. )he other pro+lem %e solve %ith the 0eyhotee "D is that you don(t need to use pass%ords to lo- into %e+sites. Currently$ %hen you lo- into anythin-$ %ether it(s your +an* or letstal*+it#oin or +it#ointal*$ or any of these other %e+sites$ you send over a pass%ord. )he %e+site re#eives your pass%ord and in theory if you use that pass%ord any%here else$ they #an steal your identity. 8hi#h means you(d have to use a different pass%ord for every #ompany you do +usiness %ith. )he other pro+lem %ith usin- a pass%ord +ased approa#h is that the SSL #ertifi#ates that you use for sendin- over the #onne#tion is #ompromised$ the :SA #an -et a##ess to your pass%ord and have #omplete a##ess to your online identity. )he last pro+lem %e are solvin- is the fa#t that your email address is your identity ri-ht no%. Any time you need to reset your a##ount information or you for-et your pass%ord$ they #onfirm it throu-h your email and they allo% you to reset it on your email. <ou don(t o%n your email address. At any time$ ?oo-le or Apple or Mi#rosoft or <ahoo #an #ome alon- and disa+le your a##ount$ they #an send email 9":A1D"BL ; you if they %ish. So$ it(s a system %here you(re allo%insomeone else to #ontrol your identity. 0eyhotee "D(s and our email system entirily repla#es all pro+lems %ith a de#entralised solution. ABL: "f the system that %e(re movin- a%ay from %ith #ertifi#ate authorities is a fe% people ma*in,ud-ements$ +ut there(s a #entralised list$ so it(s useful from that perspe#tive. And this system that %e$ you *no%$ see %ith %e+ of trusts is %here there(s really no #entral authority and so there(s no means of #oordination. )his is *ind of li*e a hy+rid approa#h$ %here you ta*e the #on#ensus from the %e+ of trust side$ +ut you ta*e the #entralised sort of data+ase stru#ture from the #entralised side. So you(ve -ot the #entralised repository +ut you don(t have the ar+itrary nature of the entity runnin- it$ is that ri-ht7 DL: <ou(re #orre#t. Fust li*e +it#oin$ you rea#h #on#ensus a+out %hat names +elon- to different pu+li#

*eys$ and the #ost of for-in- it is far too hi-h do 9":A1D"BL ;. ABL: :o%$ 0eyhotee is one element of this pro,e#t that you(re %or*in- on$ +ut the other side of it is +itshares$ %hi#h is a very am+itious pro,e#t that %e(ve +een tal*in- a+out this #on#ept of distri+uted autonomous #orporations as opposed to tal*in- a+out alternative #rypto#urren#ies. Can you tal* a little +it a+out +itshares and %hat you(re tryin- to do %ith that7 DL: " #ame up %ith the notion of a distri+uted autonomous #orporation %hen " %as tryin- to e3plain +itshares. " thin* it %ould +e helpful to -o throu-h the analo-y " used to des#ri+e +itshares as a distri+uted autonomous #orporation. A (DAC( for short$ is *ind of li*e a #ompany$ it(s -ot eCuity$ it(s -ot sto#*. <ou #an trade the sto#*$ and DACs pay dividen#e +ased on profits earned. But there(s no #entralised #ompany that(s a#tually +a#*in- it$ it(s not li*e sto#* for Apple in a +lo#*#hain. "t(s a +usiness that has 9":A1D"BL ; roles$ it(s performin- a servi#e and -eneratin- a profit. )hat(s the #on#ept of a DAC. Let(s loo* at a de#entralised +an* and see if %e #an #reate a +an* that doesn(t have any #orporation +a#*in- it$ yet #an do everythin- a traditional +an* #an do. 8hen " -o throu-h this analo-y$ " thin* %e %ill find it(s ama5in-ly strai-htfor%ard ho% you #an #reate dollars in a de#entralised manner. Before tal*in- a+out the #rypto#urren#y eCuivalent of a dollar$ let(s loo* at %hat the dollar a#tually is. 8hat is it that %e are tryin- to #reate$ and ho% are dollars #reated today7 8hen you -o to the +an*$ and you %ant to -et a mort-a-e to +uy a house. )he +an* doesn(t have enou-h dollars sittin- around that they #an lend to you. )hey #reate ne% money out of thin air +a#*ed +y your promise to repay the +an*. :e% dollars sprin- into e3isten#e %hen you +orro% to +uy a house. <our loan of#ourse is #ollateralised +y your house and you have to have GBH do%n or if the mar*et is sha*y li*e it is today sometimes they reCuire more$ li*e &BH do%n. So the +an* -ets a promise from you to repay that #ollateralised +y somethin- that(s %orth t%i#e the value of your loan and ne% dollars #ome into e3isten#e$ and then you #an -o spend those dollars. :o% these dollars are an "D1 from the +an* and people %ill a##ept them at fa#e value +e#ause they +elieve that %e #an honor the promise. So " %ant to -o one step further$ %ay +a#* in time$ +efore %e -ot onto this fi#tional reserve system and loo* at the ori-inal +an*notes. )hey %ere a promise to pay one dollar(s %orth of -old$ +ut %hat is a dollar(s %orth of -old7 A dollar is defined as a fi3ed %ei-ht of silver. "n our la%s$ still in the +oo*s today$ dollars are defined as a %ei-ht of silver. )he ori-inal +an*notes %ere a promise to pay a dollar(s %orth of -old$ not silver$ and there(s a ratio +et%een the -old and the silver. 8hen you %ent to ta*e out your mort-a-e$ the +an* #reated a ne% +an*note that they #alled (so many dollars($ there(s a promise to pay a dollar(s %orth of -old. So a dollar is not some entry or somethin- that the federal reserve has a monopoly over. )hey have a monopoly over federal reserve notes$ +ut not ne#esarily over a dollar. A dollar is more li*e a unit of value and it(s a promise to pay a unit of value. Any #entralised +an* #ould #reate a ne% dollar assumin- that people trusted that the +an*(s note %as as -ood as a federal reserve note$ in that you(re -oin- to -et a dollar for a dollar. )hat(s ho% #entralised systems %or*$ and " apolo-i5e if that %as very rou-h e3planation. )here(s an arti#le "(ll +e pu+lishin- soon that -oes throu-h it in mu#h more detail$ if you %ould li*e to follo% the analo-y #loser. Let(s loo* at ho% a de#entralised +an* #an lend dollars into e3isten#e. )he first thin- that needs to happen is someone has to +e %illin- to +orro% the dollars from the +an*$ and in order to +orro% the dollars you need to post enou-h #ollateral to +a#* the loan. "n the #ase of +itshares$ it reCuires a &BH do%n payment$ or a &BH mar-in. "f you %ant to +orro% ABB dollars from the +itshares de#entralised +an*$ you need to put GBB dollars %orth of +an* eCuity$ %hi#h is the #rypto#urren#y$ held as #ollateral. Bitshares %ill then do a mar-in #all any time your #ollateral starts to +e#ome insuffi#ient to se#ure the loan$ at %hi#h point it %ill +uy +a#* the dollars that it lent into e3isten#e$ pay off the loan$ and destroy the dollars. )his is the e3a#t me#hanism throu-h %hi#h #entralised +an*s #reate money +y lendin- them into e3isten#e and they destroy the money %hen the loan is paid off. )hat in a nutshell is ho% a #rypto#urren#y #an #reate dollars in the same %ay as a #entralised +an*. ABL: 8hy %ould someone %ant to do this7 Be#ause it sounds li*e %hat you(re sayin- is that in order to

ta*e a loan$ " have to put more then... " have to put more than " %ould %ant to +orro% on es#ro% at ris* to #ollateralise that loan. So %hat$ %hat$ under %hat #ir#umstan#es %ould " %ant to do this7 8hat type of person %ould this +e attra#tive to7 DL: !h$ the reason people +orro% sto#*s$ people +orro% sto#*s li*e Apple and 33on$ they +orro% it and turn around and sell it. "t(s #alled a short sell. And %hen you +orro% it and then sell it$ you #an +uy it +a#* in the future for less money if the pri#e -oes do%n$ and as a result you ma*e money. So spe#ulators %ho %ant to spe#ulate on the value of a +itshare versus the dollar #an short a dollar +y +orro%in- it into e3isten#e and then sellin- the dollar they +orro%ed. )hey #an sell it for +it#oin$ they #an sell it for a#tual paper dollars$ E But either %ay$ they end up not havin- possession of the dollars. And in order to pay off the loan$ they are -oin- to have to +uy them +a#* at a fe% date. And hopefully they are spe#ulatin-$ they %ill +e a+le to +uy it +a#* #heaper in the future and therefor ma*e money. IadvertisementJ ABL: Hi$ listener. Here at letstal*+it#oin %e(re +uildin- up a -lo+al net%or* of #orrespondants a+le to #ontri+ute on the -round perspe#tive %hen #rypto#urren#y related information #omes a##ross their filters. "f you %ould li*e to ,oin our -lo+al #onversation$ send an email %ith your name and -eo-raphi#al #ultural ni#he to apply at letstal*+it#oin.#om. Fust li*e +it#oin$ the only +arrier to entry is your time and -ood %or*. )han*s for listenin-. asyD:S is the s%iss army *nife for your domain names$ helpin- meet their #ustomers individual needs sinds AKKL. asyD:S has +een an outspo*en #riti# of S!/A and S"S/A. asyD:S %as an early supporter of +it#oin$ and no% they are proud to sponsor this sho%. Do +usiness %ith a #ompany that shares your values. ?et a A@H dis#ount %hen you pay %ith +it#oin. ?o to +it#oin.easydns.#om$ and +e sure to use dis#ount #ode L)B. IMadvertisementJ ABL: <ou(re tryin- to solve the de#entralised e3#han-e pro+lem and +itshares is essentially a ne% type of #rypto#urren#y that not only has this distri+uted e3#han-e me#hanism +uilt into it$ +ut it also lets you #reate ne% versions of it that tra#* other real-%orld items li*e$ you *no%$ #ommodities or sto#*s or thin-s li*e that. And so in that %ay it(s li*e a sto#* mar*et and a #urren#y mar*et all +uilt into a +lo#*#hain-li*e stru#ture$ is that ri-ht7 DL: )hat(s e3a#tly ri-ht. ABL: !*ay$ -reatN )errifi#$ "(m -lad " %as a+le to summarise that. So$ that(s a +i- pro,e#t$ that(s li*e$ that(s li*e a holy -rail pro,e#t. /eople have +een tryin- to solve this de#entralised e3#han-e thin- for a %hile$ and it seems li*e it(s a tou-h nut to #ra#*. 8here are you in that pro,e#t and %hat(s ne3t7 DL: !h$ %e have +een hammerin- out the details$ %e have made a lot of pro-ress to%ard implementin+itshares$ +ut there(s a lot of testin- and a lot of %or* that needs to -o into it +efore %e #an a#tually release this de#entralised +an* and e3#han-e for produ#tion purposes. But in the meantime a lot of people have e3pressed interest in +ein- a+le to mine +itshares and -et involved in +itshares today. So %e #ame up %ith a #on#ept #alled (protoshares(. Sort of li*e the stem #ell of +itshares. "t(s effe#tively an alt#oin$ li*e lite#oin and the others$ e3#ept it has -ot a ne% proof of %or*$ %hi#h " %ould love to tal* a+out. And it #omes %ith a so#ial #ontra#t$ and that so#ial #ontra#t is that the -enesis +lo#* of the +itshares %ill honor$ one for one every proto#oin you have you(ll end up %ith one +itshare. 8hi#h means$ if you(re

interested in spe#ulatin- in the future value of +itshares$ -ettin- involved$ promotin- it$ you #an mine protoshares and you #an then profit as the value of +itshares -ro%s as the #on#ept solidifies and more people +e#ome a%are of ho% +i- this is -oin- to +e$ and it all starts %ith protoshares. ABL: So no%$ %e tal*ed to miners and %e tal*ed to AS"C manufa#turers. 8ho #an a#tually parti#ipate in minin- protoshares7 DL: /rotoshares is +ased off of a ne% proof-of-%or* %e invented$ that " #all momentum and it(s limited +y the memory +and%idth of your #omputer$ so that even if you %ere to develop an AS"C$ it %ould not +e a+le to operate any faster than$ you *no%$ your memory +and%idth. And a des*top C/1 #an already more or less saturate your memory +and%idth. So$ the proof-of-%or* reCuires a+out a -i-a+yte of DAM to run$ %hi#h means any AS"C developer %ould +e spendin- most of their transistors on DAM$ rather than on additional #omputational parallelism. As a result$ " do not +elieve it(s e#onomi#ally feasa+le to #reate spe#ialised AS"C hard%are for minin- this. ABL: !*ay$ so %hat you(re sayin- is that this is tar-etted to%ards C/1(s spe#ifi#ally and that this is somethin- %here there isn(t really an advanta-e to spe#ialisin- on the hard%are +e#ause -eneral purpose hard%are is a+out as spe#ialised as you #an -et7 DL: <es$ the te#hnolo-y that -oes into ma*in- DAM is 9":A1D"BL ; as fast as possi+le$ it(s hi-hly patented$ it(s state of the art. )hat is the lar-est #omponent of the momentum proof-of-%or* is ho% fast #an you address memory and ho% mu#h memory do you have. So$ a C/1 %ill +e the +est miner provided that it(s a+le to *eep up %ith the memory +us. " have loo*ed into %ether or not ?/1(s #an #ompete$ and the /C"-e3press +us that #an #ommuni#ate +et%een your C/1 and your -raphi#s #ard is slo%er than the memory +us. So " do not +elieve that a ?/1 #ould even *eep up$ ,ust +e#ause of the +and%idth #onstraints +et%een the different #omponents on your #omputer. ABL: 8e have seen #laims li*e this +efore from li*e the s#rypt proof-of-%or* and thin-s li*e that %here people #laim they(re AS"C-proof. But that(s li*e$ that(s *indof li*e time-e3#lusive releases these days that you see a lot of times in media$ you %hat " mean *no% li*e... Ho% lon- is it AS"C-proof7 " mean li*e$ is that for$ you *no%$ for a year7 6or five years7 6or a #ouple of months7 " mean$ until it -ets %orth enou-h money for someone to develop it. DL: " +elieve that unli*e everythin- that(s #ome +efore$ this has a mu#h lon-er shelf-life$ +e#ause #ommodity hard%are %ill #ontinue to improve. " +elieve it is possi+le to #reate an AS"C that %ill +e faster than a C/1 +y itself. "(m not #laimin- that it(s not possi+le. 8hat "(m #laimin- is that instead of -ettin- a ABB3 or a ABBB times faster performan#e at si-nifi#ant po%er savin-s$ you %ill only +e a+le to see A$ G$ at most AB3 performan#e -ain from #reatin- an AS"C. And that the #ost of su#h an AS"C is -oin- to primarily the DAM$ and therefor there(s not -oin- to +e these hu-e opportunities to profit. And " don(t thin* that an AS"C %ould entirily displa#e the value of C/1 minin-. ABL: Deal Cui#*ly$ you *no%$ "(m sittin- ne3t to a #omputer %ith AO -i-a+ytes of DAM. "s there an upper limit to ho% %ell hard%are #an do7 " mean$ is there a #ap$ or is it ,ust as mu#h DAM you have that(s ho% effi#ient you #an +e7 DL: )he memory +and%idth is the #ap$ you only need one -i-a+yte of DAM in order to -et the ma3imum performan#e. <ou don(t -et any from havin- more DAM. 8e #ould tune the parameters of the proof-of%or* for other uses to reCuire more DAM$ +ut %e settle on one -i-a+yte as +ein- a ni#e round num+er. So yeah$ if you have a #omputer %ith a -i-a+yte of DAM that(s free$ and a C/1 that(s a+le to saturate the memory +us for #ommuni#atin- to that DAM$ you(ll have a+out the +est miner you #an have. :o% there(s

different speeds of DAM. )he hi-her end your mother+oard and the more re#ent your DAM$ the +etter the miner you have$ +ut it(s not somethin- that(s -oin- to -ro% +y orders of ma-nitude %ithout every #omputer out there -ettin- the +enefit. ABL: :o%$ %hy %as this somethin- that you de#ided to do %ith these protoshares7 Be#ause$ " mean$ usually minin- serves a #ouple of purposes. !ne of %hi#h is fran*ly to #reate and se#ure the net%or*. So there is no net%or* that proto#oins is se#urin-$ ri-ht7 DL: )he protoshares net%or*. ABL: /rotoshares$ my mista*e. But " mean$ this is really$ this is li*e$ this is a-ain another %ay to -et people involved %ith the pro,e#t and -ivin- %ay to parti#ipate$ ri-ht7 DL: But it does t%o thin-s. "nitially people raise money +y preminin-$ if they are tryin- to #reate somethinli*e %e(re doin- and there(s an opportunity to mine. :o%$ %e didn(t %ant to premine$ %e %anted everyone to have an eCual opportunity. And another thin- %e %anted to do is to esta+lish a mar*et value for +itshares. ven +efore they e3ist$ +e#ause that #an help %ith raisin- money to a#tually develop it. So laun#hin- this$ %e are -oin- to +e minin- it$ ,ust li*e everyone else. As the value -oes up$ the protoshares on our +oo*s as a #ompany -ains value and that allo%s us to raise money$ or potentially sell protoshares that %e have mined$ to raise money. ABL: !ne of the diffi#ult thin-s a+out -ettin- involved %ith a ne% #rypto#urren#y$ a lot of times is$ espe#ially if you %ant to mine is that if you(re not te#hni#ally savier or you don(t have a +a#*-round in minin-$ it #an +e *indof diffi#ult to set up. " *no% that %ith +itshares$ you -uys are usin- an entirily different #ode+ase. So " %onder$ have you #reated a ne% solution for minin- or are you usin- the standard soft%are. DL: "t(s ne% soft%are from 9":A1D"BL ; +e#ause of the ne% minin- al-orithm. But for protoshares$ it is a#tually a #lone of the latest #oin #ode+ase$ %here the only #han-e that %e made is to repla#e the proofof-%or* and ad,ust the money supply %hi#h is limited to t%o million. <ou %ill +e a+le to do%nload and mine protoshares as easily as do%nloadin- +it#oin-Ct -oin- to (menu( and sayin- (mine(. ABL: !*ay$ sounds pretty easy. DL: 8e(re plannin- on havin- a 9":A1D"BL ; availa+le for do%nload immediatly. "f you(re usin- linu3 you(ll have to #ompile it from sour#e. ABL: And it %ill +e availa+le on Ma# initially7 DL: "(m %or*in- on -ettin- a Ma# one as soon as possi+le. " use a Ma# +ut " need to %or* on pat#hin- it up. So$ %e have +een doin- a lot in this past months sin#e C@ and the main thin-s %e have today are4 <ou #an start +uyin- your 0eyhotee "D(s and you should visit our %e+site to find out more a+out ho% they %or* and %hy they are valua+le. And you(ll +e a+le to start minin- protoshares. And if you si-n up for our ne%sletter you #an -et a heads-up of %here you #an do%nload the latest #lients for minin- and of#ourse %e are also -oin- to +e laun#hin- a +eta as soon as possi+le for 0eyhotee 9":A1D"BL ; %hi#h is -ointo have all of the e3perien#e of +itmessa-e only easier to use. So you(ll -et to have a feel for the Cuality of stuff %e are tryin- to produ#e. And that(s %hat %e have +een doin-N ABL: 8ell$ that sounds li*e you are ma*in- some e3#itin- pro-ress. Daniel$ if someone %ants to... 8hy don(t you -ive your %e+site a-ain one more time.

DL: <ou #an rea#h us at invi#tus-innovations.#om ABL: Daniel Larimer$ than*s a-ain for ,oinin- us on Let(s )al* Bit#oin$ %e loo* for%ard to your #ontinued pro-ress in this spa#e. DL: )han* you$ Adam. IBrea*J AMA: )his last %ee*$ t%o resear#hers at Cornell 1niversity pu+lished a very interestin- paper on a potentially ne% and different atta#* that miners #ould use on the +lo#*#hain in order to -ain a #ompetitive advanta-e a-ainst other miners. :o%$ %e(ve already heard and dis#ussed$ " thin* ad nauseum the #on#ept of a &AH atta#* +ein- a+le to ta*e over the +lo#*#hain for many #onse#utive +lo#*s +y marshallin- &AH of the hashin- po%er of the net%or*. 8hat this paper tal*s a+out is essentially a short#ut that allo%s you to a#hieve the same thin- to a#hieve a predominan#e of the +lo#*s mined #omin- to you and do that %ith far less effort than &AH of the hashin- as lo% as potentially GL-GKH$ some have said even lo%er$ may+e as lo% as G&H of the hashin- po%er in order to e3e#ute an atta#* #alled selfish minin-. So this paper %as posted and has re#eived a ton of dis#ussion o+viously. "t -enerated +oth some very sensi+le and -reat analyti#al dis#ussion and fruitfull thou-ht amon- the developpers and it also -enerated a mountain of s#reamin- sensationalist =+it#oin is +ro*en>-$ =my hair is on fire>-$ =%e should all sell>-*ind of arti#les. Let(s tal* a+out itN SM: Hey -uys. Before %e start tal*in- a+out this$ " have some +rea*in- ne%s. (+eepin- sound) Brea*in- ne%s4 the 1S dollar is +ro*enN (lau-hin-) )here(s a -roup of people %ho #an ,ust print more at any -iven time on any %him and they set the interest rates and they de#ide ho% mu#h money is printed. ?uess %hat7 <ou #an(t really do mu#h %ith it. <ou have to as* people(s permission to -et it in and out of a +an*$ you #an(t really ta*e it a#ross +orders... ?osh$ " thin* %e should all sell our dollars. AMA: (lau-hs) )hat(s a really -reat point$ Stephanie. )he a+solute %orst-#ase$ ed-e-#ase s#enario of impro+a+ly +it#oin failure is that it +e#omes as useless as the dollar$ in terms of #ontrol$ distri+ution of the po%er of #ontrol +ehind it. So in that %orst-#ase s#enario$ it %ould ta*e G&H of the hashin- po%er in order to ta*e over the #urren#y$ %hereas for the dollar all you need is one #hairmanship at the federal reserve. 8hi#h is appointed$ so there %e -o. ABL: <eah$ +ut " mean$ it(s appointed. But at the same time may+e that(s a less s#ary out#ome. Be#ause at least then you *no% %ho(s doin- the manipulation$ as opposed to there +ein- a potential for lots of people to do manipulation$ althou-h +e it one at a time. AMA: .ery -ood point. " %ill ,ust +at this %hole theory a%ay very very Cui#*ly li*e this. )his is a theoreti#al #onstru#t. "t is a+solutely fas#inatin- from an a#ademi# perspe#tive$ and there(s already a lot of dis#ussion around ho% %e #an prevent the possi+ility of su#h a #on#erted effort. Ho%ever$ in pra#ti#al terms$ you #annot simulate the +it#oin net%or* the %ay they have simulated in the paper and dra% irrational #on#lusions +e#ause it i-nores a lot of the in#entives that miners have not to *ill the -oose that lays -olden e--s$ %hi#h is their minin- #apa+ility. spe#ially if they have invested in hard%are. And se#ondly$ ri-ht no% the +i- motivation to +e part of a pool is +e#ause you #an -et ready a##ess to a lot of the minin- #apa#ity and servi#es and more eCuita+ly share. But the more people %ho have AS"C(s$ the

less important pools are. So$ this is a hi-hly theoreti#al issue that(s -eneratin- a lot of a#ademi#al dis#ussion$ +ut in pra#ti#al terms$ pullin- su#h a thin- off is almost impossi+le. /ullin- it off %ithout noti#ed is impossi+le and there are already #ounter measures in pla#e. So +it#oin is not +ro*en. Bit#oin is understood a +it +etter no%. SM: Andreas$ #an you ,ust +a#* up for a minute and +rea* it do%n for me. Ho% e3a#tly %ould some+ody %ith perhaps a minin- pool or a hu-e +otnet or somethin-$ ho% %ould someone %ith G&H of the net%or* hasin- po%er -ain #ontrol over the net%or*7 "s this$ li*e$ they %ould use that G&H to do a &AH atta#*7 3plain this to me. AMA: <es$ a+solutely. So$ a &AH atta#* is %here you use the hashin- po%er of the net%or* in order to mine +lo#*s in su#h a %ay as to #ontrol %ho is on the #orre#t +lo#*#hain. "f you #an dominate the +lo#*#hain you #an essentially dou+le-spend for a period of time or do various other shenani-ans li*e that. So a ris*y strate-y that pro+a+ly %on(t %or* in the lon- term. :o% %ith selfish minin-$ %hat the authors are su--estin- is that if you dis#over a +lo#*. 8hen you dis#over a +lo#*$ the sear#h for the ne3t +lo#* after that$ nPA if you li*e$ hin-es on the +lo#* you ,ust dis#overed. :o% if you don(t tell anyone a+out the +lo#* you ,ust dis#overed and ,ust immediatly -o on to sear#hin- for nPA$ you are the only one %ho #an sear#h for the nPA +lo#* +e#ause you *no% the n-th +lo#*. And if you have suffi#ient po%er you #an even -o t%o or three +lo#*s ahead of the #hain. !n#e you(ve -one that far$ then you #an release your +lo#*s. So %hat you(re doin- is$ you(re selfishly limittin- the prope-ation of +lo#*s you dis#over$ so that you #an -ain an advanta-e on the follo%in- +lo#*s after that$ and then release them all in one +i- rush %hen you have dis#overed several in the future. ssentially not propa-atin- +lo#*s to the net%or* %hen you find them -ives you an advanta-e that you #an translate into essentially a hashin- atta#*. But$ here(s a pro+lem %ith this. "n this paper and in -eneral analysis of this %e loo* at the re%ard as if it(s multiplied +y pro+a+ility. So if you find a +lo#*$ ri-ht7 And pu+lish it immediatly you -et ABBH of the re%ard and then for every se#ond that passes that you(re not pu+lishin- that +lo#*$ the pro+a+ility of someone else pu+lishin- another +lo#* and stealin- your lead in#reases. So your re%ard pro+a+ilisti#ally -oes do%n to 5ero$ ri-ht7 And that(s ho% they have modeled this %hole thin-. Here(s the pro+lem thou-h4 you #an(t -et half a re%ard. <ou either -et it or you don(t. So selfish minin- depends on a rather ris*y strate-y that %ould +e easily dis#overed that has the possi+ility of destroyin- faith in the #urren#y. "t %ould ta*e a stupid miner$ a stupid net%or* that doesn(t rea#t to -o a-ainst all of the in#entives of the +it#oin minins#heme to do it. So a-ain$ " thin* it is a very rare ed-e-#ase. "t(s very interestin- from a theoreti#al perspe#tive. "t means almost nothin- from a pra#ti#al perspe#tive at this point. ABL: 8ell$ " don(t thin* that %as entirily it thou-h$ %asn(t it$ Andreas7 <ou(re ri-ht a+out the part that you e3plained +ut " thou-ht that the$ the reason %hy havin- that +lo#*#hain that you are essentially *eepinprivate to yourself is that if you #an -et a fe% +lo#*s ahead and then release those$ essentially you in#entivise everyone else to ,ump on to your +lo#*#hain %hi#h you are no% several ahead of$ ri-ht7. AMA: !h$ of#ourse$ yes. :o$ it(s not in#entivisin-. "f you release a +lo#*#hain that(s one +lo#* ahead then that is the #urrent +lo#*#hain. "f you release one that(s t%o +lo#*s ahead$ not only is that the #urrent one$ +ut the posi+ility of someone else #at#hin- up %ith you is even slo- even lo%er +e#ause they have to mine t%o +lo#*s in seCuen#e. And at three +lo#*s$ you are really %ay ahead of the #urve. So %hen you do release that$ your #hain %ill +e#ome the dominant #hain. So$ so$ essentially you are a+le to do the same thin- you %ould do under a &AH hash atta#* +y simply minin- the ne3t n-+lo#*s in a ro% yourself %ithout needin- any+ody else(s help$ and dominatin- the net%or*. But you(re doin- it +y hidin- the fa#t that you ,ust mined some +lo#*s$ and +uildin- on that su##ess$ essentially dou+lin- do%n on the hidden +lo#* you didn(t pu+lish. And -oin- up further$ -oin- for t%o +lo#*s in a ro%$ -oin- for three +lo#*s in a ro%. And the +i--er that -ets the lo%er the pro+a+ility you %ill su##eed +e#ause all it ta*es is one +lo#* from someone else and you(re out of the -ame.

ABL: !*ay$ so let(s assume for a se#ond that someone is a+le to pull this off$ and say they -et three +lo#*s ahead. And then the net%or* s%it#hes over to them. Doesn(t the net%or* stay on that #hain7 8hi#h has +een #o-opted. " mean$ does that matter7 AMA: "t doesn(t matter +e#ause at that point the miner has already made the -ains. )hey have +een a+le to -et three re%ards in a ro%$ and their se#ond and third re%ard for the se#ond and third +lo#* they mined$ they mined on top of a +lo#* they didn(t tell anyone a+out so they didn(t have any #ompetition +e#ause noone %as sear#hin- to e3tend that #hain$ +e#ause they didn(t *no% it e3isted. ssentially you -et further ahead %ithout any #ompetition and then you dump it all in one -o. And instead of lo#*in- in one +lo#*$ you(ve lo#*ed in three +lo#*s$ for e3ample. So it allo%s you to e3tend your lead %ith less hashin- po%er than +efore. "t(s a short#ut on the &AH atta#*. "t doesn(t -ive you any more +enefits than a &AH atta#*$ it ,ust allo%s you to ta*e advanta-e of not pu+lishin- +lo#*s in order to -ain a sli-ht ed-e on the other miners. ABL: So %ho loses in this #ase7 " mean$ the other miners... AMA: )he other miners. ABL: Does any+ody else lose7 Does this matter to avera-e users or ,ust the net%or* at all7 AMA: :ot$ not in a sin-le instan#e effort to do this. "f this %as done #onsistently it %ould +rea* do%n the in#entive stru#ture and the mar*ets$ leadin- to miners %ithdra%in- from the mar*et +e#ause they #an no lon-er a#hieve fairness. But that is a rather e3treme s#enario. " %ould assume that noone ta*es any #ountermeasures. And the dis#ussion that is happenin- on the +it#oin dev-list is very interestin-$ +e#ause you(ve -ot many of the #ore developpers loo*in- at this very seriously. And also #larifyin- that you #annot do this %ithout -eneratin- a trail of +read#rum+s that sho% you did this$ and if you do$ there %ill +e #onseCuen#es. /eter )odd tal*ed a+out ho% %e(re s#re%ed on the dev-list$ and you should see the ans%er he -ot from ?alvin. "(ve -ot to Cuote it. (Cause /eter said4 =loo*$ if anyone %ants to try this$ here(s my /?/ *ey$ #onta#t me and "(ll help you do it. And his -oal for sayin- that %as more of a #hallen-e to the pools$ -o ahead and try it$ %e(ll shut you do%n. But ?alvin too* it the %ron- %ay and his response %as pri#eless. He put on his +enevolent di#tator hat and %ent nu#lear. )his %as at L4&O /M$ Cuotin- /eter(s messa-e4 =/.S. if any lar-e pools %ant to try this stuff out$ -ive to me a shout$ you have my /?/ *ey$ #onfidentiality assured.> ?alvin(s response4 ="f " find out one of the lar-e pools de#ides to run this =e3periment> on the main net%or* " %ill ma*e it my mission to tell people to s%it#h to a more responsa+le pool. And if you thin* you #an -et a%ay %ith drivin- up every+ody(s orphan rate %ithout anyone noti#in-$ you should thin* a-ain. ABL: So this is another sort of interestin- e3ample of the #ore dev team not really havin- any po%er outside of the a+ility to tal* and +ein- listened to$ +ut +ein- a+le to *ind of +rin- that po%er to +ear on %hat other%ise #ould +e$ you *no%$ somethin- that people %ould %ant to try out. "t$ it(s very interestin- to %at#h ho%$ ho% the dev team has to lead as opposed to other pro,e#ts. AMA: Di-htN Di-ht$ a+solutely. )hey have no authority other than #ode. But at the same time they #an %rite #ode and they #an %rite #ode fi3es. )he tri#* is that they %ill have to dra% a very$ very$ very fine line$ +e#ause no fi3 you apply here #ould +rea* the distri+uted #on#ensus nature. "t has to remain de#entralised and open$ ri-ht7 ABL: Di-ht.

AMA: "f you put a rule that says %e don(t let pool Q parti#ipate$ or %e are -oin- to filter +lo#*s #ominfrom this "/ address$ you(ve opened the door to far$ far %orse thin-s than a selfish minin- atta#*. ABL: 8hi#h is of#ourse %hy it(s -ood that ?alvin has the +enevolent di#tator hat +ut he doesn(t a#tually have to -a++le. AMA: 3a#tly$ and " thin* people %ill have to ma*e edu#ated ris* assessments as to %hat(s +etter$ the pro+lem or the solution. 6or no%$ Cuite ri-htly %hat they are tal*in- a+out is4 let(s -ather more data$ let(s do more simulations$ let(s fi-ure it out$ and let(s pay attention to this for the lon- run. ssentially %hat this is is ne% -ame theory. "t(s ne% -ame theory a+out the interplay +et%een miners$ minin- pools and in#entive stru#tures. IadvertisementJ ABL: "s the +it#oin pri#e in a +u++le7 !nly time %ill tell. But one thin- is for sure$ +it#oin video passes are on sale. :ormally '& dollars for those payin- in 1S funds. .isit +it#oinvideopass.#om and spend only B.A to B.G +it#oins$ B.AG +it#oin at the time this is re#orded to a##ess all the tal*s and panels from the !#to+er #rypto#urren#y #onferen#e. See ho% easy +uyin- %ith +it#oin #an +e$ and e3perien#e instant a##ess as soon as you(ve paid %ithout even reloadin- the pa-e. Che#* it out at +it#oinvideopass.#om. Hi$ this is Fason 0in-$ founder of Sean(s !utpost. And you are listenin- to Let(s )al* Bit#oin. Sean(s !utpost is a homeless out-rea#h in /ensa#ola$ 6lorida. And %e are proudly po%ered +y +it#oin. )o date$ over A@$BBB meals have +een fed to the homeless in our area. All pur#hased %ith +it#oin and throu-h the -enerosity of the #rypto#urren#y #ommunity. Dead more a+out us at seansoutpost.#om. 6ood$ shelter$ +it#oin$ every+ody. Seansoutpost.#om. IMadvertisementJ ABL: So %hat does a #onseCuen#e loo* li*e in the +it#oin %orld7 AMA: " %ould e3pe#t the #onseCuen#e and amon- other thin-s a very very pu+li# 9":A1D"BL ; of the pool that attempts to do this. And a reCuest +y the #ore developers for the people to a+andon that pool. And " thin* that$ you *no%$ sin#e this reCuires #ollusion +y a lot of a#tors$ pu+li# shamin- %ould +e very effe#tive. But a-ain$ there are other #ountermeasures. )his is a very unli*ely ed-e-#ase %ith a lot of possi+le fi3es. "t(s a -reat theoreti#al analysis +ut it loo*s at the +it#oin net%or* as an a+stra#t statema#hine and not as a #olle#tion of humans driven +y motivations that are not entirily rational. ABL: So$ o+viously$ summarisin- here. Do you thin* that anythin- is -oin- to #ome from this as far as the development team is #on#erned7 !r do %e thin* that this is somethin- that no% that it(s understood or at least$ you *no%$ people are *no%in- to %at#h for it that it(ll ,ust +e %at#hed for and that if somethinhappens to %arn a #han-e$ a #han-e to +e made. But other%ise it(s ,ust %at#hin-. AMA: " e3pe#t %e are -oin- to see +etter instrumentation of minin- soft%are. And %e are pro+a+ly -ointo see some$ some more s#rutiny on minin- pools and their +ehavior and propa-ation ta#ti#s on the net%or* to ensure that if someone is tryin- to attempt somethin- li*e this$ it is seen early on and Cui#*ly enou-h. So yes$ this is havin- a tremendous positive impa#t on +it#oin development +e#ause %hile it is a theoreti#al #ase$ it(s a very interestin- one. 8e #an start loo*in- at desi-nin- #ountermeasures. "t(s pro+a+ly mu#h more important in the future %hen fees are +i--er than the re%ard$ +e#ause then it %ould #han-e the %ay people prioriti5e +lo#*s and transa#tions in +lo#*s. "t has some important impli#ations for later. "t(s a -reat a#ademi# paper$ it(s a very interestin- analysis. "t(s -reat #omputer s#ien#e. But it is not a mar*et disaster or a pra#ti#al atta#* in any %ay at the moment.

SM: )his %ouldn(t ,ust apply to +it#oin$ it %ould apply to any alt#oin too$ ri-ht7 AMA: "t applies to any +lo#*#hain +ased #urren#y. SM: Hmm$ so " mean$ a#tually this isn(t ,ust -reat for +it#oin and stren-thenin- it a-ainst potential future atta#*s +ut also for any alt#oin. So yeah$ li*e$ " a-ree %ith you$ " see this as a %in. AMA: /re#isely. Here(s the interestin- thin-4 %hile it %ould +e almost impossi+le to pull somethin- li*e this on +it#oin simply +e#ause of the amount of #ollusion si5e of the pool you have to assem+le. And the %illin-ness... SM: "t(s a -rand #onspira#y. AMA: And the %illin-ness to shoot a @.' +illion dollar mar*et %ith a shot-un ,ust in #ase you ma*e some pennies on the side. <ou *no%$ Cuite honestly$ miners %ould have to +elieve that they #an ma*e more +y messin- the net%or* no% than +y simply %aitin- and parti#ipatin- in the net%or*$ %hi#h " thin* is unli*ely. But here(s the thin-4 on an alt#oin$ none of these thin-s apply. So %e are -oin- to see these types of atta#*s tried out on an alt#oin and %e are -oin- to see these failure modes play out ,ust li*e %e sa% &AH atta#*s. Fust li*e %e sa% upside do%n diffi#ulty and retar-ettin- pro+lems %hen AS"C(s pulled out. )he alt#oins are -oin- to the la+oratory %here %e %ill see these failure modes play out$ and that(s -oin- to +e another -reat learnin- e3perien#e. So$ yeah$ "(m not %orried a+out +it#oin. " thin* it(s a#tually a -reat development. ABL: So on the su+,e#t of the alt#oins$ you *no% " %as thin*in- a+out this and "(m *indof as*in- myself4 no% that this is somethin- that(s *no%n$ is it ethi#al to try this out to or-ani5e and atta#* on an alt#oin7 8ould it +e +etter to tell the people or not7 !r is it ,ust +etter to let #riminals *indof fi-ure it out for themselves %hile they try to ma*e it %or*7 AMA: As a se#urity professional$ " +elieve in a responsa+le dis#losure and that means that if you find se#urity pro+lems$ you responsa+ly dis#lose them to the people %ho #an apply fi3es. And then you dis#lose them to the pu+li# soon thereafter. )o for#e the people %ho #an apply fi3es to a#tually do somethin- a+out them. )hat(s +een the poli#y for se#urity vulnera+ility dis#losure. "t has %or*ed %ell in that spa#e$ " thin* it should +e applied to alt#oins. )ell the founders$ -ive them a %ee* to fi3 it$ %ether they do or not$ then tell everyone. SM: But is this somethin- that the founders of an alt#oin #ould a#tually fi37 Didn(t you say it %as *indof up to the minin- soft%are7 AMA: 8ell yes$ it(s not ,ust up to the minin- soft%are$ it(s more up to monitorin- the net%or* itself as it propa-ates +lo#*s. And there may +e different fi3es and they may not +e a+le to dire#tly fi3 it ri-ht a%ay. 8e(ll see$ it(s -oin- to +e interestin-. SM: " remem+er seein- an info-raphi# a little %hile a-o %here they %ere #al#ulatin- the #ost of mountina &AH atta#* on the +it#oin net%or* and #omparin- it to the military +ud-ets. )he #ost that they had #al#ulated %hoever put this info-raphi# to-ether$ %as %ay more than most #ountries entire military +ud-ets. So$ that ma*es people feel -ood. But if it(s that hard to -et &AH of the net%or* hashin- po%er in the hands of may+e A person or entity$ %ouldn(t it also +e really hard %ith +it#oins sin#e the net%or* is -ro%in- all the time to -et G&H7 AMA: 3a#tly$ " mean$ that$ that(s e3a#tly the #ase. So let(s loo* at it from a different perspe#tive. )he

hashin- po%er no% is %hat$ has it already passed five peta7 "(m not sure so it(s some%here +et%een 2 and & petahashes. "t %as A petahash in Au-ust$ it %as half a petahash in Fune. So a &AH atta#* in Fune %ould have +een a G&B -i-ahash atta#*. And a &AH atta#* today is a G petahash atta#*. So ,ust in the last four months the effort to mount a &AH atta#* has Cuadrupled. ABL: :et AS"C(s are -ood or +ad7 AMA: :et AS"C(s are -reat +e#ause they put so mu#h po%er in invidual hands +e#ause the pools are less important and they have in#reased the hashin- po%er so mu#h that even a G&H atta#* is more than the entire net%or* hashin- po%er %as ,ust a fe% months a-o. ABL: <ou(re sayin- that they ta*e a%ay from pools. " don(t really understand ho% AS"C(s #an ta*e a%ay from pools$ +e#ause it(s not li*e the num+er of miners a#tually tryin- to mine are -oin- do%n. So isn(t it *inda ,ust in... SM: And are people doin- solo-minin- %ith AS"C(s7 ABL: <eah$ you(d have to have a lot of AS"C(s in order to solo-mine. AMA: !ver the lon- term the relative advanta-e of havin- a pool %hi#h in#reases your pro+a+ility of a#tually findin- a +lo#* as part of a pool %hereas you ,ust *eep tryin- and failin- other%ise. )he more hashin- po%er you have in individual(s hands in AS"C(s the less important that differentiator is. ABL: But isn(t that per#enta-e +ased7 AMA: "t is per#enta-e +ased +ut it(s also$ you *no%$ you(ve -ot to #onsider that pools #har-e fees$ ri-ht7 So at some point it is more profita+le to -o out minin- on your o%n if more people mine on their o%n. And +y the %ay$ one the thin-s that this G&H atta#* or selfish minin- or %hatever... )he +est out#ome %e #an have from this theoreti#al analysis is to re#o-nise that minin- pools themselves$ the #on#entration in minin- pools is the pro+lem. <ou #an(t do any of these atta#*s %ithout #ollusion. And minin- pools are the +est %ay to or-anise #ollusion %ithout havin- to -et the approval of every sin-le person. So$ in the lonrun$ pGpool$ the peer-to-peer pool for independant minin- is pro+a+ly our +est #han#e. Start your o%n pool$ -et off the +i- pools. "f it(s more than AH of the hashin- po%er$ -et off of it$ -et on to pGpool. And ta*e a%ay the po%er of the +i- minin- pools$ and then none of these atta#*s matter. ABL: <ou are as*in- people to do a thin- that(s a-ainst their e#onomi# +est interest in the short to medium term thou-h$ " mean ,ust... Ilau-hterJ AMA: "n the$ in the lon- term thou-h$ the #ost of the pool fees e3#eeds the +enefits that they offer. So there is a point at %hi#h pools no lon-er ma*e finan#ial sense. ABL: <eah$ +ut it has to do %ith more li*e a tippin- point in terms of li*e the Cuantities of people %ho are in pools relative to not in pools. Be#ause if every+ody(s not in pools then yeah$ you(re ri-ht. AMA: )here(s an easier ans%er. "f tomorro% mornin-$ +ein- in a pool a#tually ena+les the o%ner of that pool to ta*e do%n the @.' +illion dollar e#onomy that you(ve ,ust invested in throu-h +uyin- your AS"C then you are -oin- to leave that pool. Be#ause the ris* of them destroyin- +it#oin is far -reater than the +enefit they -ive you. Basi#ally$ you(re loo*in- at your -olden -oose and the people around you have -ot

a -linse in their eye and they ,ust pulled out a #arvin- *nife and you(re li*e4 =" don(t %ant to +e part of this party anymore$ than* you very mu#h$ "(m leavin-$ +e#ause %hat you(re a+out to do is -oin- to +e far more dama-in- than the +enefits you -ive me.> )hat(s the one thin- that the paper does not ta*e into #onsideration. )he fa#t that if you understand ho% this is -oin- to destroy +it#oin in -eneral$ if it(s pulled off$ then you %ould not parti#ipate even if it -ives you temporary advanta-e. ABL: 8e tal*ed a+out shinin- e3amples and horri+le %arnin-s$ ri-ht7 So it seems to me that you #an(t really have a lesson of this ma-nitude la#*in- one of those thin-s. )here has to +e a +ad thin- that happens$ ri-ht7 AMA: 8ell$ the -ood ne%s is that if this type of selfish minin- does happen$ it(s impa#t %ill +e minimal. ABL: <eah. AMA: "t(s fi3 %ill +e instant as the pu+li# +a#*lash %ill +e lar-e and pools %ill +e over. " thin* that(s a far more li*ely s#enario. ABL: )han*s for listenin- to episode &' of Let(s )al* Bit#oin. Conta#t for this sho% is provided +y Daniel Larimer$ Stephanie Murphy and Andreas M. Antonopoulos. Musi# %as provided +y Fared Du+ens. Any Cuestions or #omments7 mail adamRletstal*+it#oin.#om. See you ne3t time.