Audio interview transcription — WBD068

Note: the following is a transcription of my interview with Peter Todd. I use Rev.com from translations and they remove ums, errs and half sentences. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.

You can subscribe to the podcast and listen to all episodes here.

In this episode, I talk with Bitcoin legend Peter Todd. We talk about the essence of Bitcoin, why it worked whether other attempts at digital currencies failed as well as key topics such as fungibility, lightning and why other projects are scams.

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Interview Transcription

Interview Date: Saturday 26th Jan, 2019

“Anyone who understands economics and finance and how markets work will be a maximalist because it is more efficient to have one currency than a bunch of ones.”

— Peter Todd

Peter McCormack: Hi there, Peter. How are you?

Peter Todd: I’m great, thanks.

Peter McCormack: Thank you for coming on the podcast. I’ve wanted to talk to you for quite a long time. I followed a lot of your work. And, one of the things that really stood out for me is when I went on your blog, and not only did I not understand the content of your articles, I didn’t even understand what they were about.

Like there’s a certain level of technical competence that I think you have to have to kind of understand this work. And, I then read about a story that you were emailing Hal Finney and Adam Back when you were at like 15?

Peter Todd: Yep.

Peter McCormack: I’ve got to ask about this. What’s the background? How does a 15-year-old start talking to Hal Finney and Adam Berk about Hashcash? What’s the journey to that?

Peter Todd: Well, the great thing with the Internet is, no one knows that you’re dark, and even when they do, they don’t care. And I mean, if you go back far enough, as a young kid, I watched a lot of Star Trek and thought the ideals of democracy and freedom of speech, they’re all said and well and good.

And, my dad’s an economist by training. So initially, really early on, I got interested in the freedom project, which is a decentralised censorship resistant publication network. Long story short is, it lets you make a website that no one can take down, lets you publish.

And I thought, “Oh! That’s really cool.” And, got interested in it, did a little bit of work on it. So actually, first time I kind of worked on creating an exploit, was actually against Freenet. The work I created a tool to go and map out the interconnections of different nodes, so those are all well and interesting.

But, I think the big issue with Freenet network, was, as I was thinking to myself, “Well, obviously the next step is you need decentralised money. Just being able to publish your thoughts isn’t enough. Political movements need money. Take a look, political movements for the marginalised, the poor.

If you’re a rich person, you have the way of funding the things you need to fund to make your political movement happen, whereas the poor don’t have that. We are often kind of talking about it in reverse, the rich will gain politics, and so on. And, reality, I mean you can’t kind of stop that. But, for the disadvantage, you definitely need that option to be able to move money around. You need to be able to without surveillance.

So, I think long story short is, somehow or another, I wanted upon a mailing list, the Blue Sky mailing list, which if I remember correctly, it was advertised on the Freenet mailing lists. So, I signed up, we started talking about stuff, and I spent a lot of time trying to invent Bitcoin, and like many people completely failed at it.

And, it’s really interesting looking back and seeing just how wrong I was, in almost 180 degrees offset what was the right answer. And, a lot of people, I think, had that experience.

Peter McCormack: So you tried to invent a Bitcoin?

Peter Todd: Yeah. I was one of many, many people trying to create decentralised currency. And, really failed at us.

Peter McCormack: What was version?

Peter Todd: Well, I think … I mean, I didn’t have a proposal, ’cause I realised all my thoughts on it weren’t going to work. But, I think what I caught so wrong was I had thought about Hashcash in terms of the thing that controls the creation of money. And, that’s not actually an important thing. The creation of money is not the important thing. It’s preventing double-spending that is.

The creation is just a onetime event. Allowing money to be moved consistently, and accurately without double spend, is actually the critical thing. And, unfortunately, because I tied proof of works to the creation so tightly, I never really came up with the concept of, “Well hang on.” No, no. We tied proof of work to the changes in the ledger, to make sure it’s difficult three or at the changes.

Peter McCormack: Right.

Peter Todd: And, my thinking on my kind of solution where we have some kind of decentralised database, how do you do that? I don’t know. It can be attacked, it can be civil attacked. And, I just constantly shot down ideas, and could never figure out, how do you make this work, when the answer was juts so simple. But, it was 180 degrees opposite what I was working on.

Peter McCormack: But, I’m guessing you’re saying it’s simple ’cause the answer was Bitcoin, right?

Peter Todd: I mean, literally someone could have sat down … Like honestly, it’s to the point where one tweet from the future, saying how Bitcoin works, would probably have been enough info for me to have created Bitcoin.

Peter McCormack: But, what is the key, the one key element then?

Peter Todd: Using proof of work to make changes to the ledger difficult. That one sentence, I think, encapsulates the key part of Bitcoin that we were missing back then.

Peter McCormack: So, it’s more the game theory than the code?

Peter Todd: I don’t even … The point is, I don’t even think the game theory part is a really critical thing. Like, absolute core of it that you must have is tying proof work to changes to the ledger, to make it expensive to change. You could probably have Bitcoin without even a financial reward. It would still work far better than any of the crazy ideas people had come up back then.

Peter McCormack: So, the Bitcoin white paper comes out, you’re obviously are aware of it, you read it. Is it obvious at the time or?

Peter Todd: Absolutely.

Peter McCormack: Oh, immediately you could?

Peter Todd: Yeah. For me, I believe I read the Bitcoin white paper for the first time, like late 2009. And, I remember, you know when I read it, I was like, “Oh, shit! I should’ve thought of that.” It was actually, for me, it was opposite many people.

For me, I read it, and this is obviously gonna work. And, only later did I come up with reasons why it wouldn’t.

Peter McCormack: Right.

Peter Todd: Whereas, for many people, they read and think, “How would this ever work?” And then, later they’re convinced it does. But, I’d been primed, ’cause I’d already worked on this and tried very hard. So, when I saw it that’s … It just was so obvious to me. “Oh, I was wrong. This was the missing piece”

Peter McCormack: How, as a 15-year-old, do you make the leap from realising that there is a need for money to finance certain projects and things, to it must be having to be a decentralised type of money that doesn’t already exist? How do you make that leap?

Peter Todd: I mean, the idea of e-money and cypherpunk stuff around that was not exactly like an unknown concept. I partly even read Sci Fi stories at the time talking about that. The notion of credits is really sort of a common term in Sci Fi stories. I mean. it’s just …

And also, money itself has a property. I mean, sure, it’s issued by the government, but paper money I can give to you, and no one can stop me. The idea that money would have to be controlled on transaction basis is this very new thing, pushed by big companies who want to go make money off this, and Law enforcement who would like to surveil everyone. This is the opposite of how money should work. This is not the status quo.

Peter McCormack: So, this Bitcoin worked then, or is it working?

Peter Todd: I mean, in terms of doing what money should do, it’s a hell of a lot closer than say PayPal. It’s a lot closer to what PayPal was meant to be. I mean, people who started PayPal wanted to create censorship resistant e-currencies. They didn’t have the tech to do it, and they didn’t have the legal frameworks to get away with it.

So, they didn’t. But, that was the initial concept with PayPal. So, Bitcoin’s a lot close to that. I mean, Bitcoin has scaled boldy problems. But, the core thing of what Bitcoin does is much closer to that than alternatives, certainly closer to things like Liberty Reserve, which of course got shut down.

Peter McCormack: Yeah, I guess there’s always been the centralised problem, right?

Peter Todd: Yeah. Centralisation kills things if they have adversaries. Often centralisation’s way to go. I mean, I have approached it myself, called Open TimeStamps, which is absolutely centralised. There are four calendars of the Open timeStamps system. I run two of them, two other people run another two.

It’s a centralised system. But, Open TimeStamps doesn’t really have adversaries in this way that Bitcoin does. And, no one’s going to profit by shutting down Open TimeStamps in the way you would with Bitcoin.

And also, because Open TimeStamps relies on Bitcoin for the truth of the timestamps, the central third parties on a position to fake things.

Peter McCormack: Okay. So, I wanna … I should’ve asked this at the start. I love asking this question, ’cause it’s so simple. And, the first time I heard it was when Epicenter asked Adam Berk, and it also blew my mind, just hearing it set out. So, I’m just gonna ask you again. What is Bitcoin? The answers are always different as well.

Peter Todd: Well, I’ll give you a different answer.

Peter McCormack: Okay.

Peter Todd: Which is, Bitcoin is a shared data structure, that we make artificially expensive to change, by destroying energy every time we update it.

Peter McCormack: Yeah. I’ve heard that one like four times. No. I’m joking. Yeah. I’m only joking. Okay. Okay.

Peter Todd: Bitcoin is an elephant, and it’s pink with like little spots.

Peter McCormack: I love the energy angle. So, you’ve been around since the start, right? It’s 10 years and-

Peter Todd: Not quite.

Peter McCormack: Pretty much.

Peter Todd: I mean, I’ve known about Bitcoin, since nearly the start. But, I actually got more active into it a bit later. And, the reason is, I mean, relative to many other developers, but the reason is because when I first learned about Bitcoin, well, I’d just started a new job at a crazy startup. And then, I was crazy enough to then also try to do a physics degree, while I was at the startup. So, I didn’t exactly have a lot of free time.

Peter McCormack: But, I mean, I’ve gone through the exercise of going through old mailing lists, and old Bitcoin talk forums. And, there’s a number of names I recognise. A number I don’t. And, I’ve seen you in there commenting and talking. So, you were there like pretty much since the start.

Peter Todd: I mean, I started working on this stuff full time 2014.

Peter McCormack: 2014.

Peter Todd: Which is a lot earlier than many people.

Peter McCormack: But, having been there, through the whole experience, how do you take it all in, because even though you knew it would work, there’s a difference between knowing theoretically it would work.

Peter Todd: Well, remember, I thought it would work.

Peter McCormack: You thought it would work?

Peter Todd: And then, I started realising, hang on, this isn’t as good as it sounds.

Peter McCormack: Right. Okay. We’re going to come back to those things. But, 10 years on is still exists. It holds billions of dollars in value. At one point, hundreds of billions. There is the talk of ETS. We have futures. We have so much happened. Did you foresee all this?

Peter Todd: I mean to be perfectly honest, this it doesn’t really surprise me that much. I mean, you always gotta be a bit careful. I mean, your memory of what you thought five years ago can be a bit vague. But, I don’t think if you’d asked me that many years ago, would it? Could it get to where it is now? I would have said no.

I think I would have said, “Yeah, I mean, this is plausible. It is an obvious utility. Digital gold is obviously useful. So, if things don’t fail and it continues to grow, I mean, surely could get to this point.”

I think the more interesting question is, well, how big could it get? And, I would actually put relatively small limits on it. We’re not gonna see … First time I bought Bitcoin, I bought it for 20 cents of a Bitcoin.

Peter McCormack: Right.

Peter Todd: And, I tell you, that was the best financial decision of my life. The worst financial decision of my life was only buying $20 worth.

Peter McCormack: Hold on. What is that? That’s like a hundred Bitcoin. Yeah. But, we won’t have hindsight.

Peter Todd: But, the thing with that is looking at how that grows. I mean, how many zeros is that times? Call it 10000 times growth or whatever, depending on what price you pick. We’re not going to get another 10000. The world economy is too small for that. We’re not that far away from having more money in Bitcoin than in the US dollar and gold combined.

Yeah. That’s if I remember correctly, it’s like a hundred X. That’s pretty … That’s a lot smaller than 10000X.

Peter McCormack: Yeah. But, I’m not convinced you care that much about price beyond the wider kind of a PR [inaudible 00:12:17] and brings people into the system. I don’t think you’re that. I don’t see you as somebody that is incentivised by the price.

Peter Todd: Well, I mean price is a funny thing, ’cause people often say, the price doesn’t matter. And, that’s definitely not true. Bitcoin security model relies on it being valuable. There is no getting around that. And, it probably would not work, if the price was said a thousand times less. Someone would probably attack it for kicks and giggles.

Peter McCormack: So, you were saying you started to look at the reasons why it won’t work. What were the main issues that you found, and where the things you attempted to try and break?

Peter Todd: Well, really, like the one big thing for me was when I realised, “Oh yeah. Scalability really matters, and this stuff doesn’t scale.”

Peter McCormack: Right.

Peter Todd: I figured that out, you kind of says embarrassingly late. But, in terms of like how long I was looking at Bitcoin seriously, fairly early. From the time I started looking at Bitcoin seriously, to when I realise this, and how important it was, we’re probably talking like three or four months.

And, that was while I was at a startup, doing a university career at the same time. Simple truth is, I just didn’t pay that much attention to it for quite a few years. And, when I realised that, well, I got very active and tried to solve this problem. And, also importantly got very active in debating people who thought it wasn’t an issue.

Peter McCormack: So, were you debating Rodger?

Peter Todd: Oh, he wasn’t around but around then.

Peter McCormack: Like you were going about earlier, okay. So, who would be debating this?

Peter Todd: Gavin Andresen, and actually literally debating Gavin Andresen on Bitcoin talk forums was probably the thing that got my name up there.

Peter McCormack: Right, okay. Because-

Peter Todd: There is a thread on Bitcoin talk where I disagree with Gavin Andresen, and it just spiralled.

Peter McCormack: And what? The disagreement was what? Block size?

Peter Todd: Exactly.

Peter McCormack: Okay. What did he want?

Peter Todd: His viewpoint was, yeah, he can … If I remember correctly, his exact viewpoint was you can have an unlimited block size. And, that was just such an extreme position. I laid out, very carefully, why this did not work. And, it wasn’t the first time there’d been a disagreement on that, but at least for me personally, that was the timeline when, “Hey, this is Peter Todd, the guy who disagrees with Gavin Andresen on this. And, these seem are a good point.

That’s really why my name got known. And, things just built on there.

Peter McCormack: But, there are different reasons why … Well, people give different reasons for why a larger block size won’t work. Some people I’ve heard discuss it because it doesn’t scale in computer power, ’cause of nodes.

Peter Todd: Remember, the notes Gavin’s view there was an unlimited block size. He thought the incentives were such that miners would voluntarily restrict the size of their blocks, even though they could make the biggest blocks if they want. And, I laid out basically with a bit of math and game theory why this is a bad idea.

That wasn’t even like a bigger picture. It’s just this is broken, because miners can do this when they create a bigger block, they’re going to push out the competitors. That’s kind of the arguments in a nutshell. And, the simple reality was, I was right on that. And, that’s just so well supported by academic research since. And, Gavin was just dead wrong.

Peter McCormack: And, has he ever come back and said, “You were right”?

Peter Todd: Nope.

Peter McCormack: Okay.

Peter Todd: I mean, there’s a reason why he’s no longer involved in Bitcoin in any real sense. He just wasn’t competent enough to do it.

Peter McCormack: Yeah. There’s probably more than one reason as well, right?

Peter Todd: Supporting Craig Wright was probably not the best move. But, all that stems from the fact he just isn’t that competent at what he was doing.

Peter McCormack: And, I guess it requires a certain level of competency to be able to work at that level. And, it doesn’t feel like there’s a lot of people at that level.

Peter Todd: No, definitely not. No. Most programmers in general, do you not have the capability to work on this stuff, because they don’t think it adversarially. It’s a tough thing for people to imagine. Most people are just not used to imagining, “All right, what are the bad things that could happen?”

Whereas for whatever reason, I, and a few other people, are good at that. I’m quite happy to imagine all the ways people could screw people over.

Peter McCormack: What do you make of Luke’s ideas around a smaller block? Is it 300K?

Peter Todd: I think his technical arguments for that are good, but I think he doesn’t understand the social side of that, which essentially makes it impossible. And after all, I mean, let’s face it, Luke is a crazy evangelical Catholic. He has very, very, very strong beliefs that are ultimately driven by very strongly held principles.

He is, to us, an evangelical crazy Catholic. But, that comes from him having very well defined beliefs and very strongly held principles. And, the logical conclusion of that is his belief system.

And, I think what Luke … I’m not even sure I could say that he fails to see, ’cause he may very well understand this perfectly, but you know why Luke would say something like that is, he has the principles, and he takes it to his conclusion. Whereas the way I’d put is, “Yeah. I mean, he’s not wrong, but it just ain’t gonna happen.”

Peter McCormack: Right. Okay. Where do you envisage the block size being in the future? Do you think it was gonna stay as it is, or do you think at some point there’ll be a change?

Peter Todd: Oh, I think it’s plausible actually for the rest of life of Bitcoin, we’re not going to see another block size increase. And, the reason why I say that’s plausible is ultimately things lightning and whatnot work pretty well. And, what would it be right now? Like 15 transactions per second or something is actually a fair amount.

And, the way people use Bitcoin, like after all, for Bitcoins be wildly successful, it doesn’t necessarily mean that people are actually making payments on it. Bitcoin as a store of value can be an incredible success story.

I think the bigger threat we would have is actually Bitcoin’s inflation schedule, ’cause in the long run … And, this isn’t a short term thing, but this is like 10, 20 years down in the future, there might not be enough inflation to pay for security.

Peter McCormack: I just wrote that down, actually. So, I’ve got a couple of questions about that. So, if it’s just a store of value, and there wasn’t enough Bitcoin being moved around for fees, and the mine of rewards have dropped, that’s a huge risk for the security of Bitcoin, right?

Peter Todd: Absolutely.

Peter McCormack: And-

Peter Todd: But, that’s a risk like 10, 20 years in the future. That is a very long time. And, by then, who the hell knows what the risks are?

Peter McCormack: But Peter Todd thinks adversarially, and I think that goes into the basket of things that you probably are thinking about now.

Peter Todd: Yep. Well, let me look this way. If I were able to go back in time, and redo Bitcoin, ’cause of course, I am Satoshi as is everyone else.

Peter McCormack: I’ve read it. I’ve read you invented Bitcoin at 12.

Peter Todd: Yeah, yeah. If I was able to go back in time and create Bitcoin from scratch, I would have made it have a perpetual say 0.5% or 1% inflation rate.

Peter McCormack: Okay. That’s controversial, for some people.

Peter Todd: I’ll put it this way if you can’t afford like a 0.1% or 0.5, or even a 1% inflation rate, what the fuck are you doing with your life? It’s 1% a year. So what?

Peter McCormack: So, who have you discussed that with? And, like you don’t have to name names. But, have you discussed that with people? What’s the general reaction? Because there’s no reason for that not to be introduced in the future, right? I mean …

Peter Todd: I think the general reaction is … Well, first of all, Bitcoin right now has what a 4% inflation rate. We’re a long way from any of this discussion being relevant. So, I think the general reaction right now is, it's pushing it to the future. It’s just not a discussion worth having right now.

It’s drama, and of course, you look at my twitter account, and I don’t shy away from that. But, most of the development community wouldn’t really wanna touch the issue. And, I think they’re right. There is no reason to touch this issue until it actually matters.

Peter McCormack: What about if Lightning Network is hugely successful? And, people stop using the base chain, because Lightning is fast, and it’s cheap, is instant. Could we get to the point where there’s no argument to use the basechain, because Lightning is as trusted as the base chain? Do you see what I’m getting at?

Peter Todd: Well, I mean, Lightning security model is riskier than the base chain. It just doesn’t … Lightning, there’s a good reason to use it beyond scale. I mean, Lightning has much better UI experience. But, the simple reality is the Lightning security model is more dangerous than Bitcoin itself, assuming that you’re able to wait for confirmations.

Under certain cases, Lightning can actually be much more secure. I mean, if I go pay you with Lightning, the security of that payment from the point of view of being reversed 10 seconds from now is far better than the main chain ever could be. In effects, it will be better probably what an hour or two into the future.

But overall, if you’re making big payments that aren’t time sensitive, main chain has better security. On the other hand, this idea of Lightning taking my transaction fees, that’s not unique to lightning. Tons of things do this. Exchanges do this. Probably the most payment volume that happens is actually on exchanges. Liquid side chain does this as well. Liquid takes transaction fees away from the main chain.

There’s no end of things that take transaction fees away from the main chain. And, the inflation arguments I would give is very simple. It’s, well, make sure you always have this mechanism to ensure that the chain keeps marching forward.

Even with transaction fees, you actually need this for a kind of subtle to game theory technical reasons. The simple reality is, Bitcoin without an inflation subsidy has a much worse security argument than Bitcoin with an inflation subsidy, even if you have transaction fees paying for things.

Peter McCormack: I haven’t heard you talk about this a lot though, right? So, are you waiting? Is it a case of priorities? Deal with what needs to be dealt with now? And, you’ll bring this up in 10 years?

Peter Todd: Yeah. It’s just isn’t relevant for literally like another 10 years or so.

Peter McCormack: What about 10-minute blocks across the solar system though? When is that going to be a precedent? I read that.

Peter Todd: Well, yes. I did a talk, actually. I believe the title of the talk was a solar powered space miner. Yeah. Solar Powered Space Pirates, a Threat to Bitcoin. And, the simple answer to that is yes, if space travel becomes cheap enough that big mining operations are operating far enough away from earth that the speed of light gets people out of consensus, yeah, Bitcoin’s fucked, and we’ll probably have to increase the block control.

Peter McCormack: And, say are you general evil?

Peter Todd: Yes, I’m a bad person capable of love.

Peter McCormack: Okay. Outside of Bitcoin, ’cause other Bitcoiners are very Maximalist in nature. But, I have seen you talk about Zcash and a theory. Like, what’s your position on alternative coins and alternative currencies?

Peter Todd: Well, the thing is, I’m not a Bitcoin Maximalist. I’m a Maximalist. Anyone who understands economics and finance, and how markets work will be a Maximalist because it is more efficient to have one currency than a whole bunch of different ones. That’s just not a controversial opinion. And, it’s a controversial opinion amongst scammers who want you to go by their ICO.

But, standard non-scam driven, economic thinking, this is not a controversial opinion. This is how the Euro got created. And, there are certainly downsides to not having multiple currencies. The one world currency thing has a lot of very real economic problems. But, they’re not problems that apply to things like Bitcoin.

For digital payments in a decentralised environment, it’s just natural to end up with one coin. Whether or not it’s actually Bitcoin, who the heck knows? But, Bitcoin’s technical design and sort of technical ethos currently are definitely the most suitable for being the one currency everyone uses.

That’s just a matter of like simplicity, reliability, of disinterest in making deep dangerous changes. And, there’s just … Conservatism is a good thing for that store of value. It’s just a pretty obvious set of combinations that mean Bitcoin’s kind of the default there.

Peter McCormack: But therefore, is it good to have competing alternative currencies?

Peter Todd: I mean, it’s not going to hurt things. But, for the most part, the competing alternative currencies are scams.

Peter McCormack: Every single one?

Peter Todd: Well, some are more scammy than others.

Peter McCormack: Is Ethereum a scam?

Peter Todd: Ethereum is a funny example, because the way it was launched, and the way it was promoted, that’s much more of a scam than any of the surf currency itself. Had Ethereum, for instance, been launched. I mean, it’s hard to kind of come up with an example of where this would be possible.

Let’s suppose, hypothetically, somehow launch Ethereum, where it was just an add on to Bitcoin, where somehow the people behind Ethereum were making money off of it. This isn’t really technically feasible, but let’s assume for the sake of argument was. It would still wind up being a scam, even without a separate currency, because they were advertising things that they knew would not be possible.

Ethereum is just a bed of lies if you will. And, I think it’s very unfortunate, ’cause it also means a lot of academics, because they can get grant money from this, and because Ethereum is easy to experiment on. I think it’s pulled down ethical standards of academia.

And, it’s just an unfortunate position to be in. And, this is also … I mean, maybe a good way to explain this is the private chain side of things. Well, some of that’s perfectly reasonable. A lot of the more grandiose claims made are effectively scams. And, it’s sort of a new interesting category of scam where it’s not like we’re directly ripping people off, but rather were lying about what our products can actually do, and we’re getting away with it because it’s security.

And, in security, well I can sell you a magical rock that keeps lions away. How do you know it doesn’t work? There are no lions around.

Peter McCormack: So, what are the main claims for Ethereum then that you think of false?

Peter Todd: I mean, it’s a funny one, ’cause it’s tough to pin down because the main claims were designed to be vague. Claims like this is a world … A great example is the world computer thing. What does that actually mean?

When you start thinking about any reasonable interpretation of it is, no, this is total bullshit. But, it’s presented in a way which is vague enough, it’s tough to argue against. You’ve got to play pin people down on what does a world computer mean? What’s it actually computing?

Now, you ask a normal person, I think, “Oh yeah, computations done somehow on Ethereum.” And, it’s no, that’s not how it works at all. Your Ethereum node redoes the computation. It’s not a computer, it’s a verifier, whereas the sort of general way of building consensus applications I push is client-side verification, which is quite explicit.

Yes, we have this big dataset that your computer verifies. And, other people don’t even have to verify the data. They don’t even necessarily know what it means. They may never even have a copy of it. But, if I want to convince you that something’s true, like I just sold you a house, I give you the data to prove it’s true, and you verify that data yourself, and you come to a conclusion that yes, you now own a house, or no, I’m trying to defraud you.

That is a sane way to talk about block chains. A world computer is not. A world computer is a pie in the sky scam material. And, even Vitalik, I mean he’s kind of admitted, “Well, the world computer stuff was a bit of a red herring.” I’m sorry. The moment you say red herring, and please go and invest in my thing, you’re probably scamming someone.

Peter McCormack: I don’t get the feeling he intentionally scammed somebody.

Peter Todd: You know about his quantum computing thing?

Peter McCormack: No, tell me.

Peter Todd: Well, just prior to Ethereum, he was involved in a quantum computing scam.

Peter McCormack: Okay.

Peter Todd: And, essentially what the scam was was they would do simulated quantum computing that would somehow be better than anything else. It just didn’t make any sense. And, his claim is, “Oh! I kind of young, and just had higher hopes for it. That’s all.” No, you weren’t that stupid.

First of all, you were like 19, at university. You knew what this was. You knew this was bullshit. Yeah. The guy’s got the mind of a scammer, basically. He’s got the intentions of a scammer.

He’s very clever about it. He’s not someone who is careless. He’s not someone who gets himself clearly involved in a scam in the way that you can prosecute. But, he’s pushing dishonest stuff. I mean, that’s what scammers do.

Peter McCormack: So, ETH 2.0, I’m guessing you’ve read some of the specs.

Peter Todd: I mean, it’s one of those things where he just go put up a whole bunch of complex shit on the wall to try to be resistant to criticism. I think I believe Greg Maxwell was the one who deserves credit for this. But, he’s pointed out how the general approach of Ethereum crowd is, they put something out, it gets shot down because it doesn’t work. So, rather than go back and fix the problems, they make it more complex.

And, if you keep repeating this, eventually you appear to be secure, not because you’ve actually created something secure, but rather, you’ve created something sufficiently complex, it’s just too much work to criticise.

Peter McCormack: Yeah. I mean, I’ve read James Press, which is medium posts recently looking at ETH 2.0. I don’t know if you saw it.

Peter Todd: I might have.

Peter McCormack: I mean, the only thing I could think of when I was reading this is, “This just seems an insanely complicated way of creating a distributed database.” I was written about sharding, and then I was reading about state rent, and that certain things would be on chains. And, I was just thinking, “What’s this for?” I just can’t get my head around it.

Peter Todd: It is designed to be sufficiently complex that you can’t criticise it. Now, on the other hand, if I wanted to explain to you how Open TimeStamps works, I could do that in a morning, including the part where I explain how hash functions work. It is dead simple.

If I wanna explain to you how my proof Marshall Project works, I’d probably have to go spend the afternoon as well. This stuff is designed to be dead simple. I mean, this is why, on my twitter profile for a long time, the pinned tweet was, “A blockchain is a chain of blocks.”

Peter McCormack: I knew that was coming.

Peter Todd: Yeah. Blockchains are not complex things. People try to make them complex things, so they can go sell stuff, or in the case of academic skill, write papers and make them relevant. But, they just aren’t that complex.

Peter McCormack: Yup. And, they have one purpose. Like, Jimmy talks about this a lot. The blockchain has a really good purpose for Bitcoin and money. Nothing else really. And, I’ve tried-

Peter Todd: I actually disagree on that.

Peter McCormack: Well, that’s good, because I’ve tried to be open-minded, and tried to kind of just be as open-minded as a can say, “Okay. Is there something else here?” Like-

Peter Todd: You’ve gotta remember because I define a blockchain is a chain of blocks, I would actually have the viewpoint that, “Yeah. Blockchains are worth adding basically anything.” I mean, the moment you have a data structure, where you even wanna create a backup of it, it might as well throw it blockchain in there so it can update and ensure you have a complete copy.

My Open TimeStamps project, it’s a centralised system that creates timestamps, long story short. Well, one issue with it is if the central servers go down, you want to have a backup of all the timestamp proofs they made. How do you make that backup? Well, currently, you go and go through this HTTP, RPC, restful protocol, total box standard stuff, and he just download one after another.

How do you know that your copy of the back up is the same as mine? Well, obviously you gonna add hashing to it. Well, how are you going to add hashing to it? Well, why don’t you go and make updates, and have one update hash another? Oh, what do you know? We’ve created a blockchain.

Peter McCormack: Indeed a blockchain, yeah. Okay. So, I met with Zac Prince of Block Fight, and we have a long chat about Bitcoin. They do crypto back loans. And, it’s a market that makes sense. But, he also said, it doesn’t make sense when they’re Lending money, say to Argentina, that if you’ve got to lend out Bitcoin because it’s volatile.

He said it makes sense to do a stablecoin. A stablecoin is built on Ethereum. So, whether it’s a scam or not, the fact that people are building things that people are using, how do you sit with that?

Peter Todd: Well, so the point I’d make there is, the stable coin’s built on top of Ethereum. From a tech perspective, that could actually be the right decision. And, the reason why there can be the right decision is, yeah, I mean the infrastructure is there. We know we can throw together something. It doesn’t work as well as it could. But, the tooling’s there, we can get it done, push it out the door.

I’ve literally told clients of mine, “Well, you actually might want to build this on Ethereum, ’cause alternatives don’t exist yet.” We know they can exist, but the effort to actually make it work hasn’t been done yet. And, in all equally, I’d say the stable coin idea is just an obvious no brainer.

You might want to have exposure to this currency. Why wouldn’t you want to have some nice digital way of doing it with a well-defined trust relationship? It’s just not a complex thing to talk about. It has very obvious reasons to, in much the same way like having an ETF, it makes a lot of sense for certain people.

Now, having an algorithmic stable coin, where you try to do consensus, decentralised magic to keep the price stable, there’s a pretty good reason. I think those are impossible. It’ll never work.

But, a trusted stable coin, where you have a central issuer, who you have legal mechanisms to ensure that you get your money back, yeah. I mean, why not? Hell, in some cases, a stable coin that’s actually a total fraud can actually make sense. If I’m a trader, and I want to temporarily move out of a position into a stable thing, and then move into another position, even if the stable coin is a total fraud, and there’s no US dollars or whatever backing it, it can still be useful for me as a trader, because my risk of the stable coin going belly up, and the fraud playing out maybe less than the risk I have of not moving my currency, not moving my assets into that stable currency for whatever reason I needed to.

Peter McCormack: I only see the two use cases. I see Bitcoin and a stable coin. That to me is pretty much all I think we need, personally. I mean, you probably can think of some great other examples.

Peter Todd: Well, if you’re talking about money, and things related to money, I think you’re a lot more right than people would want you to be.

Peter McCormack: Yeah. Well, do you know why? Because other people want to invent other uses for blockchain, ’cause they want to monetise it. And, other people want to shoot down stablecoin-

Peter Todd: So, I guess the way I’d put it is, if there’s a money component involved, I think you’re ultimately right. If there’s not a money component involved, and we’re just trying to do something related to some asset or some data structure, which for a reason we what consensus over, I mean, yeah, block chains basically always make sense.

But, that’s because of blockchain is just a chain of blocks. It is not rocket science. I mean, I love the example GET. People say, “Oh, but then is GET a blockchain?” And, my answer is, well yeah. it’s basically a blockchain. It doesn’t quite precisely match the linear chain of blocks in how we use it. But, why GET is a set of hashed things in a direct acyclic graph is essentially the same reason why Bitcoin is a chain of blocks.

I want to make sure that my copy of the source code on my computer is the same as your copy. That’s why Bitcoin is blockchain. That’s why GET has something nearly a blockchain.

Peter McCormack: What about privacy coins? Obviously, I’ll see you tool more about Zcash than-

Peter Todd: Say proof of what?

Peter McCormack: Privacy coins.

Peter Todd: Oh, privacy coins?

Peter McCormack: Yeah. So, I’ve seen you talk about Zcash more than, say, Monero. What’s your position on privacy coins?

Peter Todd: