 Hello and welcome to the March Livestream Q&A. This is Andreas Antonopoulos and I'm going to be answering questions from my Patreon subscribers. Oh my god, what the fuck is happening in the world? It's been one month since my last livestream and apparently the zombie apocalypse has started. So we're going to do this in my new bunker. And this is a slightly different format today. First of all, I've been doing these monthly livestream Q&As for two years now. Until now these have been exclusively for my Patreon subscribers and we decided and my subscribers agreed to make this a public livestream. That means you get to see this live. Or we would record this and then publish each of the question and answer videos separately, which we'll still keep doing. But now you get to see it live. Of course my monthly subscribers still keep one very important perk which is they get to ask the questions and vote on the questions that we get. I'm going to answer a few questions from the chat today just for a change since I think a lot of people are probably coming up with lots of new questions. So first of all, how can you hear me? Can you hear me okay? Can you see me okay? Let me know. All right. We're having some lag problems. That's disappointing. Let's see if we can make some small changes. We may have to stop and restart the stream one second. Uh-oh. We had some technical problems and my streaming software just completely crashed. Hopefully that has maybe corrected some of the lag issues. We'll see. Let's hope the quality stays good for now. Thank you for the recommendation to decrease the resolution. Unfortunately that can't be done once the stream has started and we can't stop it. Let me see if I can make some more adjustments. All right. I think my microphone was cutting out a tiny bit. Audio isn't great. Sounds robotic. No, that's just my voice, you know, that's not the pickup of the microphone. It's, I grew up in the 80s, you know. Sounding robotic. It's part of it. It's what we did at parties. Hang on. So as most of you are probably aware, there's a pandemic going on. So I'm currently in quarantine. For those of you who might be wondering, I'm actually in the United States and I'm here supporting some of my family members who are in the United States. But my family in Greece are doing fine and of course we'll talk about some of these things with our very first question that is coming up here. The first question came from Mark a week ago. Not very highly voted. It was downvoted by my patrons but I thought I'd address it anyway. Why is Andreas taking up stick in Cyprus so close to the Middle East? Are the feds chasing him? No, the feds are not chasing me. I don't know where you got that idea. I am not being chased by the feds and I am not in Cyprus. I'm currently in the United States. Funny story. You probably know that I teach a MOOC, a massive open online course for the University of Nicosia in Cyprus. All the time I keep getting asked to go to conferences or meetups in Cyprus. So here's the little secret. I haven't actually been to Cyprus in 15 years. All of my university teaching has been remote. So thank you so much for joining me for this live stream. Again, I'm sorry we have some technical difficulties. Streaming is difficult these days. We're going to figure it out. This is the first time I'm doing it from this location and we're still trying to figure out the connectivity and make sure we fine tune everything so it works really nicely for the live stream. I hope things are good enough now. So this live stream is a live stream that is about answering questions. I have a bunch of questions already from my subscribers on Patreon. Now you probably know and I'm going to do this pitch once and only once. I give out all of my work for free. My videos are available for free. My books are available for free. Open source and free. Almost all of my work is open source and free. And as a result, I depend on your support in order to sustain my mission to educate as many people around the world in as many languages as possible about the technology of Bitcoin and open blockchains and using that education to help people understand this complex technology. Now I have a staff now of 11 people and as a result I'm able to reach much further. There's been a brief hiatus in videos over the last couple of months because of some upheaval going on but we're back and we're going to keep you entertained throughout your quarantine. So I do appreciate your support. Subscribe, like on this channel and this video. And if you have the ability please feel free to support me on Patreon with a monthly subscription. Let's get right to the questions. Our next question comes from Mohad. Who is mainly responsible for securing the Bitcoin ecosystem? Is it the miners or is it the full nodes? Or do they share responsibility of safeguarding the ecosystem? Could it be seen as Bitcoin being the castle so that the miners are the walls or guards protecting the ecosystem from external threats and full nodes as the rulers defending the ecosystem from internal threats such as a miners' coup? It's not that simple. There are a number of competing interests and checks and balances that operate in the Bitcoin consensus system. I identify five distinct constituencies of consensus as I call them and these are really groups of people or roles if you like that have power within the Bitcoin ecosystem and together they create the emergent consensus around the rules that everybody is supporting. So these five constituencies, each one of these roles is not necessarily distinct from the others. People can have multiple roles within this ecosystem and they are developers and developers write the software that is used to communicate and enforce the consensus rules. So developers are one power dynamic within the five constituencies of consensus. Miners, miners obviously enforce the rules and are subject to the rules and ensure the security through proof of work. Exchanges run their own full nodes and they are a very big part of the economic activity of Bitcoin and the choices they make in how they enforce the rules and what full nodes they run affect emergent consensus. Merchants, of course, who are the other big chunk of economic activity in the Bitcoin ecosystem and finally users which covers also all the wallet choices and full node choices that those users make. Now somebody could be a developer and a wallet user, they could operate and exchange and be a developer, they could operate and exchange and be a miner but generally speaking those are the five roles. So consensus emerges from the interactions between these five and every one of these roles at different times has tried to exert authority by claiming that they have power over the consensus rules and it's absolutely true that everybody in that group has power with the consensus rules but only if everybody else agrees with them and so the interesting thing that happens with consensus is that as long as these five constituencies agree everybody can feel they have ultimate power, the moment one of these groups tries to step out of line and change something without the overwhelming support of the other four groups of constituents, effectively they lose that power, they see how fickle and weak that power is. We've seen attempts by developers to rush changes into the protocol that have failed, we've seen attempts by miners to change the consensus rules or push certain strategic changes to the way Bitcoin operates, we've seen exchanges try to work with miners in some cases with developers in other cases in order to change the rules, we've seen merchants demand things and fail to get changes they want and we've even seen a user revolt in the form of the user-activated software in August of 2017 which is probably the most effective way to exert power directly from users, the broadest constituency of consensus. Alright, let me just check in quickly with the chat and see how things are going. We still seem to have a bit of latency in the feed, we still seem to have some problems with the audio, I apologize for that, we're going to issue obviously a recut fresh video that will be well recorded at high quality and you shouldn't have those problems but the live stream we can't really fix at this moment. So a number of people are asking follow-up questions in the chat and I think this is a topic that has a lot of interest and that has to do with miners and the coming having. We're going to be talking about that again and again, it's a topic that comes up very very often but since we just talked about the various constituencies of consensus I'd like to address that a bit further. Now you're going to be reading a lot of articles in the media about various potential problems that occur with mining around the having period and especially related to either the pandemic and quarantine implications or the economic recession that comes out of that. So first of all one of the things you will keep seeing is the idea that it is only profitable to mine Bitcoin at a certain price. So a lot of articles you will see say the profitable price, the break-even price for mining Bitcoin is so many thousand dollars and that's not true. That analysis is flawed and the reason it's flawed is because it doesn't take into consideration the difficulty with targeting algorithm. What it's doing is it's assuming given the current hash rate and the current probability of succeeding in a block and miners running all of their equipment at full energy draw and the cost of electricity that's the price that you need to break even. But of course all of those things are dynamic including the difficulty whereas the one constant one static thing in Bitcoin the the thing that remains stable is the 10 minute issuance of blocks over the long average blocks are issued every 10 minutes. Everything else dynamically adjusts in order to ensure that one heartbeat remains the same. So if the question is are miners going to be profitable miners are always barely profitable some miners and some miners are always barely unprofitable the least efficient miners will be unprofitable the most efficient miners will be barely profitable because their profitability depends on the meeting of supply and demand at the current Bitcoin price and hash rate and the one thing that changes in that is hash rate. So what happens if at the current price many of the miners are not profitable well the end result is they will turn off their least efficient mining equipment and they'll do so because consuming electricity without making profit isn't sensible and if they don't have long-term contracts for electricity or if their long-term contracts are unprofitable at the current hash rate they'll turn off their equipment. Now that may lead to a decline in hash rate not a significant decline because we've seen massive increases over the past two years but nevertheless a decline in hash rate that then makes the remaining miners more profitable because two weeks into that at most usually less time on average about a week later the difficulty retargets and it retargets taking into consideration the drop in hash rate and the resulting longer time between blocks and it gets easier to mine that means that the miners who leave their equipment on become more profitable because they find a greater percentage of the blocks. Now this may lead to some temporary centralization that's absolutely a likely outcome but it doesn't lead to any problems with hash rate profitability of miners or the security of the bitcoin system in my opinion. All right we have 600 people on this live stream that's a new record if you want please invite your friends copy the link to the video and share it around there's a little share button right below the video it'd be great to have more people join us on this live stream we're going to run for about an hour and a half today in total and I'll get right to the next question. All right the next question is a question that's more for economics than technology but I'll try my best to answer it. Nicholas asks is inflation necessary for the economy to work? Bitcoin is a deflationary asset meaning it has a hard cap there could ever be more than 21 million. In modern economics theory Tolta at university they swear by the fact that inflation is necessary to incentivize people to spend their cash into the economy whether that's regular consumer spending or investing into the stock market can an economy work with a deflationary currency will people still have the incentives to spend their cash? All right first of all I think one of the things you're seeing there is what is mainstream and economics in western developed nations which is not necessarily what is the same in other countries especially for example eastern nations so in western nations the savings rate is very very low meaning that on average people save very little money and spend the vast majority of their money this is very very different than the way economies operate in places like China and Japan for example also Korea Taiwan many other Asian countries where people don't have debt instruments like mortgages they don't buy things on credit cards and if you want to buy a house you save up for 20 years and that's done on a generational basis so the savings rate in Asia is much much higher now in in developed countries we call that hoarding of wealth instead of saving to give it a negative connotation but certainly economies that have more deflationary characteristics tend to encourage saving now the big thing to realize here is that I see no circumstance or scenario in which bitcoin is the only currency available and as a deflationary currency is the basis of the entire global economy I honestly don't see a scenario like that I see a scenario where there are thousands of currencies available and of those many don't have value and of those many are inflationary and play money such as the US dollar but at the same time there will also be hard currencies and hard assets like bitcoin and gold and other things like that so from that perspective the fact that bitcoin is deflationary doesn't affect the entire economy if the theory of the necessity of inflation is correct people will have plenty of choices of inflationary currencies that they can use or in fact borrow or in fact borrow at extremely low interest rates zero or negative interest rates so that they can spend to their heart's desire in a massively inflationary economy now right now when you have a supply a supply clot and a demand crush inflation cake keeps down so over the past 10 years we've seen most inflation go into asset bubbles and right now we're seeing all these deflationary pressures because of the economic recession but who knows how these things are going to play out I'm not worried about whether an inflationary or deflationary currency is better or whether an economy can work on only one or the other primarily because I don't see any scenario in which people don't have a choice and if people have a choice they will choose the mechanism that works for them and I think a lot of people may end up choosing bitcoin and other stable and sound assets as a savings mechanism and as a long-term store value that's just one theory of course of how bitcoin may work in the broader economy but I don't see it displacing everything else to the point where people don't also have a silly inflationary currency to play with that gives them infinite debt with infinite issuance and zero interest rates okay let me quickly check back in with the chat see how things are going there all right everything's everybody's having fun and a question from one of my patrons in a follow-up DaVinci asks Andreas will the price change so dramatically in european did anything fundamentally change about bitcoin no in my opinion nothing fundamentally changed about bitcoin I think what happened is that the vast majority of trading that was happening before the big drop in price was driven by speculative interests primarily by people who are looking at bitcoin as an investment perhaps there's a risk asset that gave them a nice little bit of spice in their portfolio by having more volatility and upside potential potential for yield etc and that trading had very little to do with the economic fundamentals and a lot to do with emotional trading and price reflectivity and that kind of investment is fickle and I had predicted more than two months in advance that if there was a sudden drop in assets in the stock market etc investors would pull money from all assets especially assets that they see as risky such as bitcoin so in the first stage of a financial recession we expect to see bitcoin dropping just like all other assets including gold and that's pretty much exactly what happened and it may happen again honestly this is entirely about sentiment and the emotional response people have to these things people believe that it's going to happen then it will happen because it's a self-fulfilling prophecy for the same reason we could go in the opposite direction long term the fundamentals bitcoin are the same it is a technology that allows us to implement the internet of money on a massive scale and it delivers some unique characteristics that are different from every other system that is out there and those characteristics are that it is revolutionary it is immutable it is public it's collaborative it is open it's resistant to censorship and it's decentralized and that's why I I use the ripcord acronym to give us the idea that what we're doing here is pulling the ripcord on a parachute as we exit a broken financial system there are billions of people out there in the world who don't have access to the financial system because it excludes them by design and through various mechanisms of geopolitics makes it very difficult for them to participate an open internet-based system those are the fundamentals and those fundamentals are about economic inclusion of everybody and the ability to do transactions in a completely open and free market online those fundamentals haven't changed and if anything I think that kind of technology is more necessary than ever before all right let's let's do another question from our patrons let's see oh this is a good one a bit more in terms of economics pyrrhus asks are we economic flat earthers as many bitcoiners i'm concerned about economic issues such as central banks printing money that reaches the rich first excessive lending military policy etc many bitcoiners complain about these issues and I tend to agree but I can't easily find any mainstream economics supporting our concerns so I can't help but feeling like a flat earther should be feeling that I might be disconnected from reality where things are gradually getting better fewer wars fewer poor better health less inflation almost everywhere for the past 70 years therefore I would like it if you could give some good pointers to resources by mainstream economists about these issues what a great great question are we economic flat earthers well if you take the perspective that bitcoin is the only system that can survive and that its economics guarantee its success over all other systems and will lead into this spiral of hyper bitcoinization dominate the world become the world reserve currency until all countries abandon their fiat currencies rejecting them and burning them in giant bonfires so they can instead adopt the one true coin that unites them all yes yes you are an economic flat earther in my opinion because I think that that kind of perspective of a pure economic miracle that that has no connection to the underlying technology or has a very tenuous connection to only one part of the technology I consider that a bit like flat eartherism and because in the end it it doesn't matter it doesn't matter if this system is the perfect solution of monetary policy and all others are wrong it doesn't matter if the monetary policy of traditional fiat systems is fundamentally broken or not and it doesn't it doesn't matter if the monetary policy of bitcoin is perfect and the reason it doesn't matter is because we're not talking again about one system to replace all others what we're talking about here is a massive change that happened 10 years ago where we went from having 194 national currencies that were closed systems and heavily controlled by the nation states that issued them into a world where we have a set of open systems that anyone can voluntarily participate in and these open systems are competing on a variety of different metrics we broke open the monopoly of currency and now there are thousands of choices and as long as we have a choice to use a system that fulfills our monetary options we now have a free market for currency and that free market for currency allows every individual to make decisions and those decisions can be motivated by a variety of factors for some people these decisions are highly emotional they're about associating with the community they're about fulfilling political ideas they're about association and really fulfilling their worldview and this feeling of fitting in with people who think alike and that's not a bad thing that's the basis of community as long as you don't take it too far for other people the decisions are made purely on rational economic basis which itself can be rather narrow and for other people it's a matter of basic economic necessity there is no fiat currency in their country that works it's actually broken they have no access to banking facilities they can't invest in startups in another country they can't send money across borders easily or perhaps at all all of these different motivations may compete but at the end of the day it's about people having the ability to make a choice to use one of these new open systems without interference without monopolies without coercion and so in that environment if you believe that the monetary policy of bitcoin protects your savings in the long term then you can make rational decisions about allocating a certain percentage of your assets in that just as you would investing in gold or some other sound asset you don't have to believe that at the exclusion of all other possibilities and you don't have to believe that at the exclusion of any contravening facts you can assess the values of bitcoin assess the technology and make a rational decision and then be open to being proven wrong about that decision and that's the fundamental difference between flat earthers and bitcoin adherence you know this is not a belief system absence of science this is a position an opinion that people hold because they have seen and evaluated the technology at least that's how it should be and it should be an opinion that is subject to change if you understand and see new facts if you see new behavior in the markets if the rule change in the system etc etc so yes some people can take this to an extreme belief and it's certainly true that this contravening what is today normative mainstream economics but economics itself first isn't science because it's too strongly tied to behavior of people and the sociological aspect of economics and secondly it's not even coherent science in terms of everybody agreeing on these things it's dominated by a specific school of thought of Keynesian economics today and that is not a long-term effect that is a fairly recent attitude that has only developed in the last 40 or 50 years so economics has a much longer history than that and it certainly has a much longer future than that mainstream economists may change their minds one thing that is for certain is that in the current environment where we are we do not have models for predicting where things go interest rates have never been as low as they are today worldwide we have never seen an injection of capital as we're seeing today so anybody from any from any discipline of economics who tells you we know how this is going to play out is lying we don't have any basis or model to predict how this is going to play out because this is truly a completely unprecedented and new environment we're in so make your own choice and maybe you're right maybe you're not right let me quickly check the chat see everything's okay having a few buffering issues again but we'll manage all right the next question is a technically specific question Salim asks watch towers justice transactions in the lightning network how do watch towers with our third party lightning nodes detect dishonest parties and fraudulent transactions watch towers could also be used for spying on users how does the privacy angle payment channel and watch towers trio work it's a great question Salim so if you don't know what a watch tower is in the canonical construction of payment channels in the current version of the lightning network the payment channels that are currently used have a penalty mechanism in them in these payment channels as they're currently specified in the basis of lightning technology specification or bolt specification a payment channel consists of bilateral asymmetric commitment transactions that are exchanged between the two parties and that anchored on a two of two multi-sig UTXO that is recorded on the blockchain so first the two parties record an amount as a two of two multi-sig that's recorded on the blockchain and is the funding transaction or open transaction of their channel from then they exchange commitment transactions that update the balance or state of the channel to reflect movement of funds from one end point of the channel to the other and perhaps back again in the opposite direction these commitment transactions however can potentially be can be used to cheat and there is a specific scenario where if one of the two parties in the channel is not online and remains offline for an extended period of time two to three days for example the other party in the channel can take a prior revoked commitment transaction and broadcast the prior state so let's say for example I have a payment channel with Alice and my payment channel shows one bitcoin on my side zero bitcoin on Alice's side and then half a bitcoin on my side half a bitcoin on Alice's side because I sent half a bitcoin to Alice and then a quarter of a bitcoin on my side three quarters of a bitcoin on Alice's side because I sent Alice another quarter of a bitcoin now obviously now we have three different states in that channel the first state where I had a whole bitcoin the second state where I had half a bitcoin and the third state where I have only a quarter of a bitcoin and Alice has three quarters of a bitcoin now if Alice went offline and I then broadcast the commitment transaction from when I had one bitcoin effectively I'm undoing the last two payments Alice has an immediate recourse in that in the process of revoking that previous commitment I gave Alice a revocation key and that revocation key allows Alice to punish me and to punish me so that if I try to broadcast a prior state in which my side of the channel had more balance Alice can use the revocation key to take the entire balance of the channel and burn it basically burn down the channel and take all of the money for herself and I lose whatever balance I may have had in the channel so even in the last state that we publish the correct last commitment I still had a quarter of a bitcoin on my hand if I try to cheat however I'm going to get zero bitcoin so if I try to get more than what I actually have on my side of the channel I get penalized by losing all of the bitcoin in the channel and Alice gets rewarded by taking all of the bitcoin in the channel that's a penalty now here's the problem if Alice is offline and I broadcast a prior state she only has a certain amount of time to take the payment using the revocation key because there are time locks within the commitment transaction and the time locks give Alice an opportunity to use the penalty and take all of the money from the channel and force me to wait before that commitment is actually in my favor but if Alice is offline she can't execute that penalty and what watch hours do is they allow a third party to act on behalf of Alice in order to protect the channel integrity a watch tower basically receives a hash that tells if you see a commitment transaction that corresponds to spending of this UTXO then here's the revocation key that you can use to execute the penalty on behalf of Alice and what the watch tower does is it's there and watches blockchain on behalf of many customers and it looks for any prior commitments broadcasts for those channels and then executes the corresponding penalties if someone tries to commit a prior commitment. There are a couple of mechanisms that can be used to increase the privacy if you simply tell the watch tower the current state of the channel and you give it a commitment transaction and a penalty transaction and you give it the channel endpoint then the watch tower not only can act on your behalf to execute the penalty but it also has a lot more information about the channel than you might want to have public when you've created a funding transaction for a channel the channel itself is invisible all you see on the blockchain is a multi-sig address which basically is a p2sh page script hash 3 address for example that hides a lightning funding transaction multi-sig channel so sorry the funding transaction of the channel which is a multi-sig transaction so you can't really tell that that's a lightning transaction you can't tell what's a channel you can't tell who the participants are all of that information is invisible to the world from the blockchain but the watch tower would have more information and that can create some privacy problems there are some mechanisms that can be used to hide from the watch tower the details of the channel and provide them with the information they need to execute a penalty transaction but in such a way that they can't actually see that information until they execute the penalty transaction so you can actually balance these things in fact in future versions of payment channels this entire mechanism is unnecessary the next generation of payment channels are likely to be based on a protocol called L2 ELTOO and L2 is a channel construction mechanism that uses a sig hash no input construction that hasn't yet been implemented in the bitcoin consensus rules but if that opcode was implemented and L2 channels became possible in an L2 channel a prior commitment is revoked in such a way that there is no need to do this game theory penalty mechanism because it simply cannot be broadcast and as a result with L2 channels all of the need for watch towers and watching online to ensure you can enforce penalties and the possibility of cheating by broadcasting a prior state all of that goes away we are going to see several more iterations of how payment channels work in lightning all right that was a technical answer oh that's a good quote yes someone on the chat said did anyone notice the elephant in the room yes my family are not currently competing from network bandwidth they have all been instructed not to watch any streaming videos or anything like that during the time of this live stream we're just still having some adjustment problems and i'm going to make the necessary improvements so our next live streams are a bit smoother than this one i apologize for the quality issues all right i hope everyone's having fun we've got 550 people on the live stream we'll go straight to the next question and the next question is about iot david asked can iot and blockchain work together i've seen several proposals to use blockchain to register internet of things devices or generated data but my conflict here is that how can anyone ensure the iot data won't be corrupted and saved in an immutable database forever what are your thoughts on overcoming these challenges to use iot input for future smart contracts that's a great question and i have a lot of skepticism when it comes to mixing extrinsic items things like internet of things devices sensors etc with blockchain consensus rules this is a problem known more broadly as the oracle problem it's how you bridge real world data into an open blockchain the problem you have is that where a traditional construction of a blockchain where you're dealing with consensus rules and you're dealing with intrinsic assets such as bitcoin that are stored and regulated entirely by the consensus rules in that case where bitcoin doesn't exist outside of the consensus rules and where that enforcement is managed by the consensus rules your only risk is the consensus rules as long as the network operates as long as the miners are incentivized to behave honestly as long as all of those parameters of the consensus mechanism are operating correctly that's your risk so you don't have counter party risk third party risk other than in the implementation of the consensus rules and how well that security model is working when you have an external asset whether that's a stablecoin that's backed by some other asset whether it's a mechanism that is providing information such as the exchange rate of a cryptocurrency with fiat markets through an oracle or an insurance smart contract that is examining the weather in Oklahoma in order to make payouts for tornadoes or crop damage due to frost or whatever and you're feeding information if you're taking information from sensors and you're trying to make smart contracts decisions based on that sensor information all of that is outside of the consensus rules there are a number of suggested mechanisms to provide some certainty in the way oracles operate the solving the oracle problem one of those ways is for oracles themselves to be decentralized mechanisms that either use proof of stake or proof of work or some other consensus mechanism in order to arrive at a decentralized but consensus determined answer meaning that let's say for example you're looking at an iot sensor that's checking temperature what if you take a thousand iot sensors from the area take the average temperature and require every sensor to commit some kind of stake or do some kind of work in order to bet on the outcome of the temperature and all of those sensors that are within a range from the average essentially are considered correct and they win a reward and any sensors that are reporting temperatures outside of the average are considered incorrect and lose something so effectively what we're talking about here is the mechanisms to solve the oracle problem is to add a consensus mechanism to the oracle decentralize that and then essentially use the same kind of game theoretic security that you have now it's very difficult to do that with iot and it's very difficult to do it with many of the other types of oracles and we've seen examples where failure of an oracle leads to a cascade failure within the smart contracts that it supports more most recently during the the 55% drop in the exchange rate of ethereum and as ether dropped and the oracles choked in the various defy products we saw the stability of some of those products be threatened temporarily now the great news is that they survived with minimal losses and lived to fight another day but what we saw was a real life test of the oracle problem among other things and it's a hard problem to solve i am very skeptical of iot blockchains i'm very skeptical of logistic supply chain blockchains i'm very skeptical of any blockchains that are trying to track things that exist in the real world whether consensus rules do not apply and then trying to manage that risk through regulations oversight of authority attestation and there's other mechanisms of authority that are not based on decentralized consensus algorithms effectively they require you to trust somebody trust the government that issued the real estate deeds trust the company that makes the censor trust the environment in which the censor is built etc etc they're not solving the fundamental business time generals problem they're not solving the problem of not being able to trust in a decentralized environment to multiple sources of information that may be lying so unless you solve that somehow you're not really making use of a blockchain for the reason a blockchain was built all right here's a controversial one this one's going to be fun in the consensus category alberto asks what would be in your opinion the best way to activate a soft fork recently mad corral will reopen the discussion on the developer mailing list about what would be the best way to it to activate a soft fork can you explain differences between bip eight bip nine and more recent proposals my activated user activated etc i would really like to know your view on this topic both technical and opinion alberto so it's really funny because over the past i guess six to eight months we've had an ongoing discussion about the development of some important changes that are coming to the bitcoin system in the form of three proposals that work together uh called schnoar taproot and tap script these have now been formalized as bitcoin improvement proposals and uh schnoar signatures which have a number of very very interesting um qualities and capabilities that you can't do with e c d s e signatures taproot uh which allows you to have um a common execution path in a script for the consensus case in a multi-party um script execution and finally uh tap script which is a number of changes to script including the implementation of um merkel uh merkelized abstract syntax trees or mast uh basically what this means is that the script language in bitcoin is going to um change with these proposals and there will be an optional new way of constructing scripts in bitcoin uh which will involve making trees of scripts where each of the leaves in a tree is a different script execution path and then selecting those using merkel uh merkel tree paths um in addition having uh one of those uh scripts being the case where everybody agrees which can make all of these scripts appear like a single payment to a single public key so that all kinds of different exotic scripts and smart contracts that operate from lightning network to coin joins to other things like that can appear to an external observer as simply a single payment to a single public key with a single signature and of course schnoar signatures that have these um magic capability being able to aggregate uh signatures adapter signatures as they're known um and threshold signatures in order to uh get all of these neat tricks for the past eight months this has been uh nearing finalization it's gone through several rounds of reviews and the funny thing is that until about a month and a half ago no one talked about the elephant in the room and the elephant in the room in this case is how are we going to activate this change given the experience of segwit um and the experience of segwit was uh a holy uh scaling war that broke out um over uh a technical change that shouldn't have been controversial from a technology perspective but became instantly controversial because it turned into a political decision not about which scaling mechanism should be used more importantly about who should have the power to make that decision um and once it went down that road and it became about who should have the power to make that decision the the technical change itself became heavily politicized and turned out uh into an all-out competition between uh miners developers exchanges etc etc very very controversial bit of a mess a mess that uh that lasted for a couple of years and led to a couple of forks of bitcoin so until recently nobody really wanted to talk about how do we make the activation of a soft fork like the schnoar taproot tap script set um in a way that uh works a bit better now schnoar tap roots and tap script are soft forks that means that they are backwards compatible opt-in changes after these things are introduced you can still continue to do transactions the old way um without uh changing any other behavior uh you don't need to upgrade wallets you don't need to upgrade clients um and there will be no uh radical change for the miners with a hard fork it's a it's a backwards compatible opt-in uh feature in the past there have been a number of ways to activate this uh bip nine is the mechanism pardon me bip nine is mechanism that was used for segwit activation was introduced for segwit activation and bip nine is a mechanism where miners signal their readiness for activation by changing some bits in the version field of each block in order to signal readiness now once a specific threshold has been achieved 95 percent of all of the blocks in a sequence of blocks a rolling window that looks backwards at the most recent x number of blocks once a certain percentage of those blocks are all signaling readiness then the change is locked in and is activated subsequently a few blocks later that's basically the plan for bip nine of course what happened with bip nine is that uh for almost a year and a half um there was a battle about that signaling and um the threshold barely moved until um until the bitcoin cash hard fork um and uh at that point on august 1st 2017 um segwit was activated bip eight uh as far as i remember is a so-called flag day activation meaning that a specific date is set and um at a specific height in the blockchain um the feature is activated other mechanisms that have been suggested there's obviously minor activation where miners can simply turn on the feature and start um accepting it and not rejecting blocks that have this new script mechanism in them um user activation uh where users can start uh configuring their nodes to accept this and then there's various variations of minor user activation that involve different degrees of hostility towards uh transactions and blocks that do not accept this change for example a user activated soft fork might also include rules where any block that isn't uh accepting transactions like this or isn't signaling readiness is not propagated by the users and of course that doesn't mean that block won't get mined and it won't get propagated um it might uh but it's certainly going to slow things down if users configure their nodes to not propagate touch blocks miners can also do that miners can uh create a kind of embargo on blocks where they say we will only accept blocks that that have that feature or we will only accept blocks that don't have that feature and refuse to mine on top of reject or block uh a blocks that don't have that again that's a level of um kind of hostility that may backfire very very badly for both users and miners because um then it creates a divergent consensus two different perspectives on consensus it can cause a hard fork in the network um it can cause a hard fork off the blockchain uh it can cause all kinds of forks in all kinds of places as well as a lot of drama and animosity uh Matt's current suggestion is to use a mechanism that allows for a long period of activation um and um followed by a flag day so basically it's kind of a hybrid uh if i remember correctly and i don't want to mischaracterize it but the basic idea is that miners given the opportunity to signal readiness and uh regardless after a period of time if there is no red readiness signaled then the soft fork uh is activated regardless uh so that's kind of a hybrid of the two approaches which seems to be a position that more people are comfortable with um some people are worried that this timeline is too long uh so it could take two to four years for this to to activate um and um as as is the case in many bitcoin developments there is an element of conservatism in the deployment of such changes so as not to disrupt the system uh so we'll see how it plays out uh i don't think any agreement has been reached yet it's still in discussion and uh we'll see how it goes all right so that's one hour down we have five hundred and fifteen people currently watching the live stream and are you having fun on the chat uh i'm going to check in on the chat very briefly um let's see how things are going here very good i'd like to point out the the chat currently shows a woeful woeful um lack of emojis um so please fix that uh whatever you were going to say can be said better with five or six emojis per sentence uh so please fix that we want this chat to be very very emojiful um excellence i hope you're having fun let's keep going the next question comes from george about privacy deterministic links hindrance what do you think of the website kycp.org short for know your coin privacy basically a chain analysis tool also what are deterministic links among transactions what have they created and what do they imply for privacy do you think that more tools like kycp.org should be developed is there any resource you'd recommend uh to learn more about chain analysis and privacy heuristics um there there's a lot of competing documentation about chain analysis and privacy heuristics i'm not sure i can recommend to any specific one i'm not that familiar with kycp.org i have seen other chain analytical um uh block explorers out there one that i use quite often is oxt i believe the url is oxt.me and oxt also gives you a score about the privacy and linkability of the utxos uh created in a transaction so again another tool that shows you some chain analysis perspective i think these tools are really important um the the bottom line is that chain analysis surveillance uh companies um intelligence agencies law enforcement agencies etc are all using uh and implementing and developing these tools and spying on blockchains all the time all of the agencies all of the law enforcement organizations and many of these private uh chain analysis surveillance companies are doing that on many blockchains simultaneously and they're developing the state of the art um this is an arms race so if you are better informed about the privacy of your own transactions you can make better choices in the future you can also see how your wallet is working so um almost all of this is determined by the wallet a wallet constructs a transaction and when constructing a transaction it can do things to improve privacy but it can also do things that really mess privacy up some of these things are called coin selection algorithms uh for example when a wallet is constructing a transaction it has the option to choose from various um UTXO on spend transaction outputs or coins that your wallet controls your balance which is shown by the wallet is is is not actually a real thing it's something your wallet constructs by simply adding up all of the little chunks or coins that it controls through different private keys now when constructing a transaction it has to select a series of coins that add up to the amount that you want to pay plus a bit um and cover fees and it can do that either by getting a bigger coin and breaking it up and getting some change or it can do it by aggregating several smaller coins and again possibly creating some change in in those selection um those selection algorithms are a very very big factor for privacy so if you link together coins that previously had no relation to each other as inputs in a transaction you are signaling to the world is most likely that both of those coins were controlled or the private keys were controlled by a single entity if that transaction doesn't look like a coin join um and and there are certain nuances to that too it will look like a single entity and therefore chain analysis companies can go back and look at the whole chain of transactions up to those coins and assume that those transactions were also controlled by a single entity so you're creating statistical correlation between your input coins well let's leave a whole bunch of other hints in the transactions they create there are so many little things that can be tweaked in the transaction um so from from things that are very obvious like um how inputs and outputs are selected how outputs are ordered uh what types of addresses are used in inputs outputs for example um if a wallet um is using three addresses um for its change and then allows you to send to a native seguit address for your payment um that's going to be very obvious on the blockchain you're going to see all of your inputs coming from three addresses uh one of your outputs going to a three address and one of your outputs going to a native seguit address anybody looking at that will know that your wallet controls um and uses addresses of the three address type only and therefore will conclude that the native seguit address is the actual payment and the other output is change um that's a pretty big flag there so some wallets can actually use multiple different um address formats and uh can therefore blur these distinctions they can use various tricks about how you order outputs so the outputs are not always ordered in the same way there's a specific mechanism called deterministic ordering of outputs where they're ordered essentially alphabetically um by the by the address of the output so that the change output ends up wherever it ends up randomly selected by its address um you could also um leave your wallet and also leave other hints like for example whether it uses and lock time to prevent fee sniping and how it sets that and various other little breadcrumbs all of these things add up to a fingerprint that can tell people what wallet you're using and also then help them associate other transactions you're making based on identifying what wallet you're using and wouldn't it be useful to know these things to know that your wallet is leaving these breadcrumbs to see how different wallets are constructing transactions um and then choose a wallet that protects your privacy better uh i think that's why these types of of blockchain explorers that give you privacy analytics and chain analysis information are very useful for individuals all right so um let's uh let's spend the next few minutes just answering questions in the in the chat um this is a special and different uh q and a stream today and normally i will not just answer questions in the chat uh that's a perk you get by uh supporting me with a monthly subscription on patreon that's uh what funds this entire educational mission i would encourage you if you can to support me um even even a one dollar a month uh subscription it gives me some certainty uh and predictability in my ability to support my staff and so that helps me continue my mission and build my mission um but for today let's take some questions from the chat and see what people want to talk about all right this is the part where you see me putting on my reading glasses let's see okay by the way uh we're going to have a bitcoin emoji added to the chat room soon that's going to be one of the little perks of being a youtube member um so we're going to add some additional emojis so you can really really express yourself um SR7 asks how does bitcoin come into existence after creating a block um so bitcoin it comes into existence because every block must have at least one transaction that transaction is called the coin-based transaction it is the first transaction in a block and within that transaction um there is an amount of bitcoin that is created from nothing issued for the first time uh through the mining process at the moment that is 12 and a half bitcoin at least in the coin-based transaction you can look at that on a block explorer you'll see that some blocks um have exactly 12.5 with a single coin-based transaction most blocks have more than 12.5 because that amount includes also the fees from all of the transactions that are in block who writes that transaction the miners write that transaction they write it to themselves but it only becomes real if they are able to find proof of work for their block uh validate it and broadcast it win the competition and have it recorded in everybody's copy blockchain there is a rule in consensus rules that says they cannot spend that money even though there is a transaction that sends it to their own wallet address uh or in the case of a mining pool pool address um it cannot be spent for 100 blocks 100 blocks after that block has been mined the miner can spend it by making another transaction just like a normal bitcoin transaction that um spends as its input the output created in that block which includes the 12.5 bitcoin in block subsidy as well as the transaction fees and spend it to buy something nice uh which in the case of a miner really is another megawatt of electricity they don't get to buy something nice but still it's a thought that counts all right uh let me scroll okay too many questions slow down there everyone um let's see Amsterdam Holland asks Algorand claims to have solved the blockchain trilemma problem what is your thoughts on that um proof is in the pudding uh if they have solved the blockchain trilemma problem uh then they will be able to build uh a blockchain that scales and is secure and is decentralized um all at once great um that sounds fantastic I don't believe it until I see it at large scale everybody can write a paper and make claims the difficulty comes when your system is under attack and trying to survive phantom asks what is the best crypto wallet um that answer changes for me every three months honestly um if you look at my uh smartphone and the little group I have for crypto it is now three pages of apps I think it's a four by maybe like a four by four square so it's 16 um applications per page and three pages so yeah that's a lot of apps uh so almost 50 different uh crypto wallets that I use try evaluate at different times some of them I use more regularly than others I am a fan of some mobile smartphone wallets but I won't give them endorsements because that's a very very dangerous um type of action and and quite honestly it would be irresponsible for me to do that what I would say is that you should evaluate the wallet on multiple different axes depending on your particular needs it depends on how technical you are whether you're looking for ease of use or you're looking for advanced features whether you're really concerned about privacy or uh rapid transactions maybe you want something that has a bit of lightning uh or is exclusively a lightning wallet you probably care about whether the wallet is custodial or not or whether you have control over your keys you probably care about um whether the company that makes the wallet respects your privacy uh or whether they require you to do some kind of KYC identity verification all of those factors should go into choosing a wallet um I think uh smartphone is probably the most secure operating system and platforms you have a properly updated smartphone is highly secure and so for small amounts petty cash amounts that you might carry the same amount of money you might carry as cash in your wallet when you're walking around your city I would use a smartphone mobile wallet for that um and then beyond that uh for cold storage and larger amounts um I would most certainly use hardware wallet uh again the choices of hardware wallets there are many different choices um pick the one that works for your scenario but the bottom line is that any of the hardware wallets is better than no hardware wallet and so if you don't currently have one and you are storing uh an amount of money that is several times more than the cost of a hardware wallet you should buy a hardware wallet and at that point buy the one that you can get delivered directly from the manufacturer relatively quickly and start using it and move your funds into that asks what do you think about keeping a chunk of cash in a die savings account I am loving it right now um I have actually used uh both the borrowing and the savings part of the make a dial platform so I have created a collateralized uh volt a collateralized that position um where I collateralize ether and then um generates uh die uh that I can spend and um I did that actually after the price collapse of of ether because first of all um that gave us a very good view of exactly the risks that exist in the maker dial die platform and how it can lead to some bad outcomes if there's a very very rapid uh decline in price but at the same time because after the very very rapid decline in price the probability of an equally large and rapid decline in price just went down um now that may not be strictly statistically true uh it's a bit like uh the joke where they say how do you know there's not a bomb on your plane uh well I brought one with me knowing that the chances of there being two bombs on the plane are very very low um not true those are not correlated events but in the case of drops in cryptocurrency they are correlated events so um I did actually um use a make a dial system and I I played with it over the past uh year and a half and I think it's very interesting um using it as a savings vehicle where you uh invest uh die and then get a return on your investment through the savings rate that's a very interesting use of decentralized finance but and and this is critical these are very very risky and experimental platforms so um I would only do it with an amount of money I am absolutely comfortable stacking up on the middle of this table here and setting on fire without crying um that's that's the kind of investment I would make in highly experimental platforms by the way most people are investing far too much at the moment on highly experimental platforms like that and that's their prerogative um to be reckless but um it's it still is quite dangerous all right let me do a couple more ducky ducky dango will bitcoin be implementing privacy features similar to the ones in monero um ducky ducky dango I I wish bitcoin had war privacy features um but I don't think bitcoin will be implementing privacy features similar to monero and and the reason is because the structure of bitcoin doesn't allow us to do um easily at least things like ring signatures and stealth addresses and also uh because the introduction of privacy features in bitcoin will generate an enormous amount of controversy um I think the most likely privacy features we're going to see soon are the introduction of schnore tap root and tap script which opened the door for a lot of privacy improvements but they still do not involve zero knowledge proofs or the types of ring signatures and stealth addresses um that are are done in monero bitcoin is not a privacy coin and that's uh a bit disappointing and it's one of its downsides uh but it is the truth I would like to see stronger privacy in bitcoin I would expect there'll be a lot of pushback by regulated exchanges as they will find that a very very hard pill to swallow as it will put them in much more direct conflict with their regulators um but nevertheless I think that is a battle worth fighting right let's see if we get some more questions um you're going to ask Andreas do you have plans to come to holland in the future um just so you know I have no plans to travel uh probably until the end of the year at this point things have gotten very very difficult and uh that really really hurts I very much enjoy doing live events I very much enjoy coming to community meetups I very much enjoy interacting with all of the people who share my enthusiasm for bitcoin and open blockchain um and it's it's really tough to not be able to do live events but it would also be really irresponsible to do a live event or even support a live event that is happening um anytime in the near future so at the moment no um maybe next year I I hope I then we're out of quarantine and we can start going to more live events in which case I would ask that you all wear your masks while sitting in the audience thank you uh george fukarakis asks what is the best programming language to start if you want to start with lightning network um you know george there that answer is actually pretty flexible because um lightning network nodes have now been implemented in a number of different languages the two most prominent are lnd by the lightning labs uh company which uh is implemented in go go is language created by google it's um i've recently played a bit with go i did some very very minor um poor quests for lnd um it's a fairly easy language to learn and it keeps you rather disciplined and is easy to collaborate with so that's one language you could learn um similarly uh sea lightning is written in sea and is uh which is a very robust language but is also a fairly low level language low level meaning closer to um the hardware on your computer which makes it very efficient but also uh a bit unforgiving when it comes to certain types of bugs however this is where it gets really interesting sea lightning has a series of plug-in capabilities that allow you to plug in directly to both the processing pipeline of the peer-to-peer network as well as the event driven engine um that allows you to um to process messages um as they're going through the state machine and react to events on the lightning network the plugins can be written in python um and that makes it very very easy um to jump in with uh with a language like python which is one of my favorite languages and probably the one i'm most comfortable with uh so there are some suggestions there um you could start with writing some uh plugins for the sea lightning um system in python or you could learn a bit of go and read the source code of lnd okay philix asks and this will follow up to my some of the first questions we had maybe a good point to end it on um btc mining costs could could btc mining costs never be a reason for existential btc problems uh btc mining costs cannot be in my opinion uh existential problems for bitcoin because um the the cause of mining is only one aspect of it profit is determined by the cost and income of mining which is determined by the difficulty which is determined by a dynamic algorithm this is a dynamically adjusting market which means that miners should always be just marginally profitable in this system um if they get too profitable it attracts new miners who make it more difficult and therefore less profitable if they're not profitable enough then some of the miners the least profitable miners drop out and then it makes them more profitable for the ones who remain this dynamic adjustment every two weeks uh creates an environment in which miners should always be some miners the most efficient miners should be profitable sometimes very profitable um the medium efficient miners are barely profitable and the least efficient miners are unprofitable this is always the case and the rankings of profitability change and miners are constantly upgrading equipment changing their operations getting new contracts for energy etc etc etc profitability is not an issue in mining there are other issues that could be dangerous to bitcoin for example one issue that um was brought to my attention is if we see a rapid decline in the bitcoin hash rate um because you know half of the bitcoin miners turn off their equipment yes the difficulty will adjust and yes um the profitability of the remaining miners will adjust but now we have about half of the hash rate sitting in the sidelines um that is not being operated that could be used to mount a 51 percent attack on bitcoin once it's more profitable yes that is uh a risk it's not a very big risk because if your mining equipment uh was unprofitable and then became profitable the best thing you can do uh as always is turn it on start mining and earn some reward attacking the network is very risky and has a very high chance of failure and that failure is catastrophic economically that's how game theory works but that is a risk um it's also a risk that we might see very slow block times so if the drop in hash rate is so sudden and so deep that we lose let's say 50 percent of the hash rate over a few days then um we would end up in a scenario where it would take 20 minutes per block and the difficulty retargeting instead of happening on average in one week it would happen in on average two to three weeks so we would have a two to three week period where block confirmations would be on average 20 minutes instead of 10 does that kill bitcoin no uh it's simply um creates an environment in which blocks are slow and confirmations are even slower than they are now um that creates a really nice incentive for lightning actually uh but it doesn't kill bitcoin and it's something that will dynamically adjust within a period of time i don't believe in this death spiral theory that declining hash rate leads to long block times which lead to declining hash rate which leads to long block times etc etc there have been plenty of opportunities for that to occur there are plenty of countermeasures that may take and if such a thing occurs so i'm not worried about that in general i think not much is going to happen during the having but nobody can predict the future um i certainly think that uh one of the things we've seen consistently is that if and when bitcoin survives each and every crisis it strengthens the narrative of bitcoin as being something that survives and the same thing happens in all other open block chains that manage to survive a temporary crisis i think that's uh everything we had time for today thank you so much for attending this uh live stream um thank you for coming to my first public live stream q and a but i promise you this is not my last we're going to be doing one of these at least once a month uh if you want to ask questions for the live stream um then unfortunately you do have to be a monthly subscriber on patreon you can find me on patreon.com slash a and an app um and then you can participate in asking questions voting for best questions commenting on questions in general participate in all of the behind the scenes crazy activity that is this mission of educating the world about bitcoin and open blockchain in as many languages in as many countries as possible for as many people as possible thank you so much for attending don't forget to subscribe to this channel and turn on notifications we're going to be publishing a lot of videos over the next couple of months we're going to give you plenty plenty of things to do while stuck in quarantine uh take care of yourselves take care of your families take care of your communities um stay safe and i will see you soon thank you so much for coming today