 Helo. Hei. Thank you for welcoming the Trojan horse into the bank. Because we're here to destroy you apparently. So thank you very much here. I'm the host of the What Bitcoin did podcast, which is one of the leading Bitcoin podcasts, and I have some of the best and leading minds in Bitcoin on to talk about the future and sometimes just to talk about the history as well. And thank you very much here. We've got a really great panel. I'm going to introduce themselves. Tell us what you do, what your background is in Bitcoin and why we should care. Hi, I'm Jo Kemstof and I started looking into Bitcoin in 2010 when I heard first of it because I'm interested in the stability of system. So any systems I can find in the universe on the planet I'm interested in the stability of system and if they lead to a stable system. I realized that Bitcoin is a 40 year old problem in computer science, which is a Byzantine general problem where nobody really had a satisfying solution before and then I considered this a very interesting thing to follow throughout the years. So that's more the theoretical background on the system. Stepan, we met for the first time yesterday, did an immediate interview about quantum physics and the birth of the universe in Bitcoin. And multi universes. Everything is not real, everything is like probabilities and stuff. You already know, I already said who I am, basically a hardware hacker. And Dan, I've known probably for about a year now. Yeah, about a year. I built some early products in the cryptocurrency space back in 2013, 2014. I'm currently building institutional trading accounting infrastructure and I've written some articles on the game theoretic attacks against Bitcoin in terms of how Bitcoin mining works and how certain sort of game theory might play out with financial rewards in the Bitcoin ecosystem. Great. Okay. So we're here to talk about security and risk within Bitcoin and in planning and preparing for this, there's two types of security to consider and two types of risk. But also I had a good chat with your guest today and we talked about some of the things that you need to understand with Bitcoin because it is very different from anything else that you might have experienced before and most people, when they first discover it, go down a rabbit hole of education and it can take them some people years to really understand the background and what it means. There were four things we spoke about yesterday you think it's important for people to understand. But I've also highlighted that it's not enough to just be an expert in one field how we classically derived when somebody grows up and decides for an education and he becomes a specialist in a certain area but these areas have been defined like 100 years ago and today we have in computer science these new phenomenon that you cannot only be a good computer science and how to build decentralized networks but you also have to know economics because there can be economic attacks on decentralized systems and you have to have a good understanding of physics because this is the link between the virtual world and the real world it's the physics, you need at least a good understanding of the second law of thermodynamics and of course mathematics that you have a basic understanding if you're really using mathematical secure algorithms or if they have a loophole which can be easily exploited by smart algorithms. Dan, we talked about security and there's two key areas of security we need to consider there's the security of holding and moving and transferring Bitcoin as an asset but there's also the security of the protocol. That's right, so on the protocol there's two types of risk I would say there's technical risk which is the code itself and then the game theory that is enabled by the code for example the game theory around Bitcoin mining why Bitcoin miners would rather accept the block reward or the financial incentive to mine rather than manipulate the transactions that's an example of more of the economic theory or the game theory behind Bitcoin so we can dig into that or what would you like to talk about? I would separate the two talk about the security of the protocol and what the inherent risks are and how the protocol is secured and then I would also then talk about the security of the asset itself whether you're personally or as an institution holding or transferring it this might be a good moment to touch on the custodial risk Bitcoin is like gold, it's a bearer asset if you lose your gold or you bury your gold in the middle of nowhere and you forget where you buried it then it's gone forever with Bitcoin similarly if you forget your password to your private key it's going to be gone until the end of the universe maybe and so that's a tremendous risk when it comes to holding Bitcoin it's also a huge value as well that by having something that only you control you have sovereignty over that value you have complete control over it which gives you freedom the freedom to lose it or the freedom to keep it and there's also risk in transferring the asset as well when you're sending to somebody yeah it's irreversible which means when you send a transaction there is no undo button so if you send it to the wrong person or you send it to the wrong address it's kind of gone forever with one exception if both parties agree then they can reverse you can build on top of that frameworks that ensure reversibility if there's consensus about it Steban you talked to me quite a bit yesterday about security of the Bitcoin protocol in terms of quantum attacks but you were also working on a hardware facility do you want to talk about the different types of ways that people actually can secure their asset and the risks inherent in that didn't quite get it so there's different ways you can hold the asset you can so yeah I would say that it is hardware is important obviously and this is why we are doing all this research but also another important thing is when you hold it how exactly you do it so there are techniques to protect the private keys so accusing the multi-signature schemes maybe you can give out some control well not control but a certain recovery keys to another party to the trusted so you can introduce trust in the setup if you are not trusting yourself because I mean I don't trust myself I can easily get hit by a truck and then what could I do with it so it is important to think about what other threats are there and how to recover is another important point for Bitcoin holding we've got some really good questions coming here so we'll cover these towards the end Bitcoin has been here now for 10 years we're pretty proud of that but I think everybody admits that we don't know what the next 10 years will hold so Dan we've talked about what some of the potential big risks are that could even kill Bitcoin do you want to talk about those? I mean Bitcoin has survived a lot of different attacks and a lot of different risk early on in its life cycle if you think of Bitcoin as a species of money when it was planted it has survived its early youth when it was very fragile, very weak could have been easily trampled or destroyed by a storm Bitcoin has survived a lot of those but I think Bitcoin still has much ahead of it that is still risky Bitcoin's proof of work mining mechanism essentially secures the network and right now that security budget or the annual amount spent on Bitcoin mining isn't high enough to stop a large country from potentially destroying it so that would I would consider still a pretty big risk that it has in the future do you still think there's any inherent risks in the protocol itself we've heard about inflation bugs do you think that is still a significant risk that we should be aware of? on the technical side there's different problems that might exist with the code or there might be a bug in the code that would enable someone to print more than 21 million bitcoins or do something else with the protocol there's a very large reward for a hacker to attack the protocol in fact what's the market cap of Bitcoin today? 200 billion? 150 is it? 150 so a hacker has a $150 billion reward if they find a flaw in the protocol which is a very very good incentive for the engineers who build and work on the protocol to continue to fix it so that is kind of an interesting dynamic that only open source money protocols like Bitcoin has is that it's essentially a reward if you find a flaw and in the 10 years of Bitcoin how many times has the protocol been exploited to create fake transactions? very few and they were earlier on one was in 2010 when Bitcoin didn't have any value so that one was an inflation bug but that's when Bitcoin had no value and there was very few people working on it so that was a long time ago I'm not technical enough to answer how many other times there's been but very very few but that's basically the reason why Bitcoin forks and I mean Bitcoin soft forks and Bitcoin upgrades are happening very rarely and they normally take like years so from the moment when you start specifying it to the moment when you actually release it as you are kind of releasing the product that holds 150 billion whatever fiat money it's actually there is an intensive to verify everything and really to look into what you are deep worrying Bitcoin is known as very conservative when it comes to an engineering mindset for a good reason if we try new and exciting things without testing them without talking about them it could lead to a big flaw being encoded into the protocol so the Bitcoin community and the Bitcoin developers are very very conservative we also spoke yesterday about the inherent risk with Bitcoin with market manipulation also and the potential for systemic risks if Bitcoin continues to grow and goes beyond the last peak market cap and becomes a multi trillion dollar market if it ends up competing with gold it becomes intrinsically linked across the whole market we have derivative products if there was some catastrophic bug or occurrence in Bitcoin that would lead to a market crash that could have a chain effect across the entire financial markets similar to the housing crisis one good thing is that Bitcoin goes there from one day to the other so the more it evolves into the future the more people have a look at it and everything is open so we have more bright minds looking at it this is a good thing but also the more people have an interest or are invested in it they will probably protect it because it's like a win-win network for everybody and an attacker probably would not gain the full bounty because the price would immediately crash so he would have to be very careful whether it's a technical attack an economic attack the cost of attacking it is so high that it's probably not worth it unless the attacker actually want to destroy the whole thing because but then he probably would use up all his budget and have a country full of people who are angry at him because he didn't use that money for other stuff and just destroy it they're talking about a 51% attack for example which yes the attacker would have to be willing to burn the money which is why the game theory behind it is so interesting is that miners have put their own skin in the game via financial investment with the mining machines and electricity and how much they spend on that essentially secures bitcoin through the game theory of if they were tried to damage bitcoin or damage bitcoin's reputation in terms of the manifested via the price then they would have to be willing to burn those future cash flows that they would earn I think if you want to attack systems there are more profitable systems to attack than bitcoin and to exploit bitcoin is the strongest out of all of them we've got some really good questions here and they've all come through from anonymous people so you're obviously learning about identity with bitcoin which is great some oh great okay there's a question here that says how large is the risk that one big investor could change the protocol and manipulate it I think we'll switch big investor more to anybody yeah people who hold bitcoin don't control the protocol so an investor can't really sway the protocol they could invest their money in mining equipment and decide to try to do a 51% attack but they would have to be willing to burn 5 billion dollars to do so well I would say that anyone can fork bitcoin so if someone is unhappy about the rules of the protocol they can fork and we have plenty of altcoins and then the market shows if it is valuable or not so we have this different person people that are trying to fork and put their vision into bitcoin protocol but it didn't work so I think that it's more a community driven system and it is really great this is a really good question and Dan I think it would help if you explain the difference between custodial and non-costodial here so everyone understands but the question is with the continuous consolidation of bitcoin custodians into fewer and larger ones will this introduce the same systemic risks like the consolidation of bigger banks yeah that's a great question which is that custodial would be that you trust someone else to control your bitcoins for you non custodial means you don't trust anyone else to control your bitcoins only you can control them there's pros and cons for both approach if you do non custodial and you lose your password you lose your bitcoins forever custodial you trust someone else who's typically smarter than you are to manage your bitcoins these are really really smart engineers that typically work on these different wallets that are custodial and this is a great question which is that will humans choose a more convenient method of storing their bitcoins which is typically custodial and a more convenient method over time where they choose the method where they have complete control and I think I think we are seeing if we look at chain analysis data I don't think a majority of bitcoins are held on custodial solutions I think they're actually held on non custodial so that's a good sign and I don't think we see it trending one way or the other I haven't heard any data on if we're trending to more custodial or non custodial in the future there are ways to develop something in between which would be like a multi-sig or a multi-signature setup where you don't have to trust any one other individual party you can trust multiple custodians and you just have to trust that they all won't collude together against you so I think that's a nice compromise in terms of use your experience and control over your money can I add on this you also have to differentiate between systemic risk where everybody is affected or specific risk which are there of course and you talked a lot about it that it's essential to keep the private key whatever how big your group is that agrees on we join forces to limit it the individual's risk but it's a big difference if there's a systemic risk where everybody has to pay for the errors of few people to just keep the society working and then you can still agree if you want to help individuals who made a mistake and lost something but it's not forced on everybody that's a good point it's not necessarily a systemic risk it's more of just individual key holder risk so it doesn't actually pose a threat to the protocol itself it poses more of a threat to the individual holders of their crypto assets I really like this question what would be an effective way to make bitcoin go away because China with all their might and power tried to make bitcoin go away and have failed and every time you try and make bitcoin go away you make it stronger but how could we make bitcoin go away great but something which is even better so compete with bitcoin on the market that people realize I want this instead of bitcoin and it has very good properties way better and bitcoin in all the areas not just in a single area what most people do they say bitcoin has a problem here and doesn't scale at this point and then they propose a fix for that but it breaks the system on the other end so you have to really have something which is better in all of the areas and not just one a little bit better but maybe ten times better and then people take that effort to investigate it first time, human time to research this and then make the decision to switch to something even better Dan, I've got a feeling you don't think something could be created better than bitcoin because it's more than technical All money is a social money the only reason why the Euro the former Deutsche Mark the US dollar ever had values that we all had this shared illusion or shared trust or belief that it was worth that value especially considering modern fiat currencies are not backed by gold or anything substantial it's just pure faith in it bitcoin similarly is a faith based system of shared people who believe to take their money in the real world their fiat dollars and invest those into bitcoin and to store that in the bitcoin ledger and the only reason why bitcoin has any value today is the shared belief between all the people who own bitcoin that bitcoin is worth something so I think to attack bitcoin the way to make it go away is to attack the social network if bitcoiners are divided on an issue that's big enough you could try to fork the protocol and hopefully divide that social network into two pieces the network is most valuable as one and the more and more participants in the network the more and more people that believe in bitcoin and choose to store their wealth in bitcoin increases the value of bitcoin and so if you can fracture off part of that community or substantial part of the community that would be a good way to damage bitcoin in a pretty devastating way Stefan, there are many more technical ways I think that it is a good point that on this system the weakest part is actually the human beings so by but also right now this question is kind of similar to how do you make an internet go away so at the moment bitcoin is not very widely used so there are still possibilities to use maybe regulations or marketing or anything like that to just push people away from bitcoin but as soon as more infrastructure is being built and more services are using that to do their business it will become harder and harder so I think that it's like on the one way you go with the adoption and everyone is suffering how do we make bitcoin more penetrate the ecosystem penetrate the society the attacker can do the other way around so how can we damage the reputation of bitcoin we are constantly under attacks like that up to now we survive it's impressive how much bitcoin has survived imagine when bitcoin has positive news in the press when was the last time you read a positive article about bitcoin 20k maybe around the price but not many people are very optimistic about it and I think there's a very small amount of people that believe in bitcoin right now maybe 20 million people have bought bitcoin in the whole world I think that's a really important point so I was at the Oslo Freedom Forum last weekend hosted by the Human Rights Foundation and a lot of the conversations there about how people are using bitcoin living under authoritarian regimes and I think a lot of people get lost in the whole a spirit of price and speculation and actually forget that bitcoin is also a tool for freedom so I think that's super important so what is the best way to learn about bitcoin so there's this podcast so if you want to learn about bitcoin I've always found personally I'm going to answer this very quickly Jameson Lop has a website lop.net you can embed yourself in his resources page for a few weeks and learn a lot from that and then I would go and watch all of Andreas Antonopoulos' videos on YouTube and once you get a bit more competent then start debating Jack Mo on Twitter but be prepared how about you guys best way to learn about bitcoin that's a tough question because it's like hey read this collection of medium articles or these articles and watch these YouTube videos I think those are a good place to start I think Jameson Lop has a really good index of different knowledge in the space if you want like a basic if we're going to do self promotion here like the podcast if you want to learn some of the basics around bitcoin's origin I wrote an article called planting bitcoin so bitcoin's origin story that Satoshi's brilliance wasn't just in the species of tree that he chose to plant at the species of money it was his season the soil and the gardening techniques that were equally as important to lead that led to bitcoin success so it's kind of a good intro to like where bitcoin started how it started and why it's important I would also add that probably the best way that I think for me at least would be to go to the local meetups because as soon as you have someone who can explain you and answer your questions because there will be plenty of questions about bitcoin technology and how it all works so if you can grab something and ask him it will be very useful and in the community people are extremely friendly so you can ask them questions on the stackoverfall I mean bitcoin stackoverfall or anywhere in the IRC chats and people will try to explain you in a nice way and it is not only about the technical questions but also like in the overall things but for general understanding local meetups are really great so you can meet great people there and get a lot of information out of them I can't answer this question without the buyers because I have founded a bitcoin education or blockchain education company so we streamed line this process that you can get a good start on the whole thing with six hours of your time and get into the most important basics at least and then be out there on your own and the problem is nobody knows everything about bitcoin and nobody probably will ever this is a network thing and we have distributed knowledge always as a species so you can only have different perspectives but it's a network which holds these experts together that we have thousands of eyes looking at it and everybody tries to make up his mind just like the no one knows how to make a pencil we heard about that no one knows how to go mine no one knows how to do all the wood manufacturing et cetera same thing, we all know how pieces of it are built but no one knows how the whole thing is built I would support going to read Dan's work too it's probably some of the most accessible easy work it's very technical just last things, we've got about 30 seconds left excluding the bitcoin people who have been at all the events this weekend just out of interest can I just see a show of hands of anyone who's bought bitcoin so there's a few one of the best ways to learn is actually just buying some going buying some moving some around, having a hardware wallet playing with it because in playing with it you suddenly build up an intrigue and that's what happened for me buying some you mean 0.00 something buy loads so can we just have a round of applause for our panel