During the meetup in Milan organized by Blockchain Education Network, The Cryptonomist interviewed the guest of honour, the author of the famous book “The Bitcoin Standard”, Saifedean Ammous.
Do you think that Bitcoin should offer more privacy in transactions?
I think the issue of privacy is misconstrued. People think of it as if it’s just like an app you install and then everything you do is private, and it’s as if with bitcoin you can invent this new technology that is going to make all transactions private. I think just like with privacy on the web, there’s no magic pill, there’s no magic technology that’s going to make something fully private.
In reality, privacy is an adversarial game and so you’re not up against a technology, you’re not up against physical stuff that you can manipulate to hide, you’re up against somebody else using the technology.
Therefore, there’s never going to be a final solution to this problem, there’s never going to be a technical solution where you click a button and then everything you do online is not detectable. It’s always a matter of how well you hide your tracks and how well other people are looking.
And so in this regard, Bitcoin’s privacy depends on who’s trying to hide and who’s trying to find the information, and so I don’t think it’s fair to say that Bitcoin needs more privacy or Bitcoin need privacy to succeed, because the privacy is ultimately not going to be possible by default, you have to take steps to hide your tracks if you want to use Bitcoin privately.
And that’s always going to be an adversarial game, that’s always going to depend upon who’s looking and what technologies they can employ. Having said that, I think it might well be the case in the future that user privacy on bitcoin is going to come on 2nd layer solutions rather than on the mainchain, because, although it seems that ultimately we may not like it, there’s a bit of a trade-off between the auditability of the supply and full privacy.
Reason why altcoins that use technologies that are more suitable for privacy, compromise on their supply being auditable, so you never really know how much the supply is because you’re trying to include all those things that create some kind of privacy, and I don’t think that on-chain bitcoin can sacrifice its auditability.
Moreover, I think it’s worth keeping in mind that over time we’ll likely going to see bitcoin transaction fees rise significantly and so the more that these transaction fees rise for on-chain transactions, effectively the more traceable the transactions will be, because then we’re not going to have small value transactions, we’re going to have ever larger value transactions and these will be easier to track down.
So it might be that our best bet for privacy is to keep the mainchain auditable and bring in all levels of privacy on second-layer solutions like Lightning.
Do you think that governments will regulate Bitcoin, and if yes, how? Are they going to be strict?
I think governments will impose regulations on their citizens using bitcoin. I think there’s a distinction here because in terms of regulating bitcoin itself, their best bet is to introduce BIPs and to hope that node operators adopt them, because there’s no other way of regulating Bitcoin.
You can’t pass a law that changes Bitcoin because node operators have to adopt your code to change bitcoin, but you can pass laws on how people in your jurisdiction can use bitcoin, and we think we might be seeing things like that, in terms of taxation, in terms of declaration.
I think that we’ll see more and more of governments imposing rules on their own citizens and how they use bitcoin, but I think it’s not likely to be very effective because it is not very difficult getting around these regulations with Bitcoin, since it is not physical, which means you can travel and do whatever you want outside of your jurisdiction.
I think it’s going to be a very tricky legal area for governments to try and clamp down on bitcoin with the law. I also think the cat is out of the bag and it’s probably too late for a full-on totalitarian clamp down on Bitcoin,
I may be wrong, I may be overly optimistic, but I think Bitcoin has reached a critical mass and level of growth where I can’t see it criminalized like drugs in a sense of “if you use bitcoin, or if somebody you know uses bitcoin, they go to jail and they’re locked up“, I think it’s probably a little bit too late for that.
What was your goal when writing The Bitcoin Standard?
To be honest, initially the goal was purely professional. I was a university professor, I needed to publish and I realized this is one thing that I was very interested in and I should be writing more and more about it, that was part of the motivation.
Another motivation was that I needed to write to explain to my friends because I was always being asked by people about bitcoin and I always had these opinions that I was writing out in emails and on Twitter and on Facebook, and I thought “I need to put them in one place together”. Part of it was also writing for my children, my daughter was born and I wanted to write something for her that she could read to figure out what her dad thinks about the world.
With Ethereum also switching to Proof of Stake (PoS), what are the benefits of using Proof of Work (PoS), especially considering the heavy consumption of energy?
Ethereum is completely insignificant essentially in what it does. It’s a centralized database, so it doesn’t really matter what they do. PoS is no different from anything that we have already, the central banking system that we have all over the world is a PoS system!
So, for example, the US central bank is owned by its constituent banks and so that’s essentially what a PoS system is. PoS doesn’t add anything because ultimately in that system you’re dependant on the people who own the banks, who decide the rule for the banking system, so it’s a completely trust-based model and I think the only way that a PoS system can work is if it has violent armies enforcing its acceptance, and so this is why central banks cannot compete on the free market, where people would rather use hard money, that is hard to produce, rather than money that is easy to produce for people who are insiders, which is what central bank money, which is what PoS money is.
I think PoS currencies are just a flash in the pan and they’re interesting to people because they’re speculating on this idea that we can have the benefits of PoW without burning the electricity, but I think it’s a ridiculous misunderstanding of how PoW works.
Ultimately in PoW, all the electricity spending is a feature it’s not a bug, it’s not a drawback. We have to have all of that electricity spending because we have to make it expensive to issue new currencies and we have to make it expensive for people to commit new transactions onto the blockchain. If you don’t make it expensive, if you find a way to make it cheap, you’ve defeated the whole point because then anybody can do it.
So the real innovation in PoS is to make it expensive, that’s how the security model works, that’s why Bitcoin has succeeded in working for 10 years and people who talk about PoS as a competitor, completely miss the point. PoS doesn’t compete in any sense: it’s not trustless and it’s not secure, it’s just a bunch of people who decide the rules and there’s no point in having a PoS system, you can just have those people dictate the rules as they want.
Who do you think Satoshi Nakamoto is?
I honestly don’t know and I think it’s about time that people just need to realize that the only reason Bitcoin works is because we don’t know who Satoshi Nakamoto is. If we knew who he was, then it would be just another shitcoin, it would be a project that some person controls and he would be a single point of failure and it would be possible to compromise that project because the head of the project is there.
Bitcoin is far more sensitive than Linux: Linux can have a Linus in charge and Linux can still survive with or without Linus, but I think Bitcoin necessarily has to have no Satoshi or has to have Satoshi’s identity be unknown and I think people just need to come to terms with that.