On October 16th 2018, Crypto Insider’s Vlad Costea has had the honor and privilege to interview cypherpunk and Bitcoin advocate Jameson Lopp. The discussion is about 63 minutes long and covers topics such as Bitcoin’s security and scalability, the limitations of Bitcoin Cash and on-chain scaling, Litecoin’s promising future, improvement proposals for Bitcoin, Ethereum’s Proof of Stake implementation, Ethereum Classic’s philosophical advantage, the creation of the B Foundation, the launch of Blockstream’s Liquid Network, the hopes surrounding the Lightning Network, and privacy considerations in a comparative (American vs European) perspective.
Listen to the interview by playing the video, or read the parts which might interest you from the transcript below. Feel free to take away parts and turn them into viral memes, but always mention the source.
Vlad: Hello, Mr. Lopp and welcome to the Crypto Insider interview! I’m Vlad and today I will be asking you a few questions for about 30 minutes and I just want you to know that I’m really happy to have you here and this is a true honor and privilege to me.
Jameson Lopp: My pleasure. Fire away!
Vlad: So you want me to start with the hard questions…
Jameson Lopp: Go for it!
Vlad: I have quite a few from people whom I’ve asked for questions in the last week and my boss actually has a few for you, like: „Bitcoin vs Bitcoin Cash: How do you destroy the arguments of Roger Ver?”, „Do you think that there’s anything good about Bitcoin Cash?”.
Jameson Lopp: You know, this is an incredibly complex topic that we could easily spend the entire time talking. But what it really comes down to is that there are no absolutes. Everyone has their own perspective and their own version of the truth. They have their own things that they are trying to optimize for, so the best way that I can break down the Bitcoin vs Bitcoin Cash thing is that Bitcoin is trying to optimize for a low cost of full validation of the entire history of the chain, at the possible expense of high-cost transacting, whereas Bitcoin Cash is doing the opposite in trying to optimize for a very low cost transacting at a potential high cost for fully-validating chain. These are trade-offs and it ultimately comes down to philosophical differences and then you get into issues of governance, sovereignty and all of that. I can’t authoritatively state that Bitcoin Cash should not exist, or that they don’t have the right to do whatever they want and pursue the path that they want to see happen with what they believe the real vision of Satoshi in the future of Bitcoin is.
I know that I and a lot of people that I talk to are like-minded in that we prefer to optimize for self-sovereignty and enable as many people as possible to operate in this permissionless and trustless environment. And that does mean that there are going to be pain points along the way at which people are using the system in an efficient manner and it causes problems for everyone else because it’s a scarce resource, it’s a common resource the actual blockspace. And it’s just something that we’re gonna deal with. I think it’s something that the ecosystem has done pretty well in the past year. A lot of businesses have optimized how they use the blockchain and now we have a number of different efforts that are working both at making the protocol better and making businesses better understand how to use Bitcoin in more efficient ways. It’s an ongoing process and I think that some people are never going to stop debating what the future should be, but I’m more interested in building my vision and trying to collaborate with people who share that vision.
Vlad: This just came to my mind while you were talking about whether or not you should be dismissing or telling projects that they should not exist. What do you think about the differences between Litecoin and Bitcoin Cash? They are very similar in many ways, they both have similar technologies, they use different mining algorithms, but at the end of the day they have the same approach. So which one of them do you think will live longer as a project or may have a greater success?
Jameson Lopp: You know, it seems like the Litecoin developers are more closely aligned with the mindset of the Bitcoin developers and they are willing to adopt these cutting-edge layer two technologies. So I would expect, at least from a scalability perspective, that Litecoin is going to be able to scale orders of magnitude greater than Bitcoin Cash, without increasing the cost of validating the blockchain. So it does get weird when you’re trying to compare all these different things, the fact that there are hundreds if not thousands of blockchain-based projects out there that you can transact cheaply on… the reason you can transact cheaply on them is that not many people are using them and they haven’t been pushed to the limits of what the network supports.
So I think it’s going to be a never-ending thing where there’s a lot of marketing and propaganda going on, until these networks actually reach their limits and see, as far as you can go with a protocol… and that’s why it’s interesting to see adoption happening until the point that it begins to hurt. It’s because that’s when the engineers can step in and say “these are the bottlenecks” and “these are the things that we need to change if we want to take it to the next level of adoption”.
Vlad: Okay, so I’ll ask another question which I’ve received from a guy named Laurențiu – he’s also a Romanian and he follows me. He says “Ask Jameson Lopp please about how we can make Bitcoin better and what the space will look like when all the bitcoins are mined?”.
Jameson Lopp: Yeah well, “How can we make Bitcoin better?” really comes down to the fact that this is a distributed open system where, if you want to collaborate or if you want to use your skills and resources, it’s kind of up to you. I’m not a project manager of Bitcoin the project, I can’t sit here and tell you what you need to do. It’s more incumbent, like the freedom of the system is relying upon you to decide what your skillset is and how you can best apply your skills to the system.
That doesn’t mean that you have to be a programmer to write for the protocol implementation or write for applications or whatever. If you’re a marketer, a writer, or a technical writer you can write blog posts or different posts on social media to try to help educate people. If you’re a good illustrator and you have a great sense of humor, you can make memes – memes are a very interesting way of spreading the viral effect, getting people interested and keeping them engaged. But one of the things that people ask me very often is “What is the biggest weakness of Bitcoin and what is the thing most likely to kill Bitcoin?” and my standard answer to that is “Apathy!”. The Bitcoin project can only die if we all agree to give up on it and stop contributing to it. So keeping engagement and education, and continuing to grow the system in every possible way is how we continue building it and keeping people from going and leaving to spend their time and energy doing everything else.
As for the mining issue, this is one of the reasons why a lot of us believe that it is important to have the fee market pressure that does cause a lot of conflict and anxiety and poor user experience as we’re trying to figure out how to navigate the theme market because, as the block reward and the subsidy keeps going down, if we don’t compensate for the new bitcoins that are no longer being created to pay for the miners with increased transaction fees, then that just means that the amount of value that is being paid to secure the network in terms of the computational hash power is going to decrease. So you can also argue that increasing the exchange rate as the subsidy keeps going down will also offset that, but that’s not really something we have much control over. I think it’s more feasible to help this fee market continue to develop, and while it will be like 100 years until the last bitcoin gets mined. I think it’s only 10 or 20 years until the vast majority of them have been mined, so that’s why over the next 5-10 years we need to continue to develop a fee market and continue to offset the subsidies. Because otherwise, I think Bitcoin will continue to exist, it’s just that there would be less hash power and less security. Usually it would be easier for people to start rewriting the blockchain, and that would be a bad thing. We want Bitcoin to be so secure that even first-world countries do not find it profitable to buy up or confiscate a bunch of mining equipment and try to do a 51% attack on the whole network. So if you operate under the assumption that we’re trying to go for greater-than-nation-state level of computational security, then we need to be paying basically millions of dollars a day for the security.
Vlad: I just had this thought, because you mentioned your approach and your vision to Bitcoin Cash and Litecoin. And I’ve read all these articles which claim that they are such a hazard for the environment and we should stop mining them as much. And I was just thinking: do you think there is room for more than one Proof of Work coin in the space, or maybe at some point some coins like Litecoin, Bitcoin Cash, Zcash might switch to Proof of Stake just to power up Bitcoin if we all get to that point where we acknowledge its power and its influence in the space. Do you think that they will all give the hash power to Bitcoin to secure it?
Jameson Lopp: Well, my opinion is that if you want a high level of guaranteed security, then there can be at least one Proof of Work per algorithm, and thus per type of ASIC. If you look at, for example, all of the SHA256 hashing algorithm coins out there (Bitcoin and the vast majority of the forks) where last I checked I think that Bitcoin Cash had between 5 and 8 percent of the hashing power of Bitcoin. Which means that theoretically, almost any pool in Bitcoin can redirect that hash power and start 51% attacking Bitcoin Cash. Now there’s plenty of reasons why I think this hasn’t happened, it would cause a lot of disruption in the community in general and may not be the long-term profitable option due to the lack of confidence that would happen, but it you want the ultimate theoretical security then I think you have to be top dog of whatever your Proof of Work algorithm is.
Actually, if I recall correctly, Dogecoin was using the same mining script as Litecoin, and then a few years ago they actually came to an agreement to merge-mine Dogecoin with Litecoin. That’s another interesint development there because Litecoin miners could have easily 51% attack Dogecoin. Then you can also get into symbiotic relationships, but then you can also argue about how theoretical these attacks are, since they don’t seem to happen that often in the real world. But if we are talking about having the absolute best guaranteed security, then I think that there can only be one top contender for each of these algorithms.
Whether or not Proof of Stake becomes a thing, that’s a whole other tricky issue because PoS has its own share of issues especially concerning long-term attacks, long-term reorgs, the nobility problem, and there’s also the issue of using resources inside of the system to secure the system as opposed to using external sources (aka electricity, ASICs and whatnot). That also can turn into a philosophical argument, but I think the most important thing is that right now there aren’t any really great Proof of Stake systems that have been deployed into production, that don’t have other cludgy things bolted onto them. Most of the Proof of Stake systems that I’ve seen have ended up having regular developer checkpoints or ended up being Delegated Proof of Stake (which is more like a federation). So you’re basically creating different security models than what you get from Proof of Work, and of course we could argue about the pros and cons about all those as well. But I think there is a concerted effort, especially by the Ethereum folks to try to find a better form of Proof of Stake that is good enough. And I don’t think any of these things will ever be perfect, then if we can build one that at least is so expensive to attack that we effectively don’t see any attacks, then I think we would see plenty of adoption. And I’m saying that I personally would adopt it. We’ll see!
Vlad: Do you think that the Ethereum people will do a good job with their Casper implementation? Because there seem to be a lot of rumors and a lot of talks about Vitalik’s version or Vlad Zamfir’s version. They seem to have different philosophies, they might have reached at this point, when they saw all these Ethereum killers just take away some of their market share… they might have reached some sort of consensus and maybe they want to speed up the implementation because it has been almost 2 years or even more…
Jameson Lopp: I mean yeah, they’re on the bleeding edge of creating these new consensus protocols, and it looks like they’re constantly rethinking the work that they’ve done. And it’s hard to believe that they have stumbled upon the optimal version of whatever this protocol should be because it’s still changing. I think just a few days ago they had a consensus failure of their testnet, and that in itself doesn’t mean that the whole thing is flawed, but at the very least they have some bugs that need to be worked out. When it comes to building these type of networks, you can never be 100% sure that it’s bug-free. It more comes down to “Well, the system has been running for this long and it’s securing this many millions or billion dollars in assets, and it has not been successfully attacked.” So we have to wait and see this type of deals before we evaluate it better.
Vlad: So do you think that Ethereum will ultimately be its own killer, in the sense that you have EOS, Tezos, NEO and plenty of other projects. But do you think that Ethereum will overcome its issues and just get back its community and its part of the market?
Jameson Lopp: I think that if and when they do deploy their Proof of Stake system, there are a lot of people holding onto their Ether because they want to stake it and they want to basically earn interest on those tokens that they have been holding onto. So that would create like a new sense of enthusiasm and whatnot. I think the big question for me is actually the scalability of their sharding implementation and how that changes the security model, because from what I’ve read about it very drastically changes the security model from a fully-validating node on the network today (which I would argue that there aren’t that many of Ethereum) to eventually become this sharded node of which we only see a tiny aspect. It’s about observing how it ends up playing off of other shards or whether or not there are consensus failures between the shards and how that’s all handled. It’s a big question mark and it’s going to be very interesting to see how it plays out.
But I think if they do succeed in the sharding plan, the last I saw is that they were estimating 200x throughput. Which is pretty significant, but you still come across this fundamental issue of doing all of these computations on the blockchain. Even if it’s a sharded blockchain, it’s very difficult to foresee how you end up having this world computer that is actually used in a mainstream level. Personally, I believe that Ethereum will become adopted more as a protocol and as a virtual machine than the main Ethereum network. And we’ve actually seen this happen, as there’s a number of different private and permissioned networks out there that are based on the Ethereum Virtual Machine. Even RSK, which is the Bitcoin sidechain, supports the Ethereum Virtual Machine. So I think that Ethereum has showed us a very clear use case of having this more generic developer-friendly smart contract language. It’s a bigger question to my mind how the final form of that is being adopted and implemented is. And it may not be on the main Ethereum network.
Vlad: Do you think that ETC has it right in their approach in that they support immutability they want to be what the original project wanted to be about at the same time they don’t seem to alleviating issues in scalability and they haven’t had any issues because they were not challenged up to this point. Do you think sometime in the future they might fail or maybe succeed in their attempt in the internet of things and maybe have smaller applications. Not necessarily like Crypto Kitties which will freeze their blockchain but at the same time they are permissionless. Anyone that wants to deploy on their blockchain could and depending on their malevolence may freeze their blockchain.
Jameson Lopp: I would say I would align philosophically with the Classic developers more but I think there are also at a huge disadvantage simply because it is such a smaller group. They don’t have the same manpower and skills basically dedicated to building out that network. So from that standpoint it could be more challenging for them to be a serious contender in this space.
Vlad: That is very diplomatic of you, you did not make any assumptions about the future other than saying it could be challenging. I can take that, now let’s get back to Bitcoin. I have seen your involvement in the B foundation which wasn’t supposed to be called a foundation. It was supposed to be just “The B” but as I have learned from Giacomo. It was supposed to be just a B but he had to fill out some forms which forced him to make it a foundation for legal reasons. It leaked and didn’t end so well just because people have such a bitter memory of the bitcoin foundation which somehow still exists for reasons. What is your involvement more precisely?
Jameson Lopp: That is more a branding vs a legal technical issue I guess. I’ll generally refer to it as the “B” but yeah for legal reasons it has to have foundation on the legal documents. So really Giacomo Zucco is really driving this effort because he was basically doing similar stuff with his PhD network in Italy where he was funding various projects, basically on his own. Then Alana is the force behind the legal entity but she is taking more of a hands-off approach in doing more of the advising which is what the rest of us are doing. Which basically means we are all in a chatroom and email lists and discussing various decisions that must be made.
This is mostly inane stuff like “do we want to put this project into our tree that can allow for people to funds into?” “What are the major initiatives we want to fund in this space?” I think inevitably there will be more contention in our outreach efforts. Some people may get triggered with them thinking we are trying to manipulate certain parts of the ecosystem. I was pretty up-front with not being involved in anything with government propaganda or perspectives of people thinking what bitcoin should be. I am interested in funding different projects that are trying to build on top of bitcoin and lightning, really any other technology to build on Bitcoin just to try to continue to spur adoption and developer interest in this system. I was actually trying to do something like this on my own about a year ago I was talking to attorneys in the US trying to figure out if I could form a charitable organization and it turns out that the IRS and the US made it very hard for open source projects about 15 years ago. There are only about 3 or 4 like the Linux foundation that are charitable organizations that support open source software.
When Alana came to me and was saying she was trying to something similar in Lichtenstein because the regulations were different there. I said I was all-in and whatever I can do to contribute will be great. It turns out there are a lot of other people in this space who have been thinking the same thing and just from conversations I have had over the years I think that there is a fair amount of demand and funding out there that would be interested in basically helping grow the ecosystem by donating to different projects, there just has not been a good vehicle for it. I think the Bitcoin foundation had an opportunity to do that but they made a number of mistakes by spreading themselves too thin. They tried to be everything for bitcoin. I am hoping that keeping a more narrow focus by focusing on the technical side of things we can succeed in ways that they failed.
Vlad: I think you are being too nice to the Bitcoin Foundation, they had financial interests in the first place. It did not begin that wanted to preserve or improve the protocol or maybe help with scaling shifts or the next generation of developers to emerge. It was just made out of Charlie Shrem, Mark Karpeles, and others…
Jameson Lopp: It is more than industry association but they I think they also compounded their issues. Without talking about the specific personalities, there were a number of people there that ended up having legal issues, which didn’t help. They also made it this general membership organization. They made a very rigid bureaucracy basically. I think the bureaucracy did not help and probably slowed stuff down. It also made it easier for misallocation of resources because they ended up blowing through 10’s of millions of dollars. If they had taken a longer term approach and held on to some of those funds then they would have been easily sustained for 10 years if not longer. I think the main reason that they still exist, because I still read the meeting notes from time to time, it seems like donations from Board members like Brock Pierce. They can continue doing whatever they feel like doing it just seems that they aren’t doing much anymore. I am not entirely sure why they exist. Francis Pouliot, he was on the Bitcoin Foundation board and seemed to indicate that it was basically a phone call once a month and not much else going on.
Vlad: I think at the end of the day Bitcoin does need lobbying but it does not need to be centralized, you can speak on your behalf as a person who is involved in bitcoin. It doesn’t make much sense for a protocol that is distributed and at the same time it is open source. You should not be speaking on behalf of everybody because usually you find there are so many differences of opinion.
I am about to ask you about the Liquid Network which Blockstream has launched a few days ago, you think ultimately that it is a good idea to centralize some transactions from the exchanges and have a sidechain just for them as a way to decongest the mainchain? A lot of people seem to be skeptical, and point out to Blockstream that they are turning bitcoin into something they don’t like. At the same time it is not mandatory to use it, if it fails we still have Bitcoin the way we know it and use it.
Jameson Lopp: Interestingly enough, I have a very privileged perspective of this, and that is why I’ve spent 3 years working at BitGo. And BitGo services a lot of the large crypto exchanges out there. So we actually have the ability to see what some of the fund flows are between exchanges, and what we could tell very easily is that there’s a lot of redundant fund flows between exchanges. And the reason for this is that, when you have 10.000 on OkCoin and they also have accounts on BitStamp and they want to send money from OkCoin to Bitstamp, then each of those users is going to request a withdrawal from OkCoin and put it in their Bitstamp address and click “Submit” and do whatever security steps are required. And then OkCoin is gonna see a list of addresses, and it might be a little efficient to batch them up in a list of a few transactions and outputs. But still, at the end of the day they’re going to be creating a lot of transactions and a lot of UTXOs to essentially move money from one entity to the other.
So this is highly inefficient and this is mainly due to the pseudonymous semi-private nature of the network, because OkCoin doesn’t know that all of these users are sending it to Bitstamp and it’s the same entity. All they see are these random addresses. And take that particular example and basically multiply it by a factor of like infactorial for how many different exchanges there are, and users on these exchanges. And I think that, as result, there is a significant fraction of blockspace that is being used up doing nothing more than sending money from one exchange to another back and forth, as users are rebalancing their accounts and just going about their activities.
So there’s a couple of ways that you can try to get around that and make it more efficient: one way would be to kill of the privacy and have people identify that they’re sending to a specific exchange, and then the exchanges confirm these private agreements and settle up on the daily basis, not unlike banks; another way is that you can use a second-layer network, so hopefully one day all of the exchanges will also be integrated with one another on the Lightning Network, and a lot of these cross-exchange transactions can happen on the Lightning Network. But we’re not there yet and it’s unclear how long it’s gonna take before we see majory exchanges adopting Lightning Network for withdrawals and deposits. I think one or two small exchanges already have.
And then, of course, another way or second-layer solution can use some sort of sidechain or another thing which is cryptographically tied to Bitcoin. So Liquid is one of those and just happens to be more permissioned than Lightning is, but I think it’s going to be like a faster way to get towards that. They’ve been working on Liquid for years and now they’re actually deploying it. Hopefully, this will give us a bit more congestion reduction in the near term and provide a stop-gap solution at least until Lightning becomes more of a thing. And maybe it takes off and it also ends up doing a high transaction volume itself, as it’s also got additional privacy features that you don’t get on Bitcoin. Arguably better privacy even than you would get on Lightning Network, though it’s kind of hard to compare those two.
But yeah, nobody is forced to use Liquid either. So from a moral perspective, I have no problem with it. From a technical perspective, if people look at the security model and the privacy model that Liquid offers to them, and they decide that Liquid is going to benefit their use case, then by all means I think they should use it.
Vlad: I think the only part about the Liquid Network which I do not understand clearly is how they want to be geographically-diverse in the sense that they don’t want to concentrate too many exchanges from one continent or one country, so that they political factor (the government which imposes new policies) shouldn’t shift the governance of the sidechain as a whole. But at the same time, we can see that exchanges are very much concentrated in certain countries, some which offer better financial policies, better tax situations… so I find it hard to understand how they’re going to make this work and how they’re going to maintain the balance.
Jameson Lopp: That is the tricky thing when you have a federation. Though you could argue that they have a little more control over that balance than we have in the permisionless systems with miners. Basically, nobody can control what they geographic distribution of miners is. That’s an issue of natural resources and a ton of other factors out of the control of pretty much any human. It’s a different security model and it may be difficult to reason about, especially if you’re looking at the nation state attacker level. I guess the ultimate game scenario is “What is the worst thing that can possibly happen if you’re using Liquid?”. If say, there are some sort of even multi-nation state level attacks that manage to shut down the whole Liquid Network, my understanding is that you should still be able to retrieve your coins back on the main Bitcoin chain. So as long as it is protected against total loss of funds, which seems to be the entire point of the sidechain, is that you can screw around on there… and even if the sidechain fails, no one should actually lose money. That seems like a win-win.
Vlad: I was thinking about this model of governance, that at some point we might see a Chinese exchange that wants to get in. And they will say “No, just wait until another US exchange gets in so that we have balance”. And they want to have this sort of harmony which may be a good idea… I also like the fact that they don’t care about the size or the volume of the exchange – they don’t care if it’s Coinbase, Binance, or OkCoin. They just have one exchange and one vote. But then again, that can also be exploited in the sense that you can divide the big exchanges into smaller divisions and have more voting power.
Jameson Lopp: Well yeah, you have to be aware of the type of issues that we’ve seen in EOS, for example. They had the issue with block producers voting for themselves and all that.
Vlad: Oh yeah, that was nasty, but at the same time it’s expected. Corruption is part of the human nature, even though we don’t define it as corruption. Back in the ancient times, it was all about “How about you and me get together and beat that guy? Because we’re strong together!”. It’s about the incentive and maybe accomplishing something which you otherwise wouldn’t be able to do by yourself.
Jameson Lopp: Yeah, it’s all about incentives.
Vlad: So it was expected on their behalf. I remember Vitalik was bragging on Twitter and saying “Oh, I knew it all along and I told you so, that this would happen!”. But I have no idea how EOS is still functional, in the sense that people trust it and they deploy applications. Maybe it’s just that they have so much Ethereum to burn and they maintain themselves at that high position, and they can pay for advertisements… they can remain relevant just because they’re wealthy.
Jameson Lopp: I think a lot of the regular users don’t really worry about edge-case scenarios, and as long as the system seems to work, then they’re not really concerned with what might cause it to fail. Unless it actually fails, then they generally don’t care. You could be right on the brink of failure, but if the users don’t actually notice then it’s not a huge deal.
Vlad: Plus, I think that if you have a dapp and you deploy it on EOS, you can just move it somewhere else, even though you’re not going to have the data from the blockchain. You will just take the same technology and application to use it somewhere else. But I’ve had this conversation with Jimmy Song on Friday and he wrote that controversial tweet that you should be spending with your credit card because it makes so much more sense from an economic point of view. And when you use Bitcoin to purchase, you’re actually selling it and that’s not rational in any way because it costs so much more. And he explained it to me and then he wrote an article earlier today. Are you adhering to this type of economic talk, or do you think we should be using Bitcoin as much as we can to increase the volume?
Jameson Lopp: I’ve actually come across several check out pages recently, where I saw that Bitcoin was an option, and I ended up not choosing it. The reason was several fold: one, I think that my use of disposable debit cards is actually going to afford me more privacy than Bitcoin right now – Bitcoin is not very good on the privacy front. If I was paying in Monero, that would be a very different story. Also, there is the issue of speculation on what they value will be, where right now I’m fairly confident that we’re at the bottom at a bear market and that anything that I spend or sell is going to be a lost opportunity cost where I will basically end up being better off in the long run if I hold onto it. And also, kind of related to that is that every time I spend/sell, I am actually making my life more complicated from a tax standpoint: I have to go into my capital gains spreadsheet and figure out what the price was in BTC, and what is the amount of tax that I need to pay as a result.
And I can tell you that the tax situation from last year was a huge nightmare and I’m trying to avoid that as much as possible. In general, I’m not spending because it would also complicate my life. If I do want to go with the “spend and replace” strategy, then it means that I’m going to get my hardware wallet, create a transaction to purchase the thin, and then go to some other exchange and broker and do yet another transaction that buys back those bitcoins that I just spent. And that again creates new entries in my personal accounting ledger. Okay, not I have a new cost basis for these bitcoins and I have to keep track of that. So yeah, it complicates my life and I try to avoid doing it, and hopefully those things will become less complicated over time. I would really like to see some sort of law in the US and preferably anywhere else to get rid of the need to pay for capital gains transaction for everything under certain amounts. I think there was a bill in the United States to try to set that to $500 of something. If you have to figure out capital gains for every cup of coffee and every $20 widget that you buy on the internet, that’s a huge turnoff. And that’s what results in me generally only selling larger blocks of crypto, because it complicates my life less.
Vlad: I never really thought about this because here in Romania we don’t have any piece of legislation which even remotely or vaguely mentions Bitcoin or other cryptocurrencies. So if you have Bitcoin and you purchase stuff with it, it’s like you’re not even using a form of money which they acknowledge. So you can easily do tax evasion and launder money in this country, and we even have Bitcoin ATMs – but they have high fees, so if you withdraw from those machines you would have to pay a lot of money, from 7 to 10 percent of your withdrawal. But I assume somebody who bought early on and maybe wants to take out some cash, they can do it so easily. But I’m happy you mentioned privacy earlier, as I’ve seen that many of your posts and articles are actually about privacy and how you’re trying to rebuild your life by start anew and have a new… I’m not sure if identity, but have a new life in which you’re being more cautious about your privacy in your day to day affairs. And I even saw that, I’m not sure if it was funny or sad, but you were refused to go on a rollercoaster ride just because you have a debit card which didn’t have a name, a disposable one.
Jameson Lopp: That created some additional complication. The stupid thing, is that I don’t think I’ve followed up on it. But the reason that was a stupid event where they… I basically purchased the ticket online and used throwaway e-mails and debit cards, and throwaway billing information. And then I got to the actual park and tried to claim my ticket and they basically started interrogating me, and then were asking why I didn’t use my credit card or other stuff that’s tied to my real name. Basically, they have some sort of data surveillance system where they try to positively identify that you were the actual purchaser of the ticket. The reason that they rejected my ticket and refunded it is because I arrived at the park and gave them my passport and my fingerprints. They were doing biometric identification for everyone who entered the gates. So it was really stupid that they claimed they couldn’t identify me because I was giving them my passport. And I ended up buying a new ticket with cash right there on the spot, so I don’t know what they thought that they were protecting themselves or other people from. It was one of those things where they had bureaucracy in place and their system said that they had to reject me for using that specific payment method.
Vlad: Oh man, that’s insane! So you had to give them your fingerprints and your passport just because you went to a park?
Jameson Lopp: Yeah, so don’t think that I’ve gone to many amusement parks outside of America, maybe none. But this is becoming a very common thing in America and I can only assume that it’s due to our terrorism fears and whatnot. They’re afraid that someone’s gonna come in and do a mass shooting or a bombing, something like that. Pretty much all of the parks have very high security where you have to go through metal detectors, X-ray machines and all that stuff. It’s basically like going into an airport.
Vlad: (laughs) If you ask me, that’s insane. But here in Europe, I guess we’re much more free on the surface: so you don’t get checked, they don’t care much about what you do, you can just walk into a fun park and go on rollercoaster all day long and they will not ask for any ID. But at the same time, we have much stricter and harsher secret services, like the intelligence agencies. They know all about the people who cross the border, they can check on you… and my father works for the Romania equivalent of the IRS and he told me that when somebody enters the border, they just take their passports and IDs, scan them and they can see on the screen everything: where they traveled, if they have any criminal records. Everything about them is available on the spot. And I’m not sure if you have that in the United States. I’m sure you have it in the airport, but I’m not sure if everywhere.
Jameson Lopp: We definitely have that on all of the borders at the edge of the country. Thankfully, we don’t have to go through that scrutiny when we cross the borders of states inside of the country. So you can go nearly 4000 miles from coast to coast without having to go through a checkpoint like that, though there are a number of checkpoints because some legislation was passed that basically our customs and border control agents legal rights to operate anywhere within 100 miles of the border. And you can actually drive around the coastlines and the borders with Canada and Mexico. 100 miles inside of the borders actually covers something like 80% of the population of America. Pretty much everybody lives along the coastline on the East or West coast and they do have jurisdiction over a lot of things, and I have come across a few random outposts on the middle of nowhere along motorcycle trips where there would be nothing but a road trees, and then all of the sudden there’s a guard post. Military people standing there and asking for your ID… it’s really weird because it’s rare, but they do have the authority to do that.
Vlad: What is your explanation or argument when people say “I have nothing to hide, I’m such a good citizen, I obey the law, there is nothing that I do wrong. Why would I care about my privacy?”. How do you explain to these people that they should actually care, and KYC or controlling your passport or ID should not be the norm and you should be a free person and citizen of your own country?
Jameson Lopp: It’s more of a problem of “you don’t know what data might be used against you in the future”. This really becomes more apparent when you start looking at the way the legal system operates, where even if you are remotely suspected of some sort of crime, law enforcement will just start digging through your entire past. And if they can find anything that is suspicious or gives them some sort of probable cause to dig into and try to start creating problems for you, then it’s pretty easy to do so. One way that I phrase this is that in the modern age, at least in America and I’m assuming probably with most countries that have reasonably large legal and judicial systems, we very rarely delete laws. We just keep writing and creating more and more laws year after year, decade after decade, to the point that there are so many laws on the books that even lawyers don’t know all of the laws. Lawyers have to specialize in one specific portion of the law. So, as a result of that, we are all criminals. It’s basically impossible to be alive and not commit a crime on a regular basis. I think that there is a number of interesting articles out there that are titled something like “A Crime a Day” or “A Felony a Day”, but basically all of these laws, many of which should probably not exist or should have been struck from the records long ago, if government agents wants to put you in jail, it’s highly likely that they will be able to find a crime that you committed. Even if it’s not an egregious crime where there is a victim, there are a ton of victimless crimes nowadays on the books as well… so I would argue that the only way to protect yourself from that is to keep your activities as private as possible, so it would be impossible for someone to pin you with a crime that would probably shouldn’t even be a crime.
Vlad: I’ve actually Magical Crypto Friends and Whale Panda said that during the Honeybadger Conference he listened to your speech about privacy. But he said many of the measures that you’re taking and you mentioned in the speech are not applicable in Europe. Because in here we have a personal identification number and it’s harder for you to just erase your identity or run away. Plus, I remember when I was in Paris and I’ve studied there for a semester as an exchange, I couldn’t do anything without a bank account: I couldn’t have a phone number, I couldn’t rent a place, there was basically nothing that I could do without a bank account. And for that I needed so many documents that in the end I ended up being illegally renting and illegally buying a phone number from somebody. It’s because the bureaucracy was ridiculous, not because I had anything to hide or because I was a criminal.
Jameson Lopp: A lot of the protections that I’ve put in place use various… and this is actually one of the reasons why it’s actually helpful that America is so large and so many states and jurisdiction, is that you can often find jurisdictions that are more lenient and have more loopholes. So the stuff that I’ve done takes advantage of some of those lenient jurisdictions that have better privacy. So I create legal entities in those jurisdiction and then I use these legal entities to perform various actions such as purchasing property or setting up utilities and other types of accounts that are tied to my normal day to day life. It’s not clear to me whether or not European could set up a legal entity like that in America and then use it in Europe, or what the options are… and the downside to all of this and the conclusion that I came to is because of all of these regulations that governments have put in place, they’ve basically priced most people out of privacy. The only way that you can have privacy is that you have a huge amount of wealth, to the level that you can afford to pay for lawyers to do the legal research to find the loopholes and figure out how to set up those complex legal entities on your behalf. And that’s really one of the reasons why I guess wealthy people also tend to have more freedom is because you basically create a shield between yourself and your government with the lawyers. They are like the defensive football players who protect you from being attacked by the government. They know how to use the government’s own laws against it.
Vlad: You think that these immutable blockchains that we have right now can actually be a leverage for us to negotiate with the governments until they give us back or our autonomy? We may grant them access to data in exchange. When you are in charge of your own money, you’re trying to basically the government’s power to control you with their currency. You think that you’re basically inviting the government to negotiate with you and say “we want you to use our currency and we want you to be a regular citizen, but how can you actually enact some sort of policy in order to make this kind of people be happy or stop this from spreading to the extent that our currency becomes redundant.
Jameson Lopp: Well yeah, that kind of is the thesis of the sovereign individual: that technology will give the power back to the individuals because we will be able to replace more of the services that people are used to being provided by the government, and replace those with some new technological means of coordinating on our own in a voluntary fashion. If we can build more privatized voluntary services that compete with governments and their public services, then that will finally put nation states back on their heels because they will finally have to compete in a free market rather than being able to just exercise a monopoly over all of these different aspects of our lives. But it’s not gonna be easy either and there will be a lot of people who fight back against that and say “No, we have to have the government coordinating everything! Otherwise it’s just going to be chaos”. I think it’s gonna get more contentious before it gets better, I don’t think it’s going to be a very smooth transition by any means.
Vlad: But do you think that there is going to be a transition by the way you formulated your sentence?
Jameson Lopp: That is what I am focusing on and that’s what a lot of us do: we’re trying to make that transition happen. You can get into a debate as to whether or not it is inevitable, but I think whether or not it is inevitable there have to be people behind the movement that actually build the technology and make it possible to happen in the first place. And a lot of us who are on the forefront of that are also exposed and would very easily be the first ones against the wall, as it were if there was some sort of backlash against this movement.
Vlad: I guess this is the last question: do you see Bitcoin as a mean of resistance?
Jameson Lopp: Definitely! It’s a rejection of monetary policy that is controlled by bankers and nation states. And of course, it goes far beyond Bitcoin at this point and it’s really just a rejection of the status-quo saying “We want to build a completely new system that is more open and that we have more input in deciding how it operates”. So that’s why I got involved originally, it was because I felt like the concept of money just a concept that belongs to humanity in general. It is a shared agreement, it is not something that is supposed to be dictated as to how it operates. So, you know, there should not be a small group of elite people who are controlling it. It should be something where everyone who is interested should be able to contribute and have input as to how money itself should operate. So I guess that’s why I started contributing.
Vlad: Thank you very much, this was very enlightening and inspiring at the same time. I hope that the viewers will do the same and I hope that I’ll talk to you some other time and maybe discuss topics like the Lightning Network and how this distributed and spread has become (because I know you keep tabs on how many Lightning nodes have been deployed so far). And maybe by then we will be talking about quick and easy implementations that anyone can use. Or maybe we’ll have many more sidechains to solve other problems, and we’ll see the end all of these shitcoins and maybe we will have witnessed the end of the market. So thank you very much for this interview and have a nice rest of your day.
Jameson Lopp: My pleasure, thanks!