DEBATE: BTC vs ETH; Which is more Sound Money?

BTC vs. ETH. It's the crypto title fight. Crypto is a non-zero sum game, but there can only be one #1 blockchain. Which of the two giants has the better monetary policy? What about roadmap? Community? Culture? Tune in as the two communities square off to find out which protocol is the more sound. ***** POOLTOGETHER | DEFI LOTTERY https://bankless.cc/PoolTogether ***** SUBSCRIBE TO NEWSLETTER: https://newsletter.banklesshq.com/ ️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/ ------ BANKLESS SPONSOR TOOLS: ️ ARBITRUM | SCALING ETHEREUM https://bankless.cc/Arbitrum MATCHA | DECENTRALIZED EXCHANGE AGGREGATOR https://bankless.cc/Matcha LEDGER | SECURE YOUR ASSETS https://bankless.cc/Ledger ALCHEMIX | SELF-PAYING LOANS http://bankless.cc/Alchemix ------ Topics Covered: 0:00 Intro 4:00 Dennis, Muneeb, and Justin 7:09 What is Money? 11:18 Soundness 14:32 Properties of Bitcoin 19:45 Bitcoin's Security 25:33 Stacks vs Rollups 31:55 Blockspace Value 35:25 Fee Markets & Security 41:05 Properties of Ethereum 45:08 Weak Subjectivity 53:07 Proof-of-Stake 1:01:55 Money vs Smart Contract Platform 1:08:17 Stacks 1:13:24 Money & Execution Layers 1:17:25 Attacking the Network 1:25:27 Slashing & Hard Forks 1:30:37 Soundness & Monetary Policy 1:39:02 Ossifying and Innovation 1:43:29 Closing & Disclaimers Resources: Justin on Twitter: https://twitter.com/drakefjustin?s=20 Dennis on Twitter: https://twitter.com/Dennis_Porter_?s=20 Muneeb on Twitter: https://twitter.com/muneeb?s=20 ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://newsletter.banklesshq.com/p/bankless-disclosures

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:06David Hoffman?

  Hey, Bankless Nation. Today, we are having a special episode, a debate about Bitcoin and Ether. The infamous debate, which one is money? What is sound money? Which one is more sound money? And joined me, co-moderating this debate, is Dennis Porter, who I've actually done one of these debates with before. So this is actually round two of an Ether vs. Bitcoin ultra-sound money debate. Dennis, are you ready to get started with this?

• 0:32Speaker 01

  Yeah, I'm ready. Thank you for having me on, David. I really appreciate it. I had a really great time last debate that we went back and forth. It was mostly civil, for the most part, so it was a good back and forth. We were able to discuss our points. It was more of a general Bitcoin vs. Ethereum type of conversation, but this one looks like we're going to be focusing a lot on sound money aspect of Bitcoin versus Ethereum. So I'm looking forward to having it. We'll be joined by a couple of great ones as well.

• 0:57David Hoffman?

  Absolutely, yeah. And so, as last debate, it was just me versus Dennis, and then eventually, we tapped in some people from the audience. We are bringing in some technical people as well. So I'm tapping in Justin Drake. And then Dennis, you want to intro who you have brought along for your teammate?

• 1:13Speaker 01

  Yeah, I brought along Maneep Ali. He's the founder of Stacks. He's building on Bitcoin is what they're working on, trying to bring smart contracts, NFTs, you name it. All the fun stuff that you Ethereum folks say can only be done on Ethereum. He's trying to bridge that gap with Stacks, so really interested to have him on. But also, the reason why I brought him on is mostly for his technical skills, technical savvy, similar to Drake, really understands the framework of how these technologies work.

• 1:41David Hoffman?

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• 3:04David Hoffman?

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• 3:45David Hoffman?

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• 4:29David Hoffman?

  You guys just met Dennis, but we are also joined by Muneeb Ali and Justin Drake. Muneeb, you want to tell us a little bit about yourself and your background and who you are?

• 4:40Speaker 02

  Of course. Thanks for having me. So I'm Muneeb. My background is mostly Disagreed Systems. I did a PhD in computer science at Princeton and then got into Bitcoin in around 2013. And many of you might know me mostly from the Bitcoin community, but a little known fact that I was actually part of the Genesis sale of Ethereum, and I have been involved in the Ethereum community. For example, was part of the seed round of OpenSea and a bunch of other things like that.

• 5:09David Hoffman?

  Fantastic, thanks for that color Muneeb. If you are a frequent Bankless listener, you probably know who Justin Drake is. But if you are new to Bankless, Justin, tell us a little bit about yourself, who you are, where you came from, and what you do in the world of crypto.

• 5:22Speaker 03

  Sure, so I'm Justin Drake from the Ethereum Foundation. I mostly work on a set of upgrades to Ethereum, which we used to call Ethereum 2.0, and that includes proof of stake and sharding. I guess my background is technology. I studied mathematics. I was an FPGA programmer in the past life Ethereum space. So I know a thing or two about Bitcoin as well.

• 5:43David Hoffman?

  And Dennis, I know we talked a little bit about you in the intro, but also want to tell us a little bit about yourself and your background and how you came to be in the world of Bitcoin?

• 5:50Speaker 01

  Yeah, I jumped into the world of Bitcoin in 2017. Tried to go all in on mining, but that was a lost endeavor. Eventually, I decided to kind of hunker down for a couple of years, do my due diligence, study this asset, study this market. I'm a Bitcoin-only kind of guy. Some would call me a maximalist. Prefer to go by Bitcoin-only. But now I've jumped fully all in on the world of content creation. So I started a podcast called Smart People Shit, and I also do another show called The Update, where I regularly update my listeners on what's going on in the space. Also a very avid and consistent contributor to Twitter Spaces, where I do some of the Better Rooms. Also involved politically as well, so helping candidates like Erica Rhodes in California's 30th District try to take down the most anti-Bitcoin congressman in office right now.

• 6:36David Hoffman?

  Fantastic. Thank you for that, Dennis. And for anyone tuning into Bankless for the first time, I'm David Hoffman, co-host of Bankless, where we are big proponents as ether, as money, decentralized finance, and overall, living a bankless life and promoting tools that helps one live a bankless life. And with that, out of the way, gentlemen, I think we need to start this conversation by setting some foundations. And the whole point of this conversation is figuring out which one of these assets is more money. But first, we need to figure out what money is, and importantly, what is sound money? So Dennis, in your opinion, what do you think sound money is?

• 7:12Speaker 01

  I'll keep it real brief and short and simple here. Let's start with what money is. Money is a tool. We discovered it 10,000 years ago. It's what helped us form societies. We use it for storing value, transferring value, and measuring value. For me, sound money is money that is not prone to sudden changes, appreciation or depreciation, and purchasing power over the long term. So, pretty short and sweet. It has three uses: storing, transferring, and measuring value. And then as sound money, it maintains its value, doesn't go up or down appreciation or depreciation rapidly in the short term

• 7:54Speaker 01

  or long term. Obviously, we'll get a little bit more into that as we continue, but just keep it simple for now.

• 7:58David Hoffman?

  Justin, how about your definition of money and sound money? What is sound money to you?

• 8:04Speaker 03

  Right. So for me, money is basically an asset which has monetary premium. Monetary premium being this magic meme energy, economic energy, that provides this asset more value than the base utility. And the classic example in my mind is gold, right? Gold has this industrial utility. It's used in every single iPhone. But if we were to try and value gold purely on utilitarian terms, it would be worth maybe a trillion dollars. But it turns out that it's worth more like $10 trillion. And so, this extra value is monetary premium, partly because it's used as money, and so it gains this premium.

• 8:46Speaker 03

  In terms of what is sound money, for me, it's kind of the the ability to simply to accrue and maintain this this monetary premium. And so basically, there's a there's a space component and a time component. The the space component is how how much monetary premium can can it accrue? How big can it become? And the time component is how well can it retain this monetary premium over time?

• 9:13David Hoffman?

  I love that answer as well. Muneeb, tell us about your opinions of money and sound money. What what properties are required to produce sound money?

• 9:23Speaker 02

  Yeah, I think I think in my mind, money differs from sound money quite drastically. Like in the sense that money would focus more on the medium of exchange part. Like anything that you can use on a day to day basis. Like for example, if you're traveling, you land in a new country, you pick up the local currency there and then you spend it. Right, but you don't you don't think about that currency as like a long term store of value. The minute you were to think about that currency as a long term store of value, you would actually evaluate it very differently. So I think in terms of as soon as you start talking about sound money, I think you start looking more into the long term store of value. And potentially the unit of account, right?

• 10:05Speaker 02

  So if I'm if I'm holding sound money for over, let's say, a very long time, like a decade or or something. Then I I want to make sure that, you know, how will other things get priced against this asset? So that's that's kind of like the difference in my mind.

• 10:22Speaker 03

  So one concept that I use internally to not have this confusion about money and sound money is I I use the term currency instead of money. Right, because what is currency comes from the word current is basically money that flows. And so really, I think it's it's important to distinguish maybe for this conversation, currency. And you even said the word currency, Muneeb, and money, which I guess for this conversation will be sound money.

• 10:48David Hoffman?

  So I don't think either of us, either two parties, the Bitcoin or the ETH party, is interested in their money being currency. I think we both are okay with it being currency, but really what we're going after here is the sound money property. And ultimately, this is basically like, which asset's number is going to go up the most, more or less over time? If you really bake down the things, like which one holds its value and accrues and captures its value over time the most? Does anyone have any problems with that differentiation?

• 11:19Speaker 01

  I mean, just to be clear there, though, sound money, when you are looking at the definition of it, it doesn't necessarily have to go up in value over time. It can also go down in value over time, as long as it's very slow and incremental over time. So if you're looking at the actual definition, yes, we would all want our sound money to go up over time, obviously, but the true definition is a stable money, not necessarily a money that always goes up in value.

• 11:43David Hoffman?

  Okay, alright.

• 11:45Speaker 03

  So I think that's a very historical definition, and I think the notion of money is all around shelling points, and these shelling points change as technology progresses over time. And so what might have been a reasonable definition of sound money in the past, you can list a bunch of properties, if you are able to innovate and come up with properties that transcend these old properties, then suddenly you've redefined the notion of money. And part of the reason is because there's this comparative dynamic, or even competitive dynamic. And you can look at, for example, with gold and Bitcoin, right?

• 12:25Speaker 03

  It's possible that Bitcoin will defroin gold, and gold will no longer be considered sound money, maybe because it doesn't have properties such as being digital. And so really, it's important to look at these shelling points and properties in the context of time and innovation.

• 12:42David Hoffman?

  I think, said differently, there's a Gresham's Law in economics where it's called "bad money drives out good." And I think that's what Justin Drake is saying, where, "Well, Bitcoin and gold, they have really similar properties, but what one do you think is going to drive out the other?" And I think maybe Gresham's Law is basically saying, "Well, money collapses, converges down to sound money over time."

• 13:05Speaker 01

  I think it's important to know this there too, that it doesn't make it not sound money any longer. I think just that in over history, humans coalesce around the soundest money. So gold didn't stop being sound money, it's just that Bitcoin is much sounder than gold. Just like how gold stole monetary premium away from silver, Bitcoin will steal monetary premium away from gold. So just a little bit of nuance there, I don't think we necessarily disagree.

• 13:34Speaker 02

  Yeah, I'll share my mental model there, like in terms of when you mentioned that numbers going up far. Like, I think interestingly, like currency is a solved problem, right? So like, there's nothing kind of like new there. We already have currencies and we use them on a daily basis. But sound money, interestingly, is not a solved problem in today's world. And whichever solution you look at, you know, look at Bitcoin or ETH, I think both are in their discovery phase right then. And in the discovery phase, you're likely going to go up in value because their market sizes are potentially much larger than the market size today, right? And once you actually reach a stable point, then it will be interesting to see that the sound money aspect,

• 14:15Speaker 02

  does it retain value, go up in value, or actually slowly lose value over time?

• 14:21David Hoffman?

  Yeah, I feel like that is now adequately defined. So unless anyone wants any final statements about the definition of sound money, I think we can go ahead and get into the differences of monetary properties of Bitcoin and Ether. Sound good? Alright, so since Bitcoin came first in history, I think Bitcoiners get to go first on this one. Dennis Muneeb, what about the properties of Bitcoin make it the most sound money?

• 14:45Speaker 01

  Muneeb, you want to go or me?

• 14:47Speaker 02

  I think you can go first.

• 14:48Speaker 01

  Okay, yeah, for me, the attributes that make Bitcoin sound money, that protect its ability to be sound money, are the fact that its issuance is extremely stable and highly predictable. Bitcoin has a hard supply cap, so that cap is set in stone at 21 million, can never go up, can never go down. Obviously, people could burn their Bitcoin, make it even more scarce. It's also very extremely difficult to create. It requires a large amount of energy. Labor theory of value kind of kicks in here in this place.

• 15:28Speaker 01

  But most important to me, the reason why I believe that Bitcoin is the most sound money is not just because it is extremely stable, very difficult, or nearly impossible theoretically to corrupt or manipulate by governments or those in power, but because these components themselves cannot be changed. So it's very stable, highly predictable, can't be changed. Bitcoin has a hard supply cap, can't be changed. It's very difficult to create, and that actually goes up in difficulty over time, which increases its value and makes it more sound. So the biggest part for me, when you're looking at sound money is, does it have the attributes that you and I will probably agree on?

• 16:14Speaker 01

  But the one thing that I think is the most important is removing human control or the human ability to manipulate the issuance or the supply cap of that money at any given time.

• 16:28David Hoffman?

  Munee, before I bring in Justin here, do you want to add anything on to that?

• 16:32Speaker 02

  Yeah, I think my lens is a little bit more technical, like in the sense that, for me, the fact that there is proof of work, I'm like involved here, actually adds to the fact that it is sound money. Like in the sense that, you know, back in the day, people would actually do some work to dig up gold, and that actually adds an element of scarcity here, right? And I think that is a fundamental component of the proof of work. And I would say, secondly, when it's easy to define, you know, some sort of new cryptocurrency and basically say that it has a hard cap. I think that's relatively simple to do. I think what's like much more interesting here is

• 17:17Speaker 02

  the community that has emerged over the last decade around Bitcoin and how they have basically inherited this value. And they're kind of like the defendants of the 21 million cap. And I think it's the value add by the users of the network and the community of the network. And the last part there would be that Bitcoin as a network was really designed from day one to be a global network. Where meaning that anyone around the world with, you know, a normal laptop computer could actually open up their laptop and independently verify that this is the correct state and I

• 17:59Speaker 02

  have the right number balances. So I think it's a combination of these things like Uber work with global access along with a community that is going to basically die on the hill of like you would never be able to change the change supply.

• 18:13David Hoffman?

  I think that's interesting, Manib, that you're adding in the community behind one of Bitcoin's defense layers because I've frequently got into debate about like whether or not Bitcoin has a social contract or not. And many, many Bitcoiners will say that Bitcoin doesn't rely on humans at all. It actually relies on math and math alone. That's one of the properties about Bitcoin. But are you saying that there's actually a community human involvement that also puts up a shield around Bitcoin and makes it immutable?

• 18:43Speaker 02

  I think basically what I've noticed is Bitcoin makes it extremely hard to make changes at the consensus level. So the threshold to making any changes to the consensus level is extremely high, like the number of miners required, the number of scrutiny required for any even small changes. And that that sometimes gets criticized as well that Bitcoin doesn't evolve, doesn't change that rapidly. And I think the community where they play a role, and I think this was very apparent in the, in kind of like the block size wars, where the community was basically was, at one point, even the big companies and exchanges were on one side. But it was the average users who basically said, we're not going to let this change pass through. We just outright reject it. So I don't think that they have

• 19:26Speaker 02

  the property of coming together to define a change, but they're just very, very good at rejecting changes. And basically saying that we will always fall back to the base case to make no change.

• 19:39David Hoffman?

  Justin, has anything that Dennis or Manib said raised a flag in your mind about the soundness of money?

• 19:47Speaker 03

  Yes, so I think the the main red flag is basically the the security aspect of Bitcoin. I I just don't see the long term security aspect of Bitcoin. I think it's it's a broken design, to be completely honest. I think part of the reason I think it's a completely broken design from a security standpoint is because its lin- its security Lindy resets every four years. So every four years, you know, we're we're asking the question, can Bitcoin be secured on smaller issuance? And in that sense, you can kind of think of Satoshi as kind of this this D Gen blockchain designer, kind of trying to see how far he can push

• 20:32Speaker 03

  down the security of Bitcoin until eventually it it kind of breaks. And so it's kind of like slowly boiling the frog over several decades and and kind of seeing if and when it breaks. I guess the the answer that Bitcoiners would would put forward here is that Bitcoin will be secured by by transaction fees. I mean, we already discussed that, you know, transaction fees is kind of great B fuel for a number of reasons. One of them is that it's very volatile, it's also can be stolen. But even if we remove kind of these issues, if we just look at the quantitative aspect of transaction fees,

• 21:11Speaker 03

  today, transaction fees on Bitcoin is about 2% of of the issuance, so like 50 times less. And if you compare it to other systems like Ethereum, it's also 50 times less. And basically, you can ask yourself, why is that? And I think the answer is basically that Bitcoin provides very little transactional utility. The utility of Bitcoin is in the hodling, is in the not moving. You buy Bitcoin, you put it in a cold wallet, you hold it for two decades and then, you know, you sell it. And so that's two transactions over over two two decades. And so basically Bitcoin has in a way cannibalized its security, you know, plan

• 21:54Speaker 03

  by not adopting, you know, a virtual machine that allows for programmability. And but then, you know, a Bitcoiner such as Munir might come in and say, hey, I have stacks and I will provide programmability and I will provide, you know, scalability, you know, through this sidechain. But the problem with sidechains is that they leach transaction fees. So if you have a transaction on stacks, that transaction or utility is going to be captured by the stacks network. It's not going to be captured by Bitcoin. But then you might say, hey, hold on. In order to have transactions on stacks, we need to have, you know, deposits and withdrawals to and from stacks. And, you know, those would go through Bitcoin. And so

• 22:39Speaker 03

  you'd be, you know, paying fees on Bitcoin. But that's also not the case in the long term. If you have a very successful sidechain, all the deposits and withdrawals and all the bridging will happen natively with that blockchain. Like, one very easy example is an exchange, right? An exchange can just hold a lot of wrapped Bitcoin on stacks. And basically, when someone buys Bitcoin stacks, it just goes directly to that user internally to the stacks. And so really, the model of scalability and programmability for Bitcoin is inconsistent with its security. And then, once you don't have security, you've lost you've lost everything, you know. And one of the things that you've lost in particular,

• 23:20Speaker 03

  most likely, is your scarcity. Like, the whole, you know, meme and narrative of having this 21 million cap is an illusion, right? It might hold true in the short term. But really, what Bitcoiners are doing is that they're trading off short-term predictability. Sorry, they're trading off long-term predictability for short-term predictability. So in the short term, we can understand this monetary schedule very, very well. But at some point, it becomes unsustainable and something must change in the long term.

• 23:53Speaker 01

  I want to get Manib to jump in on the stack stuff, but there was one thing at the very beginning that you had said that I thought was interesting that I'd like to address. But Manibel, I think, addressed the majority of what you just said. But in the very beginning, you were talking about issuance and supply issuance. Well, the difference between, I think, really Ethereum and Bitcoin, which is a very important distinction here, is issuance versus a supply schedule. There's no issuance rate on Bitcoin. It's purely just a supply schedule. And in 2140, when it is finished, there will be no more supply issued. With Ethereum, the problem I see when you decide to say, well, we need to have an issuance rate that we can manipulate or change,

• 24:36Speaker 01

  that's when you introduce the question of how much is enough? How much issuance is enough for minimum viable security? And unfortunately, when you start asking that question, the only person who can answer it is a human being. And thus being a human being coming into the situation, it requires human control and human manipulation over the monetary supply, over the monetary schedule. And so that's why I prefer a supply schedule. When you say that it's only dependent on fees, yeah, that is the future that Bitcoiners see. I'm so bullish on the price of Bitcoin that I do believe that fees, and they have over time. If you look at it, there's charts out there you can look up. I can't post any here like I normally do on Twitter Spaces. I can post some charts up top.

• 25:14David Hoffman?

  If you send me a link, I can share.

• 25:16Speaker 01

  Yeah, there are charts that show the fees are, over time, predicted to become the dominant reward when mining. But I would love for, obviously, Justin, I'm sure you probably had something to say back to that, but I think Manib should address the stacks.

• 25:31Speaker 02

  Yeah, I think that's a very well-known type of criticism for Bitcoin's supply. And like, how would the incentives work once the Bitcoins run off? And I think the way to think about this is that, first of all, let's separate out proof of work from the incentive part. So proof of work will keep functioning, right? Like, that thing is there as long as there are incentives for miners to mine. They will keep doing the work and at some difficulty level, and they will still secure that. Interestingly, I think you can look at the phase during which the point-based rewards are coming out as almost like a bootstrapping phase for Bitcoin, right?

• 26:13Speaker 02

  And I think the biggest difference between, you know, my mental view and Justin's mental model here is that I actually don't look at Bitcoin as a transaction notebook at all. So it doesn't matter to me how many transactions Bitcoin is doing. I look at Bitcoin as a settlement layer, right? And that's, that's literally how Stacks is defined as well. So it's actually not, not a side chain, like we call it a layer 1.5. And it has cross-layer consensus between Bitcoin and Stacks, meaning that the consensus transactions are literally happening with Bitcoin. So the Stacks miners are heavily incentivized to pay very high transaction fees because they want to mine a block. So if the incentives on Stacks go up, incentives on the Bitcoin side also go up.

• 26:56Speaker 02

  And those incentives are not point-based rewards, they are actually transaction fees. So these people, like if Stacks is valuable, Stacks has a, you know, 3.5 billion dollar market cap right now, very small in the grand scheme of things. But if Stacks is successful and there are more incentives there that actually directly results in more transaction fees, very high transaction fees, because these people are heavily competing with each other. And that's the settlement use case. And I see Bitcoin as mostly as a settlement layer. And I think that given the limited block space of Bitcoin, people will be willing to pay insanely high transaction fees to put any data on, on, on the chain. And so I'm actually not worried about the incentive mechanism for, for work in the long term.

• 27:41David Hoffman?

  Justin, do you have anything you want to say to that?

• 27:44Speaker 03

  Yeah, I mean, I, I think the most interesting point is on the, the settlement layer. But I'm happy to also reply to Dennis. But I mean, I'm, I'm very curious to, to know basically how much is Stacks paying? Like the way, the way that in, in the firm land, we have shared security is basically through rollups where basically these, these rollups pay for putting data on, on the shards on the Ethereum blockchain. And this is exactly the words you use, pay for putting data on the blockchain. Now, my, my understanding is that Bitcoin is not rollup friendly. So you can't have, you can't have this model. Instead, you might have a, a, a, a different model. And my question to you is basically.

• 28:28Speaker 03

  If you have twice as many transactions on stacks, does it mean that you're putting twice as much data on the Bitcoin blockchain? My guess is that you're going to say the answer is no, like there's going to be every single block, you know, there's at most a constant amount of block space that's going to be consumed. And that's going to be orthogonal to the transactional utility that that stack is providing.

• 28:52Speaker 02

  Yeah, so that's, that's, that's not how it works. And basically, let me clarify the roll up point a little bit. So I think the only difference between rollups on the Ethereum side and rollups, rollup type systems on the Bitcoin side is the computational power, right? So Bitcoin does not have a full Turing complete programming language, but it does have Bitcoin script. And you could do limited type of computations there. We don't even do that, right? So we mostly are automatically publishing hashes on the Bitcoin side, but this is actually cross consensus. Meaning that part of the, part of your application is literally running on the Bitcoin side. I'll, I'll give you an example of a Bitcoin lending application.

• 29:33Speaker 02

  So the Bitcoin lending application has your Bitcoin on the Bitcoin main chain. If you're lending your Bitcoin, you're actually paying a Bitcoin transaction fee to send out your Bitcoin. Your collateral in, in a stablecoin could be in a smart contract on the stack side. Right? So you, I think the fundamental disagreement again between the Bitcoin and Ethereum camps is this idea that you need a full Turing complete language at the base layer. In our world, we're like, you don't need the full Turing complete language on the base layer. You can still build applications without having the full Turing complete language.

• 30:05Speaker 03

  I mean, the key word that you said here was hash, right? And not data. And there's a very different distinction between a hash of the data and the data, right? Hash is constant size.

• 30:16Speaker 02

  Yes, but it depends on, it's, it's depend on the, it's the order of applications, not order of something else. So it's order of usage, how many users, how many applications are, but let's even forget about the hashes. At the, at the end of the day, we're talking about a very scarce resource, which is the block space. I think you and I would agree that the block space can grow infinitely. So the block space in Ethereum is, is scarce, block space on Bitcoin is scarce. And at some point, the transaction fees is really how much are people willing to pay to write anything, doesn't matter if it's a hash, doesn't matter if it's something else. If they're willing to pay to write to a scarce resource. And that's where the value of the transaction fee is coming from.

• 30:58Speaker 03

  It does matter because if you're making one single checkpoint every single block, for example, then you're putting, you just need, you know, one transaction per block, and that's a constant amount. And so there's, there won't be necessarily a competitive dynamic there.

• 31:12Speaker 02

  Is your, is your argument that Bitcoin block space will not be scarce? The people won't be willing to pay a high transaction.

• 31:18Speaker 03

  No, no, is that the, the demand for the, for the, for the block space won't be that large because it's only one hash or one transaction per block.

• 31:27Speaker 02

  So I will disagree on two points. A, it's not one hash per block, like that's not how Stax works. It's, it's a big O of miners, the number of miners, plus the application.

• 31:37Speaker 03

  Okay.

• 31:37Speaker 02

  So it's a, so a big O of miners plus a big O of applications that are doing the cross-chain consensus, meaning part of their data is literally on the Bitcoin side. And secondly, I would say that I am willing to take the bet that the block space in Bitcoin is going to be insanely valuable by the time the point-based rewards actually run out.

• 31:56David Hoffman?

  So let, let's go back to that, that point because I keep my, I can't get my head around how Bitcoin's block space becomes insanely valuable while also, Muneeb, you said that Bitcoin is a settlement network, not a transactional network, right? It's not, it's not a Visa, it's not a Mastercard, it's just where Bitcoins come to, to settle, which seems to be in alignment with what Justin was saying, where the main use case for BTC is holding, it's for saving your wealth. You can use Bitcoin without actually ever making a transaction on the network for years, if not decades. In theory, Satoshi has used Bitcoin without actually making a transaction on, on it ever since 2009. And so where do you think all of this demand for Bitcoin block space,

• 32:40David Hoffman?

  which is the way that the block space, block chain sustains its own security? Where do you think this demand comes from?

• 32:46Speaker 02

  Yeah, I think I have a great example that actually answers your question and Justin's critique as well. So recently Bitcoin NFTs started picking off. So every single NFT has its data, the hash, stored on Bitcoin, and every single transfer also results in information, right? So if you just look at an NFT market, so again, it's a big O of NFTs here, not a big O of the...

• 33:12David Hoffman?

  We're gonna need you guys to define big O because that goes off my head.

• 33:16Speaker 02

  So big O is basically it's a, I mean, let me try to simplify it. So when you're looking at a function, what is the input? That is going to grow, that is the main vector that is going to help grow something, right? So if something is dependent on the number of miners, then let's say if miners go from 10 to 100, the, the, the resulting function is going to grow based on that, right? So let's say if something is dependent on the, on the block, the number of blocks, but not the transactions. So it doesn't matter if you do 10 transactions or 1,000 transactions. It's only going to do like one hash per block because it's, it's, it's based on the blocks, not on the transaction. Right? So in, in this example, in NFT's example, I think is the perfect one.

• 33:59Speaker 02

  Because then the data on Bitcoin is growing

• 34:05Speaker 02

  based on the number of NFTs, not based on the stack's blocks. Right?

• 34:10Speaker 01

  Okay.

• 34:10Speaker 02

  And, and so in, in, in that sense, I think that, that example basically clarifies that, that why would Bitcoins block space be valuable? Because if Bitcoin NFTs are taking off, then people are paying, paying for them.

• 34:23Speaker 01

  But also real, just real quickly too, I think, you know, we're looking far into the future here when you're talking about the, the supply schedule being complete and there being, you know, the final 21 million Bitcoin. The world in our eyes is fully on a Bitcoin standard. Everybody is using it. I think a lot of us see the, the block space on Bitcoin. It probably won't be used by the average person, the average user. It'll be used by very large institutions, banks for trade, global trade, where they will want to see finality on very large transactions. And so far into the future, when, you know, all of us are dead, because that's how far away

• 35:05Speaker 01

  it is when the reward runs out, not a single person on the planet today will probably be alive unless they live for, I mean, I guess I could live for 120 years. But that space will be used by the very, very large institutions, global trade, and they will most definitely be able to keep the value of that block space up.

• 35:25David Hoffman?

  Okay, so I want to return to one of the original question, which is we started talking about ETH and Bitcoin as sound money based on the sustainability of the chain. And so Dennis and many of you guys just gave some cases as to why there will be block space demand, which will generate the fee market required to sustain Bitcoin. But I would contend that the growing fee market of Bitcoin actually needs to increase at a rate that's commensurate to the actual growing in value of BTC, because it's one thing to have dollar-denominated transaction fees be sustainable, but I don't think we want to secure our chains based on

• 36:07David Hoffman?

  the value of the dollar, because the value of the dollar is fleeting. So in a Bitcoin-denominated world, the value of the Bitcoin blockchain, the security budget, needs to be sufficiently large in Bitcoin terms. And I think even with the decreasing fee budget in Bitcoin terms, the growing dollar value doesn't grow at a rate fast enough to maintain security when the value of a Bitcoin is growing way faster than the value of a dollar. Does that all make sense?

• 36:36Speaker 02

  I think it makes sense like what you're trying to say, but I think my answer is pretty simple there. Like, I look at Bitcoin's security budget to be something where it needs to be so high that even a state actor would find it very hard to attack them. So when people talk about difficulty, that Bitcoin difficulty is going down, like recently, for example, Bitcoin difficulty went down when miners moved out to China, I wasn't worried about it at all, because on an absolute scale, the difficulty level is so high that the Bitcoin network is secure, right? So what we're talking about is really, I think we can put aside like proof of work, we can just look at the incentives available for the miners, and are the incentives resulting

• 37:19Speaker 02

  in a high enough difficulty level that a state actor would find it very hard to actually come in and attack the proof of work, right? So I think that value, that number, given like how early we are in prepare right now, and that difficulty level is already so high, I think 20 years from now, 30 years from now, maintaining that level of difficulty wouldn't be an issue in my view.

• 37:44Speaker 01

  Another thing here too, I'd really like, Justin, did you want to give final comments there? Because I, since we're co-moderating, I think it would be good to also kind of flip this now and try to move the other direction. But I think, Justin, you should get the final comments here. But to start to move towards is, why is Ethereum sound money? You know, what's your argument about that? You know, because obviously, we could go back and forth all day on Bitcoin here. But would like to kind of hear what your guys' points are for why Ethereum is sound money? And then, obviously, get the back and forth. But, Justin, final comments on what Muneeb just said.

• 38:15Speaker 03

  Yeah, so Muneeb just talked about, you know, resistance to state-level actors. I think that's an illusion. Basically, you can try and quantify the security. And you can talk about, basically, economic security, like how much economic resources are securing a particular blockchain. And when you look at Bitcoin, it's relatively, you know, straightforward. What you do is you take the hash rate, which is about 150 million terahashes per second, and then you ask yourself, how much does it cost to manufacture and deploy one terahash per second? Now, my rough guess is that it's roughly $50. But, you know, some Bitcoiners will say, you know, maybe it's like $100. But I don't think any reasonable Bitcoiner will tell you that it's above $100.

• 39:00Speaker 03

  And so, basically, we're looking at roughly $15 billion of economic security. And in the grand scheme of things, that's peanuts, right? Like, if you look at the security budget, for example, of, you know, of the US, it's, you know, like $750 billion per year, you know, for its army. And now, you know, maybe that's a good segue into why Ethereum is sound money, is you can, you can start looking at, you know, the economic security of Ethereum. And it turns out, it's several times larger than Bitcoin. And for Ethereum, it's even easier to see what the economic security is, is you just

• 39:42Speaker 03

  take the number of ETH tokens, which are currently staked, multiplied by the price of each token, and you get roughly $32 billion. So even today, it's, you know, two to four times larger economic security versus Bitcoin. And I still believe that $32 billion is too small, right? We need to have... A trillion dollars of economic security and I see a roadmap where Ethereum to achieve that, you know, partly because we have this guaranteed issuance, but I just don't see it for Bitcoin in the context of this exponentially decreasing issuance.

• 40:22David Hoffman?

  And just to ground the listeners so far, the reason why we've been talking about transaction fees and transaction volume inside of blockchains and security is that all of these things relate to the soundness of the money because it's relates to its ability to hold value over time. So when blockchains can be secure over time, the money of the blockchain can also hold its value over time. Just wanted to make sure that we had the listeners grounded on that.

• 40:48Speaker 01

  Yeah, that's a fair point to make, just so that people kind of understand where we're coming from. We moved away from the aspects of money to being just purely security focused. So I'm sure we won't need to cover security too much when it comes to the conversation around why Ethereum is sound money. So let's go ahead and do that with you and David and Justin. Why do you believe that Ether is the most sound money?

• 41:12David Hoffman?

  Well, to

• 41:13Speaker 01

  David, you want to go first?

• 41:13David Hoffman?

  Yeah, to elaborate on what Justin said, I think the proof of state consensus mechanism is the most efficient consensus mechanism possible. Proof of state collapses down the cost of providing security down to the absolute minimum. A computer connected internet computer, internet connected computer, excuse me, and which most everyone already has. And then after that, what's left is capital. And really, when you think about it, all consensus mechanisms, all security mechanisms are just a bit of computing power, an internet connection, and then something for that individual to lose if they do something wrong. And capital is the most efficient form of that, right? If they have a bunch of capital at stake,

• 41:56David Hoffman?

  they have a significant incentive to not lie to the blockchain, which is what makes the blockchain secure. Proof of work has the same dynamic. There is computers with computational resources. The Bitcoin computers are really, really big computers with a lot of computational resources. And then they also represent capital as well, roughly one third Proof of work staking or validation comes from the fact that the cost of operating a mining farm is one third computer hardware, which kind of is your stake. It's kind of like proof of stake with extra steps. But the collapsing of security down to proof of stake allows for really, really efficient security.

• 42:35David Hoffman?

  And what this means is when you have efficient security is that it actually costs very little to secure your blockchain. And when it costs very little to secure your blockchain, you don't have to issue as much money to pay for security. And so because the costs of security are really, really efficient. So you have very, very little issuance to secure a very large market cap of economic activity, which goes and lends itself to the property of sound money. If you have a global crypto economic system that is secured by the most efficient consensus mechanism possible, which I believe is proof of stake, then you have the least amount of issuance possible,

• 43:17David Hoffman?

  which retains the value of the supply of the currency by issuing the least while being able to secure the system. So proof of stake is one of the properties that makes Ether very, very sound money.

• 43:30Speaker 02

  Yeah, let me ask a couple of questions there. So I think there are two aspects of proof of stake that I generally have concerns about. And by the way, just to clarify, I think proof of stake can work for certain types of applications where the stakes aren't that high. But we are talking about building a global reserve currency and people's livelihoods are dependent on this. And this is kind of like the base layer system upon which everything else is dependent on. So the stakes are very, very high over here. So I think the issue in my mind with proof of stake is kind of two poles. The first one is if you go back to the beginning of this podcast,

• 44:11Speaker 02

  I was talking about that can a normal person, a normal user of the internet, just on their laptop, independently verify that is this the correct version of the blockchain or not? Right? So that you can't do with proof of stake because of the bootstrapping problem. Uh, we will, we can, we can debate that, but I, I think this is, this is almost like a, a proven theorem in computer, computer science that you have a bootstrapping problem with a stake. You have to trust certain nodes to be able to boot up. You can't boot up on, on your own. I, I think Justin is, is, wants to say something over here. So let, let him, let him.

• 44:49Speaker 03

  No, go ahead. Um, I mean, you're talking about.

• 44:53Speaker 02

  Yeah. So I guess I can, I can, I can define the problem very concretely, right? So let's say I'm, I'm a user. I'm sitting somewhere in Japan and somebody gives me like five different copies of the Bitcoin blockchain. Uh, I don't have to talk to anyone to independently verify which version should I go for. Wait, if I'm the same user sitting in Japan, someone gives me five copies of a proof of state blockchain. I don't know what to do. Like I have no idea how to verify which copy is the correct one.

• 45:23Speaker 03

  Yeah. So this, this is something that's been like talked about, uh, at, at, at Nozam. Um, and basically, um, you, you can, you can argue that Bitcoin as well has weak subjectivity in, in pretty much the exact same way. Um, basically the problem is that, you know, if you, if for some reason you're a caveman and you've been disconnected from the internet for, for a very long amount of time, you know, years. And you, and, and you come out of your cave and you, you, you, you, you run your, your, your, your Bitcoin clients, then you know, you'll be able to sync to, to, to, to the head. I mean, that's, that's just not true in practice. You know, one reason, for example, is that, um,

• 46:05Speaker 03

  you need to be downloading the latest version of, of the software, you know, to have all the security patches to be able to, to run the latest consensus rules and, and, and verify them. And so in the process of downloading this latest client, you, unless you're going to be verifying, you know, if your caveman is very sophisticated and he's going to verify every single line of code, which no one does, they're going to be trusting basically this, that source of where you've, you, you, you've downloaded the, the software. Another aspect of weak subjectivity which exists in Bitcoin is basically the.

• 46:37Speaker 03

  The peer-to-peer networking bootstrap nodes. So when you connect to the network, basically, there's a set of IP addresses, which is, which you're gonna query the very first time you run your software. And if for some reason or another, these IP addresses are compromised, then they can just give you a version of the world, which is just not the true version. And so they can fool you into believing that some chain is the longest chain, when actually it's not.

• 47:10Speaker 03

  And so weak subjectivity is just a fact of life for both Bitcoin and Ethereum.

• 47:15Speaker 02

  I absolutely disagree here because I think the core invention behind blockchains is that you can trust the state of the blockchain independently. Like, if you take away that core property, like, the rest of the problems that you're describing, those are all known computer science problems with really good solutions. Like, how do you verify a software download? How do you verify that you're connecting to the right peers? And can verify that you're downloading the data chunks accordingly? Like, these things have existed even before blockchains, right? Like, these things have been there for like 20 years or something like that. The only new thing that blockchain are adding

• 47:55Speaker 02

  is that you can independently verify that this is the correct version of the blockchain. If you are throwing away that property, then you start entering the land of like, why are you using a blockchain? Just like, start trusting other people for running some sort of a consensus system.

• 48:14Speaker 03

  To be clear, you don't have to trust people if you stay offline a small enough period of time. And, you know, you talk about verifying, like, the, you know, where you download the software from. I'm imagining you talking about signatures. So basically, if you're gonna download Bitcoin Core, you're gonna be verifying, I don't know, Peter Waller's signature or whatever. And, but, you know, here you're trusting Peter Waller, you know, and it's the exact same thing with subjectivity. The way that you bootstrap from weak subjectivity is that you have whatever trust assumption you wanna make, and then they will give you some sort of state of, a checkpoint of the state, and then you can take it from there. But again, this checkpointing mechanism is only required if you're a caveman, which most people are not.

• 48:58Speaker 03

  And if you are a caveman, then the same problem applies to Bitcoin.

• 49:02Speaker 02

  I think this this problem is much deeper than that, right? Because it's first of all, it's not about cavemen, but in in the ethos of decentralization, a normal user should be able to self verify that is this the correct copy or not? So you're basically breaking the number one ethos of decentralization that a normal user cannot self verify. You always have to trust somebody else to be able to then verify that, okay, I can only verify if I trust the initial state and then I can verify the state from there.

• 49:30Speaker 03

  No, no, it's not just the initial state, it's the software as well. Like, are you, as a normal user, going to read every single line of code and compile from source and run the execution?

• 49:40Speaker 02

  We we can get into how to verify that you have the right software. There are many ways of actually doing that, like people, people have been solving that problem for ages. That's not a unique thing to Bitcoin, like you're you're you're conflating how you verify that you got the correct copy of the software with verifying a blockchain. Like, you, can you all agree that it's important to verify that the blockchain state is correct or not? Or be able to independently verify that blockchain state is correct? Then why do you even use a blockchain? Then you just you just trust whatever is running on the other side of of of your computer.

• 50:15Speaker 03

  When you have a state machine, you have the state, but you also have the state transition function. And that is going to be your your code and you can't just dissociate the two, just verify the state without, you know, verifying the the state transition function, you need the two verified.

• 50:30Speaker 02

  So let me, let me, let me pose the same problem in a different way. Because of Bitcoin's proof of work, let's say there's an attacker that wants to fool you and is trying to create multiple invalid versions of the history. Every single fork actually requires an insane amount of work to be done. So the attacker is limited in how many blockchain histories the attacker can actually produce to even present to you. Whereas in proof of stake, I can give you a million different copies of a blockchain and you wouldn't be able to tell which one is the correct one. Because it requires me just signatures to create a million different copies and a million different histories of a proof of stake blockchain.

• 51:10Speaker 03

  No, because in the context of Bitcoin, you can have, you know, if you're attacking the networking layer with these bootstrap nodes, you can have an eclipse attack and basically you can censor every single, you know, chain that has done a lot of work. And so even just a small amount of work is enough to fool. And same thing for the code, you can have consensus rules, which just fork off because they consider invalid change, you know, legitimate change which have done a lot of work. And then therefore you're falling back to these insecure chains, which have done almost no work.

• 51:44Speaker 02

  Sorry, sorry. Let's say, let me make it more concrete. Let's say I want to make a change that goes 30 days back. I would need to do 30 days of work to be able to create that separate version of the chain, right?

• 51:55Speaker 01

  Real quick though, Kameen, could you do one, this last comment here and then Justin? And we should probably get back to proof of stake, just like.

• 52:01Speaker 03

  We should move on, yes.

• 52:02Speaker 01

  Yeah, but like, Kameen and then Justin, one more.

• 52:05Speaker 02

  Sure. So I think what I'm saying is, let's make it attack very concrete. Let's say I'm an attacker. I want to change the history of the blockchain 30 days back. So in proof of work, I'll have to do 30 days of work to be able to even try to fool somebody that this is not the correct version of blockchain. Like, that's the core. In a proof of stake system, I can give you 10 million different copies that each have a different version 30 days back without doing any work. That's the part of the argument.

• 52:36Speaker 03

  The work argument doesn't hold because you can have rules which disqualify chains which have done a lot of work. And so you could have a chain, for example, which, where the difficulty kind of decreases, you know, in such a way that, or, you know, a chain with very few blocks, for example. Once you mess around with the state transition function, you can't validate state. That's like a fundamental.

• 53:05Speaker 03

  Premise.

• 53:07Speaker 01

  Some of the things that I'd like to go back to, because just in regards to some of the points that David was bringing up, some of my core issues around proof of stake, which my bit, really, to be honest, my biggest issue is moving from proof of work to proof of stake. I think it's been pretty well shown that Ethereum has had a very difficult time doing that. And that I've heard, you know, I keep hearing over and over again, that's going to happen. I think that's a kind of a separate argument that a lot of Bitcoiners try to make. The one that I really would like to attack is this idea that proof of stake is a better model because it will incentivize saving. Okay, yeah, you know, I could, I can, I could see that, but my problem with-

• 53:44David Hoffman?

  I'll actually pitch why proof of stake is a better model in a different way.

• 53:50Speaker 01

  Yeah? Let me finish this one and then you can, you can pitch it in another way as well. But some of the biggest issues that I see with proof of stake is it does kind of incentivize, I would, I would say incentivizes hoarding in a similar way that Bitcoin does. But the problem is that it incentivizes hoarding with the people that are minting the ETH. So those that are creating the ETH are incentivized to hold on to it. The difference between proof of stake and proof of work is the miners have an economic cost and they are incentivized to distribute the Bitcoin that they are creating. But what ends up happening is it's harder to disperse and you have this large consolidation of supply in the hands of the wealthiest people potentially on the network, which really inevitably, when you look past in the past, in the history of money,

• 54:33Speaker 01

  the incentive to debase, manipulate, or corrupt a monetary supply or issuance is always happens when there is a heavy amount of people holding on to a large amount of that supply, because there is an incentive to manipulate or debase the currency. So, and this is the real big problem that comes down to is there will be a time when the human control over the Ethereum issuance will lead to debasement and manipulation, in my opinion. The other part is again, just this transferring from proof of work to proof of stake. I'm not sure it's, I'm not sure it's possible. It feels like it's like open heart surgery. While flying a rocket ship, hasn't been done yet. Seems like a lot of other protocols don't have too much of a problem with being on proof of stake.

• 55:16Speaker 01

  But I think from the very beginning, you can go all the way back and see that this has been a very big issue for Ethereum. And when you were talking about this minimum viable security, minimum viable issuance, you know, it's great in theory. But you know, it's kind of a problem also in a sense that you have been taking from the miners over time. You went from five ETH to four ETH to three ETH. And then now also again with EIP 1559, you are taking away the fees from these miners. These are your paid security guards that you guys have been having on your team. And they've kind of been getting screwed over by you. When you decide to move from proof of work to proof of stake, I see a real issue here because these people that you have, you know, essentially been screwing over for the last several years

• 55:59Speaker 01

  are not going to be incentivized to protect the chain for two reasons. One, you've been screwing them over. But two, the other one is that you're going to be dropping the difficulty bomb and that is going to ruin the chain that they are protecting. Well, I don't know about you, but if you've ever been a, have ever had employees, I don't ever warn my employees that I'm going to fire them three or six months in advance. Tends to lead to instances of them colluding to steal from me, you know, right? Usually what you do is you fire someone, you walk them out the door. That's not going to be the case from proof of work to proof of stake. I really do see, you know, the MEV getting kind of out of control. I think you'll get, you'll have time band that attacks that kind of get out of control and it could be a very turbulent time ahead for Ethereum as it moves to proof of stake.

• 56:43David Hoffman?

  Justin, I have the things I want to say, but do you want to take this one first?

• 56:48Speaker 03

  Sure. So many things have been said. I mean, one of them is, you know, execution risk. And you know, part of it is just, you know, having software without bugs that works, but there's also the risk that miners will somehow revolt and attack the system. And, you know, if we zoom out on the topic at hand, which is money and monetary premium.

• 57:11Speaker 03

  You know, you can start looking at a whole list of shelling points, right? And really, like, in my mind, there's two types of shelling points. There's kind of these short-term competitive shelling points, and then there's the really important long-term competitive shelling points, which are based on network effects. Now, the two really important ones, in my opinion, in terms of the long-term ones, is one, security of the blockchain, and two, scarcity of the asset, of the token. Now, it is true that Bitcoin, and in these long-term categories, I truly believe that Ethereum is kind of orders of magnitude ahead of Bitcoin. And as such, Bitcoin has lost the long-term game.

• 57:57Speaker 03

  But if we look at these short-term ones, you know, there's a whole list of them. So, you know, you can look, for example, at financialization, right? So, the notion that Bitcoin, you know, has an ETF now, you know, that makes it more money than Bitcoin, than Ethereum. Yes, yes, I would agree, but, you know, these are very, very short-term things that basically have a lifetime associated with it. It's a shelling point which will disappear. And actually, if you take a historical perspective, in financialization specifically, like, the time scale just keeps on decreasing. So, you know, Bitcoin came six years ahead of Ethereum in terms of the genesis, and then you can ask, for example, when, you know, how much of advantage did Bitcoin have for

• 58:42Speaker 03

  grayscale? It turns out there was three years, kind of. Grayscale had a Bitcoin product three years before Ethereum. And then you can ask yourself, what about futures? Well, it turns out that's half of that, again. You know, Bitcoin had futures one year and a half before Ethereum, and then you can ask the same thing for ETFs, and I wouldn't be surprised if it was also half of the previous thing. And execution risk is the exact same mindset. It's kind of this short-term myopic mindset of short-term.

• 59:13Speaker 03

  Shining point, and the reason is that execution risk, well, guess what? It disappears once we've executed. And the same thing for attack risk. You know, it just disappears. Once there's no more miners, once proof of work has been removed. So maybe you're right, you know, maybe there will be issues, but it's very short term thinking, in my opinion. Another thing that was point that was brought up is on distribution. And this, this is a misconception that somehow Ethereum proof of stake is not distributive. And the reason is very simple is because when you stake ETH and you receive the rewards, that counts as income in all jurisdictions, pretty much. And income has income tax associated with it. And that's, let's say roughly 50%.

• 59:58Speaker 03

  And so you have this natural kind of forcing function to sell your ETH. You need to sell 50% of it. And so that is a very similar distribution mechanism to Bitcoin. Bitcoin, you need to sell your Bitcoin because you need to pay for electricity bills and hardware bills. Well, it turns out that in the case of Ethereum, you need to pay your income tax bills.

• 1:00:24Speaker 01

  Depending on governments for your issuance, that's an interesting trick I haven't heard.

• 1:00:27David Hoffman?

  For the record, I actually, I think there's a better argument than the income tax being a forced distribution, although it is worth noting that that is actually blanketed across the world. The distribution aspect of proof of stake comes from the nature that proof of stake has made it trivial to become a validator to the chain, which meaning, and so Dennis, we talked about this last time we debated, Bitcoin and Ethereum have both the same problem of we have this money. And when you have money, you have a money printer somewhere. The Bitcoin protocol can print money if it wanted to. The way that Bitcoiners and Bitcoin has solved this is that it's just capped, like just capped that, just killed it.

• 1:01:10David Hoffman?

  Just like, no, kill the money printer, destroy it, take a hammer to it, it's gone. And that's what Bitcoin is. So like, no, no issuance for anyone, no one gets anything. Ethereum does something different. It says issuance for everyone and all. You need to do is bring your computer and capital because everything is involved with capital. And so by collapsing the cost of validating the chain, Ethereum solves the seniorage problem of like, all right, we have this money printer, what do we do with it? By spreading it out to the maximum number of people. And by doing that, you also receive maximum decentralization and maximum security. So whereas Bitcoin just eliminates seniorage, Ethereum tries and finds a way to spread it out to the maximum number of people by reducing the cost of providing security to the absolute minimum.

• 1:01:56Speaker 02

  My question for ETH's money is. I was actually a bit surprised when it started even seeing the meme because for the longest time I kept hearing that ETH's gas for smart contracts, which actually made a ton of sense to me, right? Like ETH deserves a lot of credit for basically inventing and smart contracts and then getting some of the early applications there. And so in my mind, ETH was always a smart contract platform. And then it has competition there. And three years ago, you know, everybody would laugh at when somebody would say, no, these other platforms are going to build better, faster, smart contract systems, and then they're going to get traction. But I think fast forward to like 2021 and that's happening, right?

• 1:02:41Speaker 02

  So the Solanas of the world, the avalanches of the world, I would even argue, to some extent, stacks of the world, they are getting all these applications and Ethereum is kind of like losing at home ground. Like this is the main thing Ethereum is supposed to do. And I just don't understand why is Ethereum even trying to pick a fight with a blockchain that has just one use case? It is a single purpose use case. The only thing it is trying to do is to be the best money layer for the planet, right? So like help explain to me, how does those two use cases differ from each other? Like what type of technology do you need to build to be a really good smart contract platform? And what type of technologies do you need to build for being a really good money layer?

• 1:03:25Speaker 02

  And which fight are you trying to pick?

• 1:03:29Speaker 03

  So one of the realizations, I guess, for me is that it's impossible to be, you know, an outstanding smart contract platform without the monetary premium, the premium, the premium area, and it's necessary for two reasons. The first one is that it's it's necessary for security, right? And the whole product of the blockchain, the block space that we're selling, is all about settlement guarantees, AKA, security. And in order to achieve this, you know, resistance against state actors, we just need tons and tons of of of monetary premium. Like, what, right now, we have thirty two billion dollars of economic security. It's it's too small by, you know, a couple of orders of magnitude.

• 1:04:12Speaker 03

  So we we we we must grow that if we're going to build a a platform which is resistant to to to World War III. Another reason why it's required is because we need trustless economic bandwidth, right? The DeFi is, sorry, the small contracts in many, many cases are are interesting because they manipulate value and and, you know, you enter the world of of of finance. And in the world of finance, you need collateral. And when when you want to build these these these trustless and decentralized applications, you want to minimize the number of assumptions that you're making. So at a minimum, you you're taking on the assumption that Ethereum is secure, right?

• 1:04:54Speaker 03

  That's kind of like the the the basic assumption, but you don't want to be making additional assumptions. So so like the the most natural way forward to not take on assumptions is to just reuse the native money, which is ETH, as your collateral, as your economic bandwidth. If you try and do something else, for example, you try and use wrapped Bitcoin, then now suddenly you're trusting BitGo.

• 1:05:18Speaker 03

  And and that that's very, and now now you you know, your weakest link is is BitGo, which which which is not satisfactory. But it it it it turns out that kind of security and and scarcity are are mutually beneficial. The the more, you know,

• 1:05:38Speaker 03

  Security that we have, the more transactional utility that we have, the more fee burner that we have, the more monetary premium that we have, which gives us more economic security, which gives us more utility. And so it's really a foolish game to try and detangle and disassociate the notion of security and utility and monetary premium and money.

• 1:06:04David Hoffman?

  Said differently, Muneeb, I think the way that you presented this is that like, you know, Ethereum pick a lane, like, are you money or are you a smart contract platform? And I would actually turn that around on you and just kind of, which is going to be reframing exactly what Justin Drake just said, where he says you need economic activity to drive scarcity. Actually, I think Bitcoin needs to do some more DeFi stuff. And also, the whole ETH killer phenomenon needs to do some more Bitcoin things. It's not Ethereum that needs to pick a lane. It's Bitcoin that needs to generate internal native finance. And then also, the ETH killers need to actually become decentralized so they can have the monetary premium. So it's actually the opposite ends of the spectrum that need to come and do both.

• 1:06:45David Hoffman?

  Because it's both that gives you both the decentralization and security that allows you to be money, while also generating the internal native financial economy that drives blunt demand for block space, which generates scarcity into the L1 asset.

• 1:07:02Speaker 02

  Yeah, so I can, I can give you the Bitcoin model, right? So the Bitcoin model is that Bitcoin is the decentralized money layer. Then you have a smart contract layer like Stacks. Stacks is purely a gas asset, never trying to be money. There'll never be money because it literally depends on Bitcoin for its existence. It can't exist without Bitcoin. And there's a separation between what is money? What is the store of value and what is the gas asset? And then they can, they can interact with each other and, and you know, you can, you can use this in that way. But then extending that argument, like, do you guys then also believe that every other smart contract platform, or forget about smart contract platforms like Solana, look at, you know, Polygon? So, you know, Polygon recently had more daily active addresses than Ethereum.

• 1:07:45Speaker 02

  So with that type of network activity happening, does Matic becomes money and would start kind of competing with Ethereum? Would Solana will become money and Avalanche will become money? Are we all in that game? Because my model of the world was very simplistic, like Bitcoin is money. Let's just bring smart contracts to it. There are a bunch of other smart contract platforms as well. But this argument seems to say that everything is trying to be money.

• 1:08:07David Hoffman?

  In my opinion, everything that is an L1 token is trying to be a global sovereign non- uh sore value asset.

• 1:08:16Speaker 03

  Yeah, I agree. And I think this is actually part of the reason why I believe that that Stacks is kind of, you know, a little dubious in the sense that one of the things that that's Stacks is is is claiming is that it has is inheriting the security of Bitcoin. But I don't know how to how to do such a thing. Like, my my my guess is that if, you know, more than 50% or more than some threshold of the STX tokens are controlled by an attacker, then that attacker can just, you know, do all sorts of bad things like censorship and maybe even break.

• 1:08:54Speaker 02

  That's that's not not how Stacks works. Stacks is not a proof of state system. There are separate miners that use Bitcoin. We we don't need to get into it, but that's not how Stacks works.

• 1:09:02Speaker 03

  Right. But you do have an honesty assumption in addition to the honesty assumption that Bitcoin has.

• 1:09:09Speaker 02

  So parts of the applications, basically think of them as cross-chain, right? So part of your application is literally just running on Bitcoin. As the lending application, you're you're just doing Bitcoin transactions to lend your Bitcoin. And part of the application is running on the Stacks side. So your collateral, for example, is in a smart contract on Stacks. And then that is settling those those that data is settling on Bitcoin. And there are miners involved that are running on the Bitcoin side. It's it's not it's not proof of state. I know that's the world you guys come from, but I we can we can get into it separately.

• 1:09:41Speaker 03

  Right. But let's let's let's remove the like the the programmability aspect for now. And just just think of Stacks as just like a side chain that provides a bit more throughput. Like, are you claiming that Stacks has solved Bitcoin scalability in a trustless fashion? And it has exactly the same security model?

• 1:10:01Speaker 02

  It it helps like how Lightning helps, right? So Lightning can scale payments and then you're doing settlement on Bitcoin. So Stacks is the programming layer. It has smart contracts. So you can do it a lot more smart contract activity that is eventually settling on on the Bitcoin chain. And then then you have the cross-chain connections between them. So you can build applications that basically are running on Bitcoin.

• 1:10:25Speaker 03

  Okay, now my understanding is that there's this proof of transaction aspect where basically I haven't looked into too much because I don't completely understand the documentation. But basically, what I understand is happening is that this money, Bitcoin specifically, which is being sent to various STX holders presumably. And as an attacker, if I'm willing to, I have a lot of Bitcoin and I'm just willing to spend and give a lot of Bitcoin to these STX holders, then presumably I have some amount of control. And if I'm willing to spend more than what the others are doing, then I can start doing bad things like censorship or reverting bad chains or stuff like that.

• 1:11:09Speaker 02

  Yeah, so the weird thing about that is a STX follows the proof of work type of security model. But instead of burning electricity, you're actually consuming Bitcoin. So that's where the security budget is coming from. But that's like specific to how kind of like STX functions. My main argument is that separating the money layer and letting the money layer be the money layer and building basically contracts around it is one model. And I actually disagree that I don't think like if you talk to people at Solana or Avalanche and other places, like I don't think they would say that they're trying to do money. Like they would argue that they're not trying to do money. They're trying to build, you know, decentralized computing platforms that are valuable for

• 1:11:52Speaker 02

  different reasons than decentralized money is valuable.

• 1:11:55David Hoffman?

  I think if they don't think that they're trying to be money, they're making a mistake. Like maybe they don't know that, but again, if you commit to being an L1, you commit to trying to fight for monetary premium.

• 1:12:07Speaker 03

  Right, and Munyab, you're saying that STX is secured in a very similar way to proof of work, except that the work is spending this Bitcoin. And so basically, that probably means that STX has, you know, all this of magnitude, maybe 10x or 100x less security than Bitcoin, simply because, you know, the expenditure of electricity on Bitcoin is just so much larger than the expenditure of Bitcoin for STX. And as such, if STX doesn't compete for monetary premium, it just won't have the security and then it just will be irrelevant.

• 1:12:42Speaker 02

  Yeah, so I think Stacks does has less security budget right now than Bitcoin, but the design is very, very interesting where all of the fork histories of Stacks are secured by Bitcoin, literally. So you benefit from the security of Bitcoin because Bitcoin is securing all fork histories on Stacks. But here's the interesting thing, even if I take your argument that Stacks is less secure than Bitcoin, let's say somebody attacks Stacks, the core argument of keeping your money there separate is that nothing happens with Bitcoin. And securing the money layer, in my view, is the most important thing. Once the world gets decentralized money, there can be many smart contract platforms. There can be many type of different applications that are that are built there.

• 1:13:24David Hoffman?

  See, that's actually something that I think a lot of Ethereum's might might agree with. We just separate our stacks differently. And so you called you called Solana and all these other ETH killers as like computing environments or, you know, smart contract platforms. And the way that I would phrase that is that these are execution optimized blockchains, as in they are optimized blockchains that have sacrificed decentralization in order to increase scale. In the Ethereum world, and really this is just a neutral technology, rollups are the same thing. They are execution optimized networks and that they have sacrificed decentralization to be layer twos on Ethereum, preserving the money layer, which is the asset transfer layer of Ethereum,

• 1:14:08David Hoffman?

  which is contrary to a lot of what Bitcoiners say, actually a very simple L1. Like, it's generally pretty simple as far as it goes. Maybe proof of stake is a little bit complex. But in the grand scheme of things, you have all these compartmentalized financial application layers, these rollups where it's very, very performant. And then you can tap into the very, very secure L1 of Ethereum. And this goes back to what I was saying earlier, where Ethereum's trying to do it all. It's trying to have a decentralized layer one, which has a very significant monetary premium that is highly secure. And then it's designed to have highly executable layer twos that can conduct all the financial activity. And so it literally gets the best of both worlds and it captures all of the money,

• 1:14:51David Hoffman?

  all the value of decentralized finance using the rollups. And then it injects it into the security layer of the of the layer one.

• 1:14:58Speaker 02

  Yeah, so can I, can I, can I give the Ethereum people some unsolicited design advice? Like, I, I think I've tried doing that back in like twenty sixteen, twenty seventeen, when I effectively said, you know, don't try to do sharding, you won't be able to do it. Try to work on L twos. Um, and I, I, I'm pretty sure Justin has spent like years and years, so I don't want, wanna discourage him for doing that, but sharding turned out to be a pretty, pretty hard problem. Uh, I would say that if I was involved with Ethereum today, I would actually not try to move to proof of stake. Uh, you actually have a fairly secure network with proof of work right now. You actually have like a bunch of traction and usage. And, and, and L twos are, are, are working, like Arbitrum is coming online.

• 1:15:42Speaker 02

  That's actually a pretty solid, solid solution. If I was designing Ethereum today, I would stick with proof of work. I would actually try to limit even further the types of activity that can happen on the L one. Maybe you just wanna do, uh, roll ops. Maybe you just wanna do fraud proofs at the L one, but discourage applications to be built at, basically try to minimize your L one layer instead of like keeping it very complex. So any types of applications are being built and don't try to do sharding. Don't, don't, don't try to move to proof of stake. And then you have a serious shock at becoming a money layer because you inherited all of the properties that, the, the arguments that I was making, like why a proof of, a proof of work system is actually, uh, better? Because it actually has security defined outside of the system.

• 1:16:27Speaker 02

  We didn't get into this that much because what, what's happening with proof of stake is you're trying to define security within the system. Everything's pointing to each other, right? You need, you need, you need a referee that is actually sitting outside of the system. That when things go south, you, someone can actually step in and be like, here is how you define security. Because one of the first things that's gonna happen if something goes south within the system is how would you then recover from it, right? Like, I can give you an example. Uh, all these blockchain systems are B F T systems. Let's say for some reason, you know, a bunch of exchanges get compromised and close to thirty-three percent of your staking power, uh, is now not, not, not, uh, not cooperating with the consensus system.

• 1:17:11Speaker 02

  You will stop making forward progress, right? That's, this wouldn't happen in, in, in other types of design. So I think like defining the security of the system outside of the system itself is actually the critical, critical difference here.

• 1:17:26Speaker 01

  There are also other, some other problems as well. I would like to kind of get your, you and David and Justin's answers on here. But a lot of times, the argument from the Ethereum community is that it's economically infeasible to attack the proof of stake network. But when you take into consideration this aspect of slashing, which could be one way to help make it more economically feasible. You could also target large holders of Ethereum. You could buy wallets off of, off-network. So there's no transaction. There's, people are unaware of the movement of those coins to other holders.

• 1:18:08Speaker 01

  But you also have this issue with these derivative companies that have been formulating. So like the Lido Protocol, I think they've captured like a very large majority of the staking in a very short amount of time. Because they give Ethereum holders this token in exchange.

• 1:18:26David Hoffman?

  Stake these derivative token, yeah.

• 1:18:28Speaker 01

  On their, on their protocol. And so it leads to this really kind of perilous situation where the supply is becoming, and the, and the staking is becoming very, very centralized in a very small amount of hands. Combined with, you know, the idea that if someone has a large majority of the staking power or control, they could intentionally get into a situation where they try to slash themselves and also slash their competitors, leading to a situation where they, again, have a larger control or percentage of the network. So I'd like to kind of hear what you guys have to say about the ability to kind of supply hijack the network and the staking protocols.

• 1:19:08David Hoffman?

  First off, Lido is a decentralized taking as a service protocol. It's a DAO. Half of Lido, I would say is.

• 1:19:18David Hoffman?

  Distributed rather than centralized, but relatively centralized. And the other half is completely decentralized. The people that are the aspect that's decentralized is that people come in and submit their ether to the validator network. It gets bonded to the beacon chain and it also gets spread out amongst, I think, like 11 validators. Meanwhile, they're also working on this thing called shared secret validation, which is basically like splitting up the keys to a validator, allowing the actual validating network to also become decentralized. And so it's not, it's not a corporation in the same way that Coinbase is. And so when I see ether going into Lido, I'm actually seeing it becoming a part of the decentralized, like staking network that Lido is offering. And this is actually a model that a lot of Ethereum teams, applications are actually expanding upon.

• 1:20:02David Hoffman?

  Rocketpool also comes to mind where yes, the ether is actually being owned by a central contract address, but that contract address is represented by a very large number of people, both validators and ETH suppliers. So it's actually not, not accurate to say like, oh, all this ether in this one address is centralized.

• 1:20:21Speaker 01

  Sure, but a lot of the governance tokens are being controlled by, you know, a very small amount of people, which does have an impact on the centralization of that supply. I mean, and it also leads to this issue with the costliness of money, which is a very important aspect, going back to sound money. And when you are able to essentially give your Ethereum to them and you get a one for one token back, it completely eliminates the costliness of production because you can be a part of the staking and you can be a part of the issuance without any cost to yourself whatsoever.

• 1:20:53David Hoffman?

  Jess, do you have anything you want to say?

• 1:20:56Speaker 03

  Yeah, so one of the things you said, Dennis, is that we're claiming it's impossible to attack the network with proof of stake. No, that's, that's not the claim, right? The claim is, is the exact opposite is that with proof of stake, just like with proof of work, you can attack the network, but there is a cost and that cost is, is measured in terms of economic security. And right now it's on the order of $32 billion.

• 1:21:18Speaker 01

  Well, that's my point though, is that it's cheaper than that because of the fact that you can get away with slashing your competitors. You can buy.

• 1:21:26Speaker 03

  No, no, no. Slashing, that's not how slashing works. It's the exact opposite with slashing.

• 1:21:31Speaker 01

  You can target top holders, you can target very top holders, wallet holders. You can collude with people, you can collude with exchanges in order to gain larger, larger controls of the supply. You don't actually have to buy $32 billion worth of ETH.

• 1:21:45Speaker 03

  Sure, but slashing is is is kind of the opposite of the way you portray it. It's like you're talking about slashing like other people, but that's not how it works. The way that slashing works is that it slashes bad actors. If you make a provably bad action on the network, you know, you make a double vote. For example, you're voting for two inconsistent things at the same point in time.

• 1:22:05David Hoffman?

  It's a cryptographic event.

• 1:22:08Speaker 03

  And slashing is is a recovery process. It's when an attack happens, if and when it happens, and it is possible that it happens, all the bad actors who are provably bad, they just get removed. And so you're left with the the good actors. And so slashing is precisely what makes it difficult to attack the network in a repeated fashion. And this is a key differentiator with Bitcoin. When you look at an attack, you can look at it as a as a one shot game, or you can look at it as a repeated game. In the case of Bitcoin, if somehow you you manage to accrue fifty one percent of the hash power, then you can attack Bitcoin over and over and over again. So for example, you can just continuously censor it and not produce any blocks.

• 1:22:54Speaker 03

  And so there's there isn't this recovery mechanism in the context of proof of stake. If an attack happens, sure, it can happen one time, but then we're going to slash you. Okay, maybe it happens a second time, but then we'll slash you again. And guess what? Every time there's a slashing event, it becomes harder and harder to pull off the attack because there's just less and less ETH in circulation.

• 1:23:14David Hoffman?

  And also, this is what Muneeb was talking about about external security versus internal security, where Justin Drake is saying that Ethereum actually derives its security by not by removing this, what Vital calls this "bond camping attack" of proof of work, which has external security. Bitcoin can't delete ASICs because they're external, but Ethereum can delete its own ether because it is internal. And so it gives it a an extra layer of defense when it comes to attack.

• 1:23:42Speaker 02

  I would I would I would push back on that, right? So think of it this way. Let's say that someone is able to get to up to fifty one percent on Bitcoin. At that point, it's open warfare, right? Like, anyone can go try to get more hash power and you're not fighting. You're not fighting publicly to to gain more hash power. And the way Bitcoin and Alcama consensus works is, uh, everything is probabilistic finality. You can actually go back in time, fork from another place, and the system has self-recovery baked in, right? Whereas in proof of state, you've actually removed one of the actors, which is the external miner. Now, everything is internal.

• 1:24:23Speaker 02

  And once someone actually gains access to, let's say, a massive hack happens, like Kraken gets taken down, Coinbase gets taken down, or something like that. Once someone has more than thirty-three percent of ETH, you're toast. You can never be able to make forward progress.

• 1:24:40Speaker 03

  No, it's the opposite. If Kraken or Coinbase gets compromised, they will, they will get slashed. And so they will get removed. I mean, if they abuse their power and and and and and and attack the the the system.

• 1:24:54Speaker 02

  So so you're saying that

• 1:24:55Speaker 03

  In terms

• 1:24:56Speaker 02

  You were

• 1:24:56Speaker 03

  In terms of

• 1:24:58Speaker 02

  You start slashing like the like thirty-three percent of economic power on the notebook and they will start losing their ETH. And then what if the attack is bigger? Uh, what if, what if now, if we were talking about fifty-one percent of tap on Bitcoin, eh? What what if somebody has fifty-one percent of economic majority power? But can they do anything on the network now? Because they're they're the majority.

• 1:25:17Speaker 03

  No, well, if they start abusing the power, they'll get slashed. That's kind of the the TL

• 1:25:23Speaker 02

  But who's gonna, who's gonna slash them? They're the majority of that one.

• 1:25:26David Hoffman?

  Built into the network.

• 1:25:26Speaker 03

  Well, it depends. There's this, okay, we're getting technical here, but there's kind of two types of slashing. Like, one type of slashing is like the cryptographically provable slashing. Like, you you you made a double vote, you know, you you tried, for example, to finalize two inconsistent checkpoints. This is automatic slashing. It happens, you know, by by by by the network. There's another more subtle type of slashing where a as a majority actor, you can, for example, do censorship. And here, basically, the the the resolution is social social slashing. So the Ethereum community can see, okay, well, there's this one actor. It's clearly compromised. It's clearly attacking the network because it's it's censoring all these blocks. The good news is that we can identify this actor.

• 1:26:10Speaker 03

  We can see that, you know. The owners of Pubkey's X, X, Y, and Z are not producing blocks. For example, they're censoring the network. We're gonna go ahead and socially slash them, which is, you know, a hard fork, but it's a very similar process where at the end of the day, the attacker loses.

• 1:26:29Speaker 02

  I think, I think this, this, this is, this really highlights the difference in the two school of thoughts. Like in the Bitcoin camp, there is no concept of a social hard fork, right? That I'm going to remove the economic, I'm going to remove Bitcoin from somebody's wallets. Or I'm going to change, I'm going to roll back the, uh, the state of the blockchain.

• 1:26:53Speaker 02

  Those rights, when, when have, when have, when have they happened?

• 1:26:57Speaker 03

  They can happen is the point. The point is that they can happen.

• 1:27:01Speaker 02

  I think to that, that, I think that's, I'm pointing to the difference, right? People can pick which camp speaks to them more. I think on the Ethereum side, it is acceptable, like, like with the DAO fork, to roll back history or to take away tokens from one wallet address and give it, give it to some other address. And the Bitcoin world is completely unacceptable, cannot, cannot be tolerated by another community.

• 1:27:25Speaker 03

  Wait, you know, you have Bitcoiners wearing, you, you, you know, user-activated soft fork, U A S F hats and, you know, you're like, saying that is completely unacceptable, I think is a mischaracterization. And also, it hasn't happened on Ethereum and it, like, the two networks are on par here. Like, it's, it can happen in both cases. And let me give you one example.

• 1:27:46Speaker 02

  Sorry, sorry, sorry. I think people will get confused here. I want to compare a user-activated soft fork to the DAO pack, right? There is a huge, this is like night and day type of a difference here. The user-activated soft fork is not changing the balances of anybody, is not rolling back any transactions. It is, it, it, but it, there's no way, it, it wouldn't, it wouldn't be a soft fork at that. It would be a hard fork at that.

• 1:28:09Speaker 03

  No, it would be a soft fork. You can, you can freeze funds. So let's, let's assume, for example, that a quantum attacker comes in and steals 10% of, of the supply. This is the exact same situation as the DAO. The DAO is basically one attacker being in control of a, a, an outstanding number of coins, let's say 10% or 15%.

• 1:28:30Speaker 03

  Would, you know, would the Bitcoin community say, okay, yeah, that's fine. You can, we're gonna have this one attack.

• 1:28:35Speaker 02

  They would literally, they would literally say that and it would never roll back.

• 1:28:38Speaker 03

  Okay, but at the minimum, they would have the option to do a user-activated fork to freeze those funds and effectively destroy them.

• 1:28:46Speaker 02

  It will not fly into the country. It will literally not fly into the country.

• 1:28:52David Hoffman?

  That's a subjective argument, not a technical one.

• 1:28:55Speaker 02

  Let's just make it a historic, historical argument. Has never happened in the Bitcoin history, has happened in Ethereum's history. So that's just a historical fact.

• 1:29:04David Hoffman?

  Yeah, to me, this is a very weak argument because the DAO hack happened in 2016, which is five years ago, out of six Ethereum's, six Ethereum's lifetime of six years. And there's also been a very significant number of proposed hard forks and proposed EIPs that did something like this for like fund recovery, famously, I think, EIP 999 to get the parity funds back. And, and many, many other EIPs, which never really make it to the surface of the conversation just because they get denied. And so like, yeah, Ethereum had its like mulligan, but also at the same time, there's a lot of things that Ethereum has denied from proposals from the community that like Bitcoiners just don't hear about and kind of really illustrate the, the new level of immutability that Ethereum has, has achieved.

• 1:29:48Speaker 02

  Right. So I think let's, let's take, for example, EIP 1559, right? So here's the, here's the paradox of that. As a economic policy, I actually think it's a much better economic policy than the previous, right? So I think I agree with you that it's an upgrade. As a Bitcoiner, I also know that that would not have happened on Bitcoin, right? And I think this is where the fork on the road is, that, and, and we don't know like what is going to win in the future, but I think it's important to differentiate the two paths. The path on the Ethereum side is that you're willing to have social consensus around monetary policy and then change the monetary policy.

• 1:30:27Speaker 02

  Bitcoin is saying that there's no concept of social consensus around these things. This is all proof of work and that's it.

• 1:30:34David Hoffman?

  That is a social consensus, by the way.

• 1:30:37Speaker 01

  Mike, that gets back to like this, like I think it was the ultimate point and um our last debate between me and David, which was that in order for something to truly be sound money, it needs to not be able to be messed with or tinkered with by human beings because. Throughout history, we've had 10,000 years of history to prove that anytime you leave the door open for human beings to come in and change the monetary supply or the issuance, they will and have always done that. And so I think that it's very much the difference between the Ethereum camp and the Bitcoin camp is that you guys kind of think like,

• 1:31:18Speaker 01

  okay, well, as long as we as a community are okay with these changes, that's, that's okay. But there will come a time, in my opinion, eventually, it could be 10 years down the road, 20 years down the road, who knows, could be beyond our lifetimes. But the fact that you leave that door open for human tinkerability to the monetary supply and issuance is ultimately leaving the door open to corruption of the monetary supply itself. Like I asked you the question, I said, you know, if the dollar became deflationary today, right, like they just, they finally raise rates, they stop printing money, they go full-blown, deflationary with the currency, start burning it, does that make the dollar sound money? And I think

• 1:32:02Speaker 01

  your answer was, was no, because the door is open to tinkerability. And I said that the door is still open for tinkerability with Ethereum. And that was kind of my, my whole argument. I'm curious if you kind of had a, something to say to that, to the effect of that since our last debate.

• 1:32:19David Hoffman?

  Yeah. And I think the video aspect of this will actually help out here. So like Bitcoin, it has maximized for immutability more than anything else. And I think Bitcoiners don't really appreciate the fact that Ethereum is actually, the, the door is more open than it is with Bitcoins, although I will say there is no such thing as perfect immutability. It's always a spectrum of how open the door is. The Bitcoin door isn't completely shut. It's open just a smidge. And the Ethereum door is open a decently more amount than Bitcoin. And then we have the dollar, which like the door is like all the way open, right? And so it's, it's actually really hard to get changes into Ethereum. Like, we don't

• 1:33:00David Hoffman?

  implement that many changes. And the changes that we do implement have like hundreds and hundreds. Hundreds of like highly technical eyes on them and those people that are putting the eyes on the changes have thousands and thousands of eyes on those people. And so in stark contrast to this whole like 12 old white dudes behind a closed door. Ethereum is like done on open forums in open in the court of public opinion and never actually really can do anything that's against the community. And so while there is a door that while it is a door that is open, it's done in a very transparent way. With the social commitment of eventually we are pushing that door more and more closed every step we can.

• 1:33:42David Hoffman?

  While we work on integrating all the technological upgrades that we can while we have this time of flexibly updating blockchains.

• 1:33:50Speaker 01

  Two things you said real quick there. Money, one sec. I just want to say two things. You said that Ethereum, you know, closing the door, it doesn't change very often, but you guys hard fork like every three weeks, four weeks, it feels like at this point, maybe even less than that.

• 1:34:02David Hoffman?

  It's once roughly once every two years and the things going into those hard forks are just very, very small.

• 1:34:08Speaker 01

  And the court of a public opinion, you know, again, this is the court of public opinion. It's it's human control and you may have made the human control. Aspect of your money more decentralized than the dollar. We can 100% agree on that. I think the dollar is the ultimate shitcoin. But when it comes down to it, you've left that door open and there will come a time in my opinion, in the future, for a majority of people to get into a position. Where they can make changes to their benefit that don't benefit all the users. I think most of the changes that you, and you said this last time, every change that we've made. So far has benefited the users of Ethereum, but that doesn't mean that that will always hold true. Also, I would say that. The community as a whole is, I think it's interesting. That you don't include the miners in there because I has, as I said earlier.

• 1:34:52Speaker 01

  You went from five to four to three and now you're burning the fees and you've so you have hurt people in your community. It's just interesting that you don't see the miners as part of your community.

• 1:35:02Speaker 02

  I want to, I want to add some things that I think this is also a very fundamental point. That when you're talking about making changes, or even the need to make a lot of changes, versus not making changes. That's where conflating the smart contract platform with money actually hurts Ethereum in my view. Because there will be more changes required to upgrade a smart contract platform. Like, maybe you could even argue that a proof of stake system is a good upgrade for a smart contract platform. Or maybe, at least in my view, it is not a good upgrade if you want to be money, right? So I think because those two things are conflated at the Ethereum base there.

• 1:35:44Speaker 02

  Something like Solana, which in my view is just trying to be a smart contract platform, can actually hard fork or upgrade. Their stakes are very different from a money layer. And if, in the case of Bitcoin, where Bitcoin's money layer is separate and Stacks, the smart contract platform layer is separate. Stacks can actually hard fork more and just optimize for whatever functionality that developers are looking for without ever changing the money layer.

• 1:36:07David Hoffman?

  This is also true with rollups. This is the same pattern there.

• 1:36:10Speaker 02

  Exactly, which goes back to my recommendation that you can even right now try to stick with proof of work. Try to actually minimize the Ethereum base layer instead of making it more complex. And just do most of the, most of the competition in rollups and L2s.

• 1:36:25David Hoffman?

  I know Justin is itching to say something, but the, and Dennis, you said, you said, and Munee just said something that I think aligns here is like. You guys are kicking out the proof of work miners, just stick with proof of work. Under proof of stake, the users and the transactors and the security validators of Ethereum are all the same people. And so it's fundamentally more about aligning incentives where proof of work miners are really mercenaries. They have to be profit driven. They have to sell the asset. And they represent a two-tiered society that wraps around a chain. So the people that have the ability to mine the chain and the people that have the, that can only buy the asset from the miners, right?

• 1:37:05David Hoffman?

  You have the, it's the same thing as like the, the money printer paradigm that we exist. There's two classes of. Citizens. There's people that can access the newly freshly issued coin. And then there's the rest of the world, right? With proof of stake, we actually collapse all parts of Ethereum into you are all, are you an NFT trader? Are you a DeFi speculator? Are you just interested in the protocol? Well, all three of those people can all be Ethereum validators under proof of stake. And it's, it's not that we're like kicking miners out the door, Dennis. Actually miners have been, we've been noticing the accumulation of Ether by miners leading up to the suspected timing of the merge. And so miners are actually going to very elegantly morph from proof of work miners

• 1:37:49David Hoffman?

  to proof of stake validators preserving their business model.

• 1:37:54David Hoffman?

  Justin, you want to say anything? I know you were itching to add something.

• 1:37:58Speaker 03

  Yeah, I just have a few, a few thoughts. I guess on, on, on the whole, you know, changing the rules aspect. I think one of them is on, on time scales. I very much disagree that it's, it's easy to change Ethereum and it's, it's changing regularly. And just to give a few examples, you know, proof of stake has been part of the plan since before Genesis. And so it will basically take seven years to deploy proof of stake. You know, another year from today, plus the six that Ethereum has had. EIP 1559, these have been ideas that have existed or have originated from five years ago. It took five years to get EIP 1559. And one topic which, you know, you know, I joined the Ethereum Foundation four years ago. And the one thing I was working on was sharding.

• 1:38:43Speaker 03

  And sharding is going to take 10 years from start to finish. And when you compare that, you know, to changes with Bitcoin is actually, you know, we're more conservative than Bitcoin in a sense. If you look at, you know, SegWit and Taproot, these don't take 10 years, you know, to, to, to go and deploy. They take, you know, significantly less. Another thing that was, you know, brought up is kind of the, the, the good ideas versus bad ideas like. You know, it's not about making a change in of itself, it's about what changes are being made. And I think Ethereum has an excellent filtering mechanism at play. And it's kind of the honest minority assumption kind of thing.

• 1:39:21Speaker 03

  If there is a bad idea, it just takes one single actor to blow the whistle and and show that this is a bad idea. And basically, you know, convince the ETH holders who are incentivized to bring in only good incentive, only good changes to come in. And so because of this honest minority aspect of of of changes, I think, you know, Bitcoin has fundamentally kind of handicapped itself because it's it's given away the the innovation. Um, innovation which is very safe because of this honest minority uh aspect. Another thing that I want to bro bring forward is that eventual ossification for Ethereum is inevitable. It will happen, it will be fully ossified, just like Bitcoin.

• 1:40:05Speaker 03

  And this goes back to, you know, my short term thinking versus long term selling points. The fact that we are changing right now is like all myopic, it's all noise, it's all short term noise. And the reason why we eventually need to ossify is because as the the total value locked on Ethereum, you you know, increases as there's more and more activity, it just becomes harder and harder to change. And the reason is that we have to make these these backward compatible changes. And our our level of paranoia and conservatism kind of scales with the amount at stake. And so at some point, we're kind of trapped in our success where we can no longer move and will be fully fully ossified.

• 1:40:46Speaker 03

  Um, in a very similar to fashion to Bitcoin, unless there's some sort of like external looming threat, which is some sort of forcing function for us to take emergency action. And one of these forcing functions could be quantum computing, for example, which forces us to upgrade our cryptography. And then the final point that I want to bring forward, and and and this is something that Bitcoiners always sweep under the rug, is that. The fact that the monetary supply is fully programmatic is an illusion, right? The door, every single four years, kind of grows and grows and grows and grows. And eventually, this door, you know, because Bitcoin will be unsustainable from a security perspective, something has to change.

• 1:41:28Speaker 03

  And it turns out that the easiest thing to change is just to remove the 21 million cap and just have this continuous kind of tail issuance to secure the blockchain.

• 1:41:42Speaker 01

  Mini, did you want to jump in there?

• 1:41:44Speaker 02

  No, I would just say the same thing, but that's a very big assumption to say that Bitcoin would be not secure, given their discussion we've had about Bitcoin being a settlement layer and miners don't care if their incentives are coming from transactions or from blockchain.

• 1:42:01Speaker 01

  And is anything to add? Yeah, you know, it's interesting too, because you do say that Ethereum or Bitcoin gave up innovation, but there are some other ways that Bitcoin is innovating, and that's in the world outside of Bitcoin itself. I think that it's pretty well understood at this point that the mining hardware that's being used, the chip production that's occurring, is all innovations that are occurring because of the desire to find more efficient ways to mine Bitcoin. Because of the halving that is programmatic, miners are forced to upgrade their hardware. It's also incentivizing renewable energy throughout the planet. And I personally believe that we'll have a very big period of time

• 1:42:45Speaker 01

  where the mining and the renewable energy production in this country and across the world will grow dramatically because of the impact of proof of work and because of the impact of mining itself. And I think that also, when you look at what's going on in the community, there's tons of work being played into things like stacks, things like Liquid, to enable Bitcoin to do all the different things that Ethereum claims it can do. And something was said earlier too, as far as smart contracts, NFTs, all of these things were created on Bitcoin. They were first invented on Bitcoin itself. But we haven't found a reason or a need to change the protocol in order to enable those functions to occur. Happy to let them occur over on Ethereum until all of it eventually comes back to Bitcoin.

• 1:43:30David Hoffman?

  I think the closing statements that I will say is that there is a

• 1:43:35David Hoffman?

  the gap between Bitcoiners and Ethereum is much larger than what's is perceived to be much larger than what's actually true. I actually, I joke with Eric Connor a lot that Ethereum and Bitcoiners, they actually have the same values. They just believe in fundamentally different executions. We believe in the immutability of money. We believe in decentralized, the world of decentralizing finance away from the powers that be into the hands of the people. And it's really more about the execution, about how we actually get that done. And so while there appears to be many, many differences between these two camps, I think we all have to be reminded that we're all in the same industry. We're fighting for very similar things. And at least we're not a centralized blockchain.

• 1:44:16Speaker 01

  Yeah, I mean, that's ultimately dry, man. Screw the Fed, so.

• 1:44:19Speaker 02

  I can, I can, I can plus one that actually sometimes I joke that the difference between the Bitcoin model and the Ethereum model is actually one layer of indirection. All we are saying is that keep the base layer simple, build the complexity in a different layer, which is kind of like happening with the L2s. Anyway, right. And that's, that's really the only technical difference that I'm talking. This is literally what Stacks has on top.

• 1:44:44David Hoffman?

  Justin, any closing statements from you?

• 1:44:48Speaker 03

  No, not really. I mean, I do want to kind of echo this, you know, we're all going to make it in the sense that the industry as a as a whole is obviously going to make it. And I, you know, it, I think that we, you know, we're all going to make it in the sense that it is very, very likely that, you know, we're all going to be able to accrue money to a premium and be successful. I think it's just a matter of orders of magnitude. And I think, you know, Ethereum is in a position, you know, to, to just win in terms of these orders of magnitude aspect of.

• 1:45:24David Hoffman?

  Well, Dennis Muneeb, Justin, thank you for coming on and hashing out one of my favorite subjects ETH versus Bitcoin as money, which inevitably these debates always go and find their own paths forward. And I think this one was no exception. So, thank you guys for joining us on this Bankless livestream.

• 1:45:39Speaker 01

  Thanks, David. Appreciate you having us on.

• 1:45:41David Hoffman?

  Yeah. Dennis, do you want to give a quick shout out where people can find out more about your content that you do and where you live in the Twitter sphere?

• 1:45:48Speaker 01

  Yeah, find me Dennis Porter on Twitter. If you search that, you'll find me easily. But if you want the handle, it's Dennis underscore Porter underscore. I spend a lot of time there. I do a ton of spaces in and out of there pretty frequently. I also have my podcast, so I do smart people shit. That's where you're going to find my channel. And then also, I have another show under that channel called The Update, where I regularly update listeners on just kind of what's going on in the Bitcoin space broadly, but also I try to bring on experts like on-chain or technical analysis, mining. I also have a, as I've said before at the very beginning, I do have some experience in politics and I kind of try to make that a framework for what I do. As we all know, the crypto tax reporting amendment was a big problem. And so, you know, even though we fight on a lot of things, there are some

• 1:46:33Speaker 01

  things that we all fight, you know, mutual enemy, and that is the, you know, the governments around the world that are trying to screw us over and trying to suppress. So I look forward to continuing to fight politically here in the United States. And yeah, if you want to DM me, my DMs are always open on Twitter.

• 1:46:50David Hoffman?

  Thanks, Dennis Muneeb. Where can people find you in the world outside of this livestream?

• 1:46:55Speaker 02

  Yeah, so I'm simply at Muneeb on Twitter. That's my first name, M U N E E B. And I spend all my time working on Stacks, which is a smart contracts for Bitcoin. So if you want, if you're interested in locking up capital and earning a pure Bitcoin yield on the main Bitcoin chain, you can try out some of the smart contracts there. Or recently, I think there's Bitcoin culture being represented in Bitcoin NFTs through Stacks as well. So if you, if you want to collect some Bitcoin native NFTs that describe the culture aspect of Bitcoin, you can, you can check out some of the new marketplaces that are coming up on Stacks.

• 1:47:34David Hoffman?

  Fantastic. And Justin, where can people find more about what you're up to and where you live in the Twitter world?

• 1:47:40Speaker 03

  Sure, yeah. I'm Drake F. Justin on Twitter, but you can also DM me on Telegram. I'm Justin Drake there. Or you can send me an email, [email protected].

• 1:47:50David Hoffman?

  And then also you can check out his website, ultrasound.money. All right. Thanks, everyone, for coming here and powharing about one of my favorite subjects. Cheers.

• 1:48:00Speaker 02

  Take care.

• 1:48:02Speaker 03

  Thank you.

• 1:48:04David Hoffman?

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• 1:48:45David Hoffman?

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