On Bitcoin, Ethereum, and Cardano

I'm sorry, but it seems there is no transcript text provided for me to edit. Please provide the text you'd like me to clean up. Hi, this is Charles broadcasting live from warm, sunny Abu Dhabi. Today is November 30th, 2023. It's been a very long year, hasn't it?

I wanted to make a video to elaborate more on my statements made during an AMA a little while ago, where I discussed the absurdity of securities law in the United States. I wanted to get into a bit more detail about it. We have a bizarre situation in the cryptocurrency space right now, where absurdity seems to exist and maximalism is at an all-time high. When I entered the space a long time ago, Bitcoin was very small, and there was really no substantive altcoin market. Everyone was very collegial, and we had relatively good relationships with each other.

Mining was done with GPUs or CPUs, depending on the era, and there wasn't really a notion of exchanges or liquidity. People traded on PowerPoints, and they would buy Bitcoin through PayPal. We had things like BitM, and it was like buying Xbox games for Bitcoin. Satoshi would talk about Namecoin and other innovations, trying to keep the main chain ideologically pure for its purpose and ensuring it didn't get overloaded. The reason Satoshi stayed anonymous, by his own admission, was the legal ambiguity of issuing a currency in the United States.

Things like Liberty Dollar and many people who attempted to create currencies, the Ron Paul dollars or the silver coins minted back in 2008, didn't fare so well. It is an ambiguous situation when someone creates a digital asset and distributes it. The unescapable reality that Bitcoin maximalists cannot accept is that on day one, Satoshi had 100% of the hash power and complete control of the Bitcoin network. There was no notion of a fair launch; there couldn't have been. No one had the technical sophistication, as evidenced by the fact that it took a deeply technical person multiple tries to get a Bitcoin node working properly and sending transactions.

At least some of the Bitcoin issued through the mining process was done in a completely centralized way because only one actor mined them and had complete control over the network. At any given time, that actor could have made arbitrary decisions to change the network in any way. They say, "Well, hang on a second here; it's now decentralized, and Bitcoin is a broad protocol with many people and different actors." While that's a true statement, then why is it the case that every single coin in the altcoin space, if they like to call us that, which has those same facts and circumstances, is always labeled a security, always centralized, always a shitcoin, always a scam? Bitcoin has changed a lot.

It went from a collegial environment where people were having fun and it was cool and interesting, to almost a cult where a group of people say a bunch of things. One is that everything but Bitcoin is a scam, and anyone who works outside of Bitcoin in the cryptocurrency industry is a criminal or misguided. There's no innovation except for Bitcoin, and the only asset that will have any long-term value is Bitcoin. Everything else is a security, everything else is an illegal asset, and the people behind it need to be thrown in jail. These statements are made regularly by Max Keiser and many others in the Bitcoin ecosystem, and they wear these statements proudly.

They call us altcoiners. Outside of the absurdity of it, the sheer madness of such statements and the misinformation that spreads also escapes the reality that a sole operator controlled the Bitcoin network for a non-trivial amount of time and likely holds 8 to 10% of the entire supply. That's just an inescapable fact. It also completely belies the absurdity of registration. They say you can't register Bitcoin as a security because it's not clear who would register it.

So, let's say for the sake of argument that Ethereum is a security. Who would register it? Is it the Ethereum Foundation or Vitalik? What if they just disappear? Do we honestly believe for a moment that Ethereum would just go away?

Do we honestly believe that the people who have devoted their lives, efforts, and billions of dollars of capital to build businesses on Ethereum would say, "Well, the foundation's gone; let's just pack up shop and go home?" No, we know that it's sufficiently decentralized that such a protocol would endure, which was the entire argument that the SEC had about the nature of Ethereum not being a security. There's no policy consideration; it's sufficiently decentralized. So then, that seems to be some sort of strange standard. The problem we have as an industry is that it's not equally applied.

There is no objectivity behind it, and no one has taken the time to clearly differentiate the operational reality of Bitcoin, Ethereum, Cardano, or other tokens and coins. It's completely murky water. Every single day, we're at a complete loss where things are simultaneously a currency, a commodity, a security, subject to regulation, not subject to regulation, subject to registration, and not subject to registration. It's not even clear how these things would operate. There are so many great people who wake up every single day wanting to innovate and build, whether it be people doing research with zero-knowledge cryptography, people researching consensus to come up with completely new protocols, new BFT protocols, new proof-of-stake protocols, enhancements to proof of work, new ways of incentivizing decentralized storage, new network stacks, or new ways of thinking about Byzantine resistance in peer-to-peer systems.

Every single one of those people is called criminals, evil, stupid, or misguided by Bitcoin maximalists, and there's no advancement from them. I'm told repeatedly that we just need to all get along, but you have to really ask yourself: if one group of people is saying, "Let's work together," and another group is saying that the first group is evil, stupid criminals whose only purpose is to defraud others, how exactly do we have a copasetic working relationship? Why would we want to work with that group of people? Let's be very clear: there are companies and members of the Bitcoin space that have actively lobbied Congress and the U.S.

federal government to criminalize altcoins. That's a fact. I know that for a fact. I've spoken with staff of lawmakers who, that same day, spoke to members of the Bitcoin community—prominent influencers—who literally just had a meeting where they were told everything but Bitcoin should be made illegal in the United States. And yet we're told, "Let's just all get along.

" There's no way to get along under those facts and circumstances. As with all these projects, they tend to start with a small group of people. Almost every open-source project, whether it be Linux with Linux Tails or Rich Hickey with Clojure, starts with a small group of people coming together, thinking of a few magical things, and building an ecosystem and a community. Over time, the governance of that ecosystem changes; it decentralizes. People leave, people die, people retire, new people come, and new ideas emerge.

That's what makes these projects so remarkable, amazing, and fun to participate in. You can go away for five years and come back to see a completely different ecosystem. Bitcoin was no different. From day one, it was a sole miner, a sole architect; one person or one group had complete control over the code and protocol. You can't escape that.

If you live in the Bitcoin space, we don't know who that person is because they chose to stay anonymous due to legal ambiguity. What financial arrangements were made? For example, talk about ICOs and private sales. The Bitcoin community seems so in love with criticizing Cardano. What if Satoshi Nakamoto wanted to take two years off from work and made a side deal with one of his friends, saying, "I'm going to mine this thing called Bitcoin, and I'll give you 5% of whatever I mine in exchange for giving me two years' salary so I can go and work on this"?

Guess what? That's kind of an ICO; it's kind of a pre-sale product. It doesn't exist. It's a private deal. So if a group of companies overseas gets together and finances something in Japan or somewhere else, somehow we should apply that there but not with Bitcoin?

We don't know. It's so far gone, and this is by design. Let's be adults and really talk about this. The reason this is happening is that the people who run the show, who want CBDCs, understand that if the world gets back control of its money, voting, identity, and data, it's going to be really hard to impose a global regime over humanity and have a small group of people run the whole show. So what they do is try to ensure that there are no projects or programs in the long term that return power to the people, make people their own banks, and push power to the edges.

They're really comfortable with things like Bitcoin because it's very clear how to control that. At the end of the day, the Bitcoin core protocol does not have smart contracts capable of doing the things that Cardano and Ethereum can do. There are no DEXs, no oracles, no algorithmic stablecoins, no on-chain DAOs, and no on-chain infrastructure. All the resources of that system are exogenous, and over time, the system will become too cumbersome to run on normal PCs. The vast majority of users will leave their assets on regulated exchanges, and the majority will use light wallets connected to some third-party source that will likely be regulated at some point.

If all your on- and off-ramps, all your everyday use cases, are completely regulated, and you can't do much other than send tokens around, your miners come from ASICs, which have a limited supply chain, and there's an economy of scale that centralizes mining operations to fewer and fewer actors, doesn't that feel a fairly easy thing to control? Doesn't that not feel a big threat? It's not value-stable; it's like gold. It's volatile. Governments can tolerate gold and still institute tyranny.

Gold is traded in China; it's not a problem. But having smart contracts, a programmable ledger, and the trajectory of evolution of non-Bitcoin cryptocurrencies is a problem because those cryptocurrencies have the capability to displace and replace most of the capabilities of sovereign governments. They can be marketplaces, national ID systems, national voting systems, education systems, credential systems, sound money, and all the things supply chain systems, medical record systems. The difference is they can also be decentralized and play by consistent, fair rules for every single actor and player. Over time, they become much more efficient and learn from each other.

That is the threat to the world order we're marching towards, and that's the opportunity for us as an industry to help humanity take itself back so that we don't get ruled by kings again. You'd figure the maximalists, if they truly believe in freedom, would say to themselves that it's a good idea to partner with and work with the broader industry. Instead, they call us criminals. They say everything but Bitcoin is a shitcoin. They go to governments and praise them for taking actions against altcoins.

Another thing is they love the idea of ETFs, BlackRock, and others getting involved. Did you ever ask yourself what kind of power these institutional solutions will have once they embed themselves in our industry? Let's say there's a fork: chain A and chain B. If all the surfaces you need to interface with those chains pick chain A, and 90% of the community picks chain B, despite the overwhelming majority wanting to be on chain B, what happens? Chain A wins.

Why? Because chain A is the only one with stablecoins, exchange support, and all that consumer infrastructure. That is the consequence of centralized stablecoins, centralized exchanges, and financial infrastructure like ETFs. You are handing the democratic control over what's legitimate and what's not to someone else. They say, "Oh, but we solve that in the Bitcoin space; whichever one has the most hash power wins.

" That may be true, but what if they support the minority chain and the majority chain? They say, "Well, we're not going to list it." The value of that chain goes down, which means the miners switch over because they're mercenary. That's the economic model; you have to make more than you spend. It's not a charity.

You see the problem here? It's worthwhile to have a broader conversation about diversifying consensus. One of our protocols we invented was multi-resource consensus, where you can put proof of work and proof of stake and other protocols together in the same network. Why would I want to do that? Because maybe one of them is compromised, and the other is a belt-and-suspenders fallback.

You'd figure this would be lauded as an innovation, but over in the Bitcoin space, they say that doesn't exist. Even if it did exist, it's somehow insecure and a scam. Every single day, the drum beats. That's what they say 24 hours a day, seven days a week. It's profoundly frustrating and distasteful, especially for people who have been in the industry as long as I have.

I remember when this was not the case. I remember when people were decent to each other. I remember when people didn't have these types of problems. I remember when the majority of people in the cryptocurrency space remembered why cryptocurrencies were created: a strong distrust of centralization, a strong distrust of institutions, and a belief that governments were no longer capable of creating sound money and sound infrastructure. The very first block of Bitcoin referenced the 2008 banking crisis as a symbol of the moral failings of those who came before us.

That's not the same Bitcoin as it is today; it's a different ecosystem, a different group of people. I'd argue the majority of people that hold it know nothing of the philosophy and don't care about it. They view it as just another asset, whether they are a financial institution or a fair-weather investor. The libertarian core has completely dissolved and gone elsewhere in our industry. There are still a few hardliners here and there, and that's fine.

All I ask is, why are you so judgmental about the rest of the industry? The existence of Cardano is a net benefit to Bitcoin, whether they want to admit it or not. For years, Bitcoin tried to discuss things like color coins and how to do smart contracts on Bitcoin with projects like Simplicity and BitML. Meanwhile, Cardano took UTXO, extended it, and figured out how to put a smart contract language on it while preserving and protecting the exact same type of model that Bitcoin seeks to preserve and protect. So it is a case study for how one would do smart contracts in a responsible way on Bitcoin.

Had that knowledge existed, I would bet every dollar I have that Satoshi would have used it to put smart contracts on Bitcoin when he launched it on January 3rd, 2009. When we look at other pieces of research in the portfolio, for example, Cardano native assets were inspired by color coins. Had that existed at the time Satoshi created Bitcoin, it likely would have been put into the protocol. We know this because he talked about it. We also know this because, in the case of smart contracts, Bitcoin script used to be much more expressive.

It was dialed back when catastrophic bugs were found. Google the Bitcoin inflation bug as an example. Some of us are old enough to remember these types of things inside the industry. There are dozens of other innovations in the portfolio, like non-interactive proofs of proof of work, which, if implemented in Bitcoin, would have no security cost. It's a protocol enhancement, very lightweight, and would enable side chains and extremely efficient light clients in Bitcoin.

There are dozens of innovations there; they're in the open domain, they're not patented, and they're freely accessible for all. They provide a lot of inspiration for a roadmap that can bring Bitcoin into our century, not the last one. They're ignored, and to make matters worse, we're labeled a scam, a criminal enterprise, and a shitcoin by that community—at least the leaders of it. It's really offensive. I'm a definitions guy; I care a lot about basic rules, definitions, inclusivity, and accountability.

I ask people again and again, what is the definition of decentralization? It turns out it's a very complicated question. So we put our money where our mouth was and financed the creation of the Edinburgh Decentralization Index through a grant. The whole purpose of that index is to study the notion of decentralization to produce a metric, a number, so you can objectively look at networks like Bitcoin, Ethereum, Cardano, Algorand, Polkadot, layer ones, layer twos, and even look at DApps and DeFi applications. We can ask a very simple question: how decentralized are these networks?

We can measure these things. We can debate whether the measurement is legitimate or not, or if it didn't factor something in or not, but the exercise itself is undebatable. Why? Because we want to understand as an industry definitively what the benchmarks are. If Bitcoin is the hallmark of decentralization, that ought to be the number we aspire to as layer ones.

Since Ethereum is sufficiently decentralized and thus not a security according to the SEC—maybe today it is, who knows? It's inconsistent. Is it less or more? We should measure that, and that's something for the industry to discuss. These are the initiatives that bring us forward because they bring objectivity, inclusivity, and truth to a discussion—not the politics of personal destruction.

In my AMA, you could see I was very angry. I'm not angry at Bitcoin; I'm angry at how that side seems to treat us. It's perplexing, but it doesn't really bother me as much as it bothers some others. I'm angry over the inconsistency of policy because, at the end of the day, I am an American citizen. I live in America, have a ranch in Wyoming, and a farm in Colorado.

I'm going to die in America; it's my country, for better or for worse. It brings me no pleasure to watch my nation declare war on an industry that not only would liberate it from many of its biggest problems but also guarantees that we will miss out on a multi-trillion dollar revolution that is the future of the global economy. Imagine if in the 1970s, the United States decided that the semiconductor revolution, the computer revolution, was not for it and made Silicon Valley illegal, making Microsoft illegal, making Apple illegal, and all those companies went somewhere else. Ten years later, they say, "Well, maybe we got it wrong; let's come back." Do you think Germany can convince Microsoft, Google, and Apple to leave the United States now?

No matter how sweet they make it, no, it's too late. If you offshore the entire cryptocurrency industry, it won't come back, and what that translates to is a more grim economic reality for the United States as a whole. This deeply frustrates me. I went to college in a few places, one of which was Metro State. I remember, as a teenager, walking down 16th Street Mall, going through Civic Center Park, and spending time in Capitol Hill.

A girlfriend at the time had an apartment right off Capitol Hill, and I spent a lot of time there. There were some homeless people, but by no means as many as I see today. There weren't encampments in cities. The crime is much worse; you can see the luster of Denver fading.