Transcription of Episode 126 Make it Costly to be Big

Participants:
Adam B. Levine (A.L.) Host
Sam Lee (S.L.) - CEO of BitcoinsReserve
Emin !n Sirer (E..S.) - Hac"in#$istri%&ted.com' referred to %( A.B.L. as simp)(
*!n+
,tta( E(a) (,.E.) - Hac"in#$istri%&ted.com
Steven Levine (St.L.) - C-O of Let.s /a)" Bitcoin0 appears in ad se#ment at 12:31
Adam B. Levine: /oda( is t4e t5e)ft4 of 6&)( 17830 and t4is is episode 819. /4is
pro#ram is intended for informationa) and ed&cationa) p&rposes on)(.
Cr(ptoc&rrenc( is a ne5 :e)d of st&d(. Cons&)t (o&r )oca) f&t&rist0 )a5(er and
investment advisor %efore ma"in# an( decisions 54atsoever for (o&rse)f.
;e)come to Let.s /a)" Bitcoin0 a t5ice-5ee")( s4o5 a%o&t t4e ideas0 peop)e and
pro<ects %&i)din# t4e di#ita) econom( and t4e f&t&re of mone(. =( name is Adam
B. Levine0 and toda( 5e.re p)eased to %rin# (o& part t5o of o&r 28> so)&tion
series. On toda(.s episode0 , spea" 5it4 ,tta( and !n from
Hac"in#$istri%&ted.com a%o&t t4e pro%)em of poo)s and t4eir proposed so)&tion
t5o-factor minin#. Basica))(0 instead of <&st re?&irin# miners to tr&st t4e poo)0 t4e
poo)s 5o&)d a)so need to tr&st t4e miners in t4is sc4eme0 and so )ar#e poo)s
%ecome ver( ris"(0 and t4&s not feasi%)e. ,t.s a fascinatin# idea0 and it even
so&nds 5or"a%)e. C4ec" it o&t.
B&t :rst0 t4ere.s a rea)0 time)( concern in t4e Bitcoin comm&nit( ri#4t no5. ,f (o&
&se mai)0 p)ease ma"e s&re (o&.re &sin# a stron# pass5ord and 4ave antivir&s
soft5are on (o&r comp&ter. @o& mi#4t :nd a pass5ord mana#er )i"e LastPass or
Pass5ordSafe to %e ver( &sef&) , "no5 , 4ave. On t4is note0 5e.)) "ic" t4in#s oA
5it4 a se#ment co&rtes( of t4e sti))-in-prod&ction doc&mentar( The End of
Money. Sec&rit( is an iss&e0 even 54en 4ac"in# isn't in t4e miB. /4is is Sam Lee0
on 4is recent eBperience.
Sam Lee: Hi0 ,.m Sam Lee0 CEO of BitcoinsReserve0 and 5e operate t4e 5or)d.s
:rst0 and )eadin#0 cr(ptoc&rrenc( ar%itra#e f&nd. Ar%itra#e if (o& )oo" on
;i"ipedia is a ris"-free trade. Essentia))(0 54at it is is 54ere (o& %&( )o5 and
se)) 4i#4 sim&)taneo&s)( across m&)tip)e eBc4an#es. Co50 as (o& "no50 t4e price
of %itcoins are c&rrent)( ver( diAerent from mar"et-to-mar"et0 and &s0 as a
mar"et-ma"er0 o&r <o% is to %rin# )i?&idit( and to Datten o&t prices.
BitcoinsReserve a)so does )ar#e vo)&me over-t4e-co&nter tradin#' t4at means
54en t4e Si)" Road %itcoin a&ction 5as 4osted %( t4e American mars4a)) service0
5e sa5 t4is as a #reat opport&nit( to ac?&ire some )ar#e vo)&me %itcoins for o&r
instit&tiona) investors. As a res&)t of &s %iddin# on t4e %itcoins0 t4e mars4a))s 4ad
&s on t4eir )ist0 54ic4 t4en )ea"ed to t4e p&%)ic0 accidenta))(. /4is #ave t4e
4ac"ers a c)ear)( identi:a%)e )ist to tar#et0 and 5e 5ere &nfort&nate)( t4e victim
of a ver( creative and amaEin# socia) en#ineerin# attac". /4e 4ac"ers t4en
pretended to %e a <o&rna)ist and re?&ested an intervie5 from me. , a#reed0 and
t4e( t4en s4ared 5it4 me a doc&ment 54ic4 seems to %e via t4e oo#)e $ocs
s&ite. So , accepted t4e doc&ment0 and it said t4at t4e doc&ment 5as &navai)a%)e
t4at , didn.t 4ave permission to access. After some more :dd)in#0 t4e( 5ere
t4en a%)e to eBport o&t a)) m( pass5ords on t4e C4rome %ro5ser t4at , 4ave
a&tosaved in p)ain teBt. So not on)( did t4e( 4ave access to one or t5o emai)
addresses0 %&t t4e( 4ad ever(t4in# t4at , 4ave saved on m( C4rome %ro5ser.
/4e res&)t of 54ic4 5as t4em %ein# a%)e to reset m( domain re#istar.s pass5ord0
#et into t4e BitcoinsReserve emai) 4ostin#0 and t4en access a)) t4e staA.s emai)
addresses at BitcoinsReserve. /4ro&#4 t4at0 t4e( sti)) 5eren.t a%)e to #et an(
%itcoins0 after 4avin# f&)) access to a)) o&r emai)s0 %&t t4e( 5ere t4en a%)e to ta"e
t4e neBt step in p&ttin# to#et4er some creative socia) en#ineerin#0 54ic4
res&)ted in t4em convincin# one of o&r staA mem%ers to send one 4&ndred
%itcoins strai#4t to t4eir address. So t4at.s o&r stor(0 %&t , <&st 5ant to 4i#4)i#4t
t4at t4is is a 5ea"ness in o&r interna) processin# proced&res. ,t 4as not4in# to do
5it4 5ea"nesses in Bitcoin0 %eca&se0 fran")(0 Bitcoin0 so far0 4as none.
A.L.: /oda( on Let.s /a)" Bitcoin0 5e.re <oined %( ,tta( and !n0 t5o researc4ers
54o 4ave %een t4in"in# a )ot a%o&t minin# in t4e recent past. Ho5 are (o& #&(s
doin#F
,.E.: Rea))( #oodG
E..S.: reat0 Adam0 4o5 are (o&F
A.L.: ,.m #ood. $id , descri%e (o& 5e))F Are (o& researc4ersF Can (o& te)) &s a
)itt)e %it a%o&t t4e 5or" t4at (o& doF Beca&se , fo&nd (o& t4ro&#4 (o&r 5e%site0
or t4ro&#4 !n.s 5e%site0 Hac"in#$istri%&ted.com0 54ic4 is a rea))( fascinatin#
t4in# t4at , <&st st&m%)ed &pon. Can (o& te)) me a )itt)e %it a%o&t (o&rse)vesF
E..S.: /4is is !n 4ere and ,.m a comp&ter science professor at Corne))
Hniversit(. =( %ac"#ro&nd is t4at ,.m act&a))( an operatin# s(stems person0 so
ever( ten (ears , %&i)d a researc4 operatin# s(stem0 and in %et5een , do
distri%&ted s(stems. =ost recent)(0 m( interests 4ave %een foc&ssed on se)f-
or#anisin# peer-to-peer s(stems. Bac" aro&nd 17730 , 5or"ed on a s(stem ca))ed
Iarma0 54ic4 5as a virt&a) c&rrenc( s(stem 54ic4 rea))( #ot me eBcited a%o&t
an( "ind of distri%&ted s(stem t4at "eeps trac" of c&rrencies0 t4at "eeps trac" of
mone(0 t4at "eeps trac" of economics0 and provides incentives to t4eir
participants. So0 t4at.s m( %ac"#ro&nd comin# into t4is0 and 54en , sa5 Bitcoin0 ,
5as s&preme)( eBcited %eca&se it.s rea))( 4ad some rea))( coo) tec4nica) ideas in
it0 and it seems to 4ave a ver( stron# comm&nit( s&pportin# it0 and as 5e 4ave
seen0 it.s act&a))( Do&ris4ed over t4e )ast :ve (ears t4at it.s %een o&t. So t4at.s
m( %ac"#ro&nd.
,.E.: ,.m a post-doctorJa) st&dentK in Corne)). , arrived 4ere a%o&t a (ear a#o. =(
main researc4 interests are distri%&ted comp&tin# and t4eor( and stora#e
s(stems and t4e )i"e0 and distri%&ted sensor net5or"s. , st&m%)ed into Bitcoin0
act&a))(0 %( coincidence' a friend introd&ced it to me0 and , starte readin#0 and
t4o#&4t *t4at.s a coo) concept+0 %&t it 5as a )itt)e diLc&)t to #et to #rips 5it4 4o5
eBact)( it 5or"s. , started to #et into it and fo&nd some ver( interestin# researc4
?&estions 54ic4 )ed to m( c&rrent 5or" in t4is area.
A.L.: ,.m c&rio&s 4o5 )on# 4ave %ot4 of (o& %een )oo"in# at Bitcoin as
somet4in# more t4an <&st a nove)t(F
E..S.: ;e))0 , 5o&)d sa( 5e started )oo"in# into it aro&nd A&#&st or so0 )ast
A&#&st or so0 so it.s %een a%o&t a (ear or so -
,.E.: - (ea40 even a %it ear)ier for me0 , t4in". A%o&t t5o (ears0 , 5o&)d sa(.
A.L.: So0 t4e %ac"drop for t4e conversation t4at 5e.re 4avin# toda( is one of
conf&sion and concern a%o&t t4e f&t&re of Bitcoin and t4in#s t4at rea))( re)( on
minin# as a 5a( to #enerate distri%&ted consens&s0 54ic4 is 54at &)timate)(
minin# is doin#' it.s "eepin# trac" of t4at #)o%a) )ed#er t4at 5e a)) )i"e to ta)"
a%o&t. B&t t4ere 4ave %een some concerns0 nota%)(0 a%o&t in a consens&s
rea)it(0 if most of t4e consen&s t4in"s t4at t4e consens&s s4o&)d %e diAerent t4an
54at it is no50 t4at means t4at t4e consens&s can c4an#e' and so t4at creates
t4is 5eird pro%)em 54ere Bitcoin is t4is t4in# 54ere ever(%od( 4as contro) of a))
of t4eir assets and a)) of t4eir "e(s and a)) of t4ese ot4er t4in#s0 %&t t4e
transaction processin# mi#4t act&a))( #o in a diAerent 5a(0 54ere t4at.s not
&nder t4e contro) of t4e %road comm&nit( at )ar#e0 and0 in fact0 is operatin# for
t4e %ene:t of fe5 to t4e eBc)&sion of man(. So0 can (o& ta)" a%o&t t4at pro%)em
t4at 5e.re faced 5it4F
E..S.: S&re0 )et.s see. So0 )et.s act&a))(0 :rst0 start o&t %( descri%in# 54at o&r
p4i)osop4ica) position is. ;e don.t %e)ieve t4at t4ere s4o&)d %e an( reasons to %e
fearf&) or &ncertain a%o&t t4e f&t&re of Bitcoin. B&t t4ere is reason to %e
concerned a%o&t t4e d(namics of t4e s(stem0 %eca&se as 5e.ve seen0 t4ere are a
co&p)e of protoco) evo)&tions t4at sta( in front of &s ri#4t no5. One of t4em is t4e
emer#ence of ma<orit( miners0 so 5e 4ave 4as4 5it4 a fair)( 4i#4 percenta#e of
t4e tota) minin# po5er0 and t4at #ives t4em a 54o)e )ot of a%i)ities t4at t4e( did
not 4ave %efore. So t4at.s0 indeed0 a ca&se for concern not panic %&t certain)(
ca&se for concern. ,t is time0 5e %e)ieve0 for t4e comm&nit( to %e att&ned to
t4ese pro%)ems0 54at co&)d %e comin# do5n t4e pipe once 5e 4ave ma<orit(
minin#0 and 54at o&r reaction o&#4t to %e so 5e can "eep t4ese peop)e in c4ec".
,.E.: , 5o&)d )i"e to add t4at0 %efore 5e #et to t4is iss&e of ma<orit( minin#0 t4e
"e( contri%&tion0 , t4in"0 of t4e Bitcoin tec4ni?&e - of t4e concept of Bitcoin is its
a%i)it( to "eep t4is tr&st #oin#0 despite t4e fact t4at t4ere are man(0 man(
p)a(ers t4at are participatin# in t4e Bitcoin #ame. So , ma( %e a ver( sma)) trader
in Bitcoin0 %&t t4ere are ot4er0 )ar#er traders and minin# #ro&ps of diAerent siEes.
/4e main contri%&tion of Bitcoin is t4at it #ot t4e incentives most)( ri#4t0 so t4at
sma)) even ver( sma)) participants can tr&st t4at t4e(.)) #et t4eir fair s4are in
t4e #ame0 and t4e ot4ers are not a%)e to %)oc" t4em0 or c4an#e or revo"e t4e
ri#4ts in an( 5a(. And t4is 4e)d tr&e for a )on# time &nti) t4e pro%)em t4at 5e.re
facin# no50 t4e pro%)em of ma<orit( minin#.
A.L.: -rom 54ere , sit0 t4e pro%)em 4as arisen %eca&se t4ere isn.t a 5a( to
%eca&se (o& can app)( eLciencies to t4is s(stem0 54ere essentia))( it is %etter to
do it in )ar#e #ro&ps t4an in sma))er #ro&ps0 <&st from "ind of a ta"in# mora)it(0
ta"in# 54atever sort of %e)ief str&ct&re o&t of it0 <&st )oo"in# at it in terms of
a%so)&tes it is %etter to 4ave a )ar#er percenta#e of a sma))er pa(oA t4an it is to
4ave a m&c4 sma))er percenta#e of a potentia))( )ar#er pa(oA t4at (o&.)) pro%a%)(
never receive.
E..S.: indeed0 t4ere are eLciencies to %e 4ad from minin#0 and per4aps minin#
at )ar#e sca)e0 %&t from t4e perspective of an individ&a)0 t4ere are on)( a co&p)e
of mar"ers a)on# t4e 5a( t4at matter. ,f (o& are a )one person minin# at 4ome0 it
matters ver( m&c4 t4at (o& <oin a poo)0 %eca&se t4at.s t4e 5a( (o& red&ce (o&r
variance0 %&t t4e diAerence %et5een a 2> poo) and a 87> poo) vers&s a 3M>
poo) are prett( sma)). Be(ond 3M>0 (o&.re act&a))( 4&rtin# t4e s(stem0 so an(
miner t4at <oins a )ar#e poo) t4at is act&a))( t4e ma<orit( miner is doin# a terri%)e
JdisserviceK to t4e entire Bitcoin ecos(stem0 and t4at.s t4e "ind of t4in# 5e 5o&)d
idea))( )i"e to see not done0 and &nfort&nate)(0 at t4e moment0 t4ere rea))( are no
mec4anisms in p)ace0 no safe#&ards in t4e protoco)0 t4at 5i)) diss&ade peop)e
from <oinin# a ma<orit( poo).
A.L.: So0 if 5e a#ree t4at t4at.s t4e pro%)em0 4o5 do (o& so)ve t4atF Beca&se
a#ain0 5e.re :ve (ears into Bitcoin. , t4in" t4e :rst time 5e approac4ed 3M> 5it4
one 5as over a (ear a#o0 so it.s not )i"e t4is is an o&t-of-t4e-%)&e0 comp)ete)(
ne50 t4in#. Ho5 do 5e so)ve t4isF
,.E.: @ea40 t4e 5arnin# si#ns are a)) o&t t4ere. /4ere are some minor incentives
t4at )ead peop)e0 )i"e advertisin# and st&A )i"e t4at0 t4at )ead miners to <oin t4ese
ver( )ar#e poo)s.
E..S.: So0 %efore 5e sa( an(t4in#0 , t4in" it starts %( ac"no5)ed#in# rea)it(. ;e
<&st )ived t4ro&#4 54at man( peop)e0 &nti) recent)(0 considered a terri%)e
scenario0 54ic4 is t4e emer#ence of a ma<orit( miner for Bitcoin. /4e ver( :rst
:B0 as an( ps(c4o)o#ist 5i)) te)) (o&0 is to ca)) o&t t4e pro%)em0 en&nciate it0 come
to #rips 5it4 it0 ac"no5)ed#e t4e fact t4at it.s 4appenin#. /4ere 5ere a )ot of
peop)e 54o 5ere ar#&in# t4at no miner in t4eir ri#4t mind 5o&)d #o over 27>0
%eca&se t4at 5o&)d %e s&c4 a disastro&s scenario for Bitcoin t4at t4e( 5o&)d
never 5ant to do t4at0 %eca&se t4at 5o&)d "i)) t4eir investment [inaudible]
reasonin#. ;e))0 it <&st 4appened. So0 t4e ver( :rst t4in# to sa( is *5e))0 t4is t4in#
t4at man( peop)e predicted 5o&)d never 4appen <&st did. And 54( did t4is
4appenF+ ;e))0 t4ere are a )ot of reason0 and t4e main reason0 , t4in"0 is %eca&se
t4ere are no safe#&ards a#ainst it. -irst 5e ac"no5)ed#e t4at it <&st did 4appen0
and t4e second t4in# is0 *5e))0 OI0 so no5 54at do 5e do from 4ereF Ho5 do 5e
p&s4 %ac" on t4isF+ So0 movin# on from t4ere0 it.s a )itt)e more comp)icated. ,
t4in" t4e main messa#e0 or t4e main
,.E.: Per4aps 5e s4o&)d start 5it4 54at.s 4appenin# ri#4t no5 to prevent t4is.
Ri#4t no50 t4e on)( means of preventin# 4&#e minin# are socia)0 so 5e #et
messa#es to t4e miners o&t t4ere from peop)e0 from avin Andreasson0 and
Bitcoin... ta)" to ever(%od( 54o rea))( "no5 a%o&t minin#. $on.t <oin t4e )ar#est
poo)s. o <oin sma))er poo)s it.s #onna 5or" <&st as 5e)) for (o&. , t4in" t4at in
recent mont4s 5e.ve seen t4is "ind of socia) press&re does not 5or". /4ere
s4o&)d %e act&a) incentives not to form t4ese 4&#e poo)s. Economica) incentives0
, mean.
A.L.: OI0 so 4o5 do 5e #o from 4ere to t4ereF ,f t4e c&rrent s(stem incentivises
t4is0 and no%od( 5ants to c4an#e t4e s(stem in a 5a( t4at f&ndamenta))(
c4an#es ever(t4in# %eca&se an( sort of radica) c4an#e is 4ard (o& #&(s 4ave
an interestin# proposa).
E..S.: ;e do indeed0 and 5e.re not t4e on)( ones 5it4 an interestin# proposa)
t4ere 4ave %een ot4er ones as 5e)). B&t , t4in" t4at t4e main ta"e-a5a( t4at an(
)istener s4o&)d ta"e a5a( from t4is is t4at t4ere needs to %e more researc40 more
t4o&#4t0 aro&nd t4e 54o)e topic of *4o5 do 5e a)i#n t4e incentives of t4e miners
5it4 t4e incentives of t4e comm&nit(+F At t4e moment0 t4e(.re not eBact)(
a)i#ned0 and t4e emer#ence of ma<orit( miners s4o5ed &s t4at0 5e))0 t4ere is
indeed a #en&ine iss&e 4ere. So o&r proposa) is somet4in# ca))ed /5o P4ase Proof
of-;or". ,t.s a fair)( strai#4tfor5ard idea0 and ,.m 4app( to descri%e it in a %it
more detai) if (o& )i"e0 %&t t4ere are ot4er ideas o&t t4ere0 and , t4in" if
an(%od(.s #onna ta"e a5a( an( messa#e from t4is disc&ssion0 , t4in" it o&#4t to
%e t4at t4ere needs to %e more t4o&#4t and more attention paid to t4ese miner
incentive iss&es. B&t 5e can ta)" a%o&t /5o P4ase Proof of ;or"0 %eca&se it is a
coo) idea t4at is imminent)( doa%)e0 and in fact it.s a ver( ver( e)e#ant idea
%eca&se it #ives (o& a "no% t4at a))o5s (o& to accommodate t4e 5or)d as it is
ri#4t no50 and t4en (o& can t&rn t4at "no% to c&t oA t4e )ar#est of t4e poo)s.
A.L.: @o&.re sa(in# t4at t4ere are ot4er options o&t t4ere t4is intervie5 is
appearin# on an episode t4at 4as a co&p)e of diAerent peop)e ta)"in# a%o&t
diAerent ideas for t4is. /4e ?&estion t4at , 4ave0 and a#ain0 t4e ?&estion t4at 5e
a)5a(s 4ave at Let.s /a)" Bitcoin is *do (o& t4in" t4at t4is is t4e ri#4t ideaF+ $o
(o& t4in" t4at t4is is an idea t4at can act&a))( so)ve t4e pro%)em0 %eca&se (o&.re
t4e one t4at.s %een spendin# time t4in"in# a%o&t it. ,.d )ove to #et more into
detai) on 54at a /5o P4ase Proof of ;or" 5o&)d act&a))( )oo" )i"e in t4e s(stem.
,.E.: A%so)&te)(. ;e do %e)ieve t4at /5o P4ase Proof of ;or" a))o5s t4e s(stem to
accommodate a contin&&m of potentia) so)&tions0 and for t4e comm&nit( to 4ave
ver( :ne-#rain contro) over t4e 5or" distri%&tion %et5een participants in t4e poo)
and t4e poo) operators0 and t4at.s 54at ma"es it &ni?&e. So0 per4aps 5e s4o&)d
descri%e 4o5 t4is 54o)e s(stem 5or"s.
E..S.: , 5anna #ive a co&p)e of 5ords of %ac"#ro&nd t4at )ed to t4is /5o P4ase
Proof of ;or" idea. An important point 4ere is t4at 5e 5ant to "eep t4e minin#
ind&str( a part of Bitcoin0 eBistin# minin# tec4no)o#( "eep it a part of t4e
s(stem. Bitcoin never s&Aered from act&a) denia) of service or a rea) severe
attac" a#ainst it. Per4aps t4e c4ief reason is t4at t4is 4&#e0 4&#e minin# ind&str(
, mean0 t4e(.re deve)opin# specia)ised 4ard5are to do minin#0 and t4ere are
4&#e companies doin# minin# %&t t4is means t4at an( attac"er comin# from
t4e o&tside and tr(in# to 4ac" Bitcoin 4as to overcome t4ese 4&#e po5ers. ,f 5e
do 5ant to s5itc4 t4e Proof of ;or"0 5e need to do t4is in a ver( #ent)e 5a( t4at
doesn.t immediate)( )ose o&r eBistin# advances and "eeps t4e s(stem sec&re
a#ainst attac"ers.
,.E.: ,ndeed0 if 5e 5ere to do somet4in# too drastic0 somet4in# t4at comp)ete)(
c4an#es t4e 5a( t4at minin# is performed0 t4en 5e mi#4t ver( 5e)) :nd
o&rse)ves %ac" at #ro&nd Eero essentia))( %ac" in t4e da(s of t4e #enesis %)oc"0
4avin# <&st "i))ed oA t4e entire minin# ind&str(. /4at 5o&)d %e a terri%)e mista"e.
/4e nice t4in# a%o&t /5o P4ase Proof of ;or" is it retains %ac"5ards compati%i)it(
and it retains t4e minin# investment %( t4e minin# comm&nit(.
A.L.: So0 t4is compares a#ainst 54at 5e 4ave no50 54ic4 is One P4ase Proof of
;or". Can (o& ta)" a%o&t 4o5 t4e s(stem t4at (o& #&(s are proposin# contrasts
5it4 54at 5e 4ave no50 and 4o5 it can act&a))( address t4e pro%)emF
E..S.: Let me #ive a co&p)e of 5ords of eBp)anation a%o&t 4o5 it 5or"s. So0 /5o
P4ase Proof of ;or"' t4e :rst p4ase is rea))( t4e eBistin# Bitcoin proof of 5or".
/4at.s t4e :rst p4ase. After a miner created a %)oc"0 %( demonstratin# t4eir proof
of 5or"0 t4e( #et a re5ard sent to a Bitcoin address. Co50 5it4 /5o P4ase Proof of
;or"0 in t4e second p4ase0 t4e 5or" done in t4e second p4ase re?&ires t4e miner
to "no5 t4e secret of t4at address. So a miner t4at 5or"s for a poo) is a%)e to #et
t4e mone( t4at t4e poo) earns 54en it creates a %)oc". /4is means t4at t4e poo)
needs to tr&st t4at miner %efore #ivin# it 5or" to do.
,.E.: Ri#4t0 as , eBp)ained0 t4e core idea 4ere is to c4an#e t4e 5a( t4e minin# is
done so t4at t4e poo) operator no5 4as to no5 tr&st t4e participants in t4e poo)0
and t4at since it.s #oin# to %e infeasi%)e for0 sa(0 a ma<orit( poo)s to tr&st t4e
ma<orit( of its p&%)ic participants0 t4is rea))( c)amps do5n on 4o5 %i# poo)s can
#ro5. /o %e a )itt)e %it more precise: t4e 5a( t4e minin# 5as done %efore0 it
invo)ved t4e so)&tion of t4e cr(pto-p&EE)e0 a sin#)e cr(pto-p&EE)e0 and 54oever
came &p 5it4 it 5o&)d #ive t4at so)&tion to t4e poo) operator' t4e poo) operator
5o&)d earn t4e re5ards and distri%&te t4em. So t4at.s :ne and dand( and so
fort40 %&t it.s &nfort&nate)( not s&Lcient. /4e 5a( /5o P4ase Proof of ;or" 5or"s
is t4at t4ere.s a second cr(pto-p&EE)e0 so (o& can distri%&te t4e initia) p4ase of
5or" <&st )i"e 5e did %efore t4e :rst p4ase is identica) to 54at 5e 4ave. So 54at
miners do is t4e( come &p 5it4 potentia) so)&tions0 54at 5e ca)) 4a)f-so)&tions0
and 54et4er or not a 4a)f-so)&tion is a good so)&tion0 a comp)ete so)&tion0 is
somet4in# t4at can on)( %e c4ec"ed if (o& possess t4e private "e( t4at contro)s
t4e pa(ment address. So t4at is somet4in# t4at 4as to %e done0 eit4er %( t4e
poo) operator or %( someone 54o t4e poo) operator tr&sts 5it4 4is private "e(.
/4at means t4at it.s a diLc&)t process' it.s <&st as 4ard a cr(pto-p&EE)e as t4e :rst
p4ase. A minin# poo) operator 54o 4ad to distri%&te and s4ard t4e 5or" of
comin# &p 5it4 t4e :rst-p4ase so)&tion 4as to0 pro%a%)(0 to %e a%)e to aAord a
28> poo)0 4as to &nfort&nate)( for 4im a)so distri%&te t4e second p4ase0 and
t4at is somet4in# t4at 4e.s #oin# to :nd ver( diLc&)t. /4ere are t5o parameters
t4at #&ide 4o5 t4e /5o P4ase Proof of ;or" idea 5or"s. /4ere.s t4e :rst
parameter0 t4e diLc&)t( of t4e :rst cr(pto-p&EE)e0 and t4en t4ere.s a second
parameter 54ic4 #overns t4e diLc&)t( of t4e second cr(pto-p&EE)e. So %(
ad<&stin# t4ose parameters0 5e can s4ift t4e amo&nt of 5or" t4at t4e miner
participants 4ave to do0 t4e poo) participants 4ave to do0 vers&s t4e amo&nt of
5or" t4at t4e poo) operator 4as to do. ,f 5e 5ere to ad<&st t4em so t4at t4e :rst
p4ase is 4ard and t4e second p4ase is trivia)0 t4en 5e 4ave eBact)( 54at 5e 4ave
no5' t4e :rst p4ase can %e farmed o&t0 t4e second p4ase is done %( a sin#)e
operator and 5e can accommodate t4e 5or)d as it is 5it4o&t an( c4an#es. So o&r
so)&ton <&st de#enerates into t4e c&rrent 5or)d <&st %( pic"in# t5o parameters
t4e ri#4t 5a(.
E..S.: And t4is is 4o5 5e s&##est (o& start if t4e comm&nit( decides to accept
t4e so)&tion: t4e :rst t4in# 5o&)d %e to decide on some start point )et.s sa( t5o
mont4s from no5 and t4en t4is start point 5i)) move to t4e /5o P4ase so)&tion0
%&t t&ne it so t4at act&a))( it on)( re?&ires t4e :rst p4ase0 so t4e transition is
comp)ete)( smoot4 at :rst0 t4ere is a%so)&te)( no diAerence in an(t4in#.
,.E.: And t4en0 t4e second p4ase 54at t4e second p4ase diLc&)t( does is it
act&a))( re?&ires t4e poo) operator to %rin# in more reso&rces. ,f 5e 5ere to
ad<&st t4at diLc&)t( <&st ri#4t0 54at 5e can do is ma"e it rea))( diLc&)t for t4e
poo) operator to #ro5 to rea))( )ar#e siEes0 %&t a)so at t4e same time ena%)e
sma)) amo&nts of poo)in#. ,t s4o&)d sti)) %e possi%)e for t4e 4ome miner to #et into
a poo) of 8>0 1>0 2> per4aps0 and for a poo) operator to 4ave0 sa(0 2> of t4e
tota) 4as4in# po5er0 %eca&se of 4is o5n comp&tationa) reso&rces t4at 4e can %&(
and so fort4 5it4 reasona%)e reso&rces0 and t4at 5i)) %e s&Lcient to c4ec" t4e
second0 and come &p 5it4 t4e second cr(pto-p&EE)e. B&t t4e diLc&)t( to sca)e
%e(ond t4e 2> )eve). So it.s eminent)( doa%)e to se)ect t4ose diLc&)t( )eve)s so
t4at t4e iterations are set <&st ri#4t0 and poo)s %e(ond certain siEes are
&nfeasi%)e.
(Intermission music)
A.L.: /oda(.s episode0 in addition to o&r L/BCoin sponsors0 is %ro&#4t to (o& %(
Ir(ptoIit. Ir(ptoIit is a 5e% 5a))et t4at insta))s ri#4t in (o&r C4rome %ro5ser0 so
it.s a)5a(s t4ere 54en (o& need it. ,t 4as a %&i)t in encr(pted emai) c)ient0 &sin#
PP as 5e)) as %ein# a 5a))et0 )ets (o& contro) (o&r private "e(s as a %rain5a))et
and #enera))( is free and a5esome. /4at.s Ir(pto 5it4 a I0 I-R-@-P-/-O-I-,-/ dot
com.
/4e 4i#4 n&m%er on episode 819 is N10231 L/BCoin for Bra5"er.com. Bra5"er.s
ta#)ine is *order an(t4in# 5it4 %itcoins and save &p to 17> an(54ere on)ine+. ,t
5or"s )i"e t4is: , 5ant to %&( a 4at from an on)ine store. /4e( don.t accept
%itcoin0 %&t , 5anna spend %itcoin. /4is is a pro%)em , co&)d reso)ve %( emai)in#
t4em0 eBp)ainin# t4e merits of Bitcoin0 tr(in# to convince t4em to c4an#e t4eir
proced&res for m( one order... and t4at mi#4t %e no%)e0 and it mi#4t even 5or"0
%&t it mi#4t not 5or"0 and ma(%e , don.t 5anna c4an#e t4e 5or)d' ma(%e , <&st
5ant t4e 4at. On t4e ot4er 4and0 Bo% is tr(in# to %&( %itcoins0 and is 4avin# a %it
of a fr&stratin# eBperience. Co Pa(Pa) credit cardsF ,s t4is t4e stone a#e or
somet4in#O Bra5"er.com is a mar"et t4at connects #&(s )i"e me0 54o 5anna
spend %itcoins0 5it4 #&(s )i"e Bo%0 54o 5anna %&( %itcoin. Bo% %&(s t4e 4at0 it.s
s4ipped to m( address 5it4 4is credit card0 and , pa( 4im t4e %itcoin. /4e
disco&nt comes into p)a( %eca&se %&(in# %itcoins 5it4 a credit card0 as
mentioned0 is prett( m&c4 impossi%)e t4ro&#4 most services0 and so peop)e 54o
5anna spend %itcoins t4ro&#4 Bra5"er se)ect t4eir desired disco&nt and 5ait for
someone to decide t4at t4ose are t4e %itcoins t4e( 5anna %&(. @o& can c4ec" t4is
o&t and )earn more at Bra5"er.com. /4ese are coo) services.
;it4 a 4i#4 %id of 1P0331 L/BCoins0 toda(.s si)ver sponsor is Coin=ar"etCap.com.
;4at is itF /4in" *cr(ptocoin )eader%oards+. ;it4 4&ndreds0 if not t4o&sands0 of
a)tcoins o&t t4ere0 decidin# 54ic4 ones #et (o&r time and attention 4as %ecome a
%i# pro%)em. Coin=ar"etCap.com #ives (o& vario&s 5a(s to sort0 and an eas(
one-c)ic" pat4 to )earnin# more a%o&t (o&r coin of c4oosin#. Here at L/B 5e.re %i#
fans of #ood too)s. , ca&#4t &p 5it4 Steve0 o&r )on#-time C-O. /e)) me0 54at do
(o& t4in" a%o&t Coin=ar"etCap.comF
St.L.: , t4in" Coin=ar"etCap.com is nice. ,t s4o5s a)) t4e information ,.m )oo"in#
for 54en , #et &p in t4e mornin#0 see 4o5 a)) t4e coins are doin# and 54at t4e
mar"et caps are. ,t.s ver( or#anised and sorta%)e0 and , )i"e it.
A.L.: $o (o& &se an( ot4er sites for t4is sort of researc4F
St.L.: Co0 c&rrent)(0 t4at.s prett( m&c4 t4e one t4at , &se.
A.L.: So0 t4an"s for participatin#. ,f (o&.d )i"e to )earn more a%o&t Let.s /a)"
Bitcoin0 or sponsor t4e Let.s /a)" Bitcoin s4o5 (o&rse)f0 (o& can visit
Lets/a)"Bitcoin.com and )oo" for t4e L/BCoin re5ards pro#ramme &p at t4e top.
Bac" to t4e s4o5.
(Intermission ends)
A.L.: ;4at impact 5o&)d t4is 4ave on a norma) miner 54o 4as0 sa(0 t5o or t4ree
mac4ines at t4eir 4o&se0 or somet4in# )i"e t4at or a co&p)e of AS,Cs 4o5
5o&)d t4is aAect t4emF ;o&)d t4e sti)) 5anna participateF ;4ere 5o&)d t4e
incentives sa( t4at t4e( s4o&)d %eF
,.E.: reat ?&estion. ,t 5o&)dn.t impact t4em m&c4 at a)). So0 t4ose peop)e at t4e
moment J54oK are dra5n to rea))( )ar#e poo)s' t4e( 5i)) :nd t4at rea))( )ar#e
poo)s are not %ein# operated' t4at poo)s are not #ro5in# to t4ose siEes. /4e( 5i))
end &p <oinin# a sma))er poo)0 and t4e( 5i)) see t4eir variance drop drastica))(
from 54at it 5o&)d %e if t4e( 5ere to operate a)one. And t4e( 5o&)d 4ave t4e
%ene:ts of a )o5 variance 5it4o&t t4e dan#er of a rea))( )ar#e poo).
A.L.: OI0 so 54at does t4is do to t4e Bitcoin net5or".s sec&rit( as a 54o)eF $oes
it 4ave an( impact0 eit4er positive or ne#ative0 o&tside of t4e 28> attac" (54ic4
is not as via%)e in t4is %eca&se it.s 4arder to #et to 28>)F
E..S.: Cot partic&)ar)(. Bitcoin re)ies on a proof of 5or"0 %&t it doesn.t rea))(
matter 54at t4e proof of 5or" is as )on# as it a%ides to certain #&idin# r&)es.
/4ere are p)ent( of ot4er virt&a) cr(ptoc&rrencies o&t t4ere t4at &se diAerent
proofs of 5or"0 and t4e( a)) 5or" :ne. /4e speci:c proof of 5or" &sed is not
si#ni:cant for t4e sec&rit(.
,.E.: Ri#4t0 (ea4. -or t4e sec&rit( of t4e net5or" is comp)ete)( ort4o#ona) from
t4e proof of 5or" a)#orit4m &sed.
A.L.: So&nds to me )i"e 54at (o&.re essentia))( doin# 5it4 t4is0 more important)(
t4an an( of t4e ot4er t4in#s0 is (o& are raisin# t4e %arrier to entr( not raisin#
t4e %arrier to entr( (o&.re raisin# t4e %arrier to 4ave a )ot of peop)e invo)ved0
%eca&se t4e poo) needs to tr&st a)) of t4ose individ&a) peop)e as it %ecomes more
diLc&)t to do t4is second )a(er0 ri#4tF ,n t4e %e#innin#0 if t4e second )a(er is
s&per eas( t4en it doesn.t rea))( matter0 %&t as t4at second )a(er #ets 4arder0 t4e
%&rden doesn.t increase on t4e individ&a) it increases on t4e poo)0 %eca&se t4e
poo) is t4e #ro&p t4at 4as to t4en tr&st t4e spendin# "e( spendin# a&t4orit(
for at )east some se#ment. One ass&mes t4at eac4 &ser 5o&)dn.t %e #ettin# t4eir
o5n private "e( from t4e poo) a)t4o&#40 co&)d somet4in# )i"e t4at 4appenF
Co&)d a poo) <&st sort of morp4 aro&nd t4is concept and iss&e a diAerent private
"e( for eac4 person0 or does t4at destro( t4e eLciencies t4at t4e( 4ave #ained
%( not doin# t4atF
,.E.: -irst of a))0 (o&r description 5as a%so)&te)( spot-on perfect. ,n ans5er to (o&r
?&estion0 5e are not a5are of a 5a( to #ain t4is /5o P4ase Proof of ;or".
Hndo&%ted)(0 5it4 an( protoco)0 t4ere co&)d a)5a(s %e some sort of a corner case
and so fort40 %&t 5e are not a5are of 54at t4e poo) operator 5o&)d do. ,f t4e(
5ere to #ive (o& a speci:c private "e( if t4e( 5ere to #ive eac4 individ&a)
participant a speci:c private "e( it 5o&)dn.t rea))( so)ve t4e pro%)em at a)). /4e
person in possession of t4at "e( 54o comes &p 5it4 a so)&tion 5i)) %e a%)e to
stea) t4e re5ards <&st as 5e)). /4e 5a( t4e "e( is mana#ed 5o&)d not act&a))(
c4an#e an(t4in#.
E..S.: @ea40 (ea40 eBact)(.
A.L.: So0 )itera))(0 <&st eac4 individ&a) t4en %ecomes a potentia) ris" point. So
t4erefore0 from a ris" mana#ement standpoint0 it ma"es sense to 4ave t4e
4i#4est ?&a)it(0 )o5est ris" t4at (o& can #et on%oard (o&r side0 ri#4tF
,.E.: @es0 a%so)&te)(.
A.L.: ,nterestin#. OI0 so0 54at does t4is do to poo)sF /4ere are certain)( poo)
operators o&t t4ere , over4eard a conversation 5it4 6os4 Qer)in ta)"in# a%o&t
t4e for" )ast (ear t4at 4appened0 and 4o5 t4e on)( reason it 5as reso)ved as
?&ic")( and c)ean)( as it 5as is %eca&se t4ere 5ere on)( fo&rteen peop)e in t4e
5or)d t4at needed to %e a)erted to it0 and t4e( a)) "ne5 eac4 ot4er.s p4one
n&m%ers. So0 , mean0 is t4is a #ood t4in# or a %ad t4in#0 to 4ave t4at t(pe
E..S.: H&#e poo)s0 , t4in"0 are de:nite)( not a #ood 5a( for Bitcoin. /4e reason
for t4e pro%)em0 , t4in"0 in t4e :rst p)ace0 5as t4at t4ere 5ere so fe5 poo)s t4at
%asica))( contro))ed t4e net5or". ;e 4ave t4e tec4no)o#( to %asica))( reac4 a))
t4e miners o&t t4ere 5it4 a sin#)e t5eet0 ri#4tF ,f a %&# is fo&nd in t4e protoco)
t4at ca&ses t4is sort of for"0 t4en it.s prett( simp)e to notif( a)) t4e miners in t4e
5or)d t4at t4e( s4o&)d &p#rade t4eir versions or 54atever is necessar(. /5o )ar#e
poo)s is )i"e 4avin# (o&r mone( in0 )et.s sa(0 a %an"0 and 4avin# some %oard of
directors decide 54at.s #oin# to 4appen 5it4 t4e po)icies of t4e %an"0 and
a))o5in# t4is %oard of directors to decide to do an(t4in# t4e( 5ant 5it4 (o&r
mone(0 on)( t4ere is a%so)&te)( no transparenc( or an(t4in# %eca&se it.s <&st
miners 54o <oined t4at 5ere not c4osen or an(t4in# )i"e t4at.
A.L.: A c4an#e )i"e t4is0 an( c4an#e t4at impacts t4e proof of 5or" &n)ess ,.m
mista"en 4as to %e o"a(ed %( t4e miners t4e( 4ave to act&a))( %e t4e ones
t4at &p#rade to it.
E..S.: /4is is (et anot4er reason to do t4is t5o p4ase t4in#. Beca&se0 ri#4t no50
if t4e miners a#reed minin# e?&ipment dies ver( ? &ic")(. A fe5 mont4s
after a person starts minin#0 t4eir minin# e?&ipment is 5ort4 a fraction of 54at it
5as 5ort4 54en t4e( %o&#4t it. J/4eK minin# diLc&)t( #ro5s eBponentia))( ver(
?&ic")(0 and so minin# e?&ipment %ecomes irre)evant0 fast. /4is is t4e reason 5e
5ant to introd&ce t4is /5o P4ase Proof of ;or" and #rad&a))( c4an#e from t4e
c&rrent minin#0 from t4e c&rrent proof of 5or"0 to t4e ne5 proof of 5or". /4is
5o&)d ena%)e t4e eBistin# miners to adapt0 )i"e ever(one e)se0 so t4eir c&rrent
minin# e?&ipment is #oin# to %e irre)evant in siB mont4s0 eit4er 5a(' if (o&
introd&ce /5o P4ase Proof of ;or"0 or if (o& don.t. B&t if (o& do0 t4en in siB
mont4s0 t4e s(stem is #oin# to %e safer. So0 , %e)ieve t4at 5e can #et t4e minin#
ind&str( on%oard on t4is. , t4in" t4at )i"e &s0 t4e( 4ave t4e %est interests in t4e
s(stem at )ar#e. , 5anted to sa( t4at t4e minin# ind&str( is a)so interested in t4e
4ea)t4 of t4e Bitcoin ecos(stem as 5e))0 and , t4in" t4at t4e( 5i)) a)so %e 4app(
5it4 improvin# t4e safet( of t4e s(stem0 speci:ca))( 54ere it doesn.t 4&rt t4eir
%&siness.
,.E.: , t4in" it.s critica) to note t4at an( potentia) c4an#es rea))( must stem from
t4e comm&nit(. , t4in" it.s critica) to note t4at t4e minin# comm&nit( is not t4e
J%e-a))-and-Kend-a)) 54en it comes to protoco) c4an#es. /4at is0 t(pes of peop)e
54o drive t4e protoco) re#&)ar 6oes )i"e (o& and me and it 4&rts &s 54en it.s
possi%)e for a monopo)istic miner to emer#e0 54en t4ere.s a ma<orit( miner on
t4e scene0 or 54en t4ere is t4e dan#er of a monopo)( miner 54o doesn.t see a
pro%)em 5it4 %ecomin# a monopo)( miner. /4ese are rea))( %ad t4in#s for Bitcoin.
,t.s &s 54o drive t4e protoco) c4an#es. Co50 t4e miners 4ave to %e on %oard0 and
t4e nice t4in# a%o&t t4is /5o P4ase Proof of ;or" idea is t4at 5e can start o&t
#ent)e0 4avin# set t4e parameters s&c4 t4at t4e( matc4 t4e c&rrent 5or)d t4at
t4e( accommodate eBact)( t4e minin# po5er distri%&tion t4at 5e 4ave and
come &p 5it4 an ad<&stments sc4ed&)e so t4at t4e miners t4emse)ves can 5or"
t4e eBpected c4an#es into t4eir :nancia) p)annin#. Co50 it.s a)so cr&cia) to note
t4at t4e miners are not static. ,t.s not )i"e t4e( 4ave some e?&ipment oA in a
data centre and t4e(.re #oin# to %e &sin# t4at e?&ipment forever after0 so a )ot of
peop)e 54o tr( to mode) t4e Bitcoin space0 t4e( ta"e a static vie5 of t4e 5or)d0
and t4at vie5 could not be more wrong. As , descri%ed %efore0 t4ere.s a critica)
ta"ea5a( from 54at 4e.s sa(in# t4ere0 54ic4 is *t4is is a 4i#4)( d(namic 5or)d.
/4e ri#s t4at t4ese peop)e are %&(in# are %ecomin# o%so)ete an an eBponentia)
rate. Ever( t4ree 5ee"s or so0 t4e ri# is )osin# 4a)f its po5er0 so after siB mont4s
t4e ri# is doin# a%o&t 1> of t4e prod&ction t4at it &sed to do. So (o&r re#&)ar
miner is in t4e constant mode of c4&rn0 and t4at c4&rn is a ver( 5e))-contro))ed
process' t4e )a5s of )ar#e n&m%ers app)(0 and t4e( can predict 54at.s #oin# to
4appen in t4e f&t&re and t4e( can come &p 5it4 a :nancia) p)an t4at ma"es t4em
mone(. Co50 once 5e introd&ce /5o P4ase Proof of ;or"0 5e can d it in s&c4 a
5a( t4at0 a#ain0 )a5s of )ar#e n&m%ers app)(0 t4e( can predict 54at.s #oin# to
4appen0 and #rad&a))( move to a 5or)d 54ere rea))( )ar#e miners are infeasi%)e
and ever(%od( e)se %e)o5 a certain tres4o)d is &naAected.
A.L.: /4is a)) so&nds0 )i"e , said0 rea))( #ood. /4e ?&estion t4at 5e a)5a(s come &p
5it4 is *are t4ere an( #otc4as 4ere t4at , 4aven.t as"ed a%o&t0 %&t t4at (o& #&(s
4ave t4o&#4t a%o&tF Are t4ere an( concerns 4ere t4at (o& t4in" sti)) need to %e
addresses.
,.E.: Co0 not at t4is )eve). So0 54en it comes to deterrin# )ar#e poo)s0 , t4in" t4is is
as #ood an idea as certain)(0 t4at I can come &p 5it4 and 5e are not a5are of
an( #amea%)e aspects of /5o P4ase Proof of ;or". ;4( is t4at soF /4at.s
pro%a%)( %eca&se 5e.re %&i)din# on somet4in# t4at 5as prett( darn coo) to %e#in
5it4. ;4en 5e a)read( accommodate0 into t4e :rst p4ase0 ever( sin#)e t4in# t4at
Satos4i and t4e rest of t4e Bitcoin comm&nit( came &p 5it4 &nti) toda(0 5e.re
<&st addin# a secondar( p4ase t4at ma"es it infeasi%)e for rea))( )ar#e poo)s. So
it.s %eca&se 5e.re %&i)din# on t4is )e#ac( t4at 5e can con:dent)( sa( *(ea40 5e
&nderstand t4is. /4is is not an enormo&s )eap0 an enormo&s c4an#e' 5e.re not
introd&cin# Eero-"no5)ed#e proofs0 5e.re not introd&cin# 4eav( cr(pto-
mac4iner(0 5e.re not introd&cin# snar"s+ and so fort4. /4ere are a 54o)e %&nc4
of comp)icated cr(pto-too)s t4at one co&)d introd&ce0 and t4e( mi#4t act&a))(
c4an#e t4e ecos(stem0 %&t o&r s&##estion is act&a))( fair)( strai#4tfor5ard. ;e
are not a5are of an( sort of secondar( iss&es. Co50 t4ere is a %i##er ?&estion of
*54at are t4e diAerent t4in#s t4at (o& mi#4t 5ant to :BF+0 %eca&se a c4an#e is
an opport&nit(. A c4an#e is an opport&nit(' a c4an#e in t4e proof of 5or" is an
opport&nit( to address o&tstandin# iss&es0 so a ?&estion to as" at t4is point
mi#4t %e *54at are t4e o&tstandin# iss&es a4ead of &sF+0 and 5e can ta)" a%o&t
t4at if (o&.d )i"e.
A.L.: ,.d )ove to ta)" a%o&t t4at. ;4at are t4e o&tstandin# iss&es a4ead of &sF ,
)ove it 54en peop)e as" ?&estions for me.
,.E.: (laughs) OI...
E..S.: So one t4in# is t4is 27> percent mar"0 t4e ma<orit( mar". ,t.s %een "no5n
to %e a dan#er for a )on# time0 %&t 5e a)so "no5 no5 for over a (ear t4at t4e
act&a) tres4o)d for a miner to %ecome dan#ero&s to t4e s(stem is m&c4 )o5er
t4an t4at. ,n a paper t4at 5e p&%)is4ed JatK t4e end of )ast (ear0 5e
demonstrated t4at even at one t4ird of t4e s(stem0 a miner is a%)e to act&a))(
#ame t4e s(stem in a 5a( t4at.s eBtreme)( dan#ero&s to t4e 4ea)t4 of Bitcoin.
A.L.: ,s t4is t4e se):s4 minin# attac"F
E..S.: @es.
A.L.: ,nterestin# t4at.s (o&r paper as 5e))F
E..S. R ,.E.: @esG
A.L.: O40 ,.m sorr(. ;e disc&ssed t4e paper on t4e air 54en it came o&t0 %&t ,
4adn.t reco#nised t4e names. , apo)o#ise.
,.E.: O40 t4at.s &sG @epG
A.L.: @ea40 a%so)&te)(. So , t4in" t4e n&m%er t4ere 5as0 (ea40 in t4e N7-N3>
ran#e0 somet4in# )i"e t4at' and a#ain0 t4e idea 5as so t4ere are c)ear)( some
ot4er iss&es0 so (o& t4in" t4is is anot4er pressin# one.
E..S.: Certain)(0 (esG So se):s4 minin# is feasi%)e for an attac"er #reater t4an
NN> in minin# po5er. S&c4 an attac"er does not need to %e 5e))-positioned in t4e
net5or"' s&c4 an attac"er does not need to 4ave an( specia) po5ers' s&c4 an
attac"er does not 4ave to 5in an( races inside t4e net5or" to ma"e more mone(
t4an 4is fair s4are of minin#. So it is a dan#er 54enever some%od(.s over NN>. ,n
fact0 se):s4 minin# co&)d %e feasi%)e for some%od( even lower t4an NN> if t4e(
4ave #ood net5or" connectivit(0 if t4e( 4ave #ood peerin# 5it4 ot4er miners and
so fort4. B&t for s&re0 some%od( 54o.s over NN> is )ar#e eno&#4 t4at0 %( "eepin#
4is %)oc"s private and %&i)din# on 4is o5n so)&tion0 at NN and a%ove0 4e 4as
eno&#4 po5er to %e a%)e to #ame t4e rest of t4e s(stem. So if 5e.re #oin# to do a
c4an#e to t4e net5or"0 5e mi#4t as 5e)) address a)) "no5n protoco)-)eve) iss&es0
so t4is is certain)( one of t4em.
,.E.: /4ere is a :B t4at 5e introd&ced in o&r paper t4at 5o&)d )imit t4e po5er of a
poo) to attac" t4e net5or". , <&st 5anted to add0 a%o&t se):s4 minin#: once an
attac"er decides to perform se):s4 minin#0 t4e( #et more t4an t4eir fair s4are of
minin# po5er0 and t4is means t4at at t4is point0 t4ere is a rea) incentive for
peop)e to <oin )ar#e poo)s. So it.s diAerent from 54ere 5e are no50 54ere peop)e
<oin a )ar#e poo) <&st %eca&se t4e( 4eard of it :rst or %eca&se t4e( 4ave a coo)
interface. /4is 5i)) create a rea)0 irrevoca%)e economic incentive to <oin t4e )ar#est
poo). At t4e time0 5e 4eard ar#&ments sa(in# t4at *even if se):s4 minin# came to
%e0 t4en s&c4 a 4&#e poo) is not #oin# to form %eca&se miners 5on.t endan#er
t4e s(stem %( %ecomin# a ma<orit(+. And no5 5e see t4at.s after t4e economic
no5 5e see t4at even 5it4 minor incentives0 rea))( minor incentives0 peop)e
tend to <oin a )ar#e miner. So se):s4 minin#0 per4aps %ecame Ja dan#erK no5 t4at
5e "no5 4o5 easi)( a ma<orit( miner0 a ma<orit( poo)0 can form.
A.L.: /4e ?&estion t4at ,.ve 5anted to as" a fe5 times 4ere is *54at is a #ood siEe
for a poo)0 in (o&r opinionF+ @o&.re not e)iminatin# poo)s' (o&.re ta)"in# a%o&t 8>
poo)s0 or N> poo)s0 or are 5e ta)"in# a%o&t fractions of a percenta#eF ;4at do
(o& t4in" an avera#e siEe 5i)) %e in t4e t(pe of paradi#m (o& 5o&)d )i"e to create0
and is t4at %etterF
,.E.: ,.)) )et !n ans5er t4at. , <&st 5anted to comment t4at se):s4 minin#0 as of
toda( t4e minima) poo) siEe is not "no5n0 so it ma( %e t4at a poo) 5it4 <&st 8>
of t4e net5or" is a%)e to do se):s4 minin#. ,n o&r paper0 5e introd&ce a sma)) :B
to t4e a)#orit4m t4at can prevent ver( sma)) poo)s from doin# Jse):s4K minin#.
E..S.: At t4e moment , said *5e do not "no5 t4e minim&m siEe at 54ic4 se):s4
minin# is feasi%)e+. ,t co&)d %e ver(0 ver( )o5. /4e odd fact is Jt4atK t4e eBistence
of rea))( )ar#e minin# poo)s0 )i"e 4as40 act&a))( deter se):s4 minin#' so in some
perverse 5a(0 t4e Bitcoin comm&nit(.s centra)isation0 54ic4 is rea))( terri%)e0 is
"eepin# anot4er terri%)e event from occ&rrin#. So startin# at Eero 5e 5o&)d )i"e
peop)e to %e a%)e to poo) t4eir reso&rces0 %eca&se 5e 5ant sma)) miners to %e
part of t4e s(stem. At 12>0 t4ere is a partic&)ar tres4o)d. ,tta( and ,0 54en 5e
came &p 5it4 se):s4 minin#0 5e a)so came &p 5it4 a :B for it0 and o&r :B if
enacted in t4e protoco) 5i)) #&arantee t4at an( miner 5it4 )ess t4an 12> cannot
pro:ta%)( p&)) oA a se):s4 minin# attac". So t4at.s important0 and if t4at :B 5ere
to %e ro))ed in0 5e 5o&)d %e a%)e to s)eep 5e)) at ni#4t as )on# as t4ere are no
poo)s over 12>. Co50 anot4er tres4o)d eBists at NN>. ,tta( and , a)so s4o5ed t4at
t4ere is no :B possi%)e to deter se):s4 minin# for a miner over NN>. So t4at.s an
impossi%i)it( proof it.s impossi%)e to #et aro&nd. And so0 5e de:nite)( need
incentives in p)ace to ma"e minin# poo)s not #ro5 %e(ond NN>0 as a res&)t. ;e
<&st don.t 4ave a so)&tion. /4ere is no so)&tion possi%)e for se):s4 minin# a%ove
NN>. And over 27>0 as (o& "no50 a 54o)e )ot of %e4avio&rs %ecome avai)a%)e to
miners t4at are a%so)&te)( 4orri%)e for t4e comm&nit(0 and most important)(0 5e
)ose t4e narrative. /4e narrative t4at 5as so cr&cia) to &s' t4e narrative t4at dre5
&s into Bitcoin' t4e narrative t4at #ot &s a)) eBcited' t4e narrative t4at made &s
fee) )i"e t4ere.s a #reat tec4nica) %rea"t4ro&#4 4ere. And t4at narrative is *Bitcoin
is decentra)ised+. /4e moment 5e cross over t4e 27> tres4o)d0 5e are in a
diAerent 5or)d 54ere Bitcoin is <&st )i"e ever( ot4er sin#)e-iss&e pa(ment s(stem0
and an(%od( can come &p 5it4 t4ose0 and 5e )ose t4e distinction t4e
diAerentiation and t4at0 , t4in"0 is t4e most va)&a%)e t4in# 5e co&)d possi%)(
)ose.
A.L.: So0 t5o ?&estions remainin#. One a)tcoin ecos(stems0 not <&st t4e Bitcoin-
derived ones0 %&t a)so ot4er a)tcoins t4at are tr(in# to so)ve some of t4ese same
pro%)ems as Bitcoin t4ere are some diAerent approac4es o&t t4ere0 and t4ere
4ave %een )ots of diAerent... proof of 5or" 4as %een reco#nised as a non-idea)
t4in#. ,t 5or"s0 %&t it doesn.t 5or" as 5e)) as some peop)e 5o&)d )i"e it to0 and
t4ere 4ave %een man( attempts to *:B it+. Have (o& seen an(t4in# in t4e
panop)( of cr(ptoc&rrenc( , don.t "no5 if (o&.ve %een )oo"in# t4at 4as str&c"
(o& as somet4in# t4at is 5or"in#0 or is c)ever0 or t4at (o&.d )i"e to mentionF
,.E.: /4at is an interestin# ?&estion. /4ere are some c)ever ideas in t4at space0
%&t none t4at stic" o&t0 t4at :B an eBistin# pro%)em. ;e rea))( t4in" t4at t4is 28>
monopo)( miner pro%)em is a pressin# iss&e0 #iven 54at <&st 4appened0 and 5e
a)so t4in" t4at se):s4 minin# co&)d %ecome a pro%)em 5it4 <&st Jt4eK emer#ence
of a se):s4 miner overni#4t. And0 as , mentioned %efore0 se):s4 minin# is
diAerent from re#&)ar minin#. Se):s4 miners #ro5 additiona) po5ers as t4e(
command more and more of t4e minin# po5er. And as t4e( #ro50 5e))0 t4en t4e(
4ave Jt4eK incentive to #ro5 more0 and so fort40 and in fact ever( sin#)e
participant 4as an incentive to <oin t4e )ar#est se):s4 minin# poo) t4ere is. So
t4at.s a terri%)e d(namic for t4e s(stem0 and once t4e distri%&ted s(stem starts
#oin# in t4at direction0 t4ere rea))( is no force to stop it. So 5e %e)ieve t4at t4ose
t5o pro%)ems are t4e most pressin# at t4e moment0 at t4e protoco) )eve)0 for
Bitcoin. And 5e.re not a5are of an( proof of 5or" :Bes t4at deter t4ose t5o.
E..L.: @ea40 5e.re not a5are0 eit4er0 of an( act&a) competition to t4e proof of
5or" concept t4at 5or"s. /4ere are some nice directions o&t t4ere0 %&t not4in#
t4at.s act&a))( feasi%)e0 5or"in#.
,.E.: @ea40 t4ere.s proof of sta"e0 %&t it s&Aers from [unintelligible]. /4ere are a
%&nc4 of ot4er t4in#s t4at 5e.ve 4eard a%o&t0 %&t t4e( do not :B t4e t5o core
pro%)ems at 4and.
A.L.: So0 if some%od( )istenin# to t4is is rea))( interested0 5ants to 4e)p (o& ma"e
t4is a rea)it(0 4as t4e reso&rces to do it' 4o5 s4o&)d t4e( contact (o&F $o (o&
#&(s 4ave a 5e%site set &pF /4is is an idea (o&.ve p&t o&t t4ere %ased on post0
and (o& don.t rea))( 4ave t4e a%i)it( to imp)ement it <&st spread t4e idea so
4o5 can peop)e 4e)pF
E..S.: ood ?&estionG , t4in" t4e %est 5a( to 4e)p is to %e a5are of 54at t4e
pro%)ems are. So t4at.s0 , t4in"0 t4e startin# point' t4ere are a)5a(s e)ements in
an( c&rrenc(-re)ated s(stem 54o 5i)) tr( to den(0 in some s4ort-si#4ted fas4ion0
54at t4e eBistin# pro%)ems are. So step one is a5areness. Step t5o is0 if
an(%od(.s eBcited a%o&t t4ese ideas and concepts and 4as0 ma(%e0 t4eir o5n
ideas and so fort40 and t4e( 5ant to #et in to&c4 5it4 &s' t4e( can <&st emai) &s.
;e.re ?&ite accessi%)e0 5e.d %e de)i#4ted to 4ear from interested parties. O&r
emai)s are p&%)ic0 so ,.m e#sScscorne)).ed& and ,tta( is
,.E.: itta(.e(a)Scorne)).ed&
E..S.: So t4e( can <&st contact &s and 5e.d %e de)i#4ted to en#a#e. Part of t4e
reason 54( , "eep t4e %)o# is en#a#ement 5it4 t4e #reater comm&nit(0 so it.s
%een va)&a%)e to 4ave inp&t from diAerent parties. ,t.s %een va)&a%)e to 4ave an
open c4anne) to t4e comm&nit(. ;e are not necessari)( 5edded to seein# our
ideas imp)emented0 and 5e.re not 5edded to seein# somet4in# done ri#4t no50
%&t 5e certain)( 4ave an interest in seein# t4e )on#-term s&ccess of Bitcoin0 and
it Jse):s4 minin#FK 5o&)d %e s&c4 a set%ac" for t4e 54o)e cr(ptoc&rrenc(
movement t4at 5e need to ma"e s&re t4at Bitcoin is not open to 5e))-"no5n0
5e))-&nderstood pro%)ems. So at t4e minim&m0 54at 5e.d )i"e to see is a5areness
and a 5i))in#ness to :B t4in#s 54en t4e(.re %ro"en.
,.E.: And a practica) disc&ssion. /4is inc)&des disc&ssion from deve)opers0 from
economists... deve)opers 4ave t4eir o5n mai)in# )ist0 t4e Bitcoin-core
deve)opment )ist and mai)in# )ist... t4ese so)&tions 4ave to %e t4oro&#4)(
disc&ssed. An( minor c4an#e to t4e Bitcoin protoco) #oes t4ro&#4 a )ot of
Jdisc&ssionK of t4e imp)ications of an( c4an#e. So s&c4 a si#ni:cant c4an#e0
nat&ra))(0 deserves ver( )ar#e-sca)e disc&ssion %efore it.s act&a))( imp)emented.
6&st in t4e comm&nit(0 on t4e fact t4at t4is is t4e direction to #o.
A.L.: /4an"s for )istenin# to episode 819 of Let.s /a)" Bitcoin. Content for toda(.s
s4o5 5as provided %( Adam B. Levine0 Hac"in#$istri%&ted.com and Sam Lee.
/4is episode 5as edited %( $enise Levine' prod&ced %( Adam B. Levine' 5it4 a
specia) se#ment co&rtes( of /4eEndof=one(.com. =&sic for toda(.s s4o5 5as
provided %( 6ared R&%ens and &rt( Beats.
/oda( mar"s t4e second 5ee")( JL/BCoinFK distri%&tion. /o t4at p&rpose0 5e.ve
a5arded more t4an fo&r mi))ion L/BC toda(. ,f (o& created an episode )i"e t4is0
(o& earned a%o&t N770777 L/BC. ,f (o& 5rote a co)&mn0 (o& earned 8770777
L/BC. And for a )imited time0 if (o& 4ave more t4an :ve posts on o&r comm&nit(
for&ms0 (o&.)) earn a 5ee")( sp)it of near)( 1.2 mi))ion to"ens #iven a5a( eac4
Sat&rda(. /4is 5ee"0 t4e sp)it 5as a%o&t M777 L/BCoin per person. ;4atever
(o&.ve done if (o&.ve added (o&r co&nter 5a))et address to (o&r
Let.s/a)"Bitcoin.com pro:)e0 5e.re 4app( to %e a%)e to re5ard (o& for t4e va)&e
(o& add to o&r comm&nit(. /4e :ve for&m post promotion sti)) 4as anot4er t5o
5ee")( distri%&tions remainin#0 so si#n &p and #et invo)ved toda(. So t4an"s to
ever(%od( for p)a(in#. ;e.re 4avin# a )ot of f&n 5it4 t4e L/BCoin pro<ect0 and ,.m
eBcited to anno&nce o&r ne5 pro#ramme0 ca))ed =a#ic;ords0 5i)) %e startin#
neBt 5ee". Ever( episode d&rin# t4e %rea"0 ,.)) te)) (o& a ma#ic 5ord. @o&
remem%er t4at0 and 54en (o& #et a c4ance0 visit (o&r acco&nt at
Lets/a)"Bitcoin.com0 enter t4e 5ord 54ere prompted0 and c)aim (o&r proof of
)istenin# credit. @o&.)) 4ave a%o&t 3P 4o&rs from t4e re)ease of a #iven s4o5 to
enter t4e 5ord.
So t4at.s a)) for toda(. ,f (o& 4ave an( ?&estions or 5ant to ta)"0 ,.m prett( m&c4
)ivin# over at t4e for&ms on Lets/a)"Bitcoin.com. ,t.s a )itt)e %it ridic&)o&s. ,.m a)so
a&ctionin# m( time' t5o 4o&rs of cons&)tin# per 5ee" to t4e 4i#4est %idder in
L/BCoin. @o& can0 of co&rse0 sponsor t4e s4o50 and t4e )ist of t4in#s t4at (o& can
do 5it4 it is #ro5in#. ,f (o& 4ave a pro<ect t4at.s &nre)ated to Let.s /a)" Bitcoin0
%&t t4at (o& t4in" mi#4t %e a #ood :t0 (o& s4o&)d de:nite)( propose it 5e.re
)oo"in# for a)) "inds of co))a%orations. ;e.ve %een #ro5in# t4e team ver( rapid)('
5e.ve added anot4er deve)oper to t4e staA 54o 5i)) %e receivin# compensation
on)( in L/BCoin0 and <&st #enera))(0 t4in#s are #oin# fantastic. /4an"s for 4e)pin#.
(Last three minutes consists of audio with vocals)