Bitcoin Debates Spam & Quantum with Matt Corallo

26:47And that's fine. I mean, certainly developers have opinions about which uses of Bitcoin are more or less legitimate. But it doesn't actually work. That miners today actually want their money. They actually want to optimize for returns. And so they're going to accept the transactions that pay the highest fee, or at least some miners will. Maybe some miners are more idealistic, some miners less so. That's fine. but Bitcoin core developers can't decide that anymore. Miners do patch it, do remove these things. And so the net effect of it actually is it harms the miners who are idealistic, the miners who are trying to select transactions in one way or another.

27:27They end up leaving fees on the floor. This is not a good thing for Bitcoin if some miners get paid more per block than other miners. And so it was removed. This one of the last or maybe the only last remaining paternalistic relay rule where developers were saying, no, no, no, this is a bad use of Bitcoin. Don't use it this way. We're not going to allow you to have these transactions relayed by default. Even though they're valid if they get into a block some other way. Right. Even though a miner could totally mine them and some miners were totally mining them. Yeah. And in fact, the fact that they were harder to mine was increasing the fee these miners could charge for it.

28:08Smaller supply.

28:09Alex Thorn:And miners have gotten so much more sophisticated too they can write their own software right i know right a marathon is running slipstream uh like a private mempool where they have all their own tweaks obviously they have to be consensus valid but that is really interesting you know before we go deeper into the controversy that that uh the harmonizing of the relay rules with the consensus rules here with return led to. You wrote the MEVL, the MEVL of relay policy in May 2025. And you were arguing that the restrictive standardness rules push transactions into such proprietary relay channels and that that was bad.

28:49Alex Thorn:Like Slipstream, that was bad for the network overall. What was the high level that could lead to centralization? Yeah. I mean, we've seen this in Ethereum and other chains where MEV has driven incredible centralization in the entities selecting the transactions that go in the block. There's some structural issues. There's a lot of structural differences. Obviously, the types of contracts running on Ethereum are very different than the types of ways people transact on Bitcoin. But the same trends can start to happen on Bitcoin where MEV means that some miners, some pools are making more money and thus miners want to use those pools because they get paid more and this drives centralization very significantly, and that's really bad for the network, obviously.

29:34Bad for censorship resistance, bad for security, bad for all kinds of things. So in any case where some pools are going to make materially more than other pools, that's bad because it can drive the centralization. And in here, by default, if you just naively spin up a pool or you're solo mining or you are just using the default software in any way, all of a sudden you're going to get paid less. And that can drive the centralization where miners select the pools that are writing custom software, doing integrations with people. Because remember, if these transactions don't relay, you have to have some API.

30:13The transactors making these transactions have to select to use your API and not some default something that exists anywhere. And so even if you were to run a pool and say like, oh, I also accept these transactions, you might not get that transaction flow because people might not use your API. So if these grow to a sufficiently large amount of revenue, it's really important that these be available for all pools and not just some pools.

30:38Alex Thorn:Yeah, that makes a lot of sense. And we've seen that explicitly with block builders and flashbots. I guess the theory of public mempool is basically dead now. Yeah, it doesn't exist.

30:52Alex Thorn:Centralization is one reason. and you mentioned censorship resistance. You know, is this like a core long-term belief of Bitcoiners and Bitcoin developers that the public mempool should be preserved and available and also viable? Yeah, I think very much so. I think Bitcoin core developers, at least in my experience, are very worried about long-term viability of the mempool and making sure that the Bitcoin public peer-to-peer mempool is a sustainable way to publish transactions, get them included in the block, and find every reasonably high fee-paying transaction as a miner so that you can just run a node and solo mine.

31:30You don't have to invest a lot of money hiring a bunch of engineers, doing marketing of your mempool API, whatever it is, or paying someone who has a private mempool API and losing some of your profits to them. I think that's seen as a very important feature of Bitcoin that that remains functional.

31:48Alex Thorn:So in service of maintaining that, Bitcoin core developers removed the limit on op return that did not exist at the consensus level, but was, in your words, paternalistically still existing in the core node software. and an alternate, I guess it had already existed, but an alternate node implementation called NOTS, K-N-O-T-S, NOTS, started to gain popularity, I will say. I mean, it's been reported. I don't have a good crawler checking the relay network to see how many nodes, but I've seen estimates as high as 20 % of the nodes currently on Bitcoin are these NOTS nodes. Those NOTS nodes do a couple things, but primarily they reject, they do not relay, op returns that are, I guess, probably beyond 80.

32:36They do a lot more than that. I wouldn't say primarily. They do a lot of different things. Yeah. Well, what else do they do then? I mean, they have a lot of different rules around transaction relays. So they have a bunch of arbitrary, well, I would say arbitrary, but they have a bunch of pattern matching on all kinds of different protocols that I didn't even know existed where they try to pattern match and ban certain classes of transactions. But only... Many of which might very well be legitimate transactions. Some of the patterns are very broad.

33:03Alex Thorn:But at the relay level. At the relay level. So they're saying there's types of transactions we won't relay. They're tightening the relay rules for nots. Does that work if they're only at 20 %? Not at all. It does absolutely nothing. Yeah. So would it work if they were at 95 %? I think what it would do is it would drive these transactions to do private mempools. Yeah. These transactors to use private mempools. It also has some janky things like an auto update feature. I saw that. That's frightening. An expiration. Yeah. Well, why is that frightening? Yeah, I mean, I think auto-update, Bitcoin Core has always taken a very principled stand that auto-update should not be automatic.

33:45Maybe you can tell someone they might consider updating, but it should never be automatic because that would allow the Bitcoin Core developers to set the definition of consensus rules. It has to be if the consensus rules change in an update, it really is very important that people explicitly opt in to those are the new consensus rules I want to follow and not just blindly accept whatever it is.

34:07Alex Thorn:Yeah, it also potentially presents a cybersecurity risk if somehow the Bitcoin core repo or developers themselves, maintainers, were compromised, right? there. So another step beyond knots has emerged as well, which is, but from the same cohort, BIP 110, which proposes a one-year soft fork that would cap outputs at 34 bytes. I guess it's been now a couple months. I was more interested in this debate of like maybe six months ago, and I've sort of forgotten. But my recollection is that they framed this as a temporary measure so we can figure out what's going on. What's your take on BIP-110? I would call it a joke, I guess.

34:50I mean, there's so many issues with it, from the actual list of things they ban is, again, too broad a set, and they end up banning a bunch of legitimate transaction use cases that are just normal, that are financial transactions. Their whole view is, you shouldn't embed data in Bitcoin, you should only use it for financial transactions. I mean, I happen to agree with that. It's just not much I can do to enforce it. And there are a bunch of, their rules limit a number of things. People have pointed to a number of different things that you might want to do that are financial in nature. Locking up coins, having different weird security policies with more custom scripts that are now banned by 1.10.

35:31So, yeah, I mean, first of all, it's absurd to talk, to even engage with, oh, we're going to disable all these different types of scripts that people might very well and in some cases are legitimately using for financial transactions in order to prevent non-financial use cases of Bitcoin. but then more generally the temporary thing is questionable you know they've said some of the proponents of it have talked about how it needs to be more long term and not just temporary but the actual BIP says temporary it's just unclear what the actual intent there is and just generally and I'm sure we'll get into this a lot with quantum the concept of disabling some coins, some coins that exist on chain and having some group decide, even if it's 95 % of Bitcoiners and everyone says, actually, we're going to do a fork and we're going to seize those coins, we're going to disable them so that you can't have those coins, is totally antithetical to the concept of Bitcoin.

36:35I mean, I can't think of anything else more antithetical to the concept of Bitcoin than doing something like that.

36:43Alex Thorn:One of the things I've been very heartened to see is that the open source nature, but also open nature of Bitcoin. It seems the tide on this has receded a bit. It got to a pretty big fever pitch, though, on X online. I think it was just before BIP-110. Because when it was a debate about relay policy, I mean, it's harder to say this is some huge antithetical to Bitcoin thing. You're not seizing coins. It's just my node. It's just my node. Yeah. I mean, I still think there's many issues with it, but it's a little harder to just say, like, no, that's absurd. Once it was BIP-110, once it's like, no, no, no, let's soft work this stuff out.

37:21All of a sudden, there were a number of people who were supportive of much more restrictive relay policy who were like, no, that's too far. That is actually not good for Bitcoin.

37:35Alex Thorn:And it would probably, they've tried to design it as a soft fork, but it would probably result in a chain split, most likely. It was my take back then. So even, yeah, I think that's fair. But also, maybe you're right, right before 110, which was in the fall, I think, if I recall. It did get really heated and personal from some of the knots and Bit.110 supporters online. There were personal attacks on Bitcoin Core developers. And many of these people are, I mean, most of them, well, all of them really are volunteers. Some of them may also be compensated in a job that includes letting them work on Bitcoin Core.

38:14Alex Thorn:How does that affect Bitcoin Core developers? Yeah, I mean, there were a number of allegations of various forms. I think a big one was people just, you know, there's a tendency these days on the Internet, of course, whenever there's a new boogeyman, everyone turns everything into the boogeyman. And so it was the DEI is the current boogeyman. And so it was like, oh, well, Bitcoin Core is clearly making hiring decisions. okay who I mean there's a bunch of different companies who are all competing and apparently all of them are in cahoots to discriminate in hiring decisions and prefer women over men and this is bad I haven't actually ever seen any evidence of this like that I don't know of any Bitcoin development group that has ever hired on anything but qualifications not based on discrimination even if it's It's, you know, DEI loves to, it's a new boogeyman, but also probably you shouldn't discriminate against white men either.

39:16That's also actually bad.

39:18Alex Thorn:Especially something as meritocratic as open source software. But yeah, I've seen no evidence for this, but of course that's the boogeyman. And so now everything is, Bitcoin Core is now all DEI and whatever. And yeah, I mean, it got very vicious for some people who they pointed to and said like, oh, she was hired because DEI. People were nasty. And I think that is bad for Bitcoin. It did cause some people to reconsider whether they want to work on Bitcoin. And I know actually many people who looked at those discussions, not discussions, those attacks, even from well-known Bitcoiners who are personalities and strong supporters of Bitcoin.

40:04And I know a few people who concluded like, you know what? I might still work on Bitcoin, but I have no desire to engage on X anymore. I have no desire to go to Bitcoin conferences. I know some people who skipped Vegas because of this, who said, like, you know, that Bitcoin conference stuff, I'm done with that. I'm going to go focus on building useful stuff and ignore that. And, yeah, some people also reconsidered whether they want to work on Bitcoin. I think that's a massive loss. I mean, it takes at a minimum five years, probably closer to a decade to train someone from knowing nothing about Bitcoin, blockchain, whatever, to useful contributor for Bitcoin.

40:45And, you know, sometimes you can short circuit some of that if they've worked on other blockchain tech, if they actually have some knowledge that is transferable, if they've spent a long time being a hobbyist around it, even if not necessarily a software developer on it. But it takes a long time. And so any loss is a huge setback for the amount of talent we have going into improving the security of Bitcoin.

41:06Alex Thorn:Yeah, and Bitcoin has no pre-mine or foundation to pay for this stuff. So it's not necessarily the most glamorous financial decision to become a Bitcoin core developer, too, and you pile this onto it. No, yeah. I mean, it's improved over history. It's not terrible, but you are still nowhere near going to make the kind of money you'd make working at NVIDIA right now or OpenAI. or, in fact, some other blockchains that have much larger budgets. That's very insightful, Matt. Let's talk about quantum. It's the – I guess I'm going to say it's the topic du jour, but we've been hearing about quantum for so long.

41:43Alex Thorn:I guess – and I'll just set the stage. There have been some academic papers that show primarily on the mathematical and software side significant improvements or reductions and the amount of time it might take to run Shor's algorithm on a quantum machine. I've seen much less by the way yet of proven development of the actual quantum hardware. But I think the Oratomic and Google papers from, I guess now, a couple months ago, I think did increase the temperature, but it had been increasing for a year or two. Sure, it's been a very slow burn. Yeah. But it's one of those things that's like – it's honestly – I remember in Clubhouse, on Clubhouse in 2020.

42:27Alex Thorn:We ran the Bitcoin club, me and some people, and we just do an open Bitcoin meetup every Wednesday night. And like this was just on the docket. Someone would ask about like how do I protect my hardware wallet? And someone would ask about like what about mining centralization? And someone would ask about quantum. And it was so far away then. It feels less far away now but perhaps still quite far away. Yeah. You told Unchained in February that the post-quantum roadmap is two steps. Commitments to a post-quantum public key first, for Bitcoin I should say, and then later decide what to do with the vulnerable coins that aren't in a post-quantum address, right?

43:08Alex Thorn:It's two steps. What are those two steps in your mind? Or what's the state of post-quantum maybe as a start? So, I mean, first of all, and I think there's much less controversy about this, you know, we obviously have to add some kind of post-quantum signature scheme to Bitcoin that people can use today that they can start migrating coins to. there's you know even the people who view quantum as a total pipe dream and it'll never happen it is entirely possible that EC gets broken in some other way or weakened materially in some other way and having more options at least more options that we're more confident in are secure than EC is good and so I think there's some loose agreement on some form of hash based signatures Jonas Nick at Blockstream Research has been doing good research on how to design hash-based signatures a little more targeted at a blockchain environment.

44:07And so we have to form some consensus on, there's been a lot of discussion around address format for it and output format. There's some more conversation to be had there, but we need to get to consensus there and then add that. And that's a standalone thing. once we figure out what color to paint the bike shed, it'll, should, I imagine it'll happen. I don't see a lot of pushback there.

44:33Alex Thorn:We've added other address formats. Address formats, yeah. Cryptography, no. Well, Schnorr, right? Schnorr signatures. Yeah, that's true. Maybe the one? Is that the one? Yeah. It's not new cryptographic assumptions, but nor is hash-based signatures, right? We're not talking about some more esoteric or more novel. And the NIST recommended or – I mean that's probably even too harsh. I don't think they're outright. But the sort of NIST standards for PQ are also super nascent, right? Yeah. And they've run challenges or I don't know what we call them, contests. And many of them have been broken with classical computers, right?

45:13Alex Thorn:Right. So that's the challenge with a new crypto no matter what type, right? Yeah, and so I think that's why you see most, not all, but most blockchain systems looking at hash-based. There's no new assumptions whatsoever. If you assume that SHA-256 is secure for reasonable definitions of secure, then hash-based signatures are easily provably secure. So that's why people are looking more at that than some of the more novel cryptography. um let's i'm gonna table the uh what to do with vulnerable legacy spend paths for a moment um some some critics have said that bitcoin developers are sleepwalking asleep at the wheel not doing enough etc you pushed back on that um from you know maybe not currently actively contributing to bitcoin core but certainly in the bitcoin developer community are are bitcoin devs asleep at the wheel?

46:06Yeah, I would say no. I think obviously Bitcoin development can sometimes be a little opaque, hard to see exactly what people are doing, especially for stuff like this, where the shorter term, you know, the process of a soft fork doesn't necessarily start with a ton of back and forth in public. A lot of it is people having conversations about, well, here's one way we could do it. Here's another way we could do it. Let's discuss that. And some of that, of course, will show up on the mailing list and some of it won't. And so there is, at the same time, there's also, of course, many developers who aren't focused on things, right?

46:44They have other things they're interested in, other features they're working on, and limited time. And so they're not, it's not kind of a, it is never the case that a soft fork is kind of all hands on deck in the sense that literally everyone is working on that one thing. Right. And so it's not necessarily always super clear what's being worked on, but there is a bunch of work being done. I point to Jonas Nick, but also other people at Blockstream Research have similarly put effort in on how to design post-quantum signatures for Bitcoin. There's also local host research just announced a, I guess in Vegas, so a few weeks ago, just announced that they're going to fund a number of cryptographers to work on post-quantum problems that are very specific to a blockchain context.

47:37And then, yeah, I mean, there's a number of conversations in the Bitcoin dev list. I think the Presidio Bitcoin also just released a paper on... Like a live working paper. Yeah, on the state of Bitcoin quantum. And they had a fun chart in there that shows the number of discussions on Bitcoin dev over the years that are quantum related. And it's just like up and to the right.

47:59Alex Thorn:Yeah. Yeah, I've seen a lot of activity. and just as I know it's not actually like post-quantum crypto, but thoughts on BIP360, which would disable a vulnerable spend path and tap root and create a new output type? No, so BIP360 only is a new output type. It then would assume kind of that something like a hash-based signature is added, opcode is added at the same time. But it gives you like a semi-shielded. Yeah, so there's still some non-trivial amount of debate around which address format to use for a hash-based signature. There's big concerns around hash-based signatures get very, very large very easily.

48:47In cases where you have no address reuse, they're not too bad. But that's very rare today. People reuse addresses for all kinds of reasons, security, whitelists, usability. A lot of people are used to address reuse coming from the Ethereum ecosystem or other address-based cryptocurrencies.

49:06Alex Thorn:Or hot wallets at exchanges or businesses. Yeah, sometimes they use a fixed address for their cold wallet so that everyone can see how much they have. There's all kinds of reasons for it, and that's probably not going to change, sadly. And so there's a number of questions around well, depending on how much address reuse exists, should we do VIP 360, which is like a hash-based output type? Should we have some kind of opt-in later seizing paid-to-taproot address? Should we do neither? So I think there's still a non-trivial amount of debate there, but we'll pick something. All right, let's get in a little bit to the Satoshi coins or otherwise vulnerable coins.

49:54Alex Thorn:I moderated a panel with Alex Pruden from Project 11 and Hunter Beast, a BIP360 co-author, both, I would say, proponents of working on quantum and Bitcoin and then also James O 'Byrne and Brandon Black, who are mostly opposed to the idea of working on it even. I was saying in this thread, in recapping my sense from talking to people in Vegas, and to your point, by the way, not that many Bitcoin core developers at that conference. Not as many as in the past that I've seen. So, you know, take my non-scientific sample size with a grain of salt. I was saying that, because even on that panel, both Brandon and James seem to agree that, well, surely we should actually be working on post-quantum crypto, at least on the side, right?

50:42Alex Thorn:I think James made the, both of them made the point that you made, which is that, I mean, for all we know, elliptic curve crypto could become vulnerable for classical reasons at some point. It's always good to be working on better crypto. And that to me, I thought, well, wow, that seems actually like you guys just spent the whole time arguing with each other, but maybe that's something everyone agrees on, that working on post-quantum crypto is a good idea. And then, I mean, I asked the panel, I've spent a lot of time on this, so we can, you've already sort of addressed that. So the The second thing that I said was that, well, on that panel, I said, what do people want to do with Satoshi's coins?

51:19Alex Thorn:Like you can freeze them maybe with some recovery method as yet to be determined in the future. You can burn them or you can do nothing. Or maybe a middle ground, you could do something like hourglass, which would slow their spending to trickle. Everyone, I think, agreed that on that panel and many people I've talked to have come around to the idea of doing nothing. might be the best. I mean, Hourglass, fine. Where do you stand on this? It is binary, but those are not the only implications. Yeah, you said explicitly the problem in response to me. The problem is we can't simply choose freeze or not.

51:55Alex Thorn:Right. So there's a lot more that goes into it, right? So I think first let me step back because I think there's also something that gets lost in conversation here a lot, which is that there are people who are proposing, so like BIP-361, for example, is proposing to disable insecure spend paths, so freeze Satoshi's coins, sooner rather than later. Yeah. So on a fixed schedule, not based on some urgent, imminent, actual, provable, cryptographically relevant quantum computer, but just based on like, well, we think it's going to come soon. The risk of it. Right. Yeah. And I think there has been an understandable response to that of, fuck you.

52:36Alex Thorn:Yeah. And I don't entirely disagree there. I don't think, you know, we were having the conversation earlier that, or I pointed out earlier that disabling coins kind of for any reason is largely antithetical to Bitcoin. And I think that's true and that certainly applies there. However, in the case where it is unambiguous that these coins are going to be stolen. So imagine not even, don't even imagine like a quantum computer is about to be built. I mean, like Google comes out and says, we have a cryptographically relevant quantum computer. Look, here, we've taken some public keys that were, you know, created 50 years ago, and the private keys long since been lost, we factored them, here's the answer.

53:23You know, we've taken these other keys from that other people created, we factored them, we can prove that we have this quantum computer. now what do you do? And I think that's a very different question because now it's not oh, you know, we think a quantum computer is going to happen. It's here. They know how to build it. Other people probably are close to building it too and also the grad student intern who runs the lab at Google the night security guy could now go steal Satoshi's coins. Ignore whether Google the company wants to do it. The night security guard could do it now. There's a vulnerability now.

53:59Now you think of it like a bug. So now it's like these coins are going to be stolen. It's not a, well, you know, are we freezing these coins or not? These coins are going to be stolen. Maybe not today, but certainly in the next few years, unquestionably. And so now the question is, you know, there's this like kind of philosophical property rates question. It's like the Bitcoin. I think people often phrase like Bitcoin is strong property rates. and if you have the key, you have the coins and that's it, full stop. And I think that's true. That's a very important piece of the value of Bitcoin is that no one can take your Bitcoin.

54:38Well, now someone can take your Bitcoin. And so depending on, it's interesting because really depending on how you phrase that property rights question, it's like no one can take your Bitcoin. Well, now someone can take your Bitcoin and so we should freeze the coins and give you the ability to get your Bitcoin back by proving it's your Bitcoin. But if you phrase it as if the keys equals ownership of the coin, then no, we shouldn't freeze your Bitcoin because they also have the keys too. They just, they kind of stole it from you, right? Yeah. So it depends a lot on how you phrase that kind of philosophical definition.

55:07Alex Thorn:Yeah, it does. Would you favor something like in that hypothetical where you, I don't, I forget what they call this, but using this, your BIP39 seed phrase to maybe prove after it's been frozen to prove that actually. So there's a few things. So, right, there's two options, right? Do nothing, let these coins be stolen. We know they'll be stolen eventually at some point. Or, and the other option is not freeze the coins. The other option is do the maximal set of things we can to give the owners of the coins, allow them to retain their coins. And that's a few things, right? It's not just one thing.

55:40It's so BIP32 proofs and BIP39 proofs. So if you have the seed phrase, you can prove that you have it. Or if you have a derivation that uses this hardened derivation path in BIP32, This is basically every wallet that has been built since BIP32, right? So this is, with the exception of some of these kind of large corporates who have very custom designs, they're going to migrate their coins. They're not a problem, right? This is basically every wallet that has been built since BIP32 was written. I don't remember when BIP32 was written, but it was like 2013, 2014.

56:12Alex Thorn:I was going to say, crucially, though, it's after Satoshi's coins. It's after Satoshi's coins. But it's most everyone else's coins. But it's most everyone else's coins. So what do you do for early coins? And so the best you can do is you can allow for pre-commitments, right? So you can say, look, if you, before the quantum computer is built, if you commit in an operatory to a Merkle route that has like, look, no, no, no, this is the public key. I know the private key now before the quantum computer exists. And here's the post-quantum public key I want to use. And you just build a big Merkle tree of all these commitments and you put it in an operatory before the quantum computer is built, then you would be allowed to spend your coins later.

56:52And importantly, this also saves time-locked Bitcoin, right? So if you have time-locked Bitcoin, and I know a lot of people do this for security reasons, right? They might have, oh, I have all my really secure keys with this 10 of 10 multi-sig. And then also if I lose my keys, because I'm probably going to lose some of these keys, I have a time lock for 10 years, and then I'll be able to get my money back and use this insecure key or something. you know so there might be Bitcoin like that there's also Bitcoin for proving commitments like a joint market does this where you have Bitcoin that's time locked potentially for 5 or 10 years and you can't there's no way to migrate to a quantum computer how do you save this Bitcoin what if Satoshi time locked their coins and said I'm going to create a time lock transaction throw away my keys and now I can only spend my coins in 10, 15, 20 years I guess 10 years has already passed, but maybe they re-timelocked it.

57:45Who knows, right? The only way you can fix this is you can say, okay, you can do a TXID commitment. So, like, you could do a public key commitment. You could actually commit to the spending TXID. You could say, this TXID is valid. I know it's not quantum safe, but, like, allow me to spend this transaction. So there's a bunch of things you can do, right, that add up to hopefully allowing the kind of maximal covering set of coin owners to retain their coins in the face of a quantum computer. And I think that those are the two options, right? Either we help as many people as possible retain their coins or we allow them all to be stolen.

58:23It's not we allow them all to be stolen or we freeze them because that was never the – some people want that, but those people are crazy.

58:30Alex Thorn:We could go on and on. I think it's really well articulated there why it's not a binary choice between freeze and don't freeze. Very complicated situation. Right. One of the other points I wanted to make, though, was that – and that I did make. So one of the things I was saying is that the markets routinely absorb a million Bitcoin. I think James Check pointed out that two million BTC – well, two million BTC has moved from old hands to new hands just since October on chain or old addresses to new hands. Yeah. Is that actually – I'm very, very skeptical that that is a change in net position of individuals and companies of 2 million Bitcoin.

59:11It may not be. There are a number of people who have talked about how they sold their Bitcoin to buy MicroStrategy stock or sold their Bitcoin to buy ETF Bitcoin. That is not a change in net position of Bitcoin held, right? That is not something where the market can absorb additional supply.

59:28Alex Thorn:That's a fair point. And I would point out, too, that that fear of not doing anything to Satoshi's coins, I feel like it really emanates from the institutional crowd that I talk with because they're worried about supply overhang. Right. Right. Like with Mt. Gox or Silk Road or the German government or whatever. But I do want to point out that you made, I think, a very compelling different argument about property rights, not just that we shouldn't or that in the case of the quantum cryptographically relevant quantum computer was built, that the reason to seize or freeze or do something with vulnerable coins, your point was not that point.

1:00:02Alex Thorn:Your point was more a different point. Yeah, I, you know, I sympathize. But you also disagree with this point, which I think is great. Yeah, I mean, I sympathize with the people who saw this discussion of like, oh, well, it's bad for the market, so we have to freeze the coins and responded with like, no, that's not, that is not how we make decisions in Bitcoin. Property rights are more important. And this like claim that it's bad for the markets while hurting property rights is worse. And I totally agree with that argument. However, my conclusion was originally driven by property rights, not by the market.

1:00:33And I think the market, I mean, the market is important to analyze because it decides the resolution, right? There's no Bitcoin core doesn't decide. There's no set of developers, no conglomeration that decides. They don't meet in like Dr.

1:00:46Alex Thorn:Evil's lair or something? Sadly not. It would be easier. Yeah. But the market – there will be a chain split around this and the market will decide which one is more valuable. And even if there's not a chain split, there will be a futures market to predict the chain split which will determine whether there's a chain split. And the futures market will determine what the resolution here is. And so it's important to look at the market as part of the process of making the decision. But I totally agree with the people who note that the important part is property rights because the market can and probably – should and probably will value property rights more than just supply overhang.

1:01:26But I think property rights is – maybe you could call it a wash and then the supply overhang does kind of matter. Yeah, and your point being too that although the market should value the property rights more and will, the outcome, the decision may actually be the same as if you solely cared about the market impact versus the property rights. Right.

1:01:46Alex Thorn:We could go on and on about quantum. Very interesting. I want to ask before we wrap about your work at Spiral and while you're not contributing actively to Bitcoin Core today, what you are working on, one of the interesting things I think is so interesting. And this has emerged, and Satoshi, I think, if I recall, speculated about this. Who would develop Bitcoin in the future? And they wrote that, well, hopefully the companies that run Bitcoin will also help develop it. Spiral is probably the most deeply doing so of a, well, certainly of a publicly traded company, which is Block. There are other for-profit companies who do a lot as well.

1:02:29Alex Thorn:You mentioned Blockstream earlier as well. It's very unusual because Block funds it, but Spiral ships open source code for the network. What is the operating model? Who decides what gets worked on? What is the relationship, your relationship with Steve? Or how involved is Jack Dorsey in caring about what Spiral works on? All of that type of stuff about Spiral. How does it work? Yeah, I mean, so we're totally independent. Jack was very clear about that from the beginning. He told all of us very explicitly, like, no, no, no. You decide what you think is good for Bitcoin and build that. I think his goal is maybe more charitable, but I think in practice, a lot of the software we built is actually used by Block internally, as well as used by many others.

1:03:14And we support others as much as we do Block internally, but it is used by Block internally. And ultimately, you know, our goal, our one and only goal is to make Bitcoin better, make Bitcoin usable and used by more people. And the result of that action is that blocks other investments in Bitcoin will grow up hopefully dramatically because of our action. So, you know, I think we do hopefully help the net bottom line of the company, but we are treated totally independently. We decide what to work on and we drive a roadmap around how do we make, I mean, I guess that's now our tagline, right? The company's tagline is now make Bitcoin everyday money.

1:03:52so that's always been our roadmap from day one for six, seven years now but that continues to be our roadmap and I think we're having good success because Block now has looked at Bitcoin and said actually no we should use this more as transacting money Square didn't turn on Bitcoin payments out of the good of their hearts right there they did do an analysis and said actually this might work very well now so we're going to invest the time and resources to build this out and do it And so we think we've had an impact there, and we're hoping to continue having an impact there.

1:04:28Alex Thorn:Yeah, it sounds like a lot like what Satoshi had envisioned, not Satoshi's vision. Because Cash App, BitKey, they got the ASIC miner, and they've got the Square Terminal now. I remember last year at the Bitcoin conference, I don't recall who, maybe was it Michael Rahani that gave the presentation? It might have been about all this data from Cash App's Lightning node. And it was amazing. Probably one of the biggest, if not the biggest, like Lightning routing node. I mean, they're making real money on it. And, you know, I think it is the case that it doesn't scale up, right? They're making a – I forget what the ARR number was, but it was – I mean, they were making like 5 % a year on the Bitcoin and the Lightning node or something.

1:05:14I mean, it was very high. But it also – I mean, it doesn't scale. Not everyone can do that. You can't just add arbitrary amounts of Bitcoin to that node and continue making that percentage. And I can't just spin up a node with a couple channels and make 5 % either. It's very much driven by the fact that Cash App also does a lot of payments and Square now does a lot of payments through those nodes. But they're making real money on it and paying for the teams that develop and maintain those Lightning nodes very easily.

1:05:41Alex Thorn:And it's really quite amazing what they've done. And obviously, like in this – basically this year, they did roll out Bitcoin payments as a default option on the Square Payment Terminals. Which is not New York. Not New York apparently because of the New York Department of Financial Services. Thanks, Lofsky. One day. Yeah, one day. PubKey I think still uses their custom solution that Evan Kalutis and Zeus helped build. So they're self – they're running their own nodes basically. But you could take the ferry to Jersey and copy it with lightning. Yeah. New York will figure that out eventually. I have confidence, I hope.

1:06:13Yeah, well, you're optimistic. Yeah, okay, knock on wood.

1:06:17Alex Thorn:So you started working on a Rust Lightning project in 2018, which is now the Lightning Developer Kit. What is that briefly, and also why a modular SDK and not just a full-blown implementation? I mean, so Lightning, so I started this to learn Rust and Lightning, but then the LDK team kind of looked, or the Spiral team, then Square Crypto, looked around when we were starting and we're like, how can we have the biggest impact on improving Bitcoin? And the thing we concluded was like more lightning. The reality of taking transactions from 10 minutes to instant, under two seconds or whatever you want to call it, improving privacy as a side effect, improving just all of these way better UX, like payments clear and the other side has it.

1:07:04Like, you know, one big issue in crypto generally is like you send a payment and then you have to talk to those. I said, like, did you see it yet? No? Uh-oh. Did you see it yet? Are you sure? Are you seeing it?

1:07:13Alex Thorn:Trading desks like Galaxy do all the time. Right. Oh, it was on a test transaction. Did you see that? Right, yeah. Okay, did see that. It's awful, right? So Lightning, if the sender sees a checkmark, the recipient has already shown the checkmark, guaranteed that's how the protocol works. So there's just so much better UX, better privacy, all these things. And we looked around and we said, how can we have a big impact here? and at the time and kind of even today there was no way to take Lightning and actually run it in a normal wallet. All the software was built around being these big routing nodes for whatever for people who want to run a routing node not for people who just want to pay and receive money and so we said well we can take this we can adapt it, we can make it work super great on mobile which we've done, it took way more years than we thought but we're actually super proud of where it is today and then also it just so happened that when we built out this kind of modular dev kit some enterprises looked at it and said oh yeah that actually adds really important features for us so for example LightSpark uses it to power their Lightning Node product which Coinbase uses Cash App uses it internally with their own custom failover logic it has ended up being very useful for large enterprises enterprises where they actually have an engineering team who wants to work on this specific problem and then also for kind of smaller edge nodes between LightSpark and CacheApp plus a few other integrations we think we power 20 to 30 % of and I'm kind of just throwing out a number but we think we power a fairly large percentage to Lightning transaction volume even if not Lightning routing nodes and so we think we've had a big positive impact there on availability of Lightning in different kinds of setups.

1:08:59Alex Thorn:Non-custodial tools including the LDK which I guess is farther down in the stack from like a front-end Lightning node or wallet, but are key to Bitcoin. You've talked about this, the Save Our Wallets campaign. The Clarity Act is being debated in Congress right now, and it has within it the Blockchain Regulatory Certainty Act, which has protections for non-custodial software developers and also clarifies that they aren't money transmitting when they only release open source software. How important is that to your work at Spiral or Bitcoin developers' work? I think it's critical for Bitcoin, for every blockchain platform.

1:09:46I appreciate the simplicity of the protect open source developers narrative. I don't think that's quite accurate about the most important part. Just writing software and running no services, If you're just publishing software, it is still the case that you have a very strong First Amendment argument in the United States. However, that's not all that you do for modern blockchain tech. There's, you know, for any kind of layer two, there's something being run. There's some server somewhere. This is no longer just publishing software. You can't make that strong First Amendment claim there in the same way.

1:10:24Whether it's Lightning where you have a routing node, whether it's a Layer 2 where you might have some kind of roll-up where you might have roll-up operators, signers, different participants in the network who do tasks, you're not just writing software anymore. There are services. These services aren't necessarily custodial. They don't necessarily have the ability to prevent, slow down, or stop transactions from happening. Maybe they can slow it down a little bit, but they can't stop it. They have no ability to steal the coins. They can't do anything like that. They just exist to kind of grease the wheels.

1:11:02And there were very legitimate, hairy questions. There are very legitimate, hairy questions around the legal status of these. I think in practice, if you just look at what the law was intended for, these shouldn't be regulated as a money service. It doesn't make sense. but the DOJ has stretched those arguments a bit to make these things questionably legal. And this means that basically any kind of layer two in any blockchain system is questionably legal to operate. That's not a good thing. And that really has slowed down the development of Lightning materially. Other ecosystems are maybe a little more willing to take legal risks, But I think in Bitcoin, a lot of companies have not been.

1:11:51And it's really materially slowed down the development of some of these technologies. And so getting a law passed that clarifies, that says, no, no, no, look, if you aren't custodial, if you can't take the money, if you aren't even really, you're not able to stop the transaction, you can't take the money, it's their money, and you're just kind of greasing the wheels a little bit, we're not going to call you a money transmitter, a law that was written on the assumption that you are actually a custodial intermediary for the transaction. that doesn't make sense. We cannot apply this law. We'll figure it out some other time.

1:12:19So it's absolutely critical for the development of any of this stuff.

1:12:24Alex Thorn:All right, last question here, Matt. I read that you started contributing to Bitcoin in 2011 from a bedroom in Germany while you were in high school. It's true. You said it was in 2011 earlier in this interview. Satoshi was still around then. And this is a heretical question. I think I might know the answer, but I'm going to ask you anyway, given the recent documentaries that have been out. who do you think Satoshi is and does it matter? I don't know and it doesn't matter. I really don't know. A lot of the basically all of the new exposés and documentaries they don't present compelling evidence in any way shape or form but yeah I don't think it matters.

1:13:08My best estimate is that the keys were either lost or destroyed deliberately it is almost certainly the case that no one alive has access to the keys or at least knowingly has access to the keys and yeah I figure we should just pin the blame on some dead cryptographers who were actually great people just pin the blame on Hal and it doesn't matter whether there's evidence whatever Hal's great Hal contributed a bunch to Bitcoin even before the software was released it's known probably after the white paper came out but before the software was released, contributed a bunch, contributed a bunch after.

1:13:47Great cypherpunk. Sure, it was hell. Whatever.

1:13:51Alex Thorn:That'd be a great answer, right? It's a clean answer. It's possible. It's a clean answer. Fran clearly doesn't have access to the coins before people start harassing Fran again to try to steal coins from her, but whatever. But yeah, I don't think it matters. I really don't know either. I think it's best if we never find out, i would say too for bitcoin it's one of the truly sci-fi uh like civilization quality sci-fi mysteries that makes bitcoin so unique um the blue mat bitcoin developer at spiral thank you so much for coming on galaxy brains yeah thanks for having me that's it for this week's episode of galaxy brains thank you to our guest matt corallo at the blue mat on twitter and our good friend bim netta bb from galaxy trading everyone have a safe and happy weekend and we will see you next week.

1:14:43Alex Thorn:Thank you for listening to Galaxy Brains, the weekly podcast from Galaxy Research. I'm Alex Thorne, head of firmwide research at Galaxy. Follow me on X at Intangible Coins. Follow Galaxy Research on X at GLXY Research. Read our written reports at galaxy.com slash research. And don't forget, if you like Galaxy Brains, to like and subscribe on your favorite podcast platforms like YouTube, Spotify, Apple Podcasts, and more. We'll see you next time. Thank you.