The Praxeology of Privacy with Max Hillebrand | Bitcoin Infinity Show #205

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Hey, warm welcome back to the Bitcoin Infinity Show, Max Hillebrand. Nice to have you here.

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Yes, let's go, Knut. I'm looking forward to every conversation and this one's going to be a good one.

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It is. Like last one we had, I really enjoyed that. That was in Riga, right?

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And in person.

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Not this year, but yeah, in person. It's totally spontaneous and it's one of the best TLDRs on Praxeology I've ever heard.

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And it's just totally spontaneous. So that was a really good one.

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And reading your new book, The Praxeology of Privacy, that reminded me of that pod because I really enjoyed the first 100 pages almost, or at least the first 50 is like a TLDR on praxeology.

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And you managed to condense Hoppian argumentation ethics and all of that into very concise, bite-sized chunks, I'd say.

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And the entire book was great. I've been reading through it. I hear you added a bunch of pages after I read it from Luke. So I'm yet to read it in its final form. But what I've seen so far has been absolutely great. So congratulations on the book.

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yeah thanks man you got a sneak peek and you know like there's nothing like if people have

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been listening a bit of on on what i've been saying across these years there's not much new

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in here this is kind of like the the culmination of i don't know 20 years of studying praxeology

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and 10 years of studying cypherpunk stuff and those two traditions are so cool and and they're

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so insightful on on different areas and i think they're even more insightful when you put them

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together. And that was the goal, right? To bridge these two traditions and make sure that the

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economists don't just stay in their armchair philosophy mode, but that they realize that we

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have practical ways of liberating humankind very soon. Like this is no longer future talk,

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this is already here. And so many cypherpunks fail with their projects because they don't

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have a proper understanding of economics and the science of human action. I think putting those two

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ideas and strategies together leads to incredible results that we've seen working extremely well.

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And so I'm excited to get both of these camps to understand each other a little bit more.

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No, exactly. And I've pushed this a lot. I've said on a lot of occasions that a perfect Bitcoin

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developer or like not just core developer but developing bitcoin software in in general should

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have like that you imagine a venn diagram with uh knowledge about computers in one circle and

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knowledge about economics in the other and you ideally you want them to be in the precise middle

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of that venn diagram um so i think like one thing you should ask yourself before developing any

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bitcoin related stuff even is does this make bitcoin better money and in order to understand

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that you need to know what money is and you can only get what money is by studying praxeology

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that's the way i see it do you agree with that view no absolutely and there's like

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very very very few people who have mastered both sides of of the aisle like i mean i consider

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myself to have mastered economics like this like i've spent so much time on it i've read

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an insane amount of books on it and i i get it and but like i'm so far from a computer science

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wizard like you know i don't even write code so there's like i'm i'm very much on on the one side

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of that diagram and and just a little bit overlapping on the computer science stuff and

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and i've learned a whole bunch there over the last 10 years so i'm i'm getting closer to it

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But I still wouldn't count myself as one of those few wizards that have mastered both.

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And I think you're in a similar line here.

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Like you're really good on philosophy, theory, economics.

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And like sure, you understand the basics of the computer science.

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I don't like a higher level metaphorical explanations more.

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And then there are so many like crazy computer science geeks, but they might have either none or really just tangential knowledge about economics.

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And if you're working on digital money, like on cyberspace money, you really should be interested in both.

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And if you do get more knowledgeable in both of these areas, your understanding of these technologies and then your implementation and the code that you write for them will go to the next level for sure.

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Yeah, absolutely.

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I mean, you're right that we're in a similar position.

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I'd say that you're way more knowledgeable about the cypherpunk stuff than I am, though,

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and especially in the history of it.

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I have studied some of it lately, but you're still way ahead there, I think.

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I mean, we're both going to this conference in Vienna soon.

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This is recorded before that.

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I think it comes out about the same time.

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And it's going to be interesting to talk to a lot of the developers there

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and get their side of things, because I think there are so many things that are,

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as you say like the the confused on a lot a lot of them are confused on a lot of economics topics

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like fungibility for instance is a very strange concept it's one of the six properties of money

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some some would argue that there are actually seven properties of money and the privacy or

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like censorship resistance is the is the last one but what do you say to that like

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Would you agree with that statement?

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Well, you know, like these, the qualities of money are, I'm not the biggest fan of them.

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Like I always preferred more the like pure praxeological analysis of money is a medium of exchange, right?

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So it's not a consumption good.

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It's not a production good.

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It's a good that you value because you can trade it later for consumption and production goods.

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So generous.

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Exactly.

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The most saleable good, right?

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Everyone wants it.

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And if you have a problem, you can trade this good with anyone and he'll solve it for you, basically.

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So that's the one core aspect of the money is the medium of exchange.

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But then there's also this aspect of you saving.

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If you want to build something cool, you have to first save up your capital in order to build it for anything.

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The question is, in what capital, in what good do you save your capital?

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You know, money is an obvious answer for this, and many monies are used to hold and to save because that reduces your uneasiness.

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So uneasiness is what humans perceive because the future is uncertain.

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You don't know yet what exactly you want to eat tomorrow at what time.

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If you had perfect knowledge of that, you would just order it today, pay it today, not save in money, but save in the cheaper contract of buying the food a day earlier.

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That will always be cheaper than buying it on spot, so to say.

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But because we live in uncertainty, we don't know when and where and what we're going to eat.

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And therefore, we'll save the money knowing that with this money, we can buy whatever food, whenever, from whomever.

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And so that's the second aspect of money, the store of value.

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And ultimately, then, how do we price things?

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Price theory is essential in catalactics.

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For this, having a common unit of account decreases complexity of accounting and it enables really deep production stages to actually come along.

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So, and like these are the attributes of money.

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And I always found it more interesting to talk about the like the purpose of money rather than its individual qualities.

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Now, sure, that's a whole other conversation on what makes a better money.

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and there we can go back to I think it was Socrates or one of the ancient Greeks that came up with this

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you know fungibility, divisibility, durability and so on

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and it's worth analyzing right but yeah ultimately it's lesser to the actual structure of money per se

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but then to the quality and to get to your actual question

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I do think that privacy is an integral aspect of a money.

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And it's in part because of fungibility, which means any unit of money is valued equally.

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And that's helpful because it makes the unit of account easier to do.

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But the main point of the book is actually that privacy is very interesting because it increases the cost of attack.

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And if the adversary does not know that you exist, how much capital you have, where you keep it and so on.

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If all of this information is private and hidden secret from the adversary, then he cannot even begin the attack cycle.

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And so money is useful if nobody can steal it from you.

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It's kind of part of that store of value aspect of it.

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And so privacy in the money increases the cost of theft.

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And that makes privacy, I think, so interesting to me.

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Even more interesting than the fungibility unit of account side, because I guess theft is a more important thing to prevent than price misallocations.

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Yeah, my favorite definition of, there are many definitions of money, but I think the Hopian one I'm paraphrasing here is that it's the best insurance policy against exactly that uncertainty that underlies all or is a prerequisite for all human action.

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That's what it is. It's the most omni insurance policy you can have because it's supposed to insure against all future events. If you can buy yourself out of the situation, you're fine.

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and this is also why i don't like the term store of value for because first of all value is

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subjective so i prefer like medium of exchange uh which is the msessian definition by the way that

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it's just a medium of change but what they leave out is that it's a medium of change over space and

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time like where the time a medium of change with your future self if if you can even call that an

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exchange but but something like that yeah and that's just savings you know and and i think

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savings is a much clearer framing than store of value. And you can hold savings in anything. And

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it very much makes sense to not only save in money, because then if you need something and you don't

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have a trading partner, then no amount of money can get you the good that you need. So for many

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goods, it does make sense to save in the stock of the good, to have a bit of meat in the freezer.

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That means you don't have to go to the butcher every time. That's a useful capital allocation.

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This reminds me of a conversation we had on a long walk in Riga. I think it's in 2022 or something, or 2021. Do you remember that?

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I think I was dragging my luggage for the whole time.

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And we discussed the difference between hodling and saving, and if there is a difference, because inanimate objects can hodl, that does not require, it's not per se a specific human action.

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I know you started writing this book back then, so this has been in the works for at least five years, I'd say, this book, right?

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Yeah.

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What's your opinion on that at this moment?

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Is there a difference between hodling and saving?

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Or is it even worth it to analyze that and to make the distinction?

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I don't think there's much of a distinction here because things cannot possess something.

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Only humans are part of the rivalrousness of who gets to spend the resource.

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And there are machines that are controlled by humans, which require certain savings and other capital to function.

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But ultimately, things don't own other things.

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humans own multiple things and some things require other things in order to function

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and so i i think what what you're pointing out is more like you know could could the machine

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have exclusive access to bitcoin and and only the machine can spend it and then i would say

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that is possible we can create a smart contract like this but then who controls the machine who

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owns the machine right and and that person would be the ultimate owner of the bitcoin that is held

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by the machine, so to say. I think you can even dissect it into whether Bitcoins are ownable at

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all to begin with, because the way I see it and the way I try to frame it now, mostly to make a

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point to these suit coiners that I end up meeting everywhere that think you can own Bitcoin in the

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same sense as you can own something else. But at the end of the day, you cannot own information. So

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So what Bitcoin allows you to do is to act as if you owned it.

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But what you're really doing is just keeping a secret from everyone else by knowing the private key.

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And I think Kinsella is really sharp on this thing, right?

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So Kinsella came up with grounding private property in scarcity, right?

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So that you can only own scarce resources and information is non-scarce.

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They're not rivalrous, right?

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The words can be copied by anyone and used by everyone at the same time.

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And that means that information cannot be property if property is rooted in scarcity.

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But there is rivalrousness in digital form, and that's Bitcoin, right?

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Like we've made it rivalrous that the UTXO that I have, you cannot spend.

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And so there's another two aspects here worth mentioning.

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The first is possession.

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And who has physical access to control the resource?

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Who can decide practically on where it goes to?

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And then the second question is, who is the owner?

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And ownership is that legal construct of who has the right title to use it.

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And if anyone contests this, who would ultimately win out?

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What is the legal settlement of that dispute and how we allocate scarce resources?

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And for this I do think you can possess Bitcoin for sure If you know the private key you the only one that can control where the UTXO goes Small devil advocate against that because you cannot with a

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hundred percent certainty know that you're the only person knowledgeable about this key.

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But I don't think you need to know that.

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No, me neither, because it's so improbable that someone else has access to the same private key,

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so you can practically discard that option.

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But it's still not 100% accurate to say that you're the exclusive owner

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since you cannot prove that because you can't prove a negative.

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I guess it would be settled once someone cracks the key

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and spends the money first or signs a signature.

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Then you would have assurance that someone that's not you knows the secret.

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But yeah, if two people would simultaneously know a secret,

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then they might both think that they're the exclusive knower of that secret.

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But the cool thing with Bitcoin is only one gets to prove it first and move the money.

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And then, yeah, the just magic of large numbers and cryptography just blows my mind like that.

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You know, for one, that we can come up with 256 bit keys, like a tiny number, like on a piece of paper.

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Right. That's not much. But you're for sure or not for sure, but for practical reasons.

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reason sure, right, for negligible, negligible probability that that you're

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the only one who knows it if you're randomly generated it.

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And that's incredibly weird and powerful.

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And one of these counterintuitive tricks of the cypherpunks to make so much happen

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is just that we can make insanely large numbers like mind bogglingly insanely large

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numbers. And the fact that that still works baffles me like hashes are the perfect

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example like separate from keys right but you can take like everything every every human forever

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has ever created in knowledge and you can keep hashing all of these different things including

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like the entire corpus of the internet right you can produce a hash of the internet archive

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for example and still like again petabytes of data can be compressed in this tiny fingerprint

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and that fits on a single line in a textbook and we will never run out and that just blows my mind

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like how is that even even possible i mean i i get the you know mathematical intuition but the fact

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that it's that this actually works is just it's insane to me no it's it's it's way more powerful

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than putting the entire library of alexandria in a matchbox it's that times a times a million like

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it's so it's so powerful but this is also so would you say that owning bitcoin requires you to have

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at least a basic knowledge of how weirdly big these numbers are and how uncrackable it is because of

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that because that's like what a prerequisite for for believing in the private key to begin with

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no i don't think that you you need to have understanding of how a technology works in

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order to be able to own that technology, right? We all own a car. None of us know how an internal

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combustion engine works, right? The details of it. And we can still own it. We can still possess it.

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We can still use it. And I think it's similar with Bitcoin. Like a tiny fraction of the population

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will know at any given time how the machine actually works. And, you know, arguably nobody

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knows how it works. That's iPencil, right? It's like even the most benign, simple physical object

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It's so unfathomably complex to produce that no single individual knows how to do it.

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We need the market process and we need to collaborate with others to produce anything,

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like literally anything.

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The most simple things cannot be produced by you alone, or at least at any rate of profitability.

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And so I don't think that knowledge or understanding of something is required.

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It helps, right?

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If you deeply understand something, you're more likely to see if it has actual value

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to you or not.

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right like most people who don't use bitcoin don't do it because they don't understand it

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if they would understand money and bitcoin they would obviously use it right so the the perceived

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value changes depending on your understanding but you can value something despite understanding

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the details of it yeah fiat money is a perfect example of this because if there's something

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people don't understand it's fiat money but they use it all the time uh no absolutely agree about

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like yeah i guess that all boils down to use value being completely subjective like uh if you don't

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know how to use it or don't know why it's i mean it's more about not knowing how to use it than

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not knowing why to use it i guess yeah and that's the thing if you don't understand it

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and you don't know how to use it properly you're probably going to destroy the machine

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right um like if you if you fill your your car with water instead of instead of fuel

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well obviously it's going to break right and and same with bitcoin if you don't know

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the importance of private keys and you post them on facebook right or or you don't back them up and

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lose your phone etc countless stories like this where people did not understand the technical

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nuance of bitcoin and therefore heavily burnt themselves and and lost access uh or gave away

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the access to their Bitcoin. So it's definitely advice to learn and study the tools that you rely

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on to make sure that you know how to use them and so that you don't shoot yourself in the foot.

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So knowledge is a powerful thing and obviously we should attempt to accumulate it and especially

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to understand it. But it's not a strict requirement. But if you don't, then it's almost

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like you're just flipping a coin and sometimes you'll be secure and very often you will not be.

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so a proper usage definitely requires knowledge and understanding but you can just by random luck

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do the correct action without knowing all the things that came in but hopefully you'll perform

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better than random chance yeah uh so so so where's the big gaping hole in people's knowledge about

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privacy specifically in in your opinion what what is like the the big aha thing that you

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mostly want to to deliver to everyone with this book like what what are they missing i mean there's

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so many different aspects here but i think the most fundamental one is definitionally

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like people think that privacy is anonymity right that if you are private that it means that you're

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secret and nobody knows about you and that's not a useful definition of privacy that's a useful

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definition of anonymity and anonymity is is important and good in many aspects and it can be

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bad in other aspects, but privacy itself, as defined by Eric Hughes, is the power to

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selectively reveal oneself to the world.

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And that is a much more useful definition.

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And so that's the first step where a lot of people miss it.

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And then maybe a bit more concrete in what the cipherpunks, sorry, what the Austrian

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economists are missing, is that privacy is at the foundation of the axioms of human action

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and human argumentation, right?

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Like Mises never really much talked about privacy per se,

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but his action assumption is deeply, deeply rooted in privacy.

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So what does the action axiom from Mises actually do?

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We perceive it as a self-given that human beings act purposefully to remove uneasiness.

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And we do that by perceiving problems that we have.

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That's the uneasiness, right?

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Life sucks for a multitude of different reasons.

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like you're hungry you're cold it's wet you know you you don't know how to make a fire and all of

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these things right bunch of we have humans will never run out of problems like we're problem

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making machines so that's that's the uneasiness that that he spoke about and then we we can in

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our minds imagine a future scenario where our problems are solved and i can imagine that i i

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will not be hungry in the future anymore and i want to get to that point and then further we

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can plan and deliberate on how do I allocate myself, my resources in my physical body, as well

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as the goods and resources that I own. How can I allocate my means in order to achieve my ends?

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And this is where entrepreneurial judgment and entrepreneurial calculation and resource

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allocation comes in on what are the tools that I have available and how can I change them in the

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physical world? So to get myself the thing that I need in order to solve my problem,

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How can I turn the cow into a steak that I can eat? This is ultimately what action is about. And what's interesting here is that inherently, that deliberation is internal. Like, it happens in your minds and hearts. And other people cannot see which problems you have. And we can guess and make informed judgments, but we will never know the same way that you know what your problems are.

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then also we don't know the preferences that you have right do you prefer bananas or do you prefer

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steak this is something again that we can that we can perceive after the action right if both the

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banana and the steak are on the table and you eat the ribeye then you prefer ribeye over banana at

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that point in time and that's proven by your action right so revealed preferences through action

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but your internal preference rankings on which order do you value your goods is something inherently

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uniquely subjective. And Menger called this subjective value theory. Value is not in the

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thing itself. It's in how humans react to the thing and how much they like it compared to other things.

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And it's marginal, cannot be quantified. And this is just another word of privacy.

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If values are subjective, then you know something that others don't. And then you can control how

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this information gets to be revealed to whom and at what time. And that's part of action. Every

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action definitionally is a private choice and a private choice over privacy right on how you

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reveal yourself to the world every word that i'm speaking now i i have the choice of do i want to

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say it or not you know sure talks are usually free-flowing and just go almost like subconsciously

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to not really but like it just flows to a large extent but still i could stop speaking at any

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point in time and choose to not reveal myself anymore and so privacy and action are to some

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extent just the same thing and and so when when when humans is talking about the human action

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axiom he might as well have called it the the privacy axiom right humans have choices on how

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they reveal themselves in relation to how they allocate their resources in order to solve their

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problems and so that's i think what most austrians miss is they think of privacy as as being anonymity

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and they don't appreciate how deeply privacy is tied to the the fundamental kernel of the human

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action axiom, on which the entire science of praxeology is built. It's even called praxeology

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because of human action. So I think just they don't appreciate that magnitude of how much

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action and privacy overlap. All right, so let's go deep here. Free will, the debate about free

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will and whether it exists or not. The way I understand praxeology, even if free will doesn't

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system, we live in a completely deterministic universe, this would not have any impact on

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praxeology because the principles still stand. Even if there's some other part of your brain

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making the decision than consciousness, the same logic applies. We still use means to reach ends.

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The way I'd like to frame this is because the neuron has to fire off before the decision is made

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in the brain, right? That's the argument against free will, that something precedes consciousness,

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and consciousness comes with a lag. So the way I like to see it is that objectively we can't

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have free will, but subjectively we have no choice but to have it, because we still act as if we do.

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There's no way to not act as if we do. What are your thoughts on free will, and have you

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done a deep dive into seeing whether this has any implications on praxeology or not?

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I think we definitely have free will.

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We're not free to escape the consequences of our actions.

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But with every action, definitionally, we act purposefully.

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Action is not the same as behavior.

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Behavior can be reflexes, which arguably you don't have a free willpower over them.

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No bodily reflexes, etc.

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But the actual acts of human life itself are absolutely there.

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i i would hate to live in a world without free will like for one that's just born

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and and then also it reduces humans to to nothingness right like what why are you then

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even here yeah but i'm i'm more more fishing for the the actual physics of it that uh you cannot

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choose what thought comes into your brain because the neuron has to fire off before you can experience

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the thought and before you can even potentially select which thought to focus on and carry out.

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In a temporal order sense of the problem, something has to precede the decision in the brain.

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Electrons will have to fire off, neurons will have to fire off before the decision is made.

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It's that kind of problem. Yeah, I guess you can then reduce it further to what makes the

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the electrons fire and maybe that's the actual conscious power.

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I mean I not deep into neuroscience but maybe that maybe that claim that the consciousness must start in the body is wrong And consciousness is the thing that controls the body that leads the neurons to fire Yeah now we getting somewhere because that implies the existence of a soul or something metaphysical And that just bonkers in a way but also super interesting if that the case

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And it also says something about whether you perceive reality the way reality is or whether you perceive a reality the way you are.

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And reality starts from within you and not from outer sources.

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It's probably both, right?

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Like that we both perceive our reality and we shape it.

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Like your mindset and your worldview have an insane amount of effect on how you act and who you are and how the world is, right?

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Like arguably the world is so fucked up right now because everyone, not everyone, many people have a bad poisoned worldview that leads them to steal from other people and to think that that's normal.

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But if you fix your worldview and I would argue align it more to what reality actually is, then the consequences of that would be stunning.

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And especially if it happens en masse.

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And I'm not sure about that last part on happening it en masse, but I know that for myself that I've had worldviews that were just wrong and not useful and leading to decisions and actions that went into the wrong direction ultimately.

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And you can change that.

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Like, you can absolutely change that.

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We've all done that, right?

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And our worldview on money specifically, for example, was insanely changed from being completely ignorant about it and just presuming what other people told you to then having that worldview of, hey, I can actually find out for myself on whether things are true or wrong.

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And then apply that to money and study and get the knowledge and acquire understandings on what a better or worse money is.

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And then even more, we can act upon that understanding and change our own lives substantially by selling fiat and buying Bitcoin.

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This is ultimately like an insanely powerful aspect that we've all experienced, like experientially firsthand of how much and how unspeakably much it actually can change your existence.

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If you're aware of that and apply these changes in your life.

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Yeah, and I love that you use the framing not useful, because a lot of things can be true, but only a select few of them can actually be useful to you and in your life. And I think there's a distinction there. There's a great, this is what Hoppe points out in one of my favorite books that you recommended. This is one thing, Max recommends the best books, just go ahead and read them, whatever you recommend.

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and it's the economic science and the Austrian method

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where he points out that Mises sort of figured out

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that action is the bridge between the two worlds,

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between the subjective and the objective.

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And everything in human society,

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every tool or technology we ever constructed,

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everything that was made by us started within our minds.

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It's always an idea first.

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So it's a subjective valuation manifesting into a physical object eventually.

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And I just find that so fascinating.

331
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Yeah, that's so true.

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And you know, on your book recommendation, throughout the book, I kept adding footnotes

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and kept adding a whole bunch of like, not just the sources, but then my opinion on how

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these sources relate to the topic that was covered in the main part of the book.

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And initially, those were footnotes, you know, after each page at the bottom, it shows you

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the links that were mentioned above.

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And so this turned out to be like Hoppe, who has like, you know, one short paragraph up

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top and then two pages of footnotes underneath it and so eventually i thought okay now let's

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let's make them end notes let's put them at the end of the chapter and then uh when i finalized

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the book and put it together it turned out to be like 90 pages of end notes you know and i'm like

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that that might be too much especially if you print it this is certainly in the tradition of

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austrian economics writers that is what they do i hope in particular but every every single one

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I took the opposite approach with my praxeology book.

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For instance, I tried to like minimize the number of footnotes and just not make any references and just have it free flow to not distract the reader.

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But that's the thing.

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I don't want to distract the reader.

347
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That's why initially I just put it to the end of the chapter.

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But then I still have so many books that I want to recommend to people that are like essential reading if you really want to grok that subject deeply.

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and there are like hundreds of books and articles and and softwares that that are referenced there

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so if you do want a couple a couple many reading books that will last half a lifetime to read

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then uh you will get them in the book yeah uh back to uh privacy being baked into the very

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foundations of why human beings act at all uh so we're you're saying that it's it's it's in

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every single decision. I guess this has to do with, there's a quote, I don't remember who said

354
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it, but maybe it's Abram Lincoln. It's easier to get what you want with a kind word and a gun than

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just a kind word. I mean, I guess that ties into the whole privacy aspect of any action. If you're

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influenced by other people than you and whoever you're interacting with, or just interacting with

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an object for that sense. If other people are aware of that, that weighs into your decision

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making. So for instance, if you make a bank transfer and you know that the state is watching

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you, you will act differently than if you use cash, because you know that the risk of

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being attacked is higher if you use a bank than if you use cash.

361
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And so this is an intervention in the market economy. Trades that would have happened without

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surveillance do not happen. And some trades that would not have happened without surveillance

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do happen under surveillance

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and the whole spectrum in between.

365
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So this goes back to, you know,

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Hayek and von Bermbewerk on price theory.

367
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Like surveillance fucks with our prices

368
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and prices are important.

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Like they're essentially important.

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If we have bad price signals,

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we make bad judgments

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on which rich resources to allocate where.

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And if we make bad judgments there,

374
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it's wasteful.

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Like we spend stuff on things

376
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that we shouldn't have spent the stuff on.

377
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And we destroy that capital

378
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Because we take very generic forms of capital like raw steel or grains, like really things with which you could do many different things.

379
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That's a raw material good, a raw production stage good.

380
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And we turn them into specifics.

381
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We take the steel, we turn it into an engine block.

382
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Now you can no longer use that steel to produce a steel bar for a house, for example.

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So we turn generic capital, put it into specific capital.

384
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And if our prices are wrong, we make mistakes here. And that comes at a huge cost because eventually we will have a bunch of engine blocks, for example, but we won't have enough steel bars to build the houses that we need. And we all live on the street all of a sudden.

385
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and and then because that hurts purchasing power and then just the wealth of society

386
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that means nobody has the capital or fewer people have the capital to buy the cars that we built

387
00:35:12,194 --> 00:35:17,274
the engine blocks for and so there's not enough demand and we have way much way too much supply

388
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of engine blocks and so we don't have the houses that we would have wanted and we have way too many

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engine blocks that we can't even finish to producing into cars because nobody would buy

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them in the first place. So ultimately, surveillance leads to larger booms and busts.

391
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It's quite similar to the Conteon effect, but money printing distorts prices. Therefore,

392
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we misallocate our resources. Therefore, we have boom periods where we spend our money on stuff

393
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that we actually don't need while disregarding the things that we actually need and that cannot

394
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be sustainable. Eventually, there will be a bust and the bust is the reallocation period where we

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take our specific forms of capital like the engine block put them back into the smelter destroy it

396
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right go back in the production stages which costs more time attention and money and so on

397
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just so that we can reproduce it into steel bars so surveillance is yet another price manipulation

398
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and the more price manipulations we have the more poor we will all be and and that just sucks and

399
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It's unnecessary.

400
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I mean, this is so interesting because it is exactly why socialism doesn't work.

401
00:36:22,994 --> 00:36:26,334
And what Mises proved, that it's not about the incentives.

402
00:36:26,614 --> 00:36:29,074
When you have a gun pointed at your head, you will work.

403
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You will grow your crops and harvest them and give them to the state.

404
00:36:34,754 --> 00:36:42,154
The problem is the price signals and how we misallocate resources by fucking up price signals in the way you just described.

405
00:36:42,154 --> 00:36:49,934
So would you say that surveillance is a form of market interventionism to the extent that you can call it socialism?

406
00:36:50,414 --> 00:36:58,874
Is it on the spectrum of socialism to have banks at all in the digital world where they can survey you?

407
00:37:00,094 --> 00:37:02,554
Yes, and quite definitially, right?

408
00:37:02,634 --> 00:37:06,834
Because socialism is the abolition of private property, basically, right?

409
00:37:06,854 --> 00:37:10,214
The collective ownership of means of production.

410
00:37:10,834 --> 00:37:13,574
And this is not socialism in goods.

411
00:37:13,834 --> 00:37:17,154
This is socialism in people, or in other words, slavery, right?

412
00:37:17,154 --> 00:37:22,134
A slave master can tell his slave that he has to reveal the secrets.

413
00:37:22,894 --> 00:37:29,034
And so that is an intervention in the most primitive of rights, and that is your right in your own body, right?

414
00:37:29,054 --> 00:37:29,754
Self-ownership.

415
00:37:30,234 --> 00:37:33,154
If you don't have privacy, that's a violation of self-ownership.

416
00:37:33,534 --> 00:37:35,794
And that is ultimately what socialism is about.

417
00:37:36,114 --> 00:37:38,094
So, yes, absolutely, it is socialism.

418
00:37:38,094 --> 00:37:49,214
And your question made me actually think if Karl Marx had in his, you know, seven bullet points of what communism ought to do, if he had something regarding surveillance.

419
00:37:49,414 --> 00:37:49,974
I don't know.

420
00:37:50,074 --> 00:37:55,974
But like, you know, central banks is a big one there, like the abolition of companies and property rights, etc.

421
00:37:56,234 --> 00:37:57,974
Price controls, all of these are mentioned.

422
00:37:58,654 --> 00:37:59,914
I'm not sure if surveillance is.

423
00:37:59,914 --> 00:38:09,734
But considering the insane amount of surveillance that any socialist system after Marx had, I wouldn't be surprised if it's at least there in some context, maybe not precisely stated.

424
00:38:11,234 --> 00:38:17,954
Yeah, Central Banks, he writes about that as a crucial thing for the revolution to take place, right?

425
00:38:18,014 --> 00:38:19,214
Which is super interesting.

426
00:38:20,014 --> 00:38:23,414
You know, I'm not sure, maybe I told the story already on the pod.

427
00:38:23,794 --> 00:38:24,774
I'll just tell it again.

428
00:38:24,774 --> 00:38:28,234
But I was at the Mises Institute in Auburn, Alabama years ago.

429
00:38:28,234 --> 00:38:34,954
and they have the personal library of all the books of mary rothbard and i this was like charlie

430
00:38:34,954 --> 00:38:41,454
in the chocolate factory for me and so i found rothbard's physical copy of das kapital by marx

431
00:38:41,454 --> 00:38:46,514
you know this like devilish bible and it was the most glorious joy to read through it because

432
00:38:46,514 --> 00:38:51,834
he just demolished him in the margins you know entire paragraphs scratched out with this is

433
00:38:51,834 --> 00:38:57,554
nonsense and like you know three sentences why i was like complete bollocks you draw like you know

434
00:38:57,554 --> 00:39:08,674
smileys and ugly looking marks in the margins. Like, ha, gay. The best notes. I wish the

435
00:39:08,674 --> 00:39:13,714
Mises Institute would digitize the personal books of Rothbard just to read the margins.

436
00:39:13,714 --> 00:39:20,434
This would be bestseller instantly. I would buy like a thousand copies and just hand them out.

437
00:39:20,434 --> 00:39:29,594
it's so good so so the the deeper into the praxeology of privacy you mentioned the the cost

438
00:39:29,594 --> 00:39:38,694
asymmetries of uh like the cost for the state to survey you is constantly going down uh it's not at

439
00:39:38,694 --> 00:39:45,814
all was it what it was before the internet but at the same time the cost for yourself to to

440
00:39:45,814 --> 00:39:52,374
undo that and bypass it and guard yourself against it are also going down so how do we

441
00:39:52,374 --> 00:39:59,654
how do we first of all give a tldr on that entire chapter and then like how do we make more people

442
00:39:59,654 --> 00:40:08,874
realize this and how do we make more people use use the tools yeah um how do we start here i think

443
00:40:08,874 --> 00:40:14,674
one good way to start with this is the is the uda loop right this is a term from from military

444
00:40:14,674 --> 00:40:19,974
strategy, specifically about jet pilots when it was written 1970s, I think.

445
00:40:20,954 --> 00:40:27,274
And so Boyd came up with this list of actions that two adversaries that are fighting against

446
00:40:27,274 --> 00:40:29,714
each other have to both cycle through.

447
00:40:30,554 --> 00:40:35,794
And the gist of him was whoever gets to cycle through faster wins the war, wins the battle.

448
00:40:36,334 --> 00:40:40,014
And so the loop is that first you have to observe your adversary, obviously, right?

449
00:40:40,014 --> 00:40:43,094
If you don't know where your adversary is, you can't fight against him.

450
00:40:43,094 --> 00:40:47,574
Then second, you need to orient yourself in relation to that adversary.

451
00:40:47,574 --> 00:40:50,974
So where am I? Where is he going? And so on.

452
00:40:50,974 --> 00:40:54,694
Then you need to decide on what you're going to do about it.

453
00:40:54,694 --> 00:40:58,094
Do you go left? Do you go right? Do you start shooting? Do you retreat? Whatever.

454
00:40:58,094 --> 00:41:00,294
And then finally, you have to act.

455
00:41:00,294 --> 00:41:05,414
So deploy that action, which then changes the whole scenario.

456
00:41:05,414 --> 00:41:12,454
And again, you have to go through the loop of observing what's the latest state after the action was taken and orient, decide, act.

457
00:41:12,454 --> 00:41:23,214
And so the goal of a fighter is to loop through this as fast as possible and simultaneously to prevent the adversary, the other guy, from looping through this as well.

458
00:41:24,274 --> 00:41:29,154
And sure, you could break the other person's decision cycle just before action.

459
00:41:29,694 --> 00:41:34,174
So he knows where you are, he's observed you, he knows where you're going and where he is in relationship.

460
00:41:34,374 --> 00:41:45,201
He has decided when to pull the trigger and then you maybe do an evasion maneuver that makes his action obsolete something like this But that extremely high risk because he already seen you

461
00:41:45,201 --> 00:41:48,281
He's quite far down the loop and is about to start over again.

462
00:41:48,921 --> 00:41:53,961
But if you break the UDA loop at observation and if the adversary does not know where you are,

463
00:41:54,201 --> 00:42:00,041
if you have a stealth bomber flying over him, then he can never even start the loop and engage the fight.

464
00:42:00,601 --> 00:42:04,661
So that means you can either just keep flying and he ignores you and he doesn't

465
00:42:04,801 --> 00:42:10,081
interact with you at all, or you can fire at him first and he will be on his back foot needing to

466
00:42:10,081 --> 00:42:15,221
defend against you who has already passed through the loop and him who is still stuck at observation,

467
00:42:15,221 --> 00:42:19,881
but is now getting shot at. So that's the origin of the UDA loop that I quite heavily cover

468
00:42:19,881 --> 00:42:26,581
in the book. And so this shows why privacy is so valuable on the defender's side. If the adversary

469
00:42:26,581 --> 00:42:32,201
doesn't know where you are, if you've engaged your privacy and stayed anonymous, then what's he

470
00:42:32,201 --> 00:42:38,041
going to do about it? And that's the beauty of an underground market that is not observed by the

471
00:42:38,041 --> 00:42:43,781
state. That's what Samuel Edward Konkens III pointed out in his algorithm. It's like,

472
00:42:44,301 --> 00:42:50,981
we just don't tell them about the dealings that we do. And then they don't know. And that's it.

473
00:42:51,221 --> 00:42:57,601
That's how we get freedom. Just do things in the shadows, basically. And so obviously,

474
00:42:57,601 --> 00:43:03,241
that's what cypherpunks agree on strategically. And that's why we have encryption. That's why we

475
00:43:03,241 --> 00:43:07,621
have anonymous communication systems like Tor. That's why we've had pseudonymous marketplaces

476
00:43:07,621 --> 00:43:13,541
like Silk Road. The reason why they worked is because they cut the OODA loop of the state at

477
00:43:13,541 --> 00:43:19,341
observation. And people couldn't read the messages. People couldn't find out IP addresses or locations

478
00:43:19,341 --> 00:43:25,581
of the participants and so on. And that's why it was a flourishing market. And so naturally,

479
00:43:25,581 --> 00:43:31,121
if we can decrease the cost of using anonymizing technology, right? If you think like for,

480
00:43:31,281 --> 00:43:35,481
if you want to use the Tor network, it's going to be a bit slower. Like every request takes a second

481
00:43:35,481 --> 00:43:40,901
or five seconds longer. That's the cost that you pay. And obviously if we could decrease that cost

482
00:43:40,901 --> 00:43:45,761
and you'll get instant anonymous internet access, then that would be better. And there's technical

483
00:43:45,761 --> 00:43:51,081
reasons why that doesn't work, but, and so there are some natural limits, but ultimately decreasing

484
00:43:51,081 --> 00:43:52,681
the cost of defense is crucial.

485
00:43:53,081 --> 00:43:54,801
Private keys, even another better example,

486
00:43:54,921 --> 00:43:57,961
like you can create a million private keys a second

487
00:43:57,961 --> 00:44:00,021
for free with hardware computers

488
00:44:00,021 --> 00:44:01,001
that you've already bought

489
00:44:01,001 --> 00:44:02,121
that are fully amortized

490
00:44:02,121 --> 00:44:03,581
and like, I don't know,

491
00:44:03,641 --> 00:44:05,761
a milliwatt of electricity.

492
00:44:06,601 --> 00:44:08,301
So creating a key,

493
00:44:08,801 --> 00:44:09,901
basically free,

494
00:44:10,001 --> 00:44:11,381
massively diminished costs.

495
00:44:11,941 --> 00:44:13,081
But then what are the costs

496
00:44:13,081 --> 00:44:14,841
for the attacker to reverse encryption,

497
00:44:15,461 --> 00:44:17,201
right, or to reverse the,

498
00:44:17,201 --> 00:44:18,901
and get the private key

499
00:44:18,901 --> 00:44:20,521
from the public key, right?

500
00:44:20,521 --> 00:44:23,641
The actual cost is not infinite, right?

501
00:44:23,721 --> 00:44:26,921
There is an actual computing cost where you can do that.

502
00:44:27,361 --> 00:44:31,741
It's just way more than any adversary can sustain properly.

503
00:44:31,981 --> 00:44:35,441
Rahim Tagestan, I should really learn how to pronounce his name.

504
00:44:35,441 --> 00:44:36,081
Tagestadigan.

505
00:44:38,081 --> 00:44:41,641
So he has a great paper on the praxeology of violence.

506
00:44:42,061 --> 00:44:44,801
Thieves are actors too, right?

507
00:44:44,801 --> 00:44:49,921
They live in uncertainty and they have resources and they allocate resources with the entrepreneurial

508
00:44:49,921 --> 00:44:54,481
judgment that after the heist, they will have more money than before the heist.

509
00:44:55,001 --> 00:45:00,801
If you spend 10 Bitcoin on tools, resources, labor, and so on, in order to steal one Bitcoin,

510
00:45:01,441 --> 00:45:03,281
then you're an unprofitable thief.

511
00:45:03,761 --> 00:45:07,961
And if you don't stop, you go bankrupt and you're forced to stop because you cannot pay

512
00:45:07,961 --> 00:45:09,921
for the next heist because all your Bitcoin are gone.

513
00:45:09,921 --> 00:45:17,821
Having that asymmetry where defense is cheap and attack is expensive, if that's the case,

514
00:45:18,121 --> 00:45:19,361
it's peace, right?

515
00:45:19,361 --> 00:45:27,221
And nobody can steal or nobody would want to steal because attempting to steal costs you more than you could actually get.

516
00:45:27,341 --> 00:45:33,341
And this is the ultimate entrepreneurial calculus of theft and coercion.

517
00:45:33,641 --> 00:45:38,481
And combining that with the UDA loop, where it can be rather cheap to protect your privacy.

518
00:45:39,081 --> 00:45:43,841
And then that exponentiates the cost of the attacker because he will have to start with surveillance.

519
00:45:43,841 --> 00:45:51,181
If you break the OODA loop after the decision-making process, then the costs to continuing to the action are much, much lower.

520
00:45:51,981 --> 00:45:53,881
And therefore, more attackers will do it.

521
00:45:54,101 --> 00:45:56,661
And then there's also this concept of anonymity sets.

522
00:45:57,321 --> 00:46:01,241
The more people use an anonymous system, the higher the anonymity set.

523
00:46:01,421 --> 00:46:05,021
You know, coin joins are the classical example Bitcoiners might know about.

524
00:46:05,421 --> 00:46:11,961
A coin join with five inputs and five outputs has less anonymity set than a coin join with 500 inputs and 500 outputs.

525
00:46:11,961 --> 00:46:16,341
And the more people use the system, the better it is for everyone.

526
00:46:16,541 --> 00:46:18,561
It's kind of a network effect itself.

527
00:46:19,401 --> 00:46:21,501
And so how do we get lots of people to use it?

528
00:46:21,761 --> 00:46:23,621
Well, first of all, make it cheap, right?

529
00:46:23,621 --> 00:46:25,061
And then more people can afford it.

530
00:46:25,301 --> 00:46:29,241
And they can afford it also for their lower value transactions.

531
00:46:30,041 --> 00:46:34,741
And if you use a VPN all the time because it's cheap, right,

532
00:46:34,741 --> 00:46:38,241
then you increase the anonymity set of everyone who uses that VPN server.

533
00:46:38,241 --> 00:46:51,041
And then that further increases the attack cost of the adversary because much harder surveillance and then much harder decision-making power on which of these anonymous or pseudonymous entities do you now try to attack.

534
00:46:51,341 --> 00:46:55,681
So all of these cypherpunk tools are here to increase the cost of the attack.

535
00:46:56,101 --> 00:47:07,001
And all of these cypherpunk tools strive to decrease the cost of defense so that we can increase the amount of users, increase the network effects, increase the usefulness and the anonymity of these tools.

536
00:47:07,001 --> 00:47:10,821
And if we do that at mass, we'll have a free society.

537
00:47:12,601 --> 00:47:17,521
Yeah, so adjacent here, what's the state of Wasabi Wallet at this moment?

538
00:47:17,641 --> 00:47:20,141
It's up and running, but you don't run a coordinator.

539
00:47:20,301 --> 00:47:21,461
Is that the case?

540
00:47:22,181 --> 00:47:22,701
Yeah, exactly.

541
00:47:22,901 --> 00:47:23,961
It's doing really well.

542
00:47:24,161 --> 00:47:30,001
The software keeps being built and shipped at a slower rate, especially in regards to new features.

543
00:47:30,281 --> 00:47:31,561
But it's very well maintained.

544
00:47:32,181 --> 00:47:35,601
They did an amazing work on making it much more stable and maintainable.

545
00:47:35,601 --> 00:47:39,881
so they decrease the costs of making sure the software will stay around in the long run

546
00:47:39,881 --> 00:47:45,361
and there's numerous coordinators and and much more volumes than than when we shut it down

547
00:47:45,361 --> 00:47:54,601
our coordinator no that's great to hear doing its thing fantastic uh yeah um i think where where you

548
00:47:54,601 --> 00:48:00,961
get most normies get lost in all of this is the the word attacker and when because they don't see

549
00:48:00,961 --> 00:48:07,241
the state as an attacker because they've been propagandized for in public schools and uh yeah

550
00:48:07,241 --> 00:48:15,521
exactly who's being naive k uh that's the other quote from the godfather so how do we make them

551
00:48:15,521 --> 00:48:22,301
realize that they need these like how do we stop them from being sweet summer childs or or do we

552
00:48:22,301 --> 00:48:27,821
even is that even is that even something we want to do like of course we want more cypher point but

553
00:48:27,821 --> 00:48:32,501
we want more real ones and we want what's the i don't even know what the question is here i'm

554
00:48:32,501 --> 00:48:38,121
fishing for something like what what's the what's the most important thing in terms of like adoption

555
00:48:38,121 --> 00:48:46,821
of privacy tools is it to awaken the lions or to uh herd the sheep into the right uh direction

556
00:48:46,821 --> 00:48:53,341
i think on on many different levels we really really want that for one because it will make

557
00:48:53,341 --> 00:49:00,061
everyone richer. Like a free market is so much more productive and profitable that we will have

558
00:49:00,061 --> 00:49:04,841
so many more problems solved, so many more resources at our disposal. So it will benefit

559
00:49:04,841 --> 00:49:09,881
everyone if we steal less from each other. So you absolutely just very selfishly for your own

560
00:49:09,881 --> 00:49:15,341
benefit, you want other people to be free. And then the second thing is, I think there is a

561
00:49:15,341 --> 00:49:23,121
massive moral obligation to help people realize that. For one, to realize that they are a victim

562
00:49:23,121 --> 00:49:27,681
and that that's wrong and that they can and should do something about that,

563
00:49:27,881 --> 00:49:29,761
that's important for people to realize.

564
00:49:30,201 --> 00:49:32,721
Then the second thing is to stop doing it.

565
00:49:33,141 --> 00:49:36,101
The amount of people that steal from each other is insane,

566
00:49:36,501 --> 00:49:38,601
including people who listen to this podcast.

567
00:49:39,061 --> 00:49:43,761
I'm sure we have a couple of people who work for the state at different levels

568
00:49:43,761 --> 00:49:44,861
or who work for banks.

569
00:49:45,301 --> 00:49:47,981
I mean, you and I steal from other people too

570
00:49:47,981 --> 00:49:50,901
because sometimes we're forced into using fiat currency.

571
00:49:50,901 --> 00:49:53,081
We can't get around it to 100%.

572
00:49:53,121 --> 00:50:10,201
Yeah, that's right. Whenever you use fiat money, you steal from billions of people who are not even born yet. So it's quite insane. So we should absolutely teach people to stop stealing. If you know that someone is stealing and you don't speak up, to some extent, you're part of the problem.

573
00:50:10,201 --> 00:50:20,601
Now, you have a lesser moral culpability than the guy who's stealing, obviously, but still not standing up and protecting victims is, I think, a bad thing to do.

574
00:50:21,041 --> 00:50:28,701
And then the other aspect is, and we can come back to the third axiom that I highlight in the book, and that's the axiom of resistance.

575
00:50:29,341 --> 00:50:31,841
Eric Woskule in Crypto Economics, fantastic book.

576
00:50:31,841 --> 00:50:41,401
And so what he articulates, which many just either approve or reject implicitly, is that resistance is possible.

577
00:50:41,681 --> 00:50:44,781
You can design systems to resist external control.

578
00:50:45,361 --> 00:50:48,841
And you yourself can resist external control and external adversaries.

579
00:50:49,661 --> 00:50:56,201
And this is one of these assumptions that so many people just disagree with implicitly without ever thinking about.

580
00:50:56,201 --> 00:51:01,641
But whenever you try to orange pill someone and that person returns with, oh, the government is just going to ban it.

581
00:51:01,841 --> 00:51:04,921
that's a person who disagrees with the axiom of resistance.

582
00:51:05,501 --> 00:51:08,581
His worldview, his propagandized worldview, obviously,

583
00:51:08,581 --> 00:51:13,021
is that the state is omniscient and super powerful and you cannot resist him.

584
00:51:13,641 --> 00:51:18,621
And therefore, if you do it, you will fail or even you're a bad person for resisting the state.

585
00:51:19,301 --> 00:51:20,821
And that's a worldview question.

586
00:51:21,461 --> 00:51:24,661
And that's why I put the axiom of resistance in, because that has to be changed.

587
00:51:24,881 --> 00:51:29,661
You can resist the attacker with the axiom of argumentation.

588
00:51:29,661 --> 00:51:37,541
you should resist the attacker, right? You ought to resist the attacker. And then if more people

589
00:51:37,541 --> 00:51:43,901
realize that, then arguably they will start resisting. And we very much need a lot of

590
00:51:43,901 --> 00:51:48,621
resistance right now because the world is full of thieves and pedophiles and rapists, and they

591
00:51:48,621 --> 00:51:55,881
have to be stopped. Yeah, but it's so obvious that we can resist. If I do my neighbor a favor

592
00:51:55,881 --> 00:51:57,361
and he does me a favor back.

593
00:51:57,441 --> 00:52:00,721
So if I paint his house and he retiles my roof,

594
00:52:01,321 --> 00:52:05,721
from the state's point of view, that's two taxable events.

595
00:52:06,401 --> 00:52:10,961
But it's obvious that we could just do that without asking for permission.

596
00:52:11,781 --> 00:52:15,121
So why don't people get this?

597
00:52:15,121 --> 00:52:19,741
To me, it's obvious that you can resist.

598
00:52:20,441 --> 00:52:24,621
It's just a question of which extent you can resist to.

599
00:52:24,621 --> 00:52:37,161
And also that people have this naive view, the sweet summer child view of the state being a good actor or the state at least being not a criminal organization.

600
00:52:38,061 --> 00:52:44,921
Yeah. And like, I mean, both of us, you know, years ago had a different worldview, I guess, right?

601
00:52:45,001 --> 00:52:48,041
Of, no, you shouldn't resist the state, right? And so on.

602
00:52:48,041 --> 00:52:58,461
Like this is something that many of us have learned and we had to deprogram the education that we received as children, especially in government schools, but also by some parents.

603
00:52:58,461 --> 00:53:10,281
Right. And so that requires a lot of thinking and like accumulating the right information, because if you're only taking government propaganda, there is no way that you will ever reach that conclusion.

604
00:53:10,281 --> 00:53:16,701
it's impossible because you first need to accumulate knowledge then you understand it and and suss out

605
00:53:16,701 --> 00:53:21,221
if it's true or not and then you act upon right that's that's the trivium that's the that's how

606
00:53:21,221 --> 00:53:28,401
knowledge works and and understanding and wisdom ultimately and garbage in garbage out right and

607
00:53:28,401 --> 00:53:34,781
and most people especially in sweden with like 21 years of government mandated propaganda like

608
00:53:34,781 --> 00:53:41,481
five days a week is like there's no way that that you could reach that and and so getting that

609
00:53:41,481 --> 00:53:45,721
knowledge out is important so we should print more books as you're as you're gladly doing and

610
00:53:45,721 --> 00:53:50,461
then of course the right books that actually speak the truth and and try to get them to to more people

611
00:53:50,461 --> 00:53:57,181
and especially praxeology like you cannot read Rothbard and not agree with him I don't think

612
00:53:57,181 --> 00:54:03,141
I've ever met a person who has seriously taken in this this knowledge and then disagrees because

613
00:54:03,141 --> 00:54:08,981
it's presented so beautifully and so approachably that you just have to agree that yes like theft is

614
00:54:08,981 --> 00:54:13,941
bad like full stop that's the end of the argument you know and you can take that into a million

615
00:54:13,941 --> 00:54:19,621
different ways and in the details of catalactics and and economics more generally but that's

616
00:54:20,661 --> 00:54:25,541
ultimately more people should read rothbar absolutely and especially swedes i mean it's

617
00:54:25,541 --> 00:54:31,701
called stockholm syndrome for a reason they're all in love with their captors no but it's it's so

618
00:54:31,701 --> 00:54:37,621
bleak over there when you see just the state monopoly on alcohol uh there is no single party

619
00:54:37,621 --> 00:54:43,861
that is against it and more than 70 of the population according to statistics and and uh

620
00:54:44,661 --> 00:54:53,221
well the polls are pro this system and that's the thing like the thieves have gotten exceedingly good

621
00:54:53,221 --> 00:54:59,461
at mind control right because if you can if you can control the information that people accumulate

622
00:54:59,461 --> 00:55:03,721
and then distort their worldview and their approach of understanding something.

623
00:55:04,021 --> 00:55:07,841
In fact, if they wouldn't even understand the trivium at all and be able to understand for themselves,

624
00:55:08,401 --> 00:55:11,461
then it becomes way easier to steal from them.

625
00:55:11,941 --> 00:55:14,421
If there is no resistance, that becomes easy.

626
00:55:14,521 --> 00:55:16,141
You just go in and take it and leave.

627
00:55:16,701 --> 00:55:18,261
And you can do it as often as you want.

628
00:55:18,261 --> 00:55:20,341
And that's exactly what the state does.

629
00:55:21,461 --> 00:55:29,341
So it's not surprising at all that in a heavily state society that people support the state.

630
00:55:29,461 --> 00:55:33,041
Like, this is the case in fucking blood red communism, like hardcore

631
00:55:33,068 --> 00:55:40,128
communism people in the gulags who were thrown in by the party uh were very glad that they were

632
00:55:40,128 --> 00:55:45,068
like they agree that they should be punished for betraying the communist party read the gulag

633
00:55:45,068 --> 00:55:51,448
archipelago like it's yeah yeah it's an insane book it's the most scary horror like the story

634
00:55:51,448 --> 00:55:56,188
ever and it's not even fiction and it fucking should be fiction but it's not so it's like if

635
00:55:56,188 --> 00:56:02,788
you if you have a weak stomach do not read that book like no one of the moments of realization for

636
00:56:02,788 --> 00:56:09,028
me regarding this was the first time I went to Cuba and visited a small village called Vinales.

637
00:56:09,028 --> 00:56:16,608
And everyone we met was pro the government. And they were starving and had no teeth and stuff

638
00:56:16,608 --> 00:56:23,208
like that. And they were all pro-government. The brainwashing is so thorough, but it's the same

639
00:56:23,208 --> 00:56:30,168
everywhere. It's just different. There's this question of whether you would be on the Nazi's

640
00:56:30,168 --> 00:56:36,888
side or not during the World War II. That's a question. Everyone believes that they would

641
00:56:36,888 --> 00:56:43,508
resist the Nazis. Yet with their action, by paying taxes and using inflationary currency,

642
00:56:43,508 --> 00:56:49,488
I believe they absolutely prove that they would all be Nazis. They're not even showing a tiny bit

643
00:56:49,488 --> 00:56:54,888
of resistance. Sheep, basically, just doing what they're told. And part of it is because they're

644
00:56:54,888 --> 00:57:00,828
scared of being of the punishment that may come when men with guns come and take your freedoms

645
00:57:00,828 --> 00:57:05,868
away because you did something without their permission but but the other part is that they

646
00:57:05,868 --> 00:57:11,208
think that this is actually a moral virtue to to to uh follow the rules so the covid was a

647
00:57:11,208 --> 00:57:19,268
and i used to preface all my talk when i had my more more rebellious talks with uh i'm not

648
00:57:19,268 --> 00:57:25,888
encouraging anyone to break any laws but fuck yeah i am i'm encouraging everyone to break every law

649
00:57:25,888 --> 00:57:33,868
against a uh against non-aggressive uh crime against victimless crime because it's not crime

650
00:57:33,868 --> 00:57:41,048
it's it's just someone fooling you it's propaganda there is no victimless crime it's a natural law is

651
00:57:41,048 --> 00:57:49,208
provable a priori and uh more people should know this stuff yeah absolutely and and here

652
00:57:49,208 --> 00:57:54,648
like again ludwig van nises was a was a fucking hero man this guy had a life like he was one of

653
00:57:54,648 --> 00:58:00,608
the very few people who like very very early on disagreed with the economics of hitler like his

654
00:58:00,608 --> 00:58:06,208
hitler had an economic doctrine and you know it was better than what germany had before like the

655
00:58:06,208 --> 00:58:12,168
weimar republic was atrocious like horrific horrific on many levels and and his programs

656
00:58:12,168 --> 00:58:18,088
were better than that and and you know he lifted up germany out of out of the the ruins of the

657
00:58:18,088 --> 00:58:24,588
say treaty into a much more uh you know a much better economic system but still nieces was like

658
00:58:24,588 --> 00:58:29,528
hey this is not this is not good there are some deep fundamental issues specifically private

659
00:58:29,528 --> 00:58:35,208
property was not respected you know that's kind of an important thing and and and so he he had

660
00:58:35,208 --> 00:58:41,488
fantastic books and treaties about the economic downfall right and and ultimately that his book

661
00:58:41,488 --> 00:58:47,348
socialism is is fantastic on this like socialism is not just communism it also includes national

662
00:58:47,348 --> 00:58:51,808
socialism which of course hitler was a big proponent of but then you see the same thing

663
00:58:51,808 --> 00:58:58,228
today over and over again and basically everywhere and there are clear consequences to a socialist

664
00:58:58,228 --> 00:59:04,968
economic order and they're not good and yes you can have a boom period for a short time you know

665
00:59:04,968 --> 00:59:11,028
that's again what hitler achieved was was a massive boom but it was not sustainable right and and a

666
00:59:11,028 --> 00:59:16,928
large part of it was funded from theft right and messing with the currencies etc and just the the

667
00:59:16,928 --> 00:59:23,008
owning or how do you say like you're not taking the property of not only Jews right but you know

668
00:59:23,008 --> 00:59:28,928
also gypsies and and and regular people who just did not agree with the regime and that led to

669
00:59:28,928 --> 00:59:34,248
to massive massive problems in the long run that he ultimately couldn't couldn't fix right so

670
00:59:34,248 --> 00:59:40,868
again like the Austrian economic tradition is so rich with people who actually resisted right like

671
00:59:40,868 --> 00:59:45,868
Like, Mises massively, massively resisted the Nazi regime at an insane cost.

672
00:59:46,048 --> 00:59:53,528
Like, not only was he a Jew, he was like actively writing books and encouraging people to stop it.

673
00:59:53,968 --> 00:59:58,348
And he was very, very close of being captured by the Nazis.

674
00:59:59,008 --> 01:00:02,988
And all of his books were burned, or at least a large part of them.

675
01:00:02,988 --> 01:00:09,068
Later, they were discovered in some Russian, like Soviet Union archive.

676
01:00:09,068 --> 01:00:17,168
but yeah like read the last night of liberalism fantastic biography about mises like and and not

677
01:00:17,168 --> 01:00:22,408
just about his life but about the history of economic thought before and after mises and

678
01:00:22,408 --> 01:00:29,368
and what of a monumental impact he has like and and that's also the thing of like free will right

679
01:00:29,368 --> 01:00:33,788
i think it's bullshit to think that there is no free will because like there there are you know

680
01:00:33,788 --> 01:00:41,688
some people and they insert their will so pressingly on on the world that it changes

681
01:00:41,688 --> 01:00:48,668
like like mountains you know and mises is is one of them with without this one dude the world would

682
01:00:48,668 --> 01:00:54,388
be so different so different right and then and then to like disregard his courageous actions

683
01:00:54,388 --> 01:00:58,328
because oh there is no free will it would have happened anyway bullshit it would not have happened

684
01:00:58,328 --> 01:01:04,368
like that no the same can be said for marks but the the inverse of it like the world would have

685
01:01:04,368 --> 01:01:14,988
been a great place without him read bastiat not marks uh well where were we here ah this is this

686
01:01:14,988 --> 01:01:22,388
is such a great conversation by the way uh that i absolutely love this um and we're like maybe six

687
01:01:22,388 --> 01:01:27,948
chapters in of the 25 chapters and covering the topic yeah yeah you know like maybe like we yeah

688
01:01:27,948 --> 01:01:31,828
We've talked a decent chunk about praxeology, and that's obviously a big part of the book.

689
01:01:32,208 --> 01:01:34,688
Yes, let's get into the cypherpunk stuff.

690
01:01:34,948 --> 01:01:35,328
Exactly.

691
01:01:35,688 --> 01:01:39,808
And so this book also traces the history of the cypherpunks, which is fascinating, by the way.

692
01:01:40,608 --> 01:01:44,168
These were the original rebels that resisted.

693
01:01:44,428 --> 01:01:46,808
The original cypherpunks were criminals.

694
01:01:47,208 --> 01:01:50,368
They broke the law, and they broke it big time.

695
01:01:50,528 --> 01:01:52,168
You know Phil Zimmerman of PGP?

696
01:01:52,168 --> 01:02:03,548
When he published the source code of PGP, Pretty Good Privacy, that was like the original consumer-grade encryption standard that actually gives you military-grade encryption algorithms.

697
01:02:04,088 --> 01:02:09,428
Like when he published that, it was like a high crime.

698
01:02:10,048 --> 01:02:14,128
You could not export cryptography outside of America.

699
01:02:14,528 --> 01:02:20,368
And obviously, publishing a research paper or even software on the internet is very much exporting it to anyone.

700
01:02:20,368 --> 01:02:27,848
and that's the thing he resisted right he didn't not do it because it's illegal like he realized

701
01:02:27,848 --> 01:02:34,988
that this is a a immoral and wrong law and in fact consenting to it would would be immoral resisting

702
01:02:34,988 --> 01:02:41,548
is the only moral choice and be glad that he did because the world would be a very different place

703
01:02:41,548 --> 01:02:47,168
not only if he would not have uh like resisted and just published the software but then even

704
01:02:47,168 --> 01:02:52,008
further resisted throughout the entire jury process and trial process that came like they

705
01:02:52,008 --> 01:02:58,868
threw everything at him it was a multi-year fight legal fight that cost millions to to make sure

706
01:02:58,868 --> 01:03:05,168
that there there is a legal precedent of no you can actually publish source code like code is

707
01:03:05,168 --> 01:03:10,628
speech right that whole thing came out of the pgp crypto voice and and again if if like a handful

708
01:03:10,628 --> 01:03:17,108
of people would not have resisted then the world today would be extremely very very very different

709
01:03:17,108 --> 01:03:20,108
And so we should be thankful that they did.

710
01:03:20,348 --> 01:03:27,428
And he's just one of many cypherpunks that throughout the history have done really substantial work on advancing the cost for human freedom.

711
01:03:28,528 --> 01:03:32,928
Yeah, I had the pleasure of meeting him in Buenos Aires two years back.

712
01:03:33,148 --> 01:03:35,608
What baffled me is that he still doesn't get Bitcoin, though.

713
01:03:36,128 --> 01:03:37,308
Why is that?

714
01:03:37,448 --> 01:03:39,648
But it's just a testament to that everyone's flaw.

715
01:03:39,728 --> 01:03:40,828
We're all human beings.

716
01:03:41,008 --> 01:03:45,508
I mean, we can be super, super good in one area and then completely miss something else.

717
01:03:45,708 --> 01:03:46,988
He's not an economist.

718
01:03:47,108 --> 01:03:53,188
That's the thing. The OG cypherpunks are not just bad economists, they're also bad business people.

719
01:03:53,308 --> 01:04:03,808
Look at David Chong. 1983, he comes up with this most brilliant, beautiful cryptography to do anonymous tokens and anonymous digital transactions before the internet existed.

720
01:04:03,988 --> 01:04:08,508
Ridiculous. This guy was a fucking visionary on computer science and cryptology.

721
01:04:08,908 --> 01:04:11,368
But then he ran his business into the ground.

722
01:04:11,368 --> 01:04:16,968
if john would have read rothbard and and just a little bit of austrian entrepreneurship theory

723
01:04:16,968 --> 01:04:21,408
the world would be so different because he wouldn't make the obvious mistakes

724
01:04:21,408 --> 01:04:26,888
that that that he did in running that business and if we would have had anonymous digital cash

725
01:04:26,888 --> 01:04:33,648
in the 90s like just imagine where we would be now like and now we have visa and fucking mastercard

726
01:04:33,648 --> 01:04:40,868
and a billion fiat shit coins and like that we were so close of avoiding all of this shit show

727
01:04:40,868 --> 01:04:46,908
of the last 30 years if if he and others wouldn't have fucked up on the business case so like that's

728
01:04:46,908 --> 01:04:51,828
why the synergy of this book is so important because the cypherpunks made mistakes and that

729
01:04:51,828 --> 01:05:01,328
cost us dearly in in life and time and and capital yeah i mean thank god for satoshi nakamoto finally

730
01:05:01,328 --> 01:05:06,588
figuring it out when he did i mean it's so hard there's so many butterfly effects too and it's

731
01:05:06,588 --> 01:05:09,268
It's like impossible to know how history would have,

732
01:05:09,788 --> 01:05:11,828
these what-if scenarios are so hard.

733
01:05:12,468 --> 01:05:15,228
For instance, call back to, I remembered,

734
01:05:15,408 --> 01:05:18,108
a call back to the Austrians here.

735
01:05:18,228 --> 01:05:22,988
Another student of Mises' that is an unsung hero

736
01:05:22,988 --> 01:05:26,248
is Ludwig Erhard, who was like the finance minister, right,

737
01:05:26,368 --> 01:05:29,888
for Germany for decades after the Second World War.

738
01:05:30,448 --> 01:05:33,228
And he basically just took the ideas of Mises and applied it,

739
01:05:33,228 --> 01:05:35,648
and that's why Germany is anything today.

740
01:05:35,648 --> 01:05:39,908
Like that's why Germany recovered, basically.

741
01:05:41,108 --> 01:05:45,688
Yeah, I just wanted to mention him because he's so, so forgotten in the history books.

742
01:05:46,688 --> 01:05:56,488
You know, and like it's probably worth to go a bit through the prehistory of Bitcoin on what the cypherpunks attempted to do and which problems they completely disregarded.

743
01:05:57,008 --> 01:05:57,308
Yes.

744
01:05:57,628 --> 01:06:04,368
So Chum in 1983 comes up with this beautiful, tiny, short math formula where you can do anonymous token transfers.

745
01:06:04,368 --> 01:06:07,568
But there were two mistakes that he did here.

746
01:06:08,328 --> 01:06:12,668
And it took until Satoshi for someone to realize that we have to fix both of them.

747
01:06:13,188 --> 01:06:16,348
Or not to realize that, but to actually pull it off.

748
01:06:16,508 --> 01:06:19,368
So the first problem was it's centralized.

749
01:06:20,048 --> 01:06:26,448
So you need to have a central server who has the blockchain, so to say, the list of all already spent tokens.

750
01:06:27,028 --> 01:06:30,008
And that server needs to be there in order to prevent double spending.

751
01:06:30,548 --> 01:06:35,008
Double spending is important because if you can double spend a token, it is not rivalrous.

752
01:06:35,708 --> 01:06:41,148
Anyone who wants it can get it because if you have one token, you can make a million of them and spend them a million times.

753
01:06:41,788 --> 01:06:45,628
So if we want to have property in cyberspace, we need to have scarcity in cyberspace.

754
01:06:46,008 --> 01:06:47,728
We want to have scarcity in cyberspace.

755
01:06:47,848 --> 01:06:49,088
We need temporal ordering.

756
01:06:49,548 --> 01:06:51,028
Which transactions came first?

757
01:06:51,388 --> 01:06:52,748
And only the first one is valid.

758
01:06:52,908 --> 01:06:53,948
The second one is invalid.

759
01:06:54,208 --> 01:06:56,828
It's an ordering, a timestamping problem.

760
01:06:57,528 --> 01:07:00,728
And so Chom figured this out in a centralized setting.

761
01:07:01,208 --> 01:07:06,668
And because he was a cryptographer, he also figured out, because he was a cypherpunk, he also figured out how to do it anonymously.

762
01:07:07,128 --> 01:07:08,388
Very, very important, right?

763
01:07:08,388 --> 01:07:13,088
Because an anonymous centralized server cannot do targeted enforcement.

764
01:07:13,808 --> 01:07:19,648
Like the service provider cannot say, take all the money of Alice if he cannot observe which tokens are from Alice.

765
01:07:20,388 --> 01:07:22,508
And again, we break the OODA loop at observation.

766
01:07:22,508 --> 01:07:32,188
And so the service provider cannot be malicious because he cannot observe and decide and orient and decide and therefore act on the results.

767
01:07:32,408 --> 01:07:33,568
That was great.

768
01:07:33,648 --> 01:07:37,108
But the second issue was it was not base money proper.

769
01:07:37,808 --> 01:07:41,988
This was a money substitute or as Rothbard would say, a money warehouse receipt.

770
01:07:42,728 --> 01:07:45,308
Like you give David John a piece of gold.

771
01:07:46,048 --> 01:07:46,888
Fiduciary media?

772
01:07:47,408 --> 01:07:48,668
Fiduciary media, exactly.

773
01:07:49,068 --> 01:07:51,048
Fiduciary media is the Misesian term.

774
01:07:51,048 --> 01:07:59,948
I personally like money warehouse receipt from Rothbard because that's just, it's a warehouse of money and you have a receipt to get the money out of the warehouse back, right?

775
01:08:00,388 --> 01:08:01,748
Very, very onto the point.

776
01:08:01,888 --> 01:08:03,628
Fiduciary Miriam, nobody knows what that even means.

777
01:08:04,168 --> 01:08:06,988
Receipt implies that it can be copied and printed.

778
01:08:08,488 --> 01:08:08,968
Yes.

779
01:08:09,388 --> 01:08:11,708
And, you know, that's the thing.

780
01:08:11,828 --> 01:08:16,128
Like the money warehouse then has to make sure that these tokens are valid.

781
01:08:16,128 --> 01:08:23,588
And that's also what John figured out, because only the Mint has the private key to produce a signature that he sees as valid.

782
01:08:24,208 --> 01:08:33,328
So the Mint, the eCash server, is both the creator of the token and the validator of the token, and the validator of the double spending of that token.

783
01:08:33,548 --> 01:08:40,108
So he figured that out, but it was centralized, which means because in this case, the bad business practices of them, they went bankrupt.

784
01:08:40,108 --> 01:08:44,008
Like, how can you go bankrupt with such a genius idea?

785
01:08:44,008 --> 01:08:46,148
Like, it's almost impossible, but he managed that.

786
01:08:47,408 --> 01:08:49,508
And so then the system died.

787
01:08:49,508 --> 01:09:05,582
And then the second aspect is it wasn it wasn base money So he needed permission of the base money ecosystem which he chose fiat money for that later like for example e was a e server basically with

788
01:09:05,582 --> 01:09:10,962
i know i think they had accounts not e-cash but but they they had gold as deposit right so you

789
01:09:10,962 --> 01:09:16,622
deposited gold into their warehouse and you get your digital token um and can transact with it

790
01:09:16,622 --> 01:09:25,282
So they fixed at least choosing a better underlying base money in the warehouse that's inflation resistant, but they were still centralized.

791
01:09:26,042 --> 01:09:38,642
And the tokens that the users had were still not the money itself, which means that once the government came after them in 2002 or something and shut them down, they had the problem of everyone lost their thing.

792
01:09:38,642 --> 01:09:42,802
Because the thing that they had of value was not the signature or the token.

793
01:09:43,542 --> 01:09:45,302
It was the underlying base money asset.

794
01:09:45,302 --> 01:09:51,102
And without the underlying base money asset, nobody would demand the token because it is redeemable for nothing.

795
01:09:52,182 --> 01:09:57,282
And then we need to figure out how to actually make this.

796
01:09:57,702 --> 01:10:00,242
How can we have a digital token that is the thing itself?

797
01:10:00,922 --> 01:10:02,742
And here is where Hal Finney comes in.

798
01:10:02,922 --> 01:10:08,582
I think he was probably the first one to figure this out with reusable proof of work, RPAL.

799
01:10:08,582 --> 01:10:15,842
right you anyone could produce the asset the good itself the base money so to say by just hashing

800
01:10:15,842 --> 01:10:21,842
right and and then you can send that token to someone else and a server manages the double

801
01:10:21,842 --> 01:10:28,602
spending so i think arpo was still centralized but it was base money itself it was not a claim

802
01:10:28,602 --> 01:10:37,242
on anything it was the thing itself and and then both bitgold and egold tried to decentralize

803
01:10:37,242 --> 01:10:42,942
this base money aspect but they failed so that's way dai and nick sabo and and then satoshi comes

804
01:10:42,942 --> 01:10:51,262
around and has a nice twist of of how to design it such that it is base money and it is decentralized

805
01:10:51,262 --> 01:10:57,422
right and and so this means that instead of the mint validating if the token is valid and if it

806
01:10:57,422 --> 01:11:04,902
is unspent the merchant validates it in order to receive a coin you validate is this coin or

807
01:11:04,902 --> 01:11:08,202
agreeing to my consensus rules, right?

808
01:11:08,242 --> 01:11:10,482
So does it have a valid transaction history?

809
01:11:11,102 --> 01:11:13,582
Was every transaction before correctly signed off?

810
01:11:13,802 --> 01:11:16,502
Was any transaction inflating the money supply, right?

811
01:11:16,962 --> 01:11:19,202
If none of these checks fail,

812
01:11:19,762 --> 01:11:22,522
then I consider it as received and valid.

813
01:11:22,822 --> 01:11:24,462
And so decentralized verification,

814
01:11:25,042 --> 01:11:26,802
and it was not a money substitute.

815
01:11:26,962 --> 01:11:28,042
It was the thing itself.

816
01:11:28,042 --> 01:11:30,922
You cannot redeem your Bitcoin for anything else.

817
01:11:31,782 --> 01:11:34,622
And this means that any one of the system

818
01:11:34,622 --> 01:11:40,862
could be shut down but your actual assets are not gone because the assets do not live in any

819
01:11:40,862 --> 01:11:46,462
money warehouse they live in in your hand ultimately or on your full node more more

820
01:11:46,462 --> 01:11:54,042
accurately and the the the downside and why so many early cypherpunks thought that bitcoin was

821
01:11:54,042 --> 01:11:59,962
a stupid idea was that it was not private right like think back we we have perfectly anonymous

822
01:11:59,962 --> 01:12:01,782
digital transfer since 1983.

823
01:12:02,182 --> 01:12:08,582
30 years later, Satoshi comes along and says like, hey, I have decentralized base money,

824
01:12:09,122 --> 01:12:10,122
but it is not private.

825
01:12:10,342 --> 01:12:15,422
And it is not private because you have to verify every single transaction that came before

826
01:12:15,422 --> 01:12:19,042
in order to receive a coin.

827
01:12:19,482 --> 01:12:22,522
In order to run a full node, you need to see every transaction of everyone else.

828
01:12:23,202 --> 01:12:24,362
And that means it's not private.

829
01:12:25,222 --> 01:12:26,862
And therefore, it does not scale.

830
01:12:26,862 --> 01:12:35,442
And if you need to read every transaction of everyone else ever in the history of the money in order to receive a payment today, that's a ludicrous scaling idea.

831
01:12:35,562 --> 01:12:39,302
It's obviously stupid on scalability and on privacy both.

832
01:12:39,722 --> 01:12:44,482
You cannot use Bitcoin without revealing the transaction to every merchant on the network.

833
01:12:45,162 --> 01:12:46,382
And that means it's not private.

834
01:12:46,582 --> 01:12:48,582
You are required to reveal information.

835
01:12:48,982 --> 01:12:51,962
And if you do not reveal that information, you cannot use the system.

836
01:12:52,582 --> 01:12:56,222
And so in this aspect, Bitcoin is not a private system whatsoever.

837
01:12:56,862 --> 01:13:00,302
Well, let me cut in there for a bit.

838
01:13:00,842 --> 01:13:07,042
It's true that you have to reveal yourself to whoever you're getting the Bitcoin from.

839
01:13:07,282 --> 01:13:11,402
But the public key is still pseudonymous.

840
01:13:11,402 --> 01:13:22,302
The other people on the network cannot know unless the person is connected to that address somehow or that public key somehow, right?

841
01:13:22,942 --> 01:13:23,842
Yes, correct.

842
01:13:23,842 --> 01:13:35,382
So you need to reveal some information, not all information, right, but some information, specifically which coin you're spending and to which address you're receiving, right, and the amounts of the Bitcoin.

843
01:13:36,082 --> 01:13:38,782
And I guess the signature, which is just derived from the public key.

844
01:13:39,682 --> 01:13:42,602
These are the aspects that you do have to reveal.

845
01:13:43,182 --> 01:13:48,022
And then in the white paper, even Satoshi pointed out two things in regarding to privacy.

846
01:13:48,502 --> 01:13:50,822
First is, this is a pseudonymous system.

847
01:13:50,822 --> 01:13:55,322
You should not reuse your pseudonymous identity and address reuse.

848
01:13:55,502 --> 01:13:56,982
He specifically called it out.

849
01:13:57,182 --> 01:14:00,902
If you want to have privacy, use a new address for every time you receive Bitcoin.

850
01:14:01,202 --> 01:14:01,822
And that helps.

851
01:14:02,082 --> 01:14:04,162
That helps for the receiving side.

852
01:14:04,282 --> 01:14:06,742
I can receive 100 payments on 100 fresh addresses.

853
01:14:07,402 --> 01:14:09,802
And nobody knows that all of these 100 payments are mine.

854
01:14:10,362 --> 01:14:13,242
Only each individual sender knows this is my address.

855
01:14:13,602 --> 01:14:16,342
And they would have to collude to find out all of my addresses.

856
01:14:16,342 --> 01:14:22,522
The second privacy aspect he mentions in the white paper is the common input ownership heuristic, right?

857
01:14:22,622 --> 01:14:41,922
That in a transaction, when you don't have any individual UTXO that is large enough to make the desired payment, you can add multiple inputs into a transaction and collect five coins each worth one Bitcoin and then make a payment of 4.5 Bitcoin, for example, with 0.5 change back to you.

858
01:14:41,922 --> 01:14:47,282
and he doesn't call it the input the common input ownership heuristic but he alludes to it

859
01:14:47,282 --> 01:14:53,002
in the white paper itself and and that's the second privacy fuck up of people know that these

860
01:14:53,002 --> 01:14:58,002
coins belong to the same person because they were spent not just at the same time but at the same

861
01:14:58,002 --> 01:15:03,882
transaction or in the same transaction and they don't know but they they can make a very educated

862
01:15:03,882 --> 01:15:11,162
guess but they cannot to 100 know i mean they can know that he moved them but anyway and and that's

863
01:15:11,162 --> 01:15:12,522
where CoinJoin comes in, right?

864
01:15:12,562 --> 01:15:14,882
Like in practice before CoinJoin,

865
01:15:14,942 --> 01:15:16,462
before like 2016 or something,

866
01:15:17,002 --> 01:15:18,722
every transaction with multiple inputs

867
01:15:18,722 --> 01:15:20,762
was initiated from one user.

868
01:15:21,262 --> 01:15:22,842
And that user might be an exchange

869
01:15:22,842 --> 01:15:23,862
that custodies monies

870
01:15:23,862 --> 01:15:25,782
of hundreds of thousands of users, right?

871
01:15:25,822 --> 01:15:27,222
But still, it was one entity

872
01:15:27,222 --> 01:15:28,642
that said all of these coins

873
01:15:28,642 --> 01:15:29,382
get spent now.

874
01:15:30,082 --> 01:15:33,902
And it was all until DarkWallet

875
01:15:33,902 --> 01:15:35,022
and later JoinMarket

876
01:15:35,022 --> 01:15:36,042
and then WasabiWallet

877
01:15:36,042 --> 01:15:38,322
where we came up with a protocol

878
01:15:38,322 --> 01:15:40,602
and implemented that in production

879
01:15:40,602 --> 01:15:45,702
where we made it easy for multiple people to come together and spend their coins together.

880
01:15:46,042 --> 01:15:46,882
That's a coin join.

881
01:15:47,302 --> 01:15:50,802
We join our input coin and everyone gets his output coins

882
01:15:50,802 --> 01:15:53,242
in order to make sure that we have better privacy.

883
01:15:53,242 --> 01:15:56,782
And coin join is a fantastic privacy technique, as we mentioned earlier.

884
01:15:57,442 --> 01:16:01,442
Wabi Sabi, that's the protocol behind Wasabi, is fantastic.

885
01:16:01,682 --> 01:16:03,082
It's still unbeat to this day.

886
01:16:03,622 --> 01:16:07,702
If you do want on-chain privacy, use Wabi Sabi and it's a solved problem.

887
01:16:07,702 --> 01:16:10,702
It was very hard to solve the problem, but it's solved now.

888
01:16:10,882 --> 01:16:15,742
And you can have quite anonymous Bitcoin transactions, despite it being pseudonymous.

889
01:16:15,942 --> 01:16:21,182
You can have very strong anonymity between your pseudonyms of different addresses.

890
01:16:22,162 --> 01:16:24,942
And we have those privacy guarantees now, which is great.

891
01:16:25,022 --> 01:16:26,042
It was a lot of work to get there.

892
01:16:26,222 --> 01:16:31,622
Yeah, the tools still exist, and we should look into them more.

893
01:16:31,882 --> 01:16:32,962
Where were we on the cipher?

894
01:16:33,102 --> 01:16:36,962
Yeah, I can recommend a book to my listeners.

895
01:16:36,962 --> 01:16:38,982
You're aware of the book and you don't need to read it.

896
01:16:39,242 --> 01:16:45,122
But Aram van Weerdum's Genesis book is very good on the prehistory of Bitcoin.

897
01:16:45,302 --> 01:16:49,402
And David Schaum and Weydei and all of these people and their stories.

898
01:16:49,942 --> 01:16:51,842
I got a lot out from that.

899
01:16:53,122 --> 01:16:55,882
And so we covered two parts of the cypherpunk prehistory.

900
01:16:56,002 --> 01:16:57,422
We covered the encryption wars.

901
01:16:57,642 --> 01:16:58,642
That was PGP mainly.

902
01:16:59,442 --> 01:17:01,342
We covered the money side of things.

903
01:17:01,342 --> 01:17:06,902
The third pillar that I'm covering in the book substantially is anonymous communication.

904
01:17:06,962 --> 01:17:13,642
So network level privacy, because on the Internet, you have a unique identifier, your IP address.

905
01:17:14,442 --> 01:17:23,642
And whenever you connect to some other computer, like visiting a website, you need to know the IP address of that receiving computer who will receive your requests.

906
01:17:23,962 --> 01:17:26,222
And that computer will learn your IP address.

907
01:17:27,042 --> 01:17:29,262
So this means that you are not anonymous.

908
01:17:29,462 --> 01:17:32,442
You're not even pseudonymous to a large extent.

909
01:17:32,442 --> 01:17:40,002
And you have a static identity that continues to be used and can very easily be tied to your real identity, especially your Internet service provider can do that.

910
01:17:40,002 --> 01:17:47,282
So what if we want to reach to talk to a computer where that receiving computer doesn't know who you are or vice versa?

911
01:17:47,462 --> 01:17:51,302
Like, how can two anonymous people meet online without learning their network level identity?

912
01:17:52,422 --> 01:17:54,742
And guess what? David Chong fixed that too.

913
01:17:54,842 --> 01:17:59,702
In like the 1990s or like 85 or something ridiculous, he proposed mixed networks.

914
01:17:59,702 --> 01:18:07,762
and um which is i guess let's talk first about onion routing which is uh an easier and and less

915
01:18:07,762 --> 01:18:12,122
private thing than mix nets but onion routing is what tor does right tor the onion router

916
01:18:12,122 --> 01:18:19,182
is a great anonymizing technique where instead of you talking to the final website computer right

917
01:18:19,182 --> 01:18:25,742
away you first talk to an entry node and encrypt your messages to that first top that first top

918
01:18:25,742 --> 01:18:29,502
decrypts the message that he gets and he sees, oh, it's still ciphertext.

919
01:18:29,722 --> 01:18:31,422
It's encrypted to that second node now.

920
01:18:31,822 --> 01:18:33,362
So let me forward it to the second node.

921
01:18:33,802 --> 01:18:36,882
He decrypts it, sees, oh, there's yet another ciphertext to the third node.

922
01:18:37,242 --> 01:18:38,222
Let's send it to him.

923
01:18:38,482 --> 01:18:42,522
And then the third node decrypts it and sees, oh, this message is supposed to go to

924
01:18:42,522 --> 01:18:44,102
facebook.com or whatever.

925
01:18:45,022 --> 01:18:50,742
And so we have a three hop of onion routed encryption where every hop is encrypted

926
01:18:50,742 --> 01:18:51,242
separately.

927
01:18:51,242 --> 01:18:57,982
and with this any individual of our routing nodes does not see the full picture that's the

928
01:18:57,982 --> 01:19:01,562
the first hop sees my ip address but he doesn't know where the packet is going

929
01:19:01,562 --> 01:19:06,002
the the third hop sees where the packet is going but he doesn't know where the sender is

930
01:19:06,002 --> 01:19:11,082
and the node in between knows nothing right he's just packing receiving encrypted data from

931
01:19:11,082 --> 01:19:19,602
a relay and sending it to a relay um and so tors is extremely powerful and is essential for any

932
01:19:19,602 --> 01:19:25,562
actually anonymous usage of bitcoin like that's again why wasabi wallet is is so unique because

933
01:19:25,562 --> 01:19:34,122
it is by far the most sophisticated wallet in terms of tor usage and arguably even the most

934
01:19:34,122 --> 01:19:41,722
sophisticated tor program entirely because it uses a lot of different tor streams which means routes

935
01:19:41,722 --> 01:19:47,642
through the tor network so that you can talk in multiple times to the same server and he has no

936
01:19:47,642 --> 01:19:52,362
idea that each of these requests actually comes from you. Yeah, quite, quite extraordinary thing.

937
01:19:52,922 --> 01:19:58,802
So, so that's super, super important. And we can make that even better to go back to John's

938
01:19:58,802 --> 01:20:05,722
original idea of a mixnet, because the downside of an Onion system is that if you have a global

939
01:20:05,722 --> 01:20:12,642
passive adversary, so a global adversary is an adversary who sees every connection on the internet,

940
01:20:12,762 --> 01:20:16,942
right? He sees exactly when a computer receives a package and sends it out again.

941
01:20:17,642 --> 01:20:20,662
And passive means he cannot interfere with those packets.

942
01:20:20,742 --> 01:20:22,642
He cannot drop them or change them.

943
01:20:23,282 --> 01:20:27,782
So a global passive adversary, think the NSA, that's literally what they do.

944
01:20:27,882 --> 01:20:29,462
So this is not a theoretical attack.

945
01:20:29,462 --> 01:20:37,462
The NSA takes every packet over the Internet and puts it into petabytes of data and analyzes that data.

946
01:20:38,222 --> 01:20:44,182
Against such an adversary, Tor cannot help you because Tor does not have any timing delays.

947
01:20:44,882 --> 01:20:53,202
As soon as one message reaches a relay, they decrypt it, which takes a knowable amount of time, and then they instantly forward it to the next guy.

948
01:20:53,942 --> 01:21:01,122
And so if you have a global view of the network, you see packets entering and leaving and entering and leaving and so on, and you can follow that.

949
01:21:01,202 --> 01:21:12,902
So the idea of a mixnet is that whenever a relay receives a message, it waits for a certain time, a random amount of time, before it forwards the message to the next guy.

950
01:21:12,902 --> 01:21:20,462
and and with this we can defeat the global passive adversary because now a relay receives

951
01:21:20,462 --> 01:21:27,102
five messages and and sends five messages and we no longer know which like if the first message

952
01:21:27,102 --> 01:21:32,622
that came in was also the first message that left out or if that timing delay was so long that it

953
01:21:32,622 --> 01:21:37,422
turned out to be the last message to leave right so this shuffling this this mixing this random time

954
01:21:37,422 --> 01:21:42,762
delay between receiving and forwarding the packet is what makes mixnets like NIM, for

955
01:21:42,762 --> 01:21:48,242
example, or KatzenTost is another example, and makes these even more private than Tor.

956
01:21:48,522 --> 01:21:52,182
So if you're really hardcore about your privacy, check out mixnets.

957
01:21:52,442 --> 01:21:53,882
They're much better than OnionRoters.

958
01:21:56,302 --> 01:21:58,762
Holy shit, that's a lot to take in.

959
01:21:58,762 --> 01:22:03,022
What is white noise and this thing over Noster?

960
01:22:03,602 --> 01:22:05,242
That's another one of your projects.

961
01:22:05,242 --> 01:22:09,242
And does it leave an on-chain footprint? Like what is this thing?

962
01:22:10,122 --> 01:22:27,416
Yeah let get a bit back then to PGP and just talk about encryption Because white noise is like the culmination of 30 years of computer science on top of encryption or more So PGP had this idea of everyone has a public key

963
01:22:28,196 --> 01:22:32,516
We meet somewhere and we exchange papers that say,

964
01:22:32,516 --> 01:22:35,516
hey, you give me your public key printed out, I give you mine.

965
01:22:36,356 --> 01:22:41,316
And now later, we can use our encrypted channel

966
01:22:41,316 --> 01:22:44,796
that we've established by me sending a message to you,

967
01:22:45,056 --> 01:22:46,816
but encrypting it to your public key.

968
01:22:47,756 --> 01:22:51,276
And the thing, though, is the way that PGP was set up,

969
01:22:51,796 --> 01:22:54,516
most people just, if I want to send you 10 messages

970
01:22:54,516 --> 01:22:56,796
throughout the year, I will always encrypt them

971
01:22:56,796 --> 01:22:57,796
to your same public key.

972
01:22:57,916 --> 01:22:59,316
And you will have the same private key

973
01:22:59,316 --> 01:23:00,496
and you can decrypt all of them.

974
01:23:00,556 --> 01:23:02,756
The address we use of encryption, so to say.

975
01:23:02,756 --> 01:23:06,196
The problem here is, for one, an outside observer

976
01:23:06,196 --> 01:23:08,816
will always see that the same public key gets a message.

977
01:23:09,616 --> 01:23:14,476
So they will know that I've messaged you 10 times, or at least that you've received 10 messages throughout the year.

978
01:23:15,196 --> 01:23:22,356
And also, if ever anyone compromises your private key, they compromise one key, but they get 10 messages out of it.

979
01:23:22,356 --> 01:23:26,456
And so that's better than not encrypting, but we can do better.

980
01:23:27,016 --> 01:23:31,216
What if for every message we generate a new private public key pair?

981
01:23:31,936 --> 01:23:38,576
And instead of address reusing on the encryption, we use an encryption public key only once.

982
01:23:38,816 --> 01:23:45,696
And this is what the protocol called Off the Record came up with in 2007, I think, maybe a bit earlier.

983
01:23:46,776 --> 01:23:55,336
And so Off the Record is a way that two people who both have to be online can send messages back and forth a couple times.

984
01:23:55,336 --> 01:24:01,196
And then they will have a new public key of the other person that they can send the message to.

985
01:24:01,196 --> 01:24:04,496
So we have this multi-round handshake.

986
01:24:05,036 --> 01:24:09,436
And at the end of it, we have a new private key and public key that we can encrypt the message to.

987
01:24:09,696 --> 01:24:12,536
And for every message that we're sending, we do that handshake again.

988
01:24:12,816 --> 01:24:15,336
And we will have this ratchet.

989
01:24:15,976 --> 01:24:19,856
We have a new key for each message, like the ratchet to open the thing.

990
01:24:20,056 --> 01:24:21,796
It goes in one direction, but not the other.

991
01:24:22,436 --> 01:24:29,436
And so the cool thing with this is that if any one of your private keys gets leaked, only one message is compromised.

992
01:24:29,696 --> 01:24:30,816
And not all of them.

993
01:24:31,196 --> 01:24:33,036
So massive improvement.

994
01:24:33,836 --> 01:24:45,976
Then the problem with off the record was that the receiver had to be online in order to advance the ratchet and get a new private public key pair out of it.

995
01:24:46,436 --> 01:24:47,456
And that's where Signal came.

996
01:24:47,616 --> 01:24:53,756
The Signal protocol 2016 figured out how to actually know with two ratchets.

997
01:24:53,856 --> 01:25:00,096
That's why it's called the double ratchet to have a way that I can generate a new public key for you, even though you're offline.

998
01:25:00,096 --> 01:25:06,336
and you will still receive it later or be able to compute it on your own and then when you get

999
01:25:06,336 --> 01:25:12,096
that message you see at which state of the ratchet of the chain it's in and you get the private key

1000
01:25:12,096 --> 01:25:19,116
this way so much better so off the record was built for the server infrastructure right you

1001
01:25:19,116 --> 01:25:24,016
want to talk to a server the server is always online and now you can encrypt messages to it

1002
01:25:24,016 --> 01:25:29,616
but with with signal the problem was on mobile networks right like your phone is offline while

1003
01:25:29,616 --> 01:25:32,416
you sleep and I would like to send you a message while you sleep.

1004
01:25:32,856 --> 01:25:38,416
And so we need a way to get that new key while the receiver is offline.

1005
01:25:38,696 --> 01:25:40,296
That's what Signal introduced.

1006
01:25:40,296 --> 01:25:42,896
Fantastic protocol, beautiful cryptography.

1007
01:25:43,056 --> 01:25:46,336
We used some of the Signal cryptography in Wabi Sabi, by the way.

1008
01:25:46,936 --> 01:25:49,176
So I'm massively thankful to Signal.

1009
01:25:49,176 --> 01:25:52,736
But one of the problems here is that it doesn't work well for groups.

1010
01:25:53,616 --> 01:25:58,536
And so there is no native way to make group conversations with the Signal protocol.

1011
01:25:58,536 --> 01:26:02,716
You can kind of hack it on top, but it's just not super elegant.

1012
01:26:03,716 --> 01:26:07,296
And there is this new scheme that came out in 2023.

1013
01:26:07,816 --> 01:26:11,576
It was finalized called the Messaging Layer Security Protocol, MLF.

1014
01:26:12,136 --> 01:26:15,316
And that is the fourth thing, right?

1015
01:26:15,336 --> 01:26:18,836
So we had PGP, static keys to one person.

1016
01:26:19,216 --> 01:26:24,716
We had off the record, two people who are online can exchange keys and get a new key for each message.

1017
01:26:24,816 --> 01:26:25,896
Then we have Signal.

1018
01:26:26,116 --> 01:26:28,036
The same trick works if the receiver is offline.

1019
01:26:28,536 --> 01:26:31,556
And now we have MLS, which makes it work for groups as well.

1020
01:26:31,556 --> 01:26:40,856
And simultaneously, we have Noster, which we haven't talked about yet, but is covered in the book in detail as well, which allows us to create our own identities, ultimately.

1021
01:26:41,476 --> 01:26:46,776
With Signal, if you want to sign up, you need a phone number and you have to go to the official Signal server.

1022
01:26:47,496 --> 01:26:49,176
You cannot just fork the Signal server.

1023
01:26:49,416 --> 01:26:54,216
Both users have to be on the Signal server in order to send and receive messages.

1024
01:26:55,056 --> 01:26:56,656
And so it's a platform, ultimately.

1025
01:26:57,256 --> 01:27:01,796
It's a very encrypted, very private platform, but it's still a platform that if that one

1026
01:27:01,796 --> 01:27:03,316
server goes down, you're fucked.

1027
01:27:03,556 --> 01:27:09,176
And so with Noster and MLS, we can now have encrypted group messaging where potentially

1028
01:27:09,176 --> 01:27:11,576
hundreds of people talk to each other.

1029
01:27:11,876 --> 01:27:14,036
And for each message, we can get a new key.

1030
01:27:14,576 --> 01:27:18,296
And so we have that double ratchet encryption that helps a lot with privacy.

1031
01:27:18,296 --> 01:27:23,116
We have removed the single point of failure of signal and the phone numbers that they

1032
01:27:23,116 --> 01:27:23,456
require.

1033
01:27:23,456 --> 01:27:28,336
And it hopefully scales into the thousands or more of participants in a group.

1034
01:27:28,456 --> 01:27:32,616
And the cool thing is it's not just not a single server, right?

1035
01:27:32,616 --> 01:27:34,056
But it's also a protocol.

1036
01:27:34,336 --> 01:27:36,436
So it's not just a single application, right?

1037
01:27:36,476 --> 01:27:41,676
Like we came up with the protocol and we came up with the first app of the protocol called

1038
01:27:41,676 --> 01:27:42,156
White Noise.

1039
01:27:42,636 --> 01:27:49,476
But there is by now probably like 10 or more different apps that support the same protocol.

1040
01:27:49,476 --> 01:28:00,096
And so a white noise user and a Pika user and a Vector user, for example, three different apps, they can have a group together now on three different NOSTA relays.

1041
01:28:00,516 --> 01:28:05,496
So there is no central server that can be shut down to take your identity away.

1042
01:28:05,776 --> 01:28:09,796
There is no central server to be shut down to stop your messages from being delivered.

1043
01:28:10,216 --> 01:28:15,056
And there is no single app that can be shut down to stop you from sending messages.

1044
01:28:15,056 --> 01:28:19,616
Because you can just put your same identity into a second app and it will just work.

1045
01:28:19,616 --> 01:28:27,296
So this is, as of now, the pinnacle of encrypted communication that Cypherpunks have come up with yet.

1046
01:28:27,296 --> 01:28:28,896
And pretty cool.

1047
01:28:30,736 --> 01:28:34,136
Is it Bitcoin related somehow, like under the hood?

1048
01:28:34,136 --> 01:28:35,856
Like, how does it work?

1049
01:28:35,856 --> 01:28:37,696
The short answer is no.

1050
01:28:37,696 --> 01:28:39,776
This is pure Noster, right?

1051
01:28:39,776 --> 01:28:44,416
So we use a taproot or like a Schnorr public key for your identity.

1052
01:28:45,056 --> 01:28:51,276
And then we use JSON events, like JSON is a text file, basically, with a little bit of structure to it.

1053
01:28:51,276 --> 01:28:56,816
So we use regular text files that you signed with your private key, and we put them on Nostra relays.

1054
01:28:57,116 --> 01:29:04,536
Nostra relays are just servers that accept signed text files, verify the signatures, and then give them to whoever asks for it, basically.

1055
01:29:04,696 --> 01:29:06,736
That's the gist of Nostra. Super, super simple.

1056
01:29:07,536 --> 01:29:14,216
And what we can do is in your profile event, so that's a text file that has, hey, my username is this.

1057
01:29:14,216 --> 01:29:19,436
my picture is this, my bio is that, and you sign this with your private key and put it on relays,

1058
01:29:19,496 --> 01:29:24,316
your profile event, here you can have a Bitcoin address, a Lightning address specifically.

1059
01:29:25,236 --> 01:29:31,216
And then anyone can get your profile event and send you money to that Lightning address and even

1060
01:29:31,216 --> 01:29:35,856
prove it to you that the money comes from him and prove that publicly. That would be a ZAMP where

1061
01:29:35,856 --> 01:29:41,556
you can brag that you tipped someone some money. Or it could be private, where maybe only the people

1062
01:29:41,556 --> 01:29:47,076
in the chat group see that you've sent that money or maybe just a receiver right knows that you sent

1063
01:29:47,076 --> 01:29:51,356
him money or fully anonymous where nobody knows that you sent him money as of now this is not yet

1064
01:29:51,356 --> 01:29:57,696
implemented in white noise we had a very very early alpha version that had it we threw that

1065
01:29:57,696 --> 01:30:02,816
code away so it's gone we will have all the cool bitcoin features there like that's in part of why

1066
01:30:02,816 --> 01:30:08,716
we want it it's like i love signal i use it all the time i just wish i could send bitcoin like yeah

1067
01:30:08,716 --> 01:30:15,376
sure they have like this mobile coin whatever shit coin stuff that nobody is using obviously

1068
01:30:15,376 --> 01:30:20,796
because who wants mobile coins nobody everyone wants bitcoin and it's like it's really hard to

1069
01:30:20,796 --> 01:30:26,696
build an alternative application of the signal protocol on the signal server as it's it's possible

1070
01:30:26,696 --> 01:30:31,256
and there are is for example molly right molly uses the signal protocol as well it's a fork of

1071
01:30:31,256 --> 01:30:36,536
the signal app and it works with the signal servers but they make almost no changes because

1072
01:30:36,536 --> 01:30:44,516
it's really hard to to maintain this and so that's why we first our first priority is let's build a

1073
01:30:44,516 --> 01:30:50,936
protocol that will work for encrypted group messaging over nostre decentralized without

1074
01:30:50,936 --> 01:30:56,796
any central server that's priority number one priority number two is let's build the libraries

1075
01:30:56,796 --> 01:31:01,616
right let's build libraries in many different programming language so that any developer can

1076
01:31:01,616 --> 01:31:04,616
can pick it up and build their own application.

1077
01:31:04,816 --> 01:31:09,216
And then our third lowest priority is let's make sure that we have at least

1078
01:31:09,416 --> 01:31:12,616
one good app that works, and that's white noise.

1079
01:31:12,816 --> 01:31:19,536
This strategy, by the way, to quickly go back to Wasabi, is my biggest regret

1080
01:31:19,736 --> 01:31:22,896
with Wasabi was that we did not have the strategy.

1081
01:31:23,096 --> 01:31:26,136
Our first strategy was let's have a great wallet.

1082
01:31:26,336 --> 01:31:28,216
And then that was it.

1083
01:31:28,416 --> 01:31:29,816
We didn't have good libraries.

1084
01:31:29,816 --> 01:31:31,656
We didn't even have a protocol, right?

1085
01:31:31,716 --> 01:31:37,036
We had like a white paper, but not an actual specification of how to implement it from scratch.

1086
01:31:37,596 --> 01:31:47,316
And then years after Wasabi was quite popular and well used, then we decided, okay, let's try to get other applications to use this as well.

1087
01:31:47,576 --> 01:31:52,156
Because more users, more freedoms, more anonymity sets, better privacy and so on.

1088
01:31:52,936 --> 01:31:54,876
But the problem there just was it was way too late.

1089
01:31:54,876 --> 01:32:02,656
And that was ultimately the, I wouldn't say the downfall of Wasabi, but it was the thing that we by far did the worst.

1090
01:32:02,916 --> 01:32:05,336
Like we made many, many very good decisions.

1091
01:32:06,416 --> 01:32:07,976
This was a horrible decision.

1092
01:32:08,636 --> 01:32:14,576
It led ultimately to, yeah, Wasabi is the only wallet that really supports WabiSabi at the moment.

1093
01:32:14,896 --> 01:32:16,896
Like we had BTC Pay and we had Trezor.

1094
01:32:17,276 --> 01:32:21,376
Both of them kind of stopped because it just wasn't designed to do that well.

1095
01:32:21,376 --> 01:32:25,676
and now you compare that with with white noise we're like in the second year of building on this

1096
01:32:25,676 --> 01:32:32,296
and only in like the last half year is it actually somewhat working uh but we already have like 12

1097
01:32:32,296 --> 01:32:37,536
clients right and like four libraries in four different programming languages and and language

1098
01:32:37,536 --> 01:32:43,336
bindings into a bunch of different things and like i don't know five different teams working quite a

1099
01:32:43,336 --> 01:32:49,636
lot on on this so it's much more decentralized to start with and that will make it so much more

1100
01:32:49,636 --> 01:32:55,276
unstoppable and yeah i hope i'll not make that same mistake again with wasabi and i hope this

1101
01:32:55,276 --> 01:33:01,236
will work out well looking forward to seeing it develop here in the future where are we in terms

1102
01:33:01,236 --> 01:33:06,996
of the book like what have we covered and what are we yet to cover uh before before we close this one

1103
01:33:06,996 --> 01:33:11,976
out there's i think two aspects here that are still missing that get quite a lot of treatment

1104
01:33:11,976 --> 01:33:15,996
in the book the first is bitcoin privacy i mean i've talked about bitcoin privacy a lot on the

1105
01:33:15,996 --> 01:33:19,916
show in the past right and we already covered it a little bit with coin join so i think i'll give

1106
01:33:19,916 --> 01:33:26,196
just a small summary like coin joins is very powerful for blockchain privacy the the second

1107
01:33:26,196 --> 01:33:32,316
aspect for on-chain privacy is called coin swaps right so instead of all of us making a transaction

1108
01:33:32,316 --> 01:33:37,156
together that spends our inputs together and creates outputs together you know i send you

1109
01:33:37,156 --> 01:33:42,656
a bitcoin in the first transaction and then two days later you send me a bitcoin back these two

1110
01:33:42,656 --> 01:33:44,356
transactions are fully unrelated.

1111
01:33:44,616 --> 01:33:46,736
You could send two Bitcoin back, by the way, if you want.

1112
01:33:47,696 --> 01:33:49,956
I think that's a good deal.

1113
01:33:51,056 --> 01:33:52,376
But so that's a coin swap.

1114
01:33:52,376 --> 01:33:57,656
And the cool thing is an outside observer doesn't know that we've just swapped the coins.

1115
01:33:58,116 --> 01:34:01,676
It just looks like I bought something and you bought something.

1116
01:34:02,336 --> 01:34:08,456
But actually, we still have each the one Bitcoin, just a different transaction history on the

1117
01:34:08,456 --> 01:34:08,696
coin.

1118
01:34:08,956 --> 01:34:11,896
So that's the other major category of on-chain privacy.

1119
01:34:12,656 --> 01:34:25,916
But I mean, in a court setting here where some Shane Anil company is trying to prove that I owned Bitcoin and I spent it on this and that, wouldn't they just claim that I owned it?

1120
01:34:26,176 --> 01:34:29,336
The other guy's, all his transactions as well?

1121
01:34:29,676 --> 01:34:33,056
And how does this remove risk from the end user?

1122
01:34:33,436 --> 01:34:35,896
Don't you just get the other guy's history?

1123
01:34:37,196 --> 01:34:37,956
Yeah, exactly.

1124
01:34:38,076 --> 01:34:39,256
You get the other guy's history.

1125
01:34:39,256 --> 01:34:51,016
And if enough percentage of the network would do that, then claiming that you made a regular payment transaction and you now have to change coin, for example, would be an unreliable claim.

1126
01:34:51,276 --> 01:34:57,616
Because the assumption that you get the change of that transaction, basically, is wrong.

1127
01:34:58,136 --> 01:35:02,916
If you spend your input in transaction A and you get your output in transaction B.

1128
01:35:03,536 --> 01:35:07,076
And it destroys the assumptions that chain analysis relies on.

1129
01:35:07,076 --> 01:35:11,076
But the important caveat, you have the transaction history of the other guy, right?

1130
01:35:11,076 --> 01:35:18,476
And if he's a North Korean drug kingpin, then you might have some problems there

1131
01:35:19,076 --> 01:35:20,916
because now people think that you are that guy.

1132
01:35:21,676 --> 01:35:29,836
So TLDR, if a North Korean drug kingpin contacts you over signal and says,

1133
01:35:30,076 --> 01:35:33,636
please send me one Bitcoin, I promise to send one back, you shouldn't do it

1134
01:35:33,636 --> 01:35:47,491
even if you trust the drug kingpin in question Exactly But the cool thing with coin swaps is we can make them atomic right so they actually not trusted uh they they are like i will send you money under the

1135
01:35:47,491 --> 01:35:52,411
condition that you will send me money and if you don't send me money i can take my initial transaction

1136
01:35:52,411 --> 01:35:57,331
back so to say my initial coin back and this was never really much deployed on the bitcoin blockchain

1137
01:35:57,331 --> 01:36:03,071
like this has been theory for more than a decade and there are some basic implementations but

1138
01:36:03,071 --> 01:36:08,671
nobody's using them but where it does see massive adoption is the lightning network the lightning

1139
01:36:08,671 --> 01:36:15,551
network is a coin swap network that makes the swaps off chain and here i can give a coin to to

1140
01:36:15,551 --> 01:36:19,951
knut under the condition that he forwards it to luke under the condition that he forwards it

1141
01:36:19,951 --> 01:36:26,271
to to alice under the condition that he pays bob right and and this way we can all swap our coin

1142
01:36:26,271 --> 01:36:30,671
and nobody knows that it's happening right so that's the idea of the lightning network

1143
01:36:30,671 --> 01:36:39,491
Not just does it do coin swamps, which already helps, it also does them off-chain, which means there is no transaction graph on the blockchain that could be seen.

1144
01:36:39,491 --> 01:36:41,571
And that's a very, very powerful idea.

1145
01:36:41,851 --> 01:36:45,031
And it changes the privacy guarantees of Bitcoin.

1146
01:36:45,751 --> 01:36:46,711
It's not perfect.

1147
01:36:48,071 --> 01:36:52,171
We spend a lot of time researching Lightning privacy at Wasabi.

1148
01:36:52,171 --> 01:37:02,971
And, you know, four or five years ago when we did that research, we concluded that Lightning is not yet private enough to the standards that Wasabi had for on-chain transactions at that time.

1149
01:37:03,191 --> 01:37:09,351
So a couple of things here, like, for example, you expose on the blockchain that you do have a Lightning network channel.

1150
01:37:09,971 --> 01:37:15,331
And it's a two of two multi-signature that is seen by every spending transaction whenever you close a channel.

1151
01:37:15,331 --> 01:37:22,571
we can fix that by taproot which is now here where multi-signature looks like single signature

1152
01:37:22,571 --> 01:37:28,991
that's the first thing we can fix the second thing was that you had to tell the entire lightning

1153
01:37:28,991 --> 01:37:33,971
network that hey this utxo on the bitcoin blockchain that's my channel and that's very

1154
01:37:33,971 --> 01:37:41,131
stupid we can use some zero knowledge magic to just tell people to tell people hey i have a utxo

1155
01:37:41,131 --> 01:37:42,031
on the Bitcoin blockchain,

1156
01:37:42,171 --> 01:37:43,451
but I'm not going to tell you which one,

1157
01:37:43,911 --> 01:37:46,411
but you can verify that it's more than 0.1 Bitcoin,

1158
01:37:46,591 --> 01:37:47,051
for example.

1159
01:37:47,691 --> 01:37:49,391
And so we can use zero knowledge proofs for this.

1160
01:37:50,071 --> 01:37:51,911
Adam Gibson did great work on that with Poodle.

1161
01:37:52,071 --> 01:37:55,151
Another problem is that the sender knows who the receiver

1162
01:37:55,151 --> 01:37:56,071
in the sense of,

1163
01:37:56,211 --> 01:37:57,631
I know your lightning network node

1164
01:37:57,631 --> 01:37:59,631
and you're the pub key of that node

1165
01:37:59,631 --> 01:38:01,591
for every payment that I send you.

1166
01:38:01,731 --> 01:38:03,851
And that might give me your IP address, et cetera,

1167
01:38:03,851 --> 01:38:05,911
and how long the node has been there

1168
01:38:05,911 --> 01:38:07,211
and how many channels you have

1169
01:38:07,211 --> 01:38:08,611
and with whom you have those channels.

1170
01:38:09,191 --> 01:38:10,711
All of these informations are public.

1171
01:38:11,131 --> 01:38:12,911
Sender privacy is great, right?

1172
01:38:12,911 --> 01:38:18,911
If I send you lightning, Bitcoin over lightning, you don't know my lightning address, which is great.

1173
01:38:19,651 --> 01:38:35,131
We can fix this, the receiver privacy with Onion routing, similar to what Tor is doing, where instead of you telling me, so instead of the receiver telling the sender, send money to me, my lightning node is XYZ.

1174
01:38:35,131 --> 01:38:40,831
The receiver says, send money to this other guy's node and he will know how to get the money to me.

1175
01:38:41,131 --> 01:38:43,531
ultimately, kind of like an onion hidden service.

1176
01:38:44,331 --> 01:38:48,431
So receivers can now receive Bitcoin without having to reveal their lightning

1177
01:38:48,431 --> 01:38:50,231
address or lightning node address.

1178
01:38:50,531 --> 01:38:52,151
It's another of the privacy benefits.

1179
01:38:52,831 --> 01:38:56,911
And then there's a whole class of probing attack, which basically means a

1180
01:38:56,911 --> 01:38:58,251
active adversary.

1181
01:38:58,611 --> 01:39:01,211
So he can no longer just be passively watching.

1182
01:39:01,211 --> 01:39:03,771
He needs to actively initiate payments.

1183
01:39:04,371 --> 01:39:09,071
He can probe how much, what's the balance between the channel that Knut and I

1184
01:39:09,071 --> 01:39:10,131
have, right?

1185
01:39:10,131 --> 01:39:13,131
Maybe it's that I have 0.1 and he has 0.9.

1186
01:39:13,491 --> 01:39:15,251
Maybe it's 0.5, 0.5.

1187
01:39:15,251 --> 01:39:17,571
Maybe it's 0 and 1.

1188
01:39:18,131 --> 01:39:21,891
And these are the possible states that it could have.

1189
01:39:22,291 --> 01:39:26,251
And the privacy guarantee of the Lightning Network is that this should be private.

1190
01:39:27,171 --> 01:39:31,211
It's public on what's the capacity of this channel, the sum of both sides.

1191
01:39:31,611 --> 01:39:35,091
But it should be private on which of us has how much.

1192
01:39:35,571 --> 01:39:39,971
And in reality, that is not private because an address, an active adversary

1193
01:39:40,131 --> 01:39:45,891
can probe the channel multiple times a minute and then find out what's the balance and then he can

1194
01:39:45,891 --> 01:39:52,451
see if the balance changes across time and if it does then a payment route it through it um there's

1195
01:39:52,451 --> 01:39:57,491
a couple other privacy fuck ups that the lightning network has i spoke numerous times about this on

1196
01:39:58,131 --> 01:40:03,011
other conferences and stuff or just go to lightning privacy.com but that's like the other

1197
01:40:03,011 --> 01:40:08,131
major bitcoin technology that's used and it's covered in detail on on what's the privacy of that

1198
01:40:10,131 --> 01:40:14,771
Yeah, so when can people expect an Omni app available from your phone,

1199
01:40:14,771 --> 01:40:20,331
which includes a Start9 server and all of these apps baked into one

1200
01:40:20,331 --> 01:40:23,051
and just private messaging for all,

1201
01:40:23,551 --> 01:40:28,591
including a superb Bitcoin wallet that hides every single footprint

1202
01:40:28,591 --> 01:40:31,851
that you may or may not make by mistake?

1203
01:40:32,451 --> 01:40:33,331
When do we see that?

1204
01:40:34,151 --> 01:40:39,391
I mean, we have it for those who want to invest a couple days of time to set it up.

1205
01:40:40,131 --> 01:40:42,371
It's not impossible to do this.

1206
01:40:42,511 --> 01:40:46,071
The combination on how I would do it is get a Google Pixel phone,

1207
01:40:46,551 --> 01:40:49,131
flash Graphene OS on it, by the way, also covered in the book.

1208
01:40:49,311 --> 01:40:51,631
Now you have a very anonymous operating system.

1209
01:40:52,571 --> 01:40:56,731
Get a Start9 Bitcoin full node server or any other umbrella, whatever.

1210
01:40:56,871 --> 01:40:57,791
But Start9 is really good.

1211
01:40:58,011 --> 01:40:59,211
Run your Bitcoin full node there.

1212
01:40:59,751 --> 01:41:00,411
There it is.

1213
01:41:00,811 --> 01:41:03,791
Run your Lightning network node there.

1214
01:41:03,791 --> 01:41:05,711
Then you can have your own Lightning nodes.

1215
01:41:06,171 --> 01:41:07,531
Open multiple channels.

1216
01:41:07,531 --> 01:41:12,551
right so you route traffic of other people which increases your anonymity set as well

1217
01:41:12,551 --> 01:41:17,471
and then on start nine you can install wasabi wallet and and have a web interface of wasabi

1218
01:41:17,471 --> 01:41:21,991
wallet on your phone it's a little bit clunky on the phone it doesn't work perfect but it does work

1219
01:41:21,991 --> 01:41:27,211
i guess then one other thing that the book covers is zap store so this is an app store

1220
01:41:27,211 --> 01:41:32,991
over the nostril network that makes it that makes developers unstoppable right developers

1221
01:41:32,991 --> 01:41:38,831
currently have to beg for permission by apple and google to publish software that's ridiculous

1222
01:41:38,831 --> 01:41:46,231
so we fixed that with zap store and so basically get graphene os get a pixel phone install graphene

1223
01:41:46,231 --> 01:41:51,751
os install zap store get all of the bitcoin apps that you want connect them to your bitcoin full

1224
01:41:51,751 --> 01:41:59,251
and you'll be pretty good to be honest now this is not a one-click thing yet but it could be

1225
01:41:59,251 --> 01:42:04,051
it's a good business by the way like a couple friends of mine are just reselling graphene os

1226
01:42:04,051 --> 01:42:08,991
phones that are already flashed and have all the basic apps installed it's really good business

1227
01:42:08,991 --> 01:42:13,451
like you can have a good mark up there people are willing to pay for that convenience not having to

1228
01:42:13,451 --> 01:42:18,571
do it themselves it'll take it'll take you like 30 minutes if you know what you're doing and you

1229
01:42:18,571 --> 01:42:22,671
can do it in parallel right so not much effort but people who have no idea on how to do it properly

1230
01:42:22,671 --> 01:42:30,591
could be a good customer thing yeah and the mind-blowing thing about this is that if everyone

1231
01:42:30,591 --> 01:42:38,651
on earth did this that we would end war forever and we would we would have all prices of every

1232
01:42:38,651 --> 01:42:46,971
good and service dropping forever yeah world peace and forever utopia that's like the radical claim

1233
01:42:46,971 --> 01:42:54,331
of the book of like we can literally end slavery like very soon if we all just improve our privacy

1234
01:42:54,331 --> 01:43:00,711
and opsec like that's that's the culmination of the cypherpunk and the austrian economics line

1235
01:43:00,711 --> 01:43:06,471
right the cypherpunks say you can resist surveillance right these are the tools that

1236
01:43:06,471 --> 01:43:12,451
you can use encryption anonymity networks sound money all of this or or cryptocurrencies rather

1237
01:43:12,451 --> 01:43:18,051
and then you have the austrians that say not only like here are the consequences of a free life the

1238
01:43:18,051 --> 01:43:24,991
consequences are everyone is rich like by a lot right like by unfathomable amounts of money and

1239
01:43:24,991 --> 01:43:32,171
capital uh and then with hoppe we have we have this like not just uh like not just is is it is it

1240
01:43:32,171 --> 01:43:38,531
like a good in the capital sense it's good in a moral sense like stealing is just morally

1241
01:43:38,531 --> 01:43:44,711
fundamentally bad right and and objectively so and you cannot argue your way out of it

1242
01:43:44,711 --> 01:43:50,271
like anyone who tries to argue that that theft is a good thing is a moron who doesn't know what

1243
01:43:50,271 --> 01:43:55,411
he's talking about and he's just lying and he knows that he's lying he's performing the lie

1244
01:43:55,411 --> 01:44:02,531
in front of you knowingly right so putting these two things together of like freedom is insanely

1245
01:44:02,531 --> 01:44:09,951
profitable freedom is achievable by utilizing technologies that that enable resistance and that

1246
01:44:09,951 --> 01:44:15,071
decrease the cost of defense and increase the cost of attack and if we would all do that we would have

1247
01:44:15,071 --> 01:44:22,631
world peace and prosperity in like a couple months so it's like we're so close as humanity

1248
01:44:22,631 --> 01:44:28,991
to figure this shit out is like so close and we just have to do it and you know i hope the book

1249
01:44:28,991 --> 01:44:36,951
kick some people in the butt to just do it that's an insanely clippable part of the interview but

1250
01:44:36,951 --> 01:44:44,871
yeah and and also remember uh wealth wealthy does not mean consumerist in this sense like if we have

1251
01:44:44,871 --> 01:44:49,631
sound money we're less inclined to buy frivolous shit that no one needs it's all about the resource

1252
01:44:49,631 --> 01:44:55,391
allocation so so it's wonderful and kind of like you know another word of wealth is just a problem

1253
01:44:55,391 --> 01:45:01,571
solved like yeah if you're poor you have many problems and if you're wealthy many of your

1254
01:45:01,571 --> 01:45:07,051
problems are solved and and this doesn't mean lambos for everyone but it means a good life

1255
01:45:07,051 --> 01:45:13,271
for everyone and and children not starving right like and and that's what actual wealth is

1256
01:45:13,271 --> 01:45:20,871
yeah this is such a good framing of it like wealth true wealth is problems solved like that's a great

1257
01:45:20,871 --> 01:45:25,311
it's a great quote i will steal that and tweet it yes

1258
01:45:25,311 --> 01:45:34,711
okay max we're uh towards liberty.com right that's your address still yeah yes oh and by the

1259
01:45:34,711 --> 01:45:40,331
way i've done a lot of vibe coding on that website it's pretty cool now like it has all of my all of

1260
01:45:40,331 --> 01:45:46,351
my nostril posts you know thousands of them it has like over a hundred articles that that i wrote

1261
01:45:46,351 --> 01:45:47,451
over the last couple months.

1262
01:45:48,171 --> 01:45:49,951
It has the book, obviously.

1263
01:45:50,371 --> 01:45:52,051
By the way, this is the third edition of the book.

1264
01:45:52,451 --> 01:45:54,591
The first two editions are available on Noster.

1265
01:45:55,111 --> 01:45:56,311
They were never put to print.

1266
01:45:56,511 --> 01:45:58,971
So this is the third edition that is actually going to print.

1267
01:45:58,971 --> 01:46:01,471
Right now, you can get the book on Amazon in print,

1268
01:46:01,831 --> 01:46:02,831
which is the fiat way.

1269
01:46:04,651 --> 01:46:06,671
If you do have too much fiat,

1270
01:46:06,931 --> 01:46:08,691
get rid of them quick and put them there

1271
01:46:08,691 --> 01:46:11,631
and then leave a review there for the reach.

1272
01:46:12,051 --> 01:46:14,271
If you do want to buy it with Bitcoin,

1273
01:46:14,271 --> 01:46:16,631
I appreciate that obviously much more.

1274
01:46:17,091 --> 01:46:19,531
It's kind of rude to toss fiat to people.

1275
01:46:21,271 --> 01:46:23,411
And like, yeah, so don't do that.

1276
01:46:23,471 --> 01:46:24,931
So go to the Bitcoin Infinity store

1277
01:46:24,931 --> 01:46:29,011
and there you'll have the actual Bitcoin edition of the book.

1278
01:46:30,711 --> 01:46:32,331
I'm also working on the audiobook.

1279
01:46:32,651 --> 01:46:33,531
It's already recorded.

1280
01:46:33,911 --> 01:46:34,831
It's right now in the editing.

1281
01:46:35,531 --> 01:46:36,871
We'll take maybe, I don't know,

1282
01:46:36,911 --> 01:46:38,471
maybe the first couple chapters are out

1283
01:46:38,471 --> 01:46:40,671
when this episode drops.

1284
01:46:40,911 --> 01:46:42,891
Obviously, this book is in the public domain.

1285
01:46:42,891 --> 01:46:49,191
like this is not licensed you can copy it you can edit it you can print it you can sell it you can

1286
01:46:49,191 --> 01:46:57,111
make a movie out of it i hope you get rich with it please like do it so zero ownership claims on

1287
01:46:57,111 --> 01:47:03,071
these ideas i didn't come up with any of this i learned it from heroes before me pass it on

1288
01:47:03,071 --> 01:47:09,171
and then so also on towards liberty.com i just finished because i have like over a thousand

1289
01:47:09,171 --> 01:47:12,471
podcast and video appearances like this one.

1290
01:47:12,751 --> 01:47:14,411
And they're now all on Noster as well.

1291
01:47:14,931 --> 01:47:15,631
Like backdated.

1292
01:47:15,931 --> 01:47:18,031
You can see my very embarrassing videos

1293
01:47:18,031 --> 01:47:19,051
from like 10 years ago.

1294
01:47:20,911 --> 01:47:25,151
And yeah, get that on towards liberty.com.

1295
01:47:26,331 --> 01:47:26,891
Fantastic.

1296
01:47:27,151 --> 01:47:29,031
And I love that you're publishing with us

1297
01:47:29,031 --> 01:47:30,751
on BitcoinInfinity.com.

1298
01:47:31,011 --> 01:47:33,971
There's a lot of great stuff coming there in the future.

1299
01:47:33,971 --> 01:47:36,871
And I certainly will steal quotes from this book

1300
01:47:36,871 --> 01:47:38,151
and profit from them.

1301
01:47:38,151 --> 01:47:40,651
and shamelessly retweet them

1302
01:47:40,651 --> 01:47:43,611
without properly crediting you and stuff like that.

1303
01:47:43,851 --> 01:47:48,131
So you have a lot to look forward to in that regard.

1304
01:47:48,391 --> 01:47:50,411
Max, this has been a fantastic conversation.

1305
01:47:50,671 --> 01:47:54,911
I will see you soon at a whole bunch of conferences.

1306
01:47:55,291 --> 01:47:58,370
If you want to meet Max and me, for that matter,

1307
01:47:58,511 --> 01:48:00,991
and look deeper into our books,

1308
01:48:01,870 --> 01:48:05,811
a good location to do that is Prague,

1309
01:48:05,811 --> 01:48:11,071
b2c prog um code infinity for a discount use that for all the conferences and every

1310
01:48:11,071 --> 01:48:15,931
everything just try code infinity everywhere on the internet when you buy something cool

1311
01:48:15,931 --> 01:48:22,871
it may just work and we have a lot to look forward to here so uh thank you very much for coming on and

1312
01:48:22,871 --> 01:48:28,871
let's keep the conversation going and make people resist the goddamn fucking state

1313
01:48:28,871 --> 01:48:34,151
that's the goal let's let's end slavery it's long fucking overdue it's been like

1314
01:48:34,151 --> 01:48:37,831
too many thousands of years and we just don't need it anymore.

1315
01:48:38,191 --> 01:48:38,951
Let's get rid of it.

1316
01:48:39,411 --> 01:48:40,591
Thanks for the conversation, Knut.

1317
01:48:40,811 --> 01:48:41,391
This was great.

1318
01:48:41,891 --> 01:48:42,411
See you on the next one.

1319
01:48:44,051 --> 01:48:45,891
This has been the Bitcoin Infinity Show.

1320
01:48:46,171 --> 01:48:48,451
Brush your teeth and see you in the next one.

1321
01:48:48,571 --> 01:48:48,831
Bye.

1322
01:49:04,151 --> 01:49:34,131
Thank you.