Nick Szabo on Cypherpunks, Money and Bitcoin

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“Every time somebody gets censored, boom… they become a Bitcoin fan”
— Nick Szabo

SHOW DESCRIPTION

Location: San Francisco
Date: Monday, 21st October
Project: n/a
Role: Blockchain, cryptocurrency, and smart contracts pioneer

On October 31st 2008, Satoshi Nakamoto emailed the cypherpunk mailing list, telling them "I've been working on a new electronic cash system that's fully peer-to-peer, with no trusted third party." In the 11 years that followed Bitcoin has proven to be the most successful attempt at creating a censorship-resistant and trust minimised digital currency.

Bitcoin was not the first attempt at creating a trust minimised currency, and there were several proposals, implementations and technologies which led to Bitcoin:

  • In the 1990's DigiCash, headed by David Chaum, attempted to make online payments anonymous.

  • In 1997 Adam Back created HashCash using a proof-of-work system to reduce email spam and prevent denial of service attacks. 

  • In 1998 Wei Dai proposed B-money to allow for an "anonymous, distributed electronic cash system". 

  • In 2004 Hal Finney built upon the idea of Hashcash and created Reusable Proofs of Work. 

  • And in 2005 Nick Szabo proposed Bit Gold. Where unforgettable proof of work chains would share properties of gold: scarce, valuable and trust minimised but with the benefit of being easily transactable. 

When Satoshi released the Bitcoin whitepaper, rather than a revolution, Bitcoin was an evolution of all that had come before it with Bitcoin being the most trust minimised, censorship-resistant and hardest currency that has ever existed.

Among Satoshi's email recipients was Nick Szabo, a computer scientist, cryptographer, the designer of Bit Gold and Smart Contracts pioneer. In a rare interview, Nick joins me to discuss the cypherpunk movement, what money is, privacy and of course, Bitcoin.

TIMESTAMPS

00:03:09: Introductions
00:04:39: Touching on Nick’s re-emergence in the Bitcoin space recently
00:06:29: Exploring some of the trends regarding money, including economics and security
00:09:36: Delving into Nick’s view on libertarianism and whether Bitcoin is coercion free
00:13:68: Exploring the background and history of money
00:16:40: Discussing Bitgold and whether Nick believed that it could become global money
00:19:33: Delving into the cypherpunk movement and how Nick got involved with the group
00:24:21: Touching on whether it will be possible to ever achieve complete personal privacy 
00:26:41: Nick’s thoughts on the encryption export wars of the 90s and if it is still going on
00:29:11: Delving into the tradeoffs between UX and security in Bitcoin and Lightning
00:31:34: Discussing Nick’s stance on Bitcoin as a medium of exchange or as digital gold
00:33:48: Exploring the differences between Bitcoin and Bitgold and how Nick discovered Bitcoin
00:36:31: Nick’s thoughts on Austrian economics and past experiments with various fiat currencies
00:42:35: Discussing Bitcoin’s limitations, including reliance on internet and transaction irreversibility
00:47:00: Delving into the problems with hard forks and Nick’s preference for smaller blocks
00:50:42: Discussing deviating from the white paper and why we can’t build everything on layer one
00:53:42: Touching on Lightning and whether future updates on the base chain with be required
00:56:43: Discussing what the goals of Bitcoin should be and whether hyperbitcoinization is possible
00:59:40: Exploring other projects that Nick is interested in, including privacy coins
01:01:09: Nick’s thoughts on Ethereum and why decentralization is so important
01:03:48: Discussing smart contracts and whether they are realistically adoptable to immutable ledgers
01:08:18: Delving into the future Bitcoin price and whether the fundamentals support an increased price
01:11:58: Exploring regulations surrounding Bitcoin and Nick’s thoughts on Libra
01:17:21: Discussing Nick’s hope for Bitcoin in the future and its importance in fighting censorship 
01:21:37: Nick’s thoughts on modern day life, including Brexit, Hong Kong and the rise of nationalism
01:27:58: Discussing Moore’s law and why we have reached a plateau in computational advancements
01:32:50: Delving into whether Bitcoin should be used for other purposes, such as identity
01:35:06: Touching on Nick’s other interests, including history and space development
01:37:24: Final comments and how to stay in touch

 

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SHOW NOTES

SHOW TRANSCRIPTION

Peter McCormack: Good afternoon, Nick.

Nick Szabo: Good afternoon!

Peter McCormack: Thank you for doing this, I know you don't do many interviews. Actually, I found two interviews, obviously the Tim Ferriss interview with Naval, which was great, and there was another one on YouTube, but you don't do many. I feel very proud to get this, people are going to lose their shit!

Nick Szabo: Thank you.

Peter McCormack: I've never figured out what your actual career goals are, what is a peak for you? But I'll embarrass you a little bit now, I've got a list of target guests and I had three that were right at the top. Two I haven't got yet and I'm not going to name the other ones to embarrass them, but you were up there!

Nick Szabo: Wonderful!

Peter McCormack: We've got a couple of people to thank, but I'm not going to thank them publicly, because what will happen afterwards is that people will pester them, say "tell Nick to come on my podcast!" Well we've got a lot to cover? Actually, do you remember when I tried to bait you into an interview online?

Nick Szabo: Oh that happens a fair amount, so I don't know if I remember specifically.

Peter McCormack: You might do. So you didn't follow me, but we had a little back and forth about something and I tried to reel you in. I said, "I've got a question for you. What have Diffie, Back and Todd got in common?" And you said to me, "don't know, let me know." I went, "they've all been a guest on my podcast. How do I get you in that list?" About four hours went by, there was no reply, but lots of people were tweeting, retweeting, it was all going crazy. I was actually on a flight and when got off the flight, I finally got an alert saying "Nick Szabo's replied" and you just said "no."

Nick Szabo: Oh man, online can be abrupt!

Peter McCormack: It can be brutal, but we got here man! So listen, I noticed over the last few months you've been tweeting a lot more about Bitcoin. It seems like, I don't know what you were doing previously, but it seems like you've come really back into Bitcoin and getting quite heavily interested in writing about again. Is that a fair observation?

Nick Szabo: I think it's more grown over me over the last few years that culture is more important. These things are trust minimized, they're not trustless, so what the people will believe, who do the coding and run the exchanges and do the mining and so forth, the influential people, who run full nodes and what they believe is important.

It's not what in the Bitcoin ethos, what most people believe about trust and related issues like that. So I've realized that it's pretty special what Bitcoin has, it's not being replicated over the vast majority of other coins and that to me is what's giving it a lot of its staying power

Peter McCormack: And you feel like that some people are getting some things wrong, it's important just to lay some kind of foundational...

Nick Szabo: Right.

Peter McCormack: So you must be self-aware that people really look up to you in this and really respect what you say?

Nick Szabo: Many do, many don't! It depends where they're coming from. Certainly in the Blockchain space in total there's lots of people who are newer to this space, came in because of the money, that do not share these values.

Peter McCormack: Yeah, I could be put into one of those, so I apologize. I'm only like a two and a half year old veteran of this.

Nick Szabo: I mean there's new people that do share the values too, so there's all kinds.

Peter McCormack: I did troll you once as well, when you talked about saving for four years and not Lambos and I was like, "well I've got a four year Lambo goal!" You forgave me. I didn't know if you were going to block me for it.

Nick Szabo: No, no, that's great!

Peter McCormack: I always have fun with this stuff. So, there's so much to talk about and I'm conscious that people are really going to want to hear from you and I expect, and I kind of hope, also selfishly that you don't do another interview for a while. So I want to get as much out of this as I can. I want to find out some of your views on Bitcoin, but I want to find out a bit more about you Nick. I think you can come across a bit grumpy online, but in person you've done nothing but smiled since you've been here.

I've listened to the Tim Ferriss interview again, you were cracking up all the way through, so I know you're not just a grumpy Blockchain Bitcoin guy! So let's get into this. It would be great to know a bit about your education and what it was about the education that led you into this interest. I'm going to say that there seems to be both money and smart contracts. What is it that took you on this journey?

Nick Szabo: So I had a computer science education and fairly broad spread of reading along with that, everything from history to science fiction to all sorts of both creative things and things that get you in touch with how people lived over a longer span than our current culture.

Peter McCormack: What kinds of things were you noticing with that though? What were the standout trends? Was money just a very obvious trend within that?

Nick Szabo: Yeah, so economics is part of that, but also going beyond that and realizing how important security is in history, for example. I mean there's parts of history that are just about wars and that's about all it's about! That's also exaggerated in one direction, but economics is exaggerated in another direction, where you assume everything's secure, you assume property rights are secure, and you start from there. Those are both very narrow views of the world and to understand money, you have to understand both of those really.

Peter McCormack: Okay so let's dive into them. What are the key things you need to understand about economics and security with regards to money?

Nick Szabo: Tons of things! I don't know where to get started with that.

Peter McCormack: I'm an open book, I'm always learning and I learn from my guests and if I'm going to learn about money, it seems to be that Nick Szabo is the guy to learn about money from.

Nick Szabo: Okay, well to think about how society is structured for those who understand protocol layers, you can think of it as protocol layers. For those who understand architecture, you start with a foundation, then you build some structure on the foundation, then you've got dry wall, your paint and your windows.

So you have various layers to your architecture. Then computer architecture and computer protocol architecture is the same, a lot of things in life are the same, they have these layers and we can think of society that way as well.

Really at the base layer, there's material needs, but there's also security and the two basic things you'll study in law school and also libertarian ideology, which has been an influence on me, are property and contracts. Those are kind of the two basic economic things that law secures, that are prerequisite to things like economics working or the assumptions starting to make sense of economics.

Peter McCormack: How far down that libertarian rabbit hole do you go? Because it's a new thing to me, that I became aware of with Bitcoin. I'd heard of it, but it's only because I've become aware of Bitcoin over the last couple of years and I've met lots of the kind of radical libertarians, everyone from Erik Voorhees to Saifedean Ammous and I struggle to go full anarchist libertarian and imagine a society which is just stateless.

I just really struggle with that. I understand the argument, but I struggle with it and I struggle with the rule of law in that view of the world they have. Where do you sit in this?

Nick Szabo: I mean for me it's a great ideal, it's one of these unachievable in full, probably ideals like trustlessness or other end state things. But it's something you can strive for, because government does a lot of nasty things. If you look at legal procedure, it's based on coercion, putting people in jail, arresting them, which if you weren't a police officer, would be called kidnapping and so forth.

Taxation, which if you weren't the tax collector would be called theft. So it's based on things that other people don't get to do and so it's like this exception to what everybody else is expected to do basically. You'd like to improve on that, it's not the moral endpoint of humanity probably.

Peter McCormack: But you've also studied humans and by the way, this is a little bit of the influence you've had on me, let me show you this and look what I'm on my Audible right now. So I'm doing "The Selfish Gene".

Nick Szabo: Ah yes! That was a big influence on me as well.

Peter McCormack: Yeah, so that came up in the Ferriss interview. But when you look at humans and the study you've done the humans, one of the things I've always thought is like, if you look up tribes or even look at animals, there's like this natural thing that animals or humans want to organize themselves, they build structures.

So isn't it natural that we do build structures and we do have something like a police force? If we ignore the fact that most of its shit, but imagine we had, just theoretically, a good police force. Wouldn't it be a good thing to have a group that we will pay into that can ensure that law is followed and that we are protected?

Nick Szabo: Yeah and that's been structured in various ways throughout history. The modern police forces didn't really come about until 18th and 19th centuries for the most part. You had certain kinds of course, of legal procedures before that, there was still coercion, but they were rather different than having a police force. So these things evolve and they change round. But nobody's figured out how to eliminate coercion out of them.

Now we have figured out how eliminate coercion out of money, at least the issuing of money. So one thing at a time and it's not a given that all the rest of it is possible, but it's an interesting ideal to think about. It gets the creative juices flowing to think about a society without government. It's not like it's actually achievable here in our lifetimes or anything like that, a lot of the more into it anarcho capitalists would argue, but there's a lot of different creative ideas from different points of view and that's certainly one of them.

Peter McCormack: Well, so Erik Voorhees said it to me quite interestingly. He said," it shouldn't be that we target no government, the target should just be less government. That's a goal we can walk towards and that's something we can achieve and we can measure."

Nick Szabo: Right. One of the interesting things about cryptocurrency, is we started at the security layer, we reinvented money from the ground up. Instead of taking the economist's view, that we're going to alter the money supply or we're going to have our own bank and issue it our own way, it's more ground up. It's starting with security and really focused on security and that's part of what makes it globally seamless for example, it doesn't depend on nation states and laws and that kind of thing.

Peter McCormack: Is Bitcoin completely coercion free?

Nick Szabo: Well, the use isn't. Obviously there's some uses of it that involve coercion, but the issuance of it and stuff, it doesn't depend on the legal system.

Peter McCormack: No, but I notice obviously certain addresses have been put on sanction lists, for example. Would you consider that coercion?

Nick Szabo: Yeah, certainly. But I mean it depends how much people are actually coerced into respecting that and another interesting issue is to look at it empirically to see how well that actually works.

Peter McCormack: Yeah, I guess. So money's always been something that you've seemed to have taken great interest in, right? Like you say, this is a good starting point for trying to take some coercion away from government. So we're going to have to then dive straight into the money side of Bitcoin. Can we do a bit of the background on money? I know you've talked about it plenty of times before, but a lot of people who listen to my show wouldn't have heard you talk about the history of money and even what money means. Can we go into that a little bit?

Nick Szabo: Sure! So as part of coming up with Bitgold kind of in parallel to that, I was doing research on the history of money and working my way backwards, part of the history of money was private banking, where private banks would issue money, IOUs, bank notes and George Selgin and Larry White were the main people I read on that one. That was inspiring, but then you read later how it failed and it got usurped by central banks and then later on, maybe 100, 200 years later, the central banks get turned into fiat currency.

People used gold coins themselves, gold and silver, actually silver more than gold, then they changed using bank notes that were redeemable in gold because gold was still the money people wanted. So at the end of the day, you wanted to be able to go to that gold window and get that gold out. So what interested me was people like David Chaum and so forth had already solved the IOU problem, you can do that digitally as long as you have a central party issue an IOU and then redeem it for something.

But what they hadn't solved is the gold part of it and that's really the trust minimized part of it. There is, I don't know how explicit it is, but kind of implicit in academic cryptography and a lot of work in cryptography is that... Well I don't even know if it's implicit, but a trusted third party is kind of when you give up and say, "I can't do any more, so we're going to trust this person with this function, because we don't know how to do this with a security protocol."

So for example, certificate authorities and public key cryptography, the main way it's done, is through certificate authorities and their trusted third parties.

Peter McCormack: Which are security holes.

Nick Szabo: Which are security holes! So they become the bottleneck in the system and the place you can attack politically or as an activist or as a hacker and bring down the system or alter it to suit your political needs, which aren't necessarily the need for the people using the system. So that was kind of the unsolved problem, was how to do that in a distributed or without the trusted third party or no doubt, at least a singular trusted third party. Reduce the amount of trust involved, the vulnerability involved.

Peter McCormack: So that's why you started work on Bitgold?

Nick Szabo: Yeah.

Peter McCormack: So let me ask you about Bitgold. Look at Bitcoin now, obviously it is essentially a global currency. I know it's in a perpetual beta, but in some ways it's already succeeded in many ways. The fact that I use it now, I invoice clients and I spend Bitcoin, to me that says that it's worked. It could fail in the future, but that doesn't mean it hasn't worked now. It is this amazing success.

When you started work on Bitgold, did you envisage something like that? Were you envisaging the creation of something that could be a global money or was it just that you were more envisaging, "can I just create something that has the functions that you would want?" Do you understand the question?

Nick Szabo: Sure, I didn't understand all the ramifications that come along with having it succeed on a global scale like it has. I was pretty focused on... Certainly I didn't want it to be dependent on government and that perhaps is more for ideological reasons and creative reasons at that point, than for realizing the value of global seamlessness, which is really what gives it its value today. 

Anyway, so certainly all the ramifications that come along with it being success, most of those I didn't imagine. But I certainly didn't want it to be dependent on the nation state and implicit with that, is that it can be global.

Peter McCormack: But your goal with BitGold, was it a project to test functionality, an idea or was it the big dream to create a global currency? Did you actually think that was possible?

Nick Szabo: Yeah, I mean I thought it was possible otherwise I wouldn't have spend a lot of time working on it, but I didn't rank the probability of it actually going anywhere, very highly.

Peter McCormack: So what happened with Bitgold? Because you never got to coding, right? What happened?

Nick Szabo: That's part of it, is that it was certainly a way out there, fringe idea at the time I was working on it and there was only a handful of people in the world I can talk to about it that even have any clue what I was talking about. We were on a mailing list, so the cypherpunks mailing list and then myself, Wei Dai, Hal Finney, Larry White, George Selgin and a few others were on a mailing list I created called libtech and that's where I came up with Bitgold and Wei Dai came up with B -money and we had great discussions on there.

So a lot of that was that kind of creative ferment and part of that is due to the internet. The internet was fairly new at that time and you could find people, first of all, not everybody was on the internet, so it was easier to find your fellow spirits as it were, on the internet. 

Once you did, you never would've found them in your own neighborhood or at the school you went to, your classmates or something, this is something the internet created, was this finding of your fellow spirits that shared your kind of politics, creative strategy, computer science, that kind of improbable combination that was needed to come up with this stuff.

Peter McCormack: What came first? Did the cypherpunk group originate before this?

Nick Szabo: So there was the invention or reinvention as it turns out, of public key cryptography or making it public in the late 1970s and that was Ralph Merkel and Whit Diffie and so forth. Then out of that, that inspired David Chaum and he created this academic cryptography group. They played various games to try to get it, so they could do this publicly because previously it had been classified secret stuff and I guess the NSA and so forth are not too happy necessarily about this going public.

But it went public and so you had this academic cryptography stuff, so that was in the late 70s, early 1980s. Then about 1990 or so, Tim May and Eric Hughes and John Gilmore got together and started the cypherpunks movement and that was just to popularize this further and get not just academics interested in it, but hackers, people like Phil Zimmerman who wrote PGP, Hal Finney wrote some remailers based on David Chaum's ideas, that later those ideas turned into Tor, for example, digital mix ideas. So yes, it was a great ferment in the early 90s!

Peter McCormack: How did you hear about them?

Nick Szabo: So I was part of a... This is my science fiction connection, I was part of a libertarian futurist group that had all sorts of interesting creative ideas and those overlap to some extent with the cypherpunks. So then I found Tim May and got introduced to the cypherpunks and so forth. And Phil [Inaudible] was also I think the person that introduce me also.

Peter McCormack: Was it like a secret group? Was it a public group?

Nick Szabo: No, it was public. I mean you would have had to read the right magazines and articles or be on the right place in the internet to know about it.

Peter McCormack: But if you turned up, could anyone just turn up and join in?

Nick Szabo: More or less, but it had an ethos.

Peter McCormack: The ethos being now?

Nick Szabo: So there was kind of two factions with the cypherpunks. One of them was the libertarian futurist faction that wanted private money and de-privatized things and so forth and the other one was privacy and that David Chaum and so forth, they wanted to take the institutions we have currently, like fiat currency, but do them so people can transact privately.

Peter McCormack: Okay, and how often did you meet? I'm trying to imagine it and it just sounds like a really fucking cool thing to be part of!

Nick Szabo: Yeah, well we had a mailing list that you can contribute to. So that was the main medium of communication and then monthly meetings in Silicon Valley. But obviously you had to be in Silicon Valley.

Peter McCormack: Were you going to those?

Nick Szabo: More or less, half of them maybe.

Peter McCormack: Did it feel like some rebel movement that was taking on the world, right?

Nick Szabo: Oh yeah, definitely! I mean a few years before, or at least a decade before this has been secret NSA stuff and here we were, writing code in open source and anybody could use it.

Peter McCormack: So what's the status of the cypherpunk movement now, because I see people on Twitter say they're a cypherpunk, but I'm not aware of it as a group, like what you had before, with an agenda and a goal. Is it more of an identity now or is that still a group?

Nick Szabo: Well, there's probably people out there marketing themselves as cypherpunk, but I would be highly skeptical of people using that thing at this point, because it was that kind of... I mean the ethos is still around, but it's scattered into lots of different groups of which cryptocurrencies are just one of the spinoffs.

Peter McCormack: Did it break up as a group though?

Nick Szabo: I mean I haven't kept up with it, with the list for example, some of them passed away unfortunately, Tim and Hal Finney. So yeah, but I mean Julian Assange was a spinoff of the cypherpunks, Tor was a spinoff of the cypherpunks, Bit-Torrent was a spinoff of the cypherpunks and Bitcoin. Oh and US new radio, a software defined radio was a spinoff of the cypherpunks.

Peter McCormack: Okay, so of the ones you said, I don't know that one?

Nick Szabo: Okay, so that's basically taking some of the lower level functions in radio and doing them in software instead of hardware. Then you can do all sorts of creative things using bandwidth spread-spectrum, all sorts of creative things with radio.

Peter McCormack: Okay interesting, I'll look into that as well! So do you think they were successful, the cypherpunks? Do you think they achieved what they set out to achieve?

Nick Szabo: They haven't really haven't achieved the privacy thing because computers with Moore's law have moved so fast and these corporations with their surveillance and Facebook tracking everything you do with them and lots of things you do off...

Peter McCormack: Google diary invites?

Nick Szabo: Right, it's everywhere! So yes, even if you use all the cypherpunk tools and use Zcash or Monero, there's lots of data leaks and it's very hard to keep privacy.

Peter McCormack: Do you think full privacy is achievable?

Nick Szabo: It's an arms race and so far it's partly winning, but mostly losing at this point unfortunately.

Peter McCormack: Would you even trust a corporation to offer better privacy? So for example, when I spoke to Ricardo Fluffypony from Monero, he said "privacy will probably best come from somebody like Apple, who make it a competitive tool" and I said, "no, it sounds a bit weird because obviously they can track you and such", but do you think there will ever come a time where that's better than no privacy?

Nick Szabo: Well, I'm not familiar with Apple and in particularly its track record. There's certainly a lot of other companies that have promised that and failed. They've gotten hacked or things leak out, like embarrassing things leak out about people.

Peter McCormack: I saw one today on Twitter actually.

Nick Szabo: So yeah, "trusted third parties are security holes", certainly applies in that case as well. These are a bunch of strangers you're trusting with intimate data, seems hazardous to me.

Peter McCormack: That "trusted third party are security holes", that's your thing now, right? It's going to be on your grave!

Nick Szabo: On my grave stone yeah!

Peter McCormack: So essentially you feel like they, I don't want to say fail, because that sounds like they didn't do anything, they just didn't achieve what they set out to achieve with privacy, the cypherpunks?

Nick Szabo: Yeah, mostly not. For example, if you go on fast track or these toll paying systems, very few of them have, next to none of them have the strong privacy features that David Chaum wanted to add for example. So there's an understandable tradeoff between integrity and privacy, we've seen that with Zcash where they had some bugs that could have risked inflating their money supply.

The bug is based on, well it's harder to audit because you've got these privacy features. So most corporations are going to err on the side of, "we want to see things and control things" and so they tend to be negative on the privacy features.

Peter McCormack: What do you think the biggest achievements were then from the cypherpunks?

Nick Szabo: I mean monetarily, certainly Bitcoin is the biggest achievement, but WikiLeaks was certainly influential, Bit-torrent was a big success, so yeah, there's a lot of interesting successful things that have come out of it.

Peter McCormack: So I did speak to two people before this interview and let them know I'm speaking to you, because they're people who I respect and I talk to a lot. One of them is, do you know Matt Odell?

Nick Szabo: Not personally, but I know of him.

Peter McCormack: Yeah, so he had a question for you and I'm going to allow him to do that. So he said, because I'm not going to frame it like I know what he's asking, but he said, "what was it like during the encryption export wars of the 90s? What has changed and has the war ended?"

Nick Szabo: Well it's still going on. The Attorney General the other day was talking about that issue. So there's two issues, one is the export issue, the other is the backdoor issue. But they're both related.

Peter McCormack: Should we do the background of what he's actually asking?

Nick Szabo: So one of the issues is simply export control, like this is a US technology, we don't want the enemies of the US getting it. Then the cypherpunks said "no, this is a free speech issue. I can wear this on my t-shirt, I can print it in a book, this is speech and it's not a weapon to be controlled." That's mostly been successful, people use cryptography and open source all the time right now. The other one is backdoors in encryption and that again, the cypherpunks have mostly been successful in that.

There's not a lot of cryptography right now that has that. I mean there are corporate backdoors and like you're trusting a VPN and that kind of thing. But in terms of government mandated, most of the world does not have government mandated backdoors. But they're still trying to do that after all these years!

Peter McCormack: I just want to ask about PGP as well. So I first became aware of PGP when I first discovered the Silk Road and it was something I had to use for it. I found it really difficult to use personally because I'm not highly technical. How do you feel about the tradeoff between usability and some of these tools? Like for example, Bitcoin can be complex for some people to use. I've been a proponent for improving UX, but some people have said, "well when you improve the UX, you risk security." How do you feel about the tradeoff between UX and security?

Nick Szabo: Yeah, so we've seen that with Casa Hodl. They erred on the side of making it user friendly and had some controversial, arguably insecure features in their entry level product. They've got at least two products, one of them is more sophisticated, more secure and one of them is entry level, where they erred on the side of, according to some people, at least too much on the side of user friendliness and has some possibly questionable security. That trade off there and that whole debate over the Casa Hodl product is a good recent example of it.

Peter McCormack: But how do you feel about it? Do you feel like this should be a pursuit of better UX? What I'm getting at, is that a lot of these tools you talk about, they're good for humanity, right? Bitcoin is good for people, privacy is good for people, but most people I know would struggle to use PGP and would struggle to use Bitcoin. Therefore, do you think there should be an objective goal to strive to make these tools easier so everyone can use it?

Or do you think the goal should be just to make the tools available so the techies can actually implement things to help everyone? I'm wording this badly, but for example, when people talk about Bitcoin, some people talk about it as a tool for everyone. Other people talk about it as separating money from the state. So if the goal is to separate money from state, do we have to worry less about UX and more about the fact that it just grows, so we can swallow up the state?

Nick Szabo: Yeah, I mean it depends what part of the system you're talking about. If you're talking about layer one, so for example, increasing the block size would make it friendlier in the sense of lower fees and probably allow you to make some user friendly tradeoffs better too. But it comes at the cost of trust minimization and security. So there, I say I'm going to err very much on the side of trust minimization and security, when it comes to layer one and the core functionality.

When it comes to the edges, like wallets and so forth and Casa Hodl's entry system, then the lower the value at risk, then the less security you need. So you're going to end up, if you're just buying a cup of coffee, you do not need the super-strong security I have to validate all the transactions in the world for myself, that you would need for higher value transactions.

Peter McCormack: So that's an interesting point also, because one of the areas I've clashed with a couple of people with regards to Lightning is that right now, and I'm really going to piss some people off by saying this, the experience of custodial Lightning wallets is far superior than non-custodial. But for me, I'm like, "well, I'm only keeping $20, $30 in one. Should I really care?" People rightly say, "well, that's not the ethos of Bitcoin. The ethos of Bitcoin is non-custodial, own your private keys, blah, blah, blah."

Nick Szabo: It's a tough issue. But again, I think that ethos is most important in the core and the layer one. As you get out into layer two and so forth and the lesser values, then it's more reasonable to start trading that off a little bit for user friendliness.

Peter McCormack: All right, well listen, I'm going to want to talk to you a bit more about Bitcoin now, we're just going to get straight into it. Interestingly though I noticed something when I was reading the Bitgold gold white paper and then the Bitcoin white paper. With Bitgold, you were very much consider it more like a reserve currency and the Bitcoin white paper very much talks about a peer to peer electronic cash for commerce.

So there's that distinct difference between the two of them, but it seems quite interesting that what's happened with Bitcoin, it seems to be evolved into what your vision was for Bitgold, which is a reserve currency. A lot of people talk about that and it's more that say Bcash people tend to now talk about a peer to peer currency. Where are you on the whole digital gold versus medium exchange for Bitcoin?

Nick Szabo: Well it's nice to hype and wish about everybody running a full node and be fully scalable and all that. In reality, it's not. If you want to have a trust minimized system, it's not going to be computationally scalable. It will be socially scalable, which I know this is a vaguer topic, but its social scalability is more important than computational scalability.

If you want to be globally seamless, if you want to have that really valuable and not just for ideological reasons or even for ideological reasons, but just because globally seamless, trust minimized, not having to go file a lawsuit to get your money back, that kind of thing is just incredibly valuable and just eliminates so much cost and risk out of the system. 

So you really want to have that and it's not really something that is worthwhile compromising on, because once you compromise in that direction, you may gain a few bits here and there and increase your transactions per second, but it comes at a much, much higher cost, which is now you have bureaucracy, now you have risk and you have traditional banking basically. Now you're moving towards what traditional banking does much better. They've been doing it, in some ways for hundreds of years.

So we're not going to improve on that. We improve by cutting the Gordian knot and saying "we're getting rid of that" and doing a simple globally seamless, trust minimized system. But to make that technologically scalable, you need a layer two solution. You're not going to do that with just layer one.

Peter McCormack: Alright, there's going to be so much to unpack here. I want to go back to the start though. When you first read about and heard about Bitcoin, what were the things that it solved, that Bitgold hadn't? What were the key differences where you're like, "ah, that's on the money!"

Nick Szabo: Well the Nakamoto consensus was big, that was a big improvement, because I was using Byzantine consensus. So incorporating the proof of work into the security is a huge thing!

Peter McCormack: Also I was chatting to Shinobi the other day and he said one of the actual very key developments in Bitcoin was the difficulty adjustment. He said that was one of the most important developments as well.

Nick Szabo: Yeah, simplifying the money supply and have a really complicated multilayer way to get a fungible currency out of what starts out as non-fungible proof of work solutions in Bitgold. So he sort of, I thought maybe papered that over a little bit, but it's radically simplified. So it turns out to be quite worth it, what he did, which is to just have this fixed schedule going up to 21 million.

Peter McCormack: Were you going to have a fixed limit in Bitgold?

Nick Szabo: No, it was a much more complicated. I don't know if I can explain it on a podcast! It was complicated enough, but it involved exchanges and trading and bundling. Quite a bit more work needed to be done to get to the money supply.

Peter McCormack: Okay, were you pissed that Bitgold wasn't cited in the white paper?

Nick Szabo: It was an odd omission because there's a ton of parallels.

Peter McCormack: Yeah, because I was like, "come on! You're taking half the work here!" All right, so you discovered it, did you have immediate interest? Did it click straight away or did you have any doubts?

Nick Szabo: Well, I still share a fair amount of the pessimism that had prevented me from implementing Bitgold in the first place. But definitely, once it started catching on, 2009, 2010, 2011, it caught on with me too.

Peter McCormack: Were you contributing to it? Were you getting involved? Were you supporting people? Were you talking to Hal and everyone about it?

Nick Szabo: Yeah, I had some conversations with Hal and some of the others.

Peter McCormack: I'm really jealous of not being around at that time. I wouldn't have been able to contribute because I'm not a coder in any way at all, but it feels like that was a very exciting time. The way I look at it, is there was all these projects previously, Digicash and your project, but this one has run continuously, it hasn't stopped. So to be part of that and then suddenly realize, "holy shit, this really is something!" Did you have a time or like a moment where you thought, "we're onto something here."

Nick Szabo: There were several of those moments, it kept building!

Peter McCormack: I've obviously been exposed to, I talked about Austrian economics as well, are you a fan?

Nick Szabo: Yeah, for the most part. As I was mentioning before, economics and a lot of academics... Well probably like every academic discipline is looking at a particular narrow part of the world and so for example, it papers over security issues generally speaking, it papers over imperfections and huge imperfections quite often, like wars and so forth and political systems that have, for example, a big impact on the history of money.

But those tend to be papered over and ignored, including by Austrian economists, but by economists generally. But as far as within the scope of what economics thinks about and buying into the assumptions of economics, Austrians yeah, do tend to have a better view of that sort of thing.

Peter McCormack: So you would kind of prefer that gold standard and you can see a Bitcoin standard? You're not a fan of say, inflation and Keynesian?

Nick Szabo: Yeah it's bad on multiple levels. It's bad because of the trust involved, because they change the rules so often. First it was gold, gold coins and those became too hard to counterfeit, so they went to bank notes and those are more trust-based. Even coins are somewhat trust-based, but gold bank notes are even more trust-based and they abused that trust.

They stopped paying on the gold, what was an IOU turned in something radical. They didn't change the look and feel of the of the bank note, that's still the same, so everybody thinks they're using the same money, but it's actually radically different. It's fiat currency, it's a radically, completely different thing.

Peter McCormack: A radical experiment as well, right?

Nick Szabo: It is! Fiat currency is, well that experiment has been tried several times in history and the previous times it's failed or when it has been tried, it's failed miserably and caused a lot of problems. John Law, some of the Chinese examples are two of the prominent ones, Assignats during the French revolution, the currency was issued during the revolutionary war in America by the Confederacy, and revolutionary war was the winning side.

Usually the winning side, it doesn't turn out so bad. If you're on the losing side of a war, forget it, your currency is destroyed and your bonds are no good! Yeah I don't understand, people in the financial community just have this very narrow view of like sovereign bonds, US bonds are riskless and risk-free bonds. How is that compatible with history? Bonds default all the time in history!

Peter McCormack: Well yeah, I was with Nik Bhatia the other day and he was discussing and calling bonds a "risk-free asset."

Nick Szabo: Well yeah, there's a bizarre theory to that, that papers over the risk by, "oh, we can just inflate, so we'll never default." Argentina both defaults and inflates both, so that does not necessarily... There are limits to how much you can inflate, especially if your currency is tradable on the international market. You'll be get severely punished for over inflating your currency.

Peter McCormack: So if fiat currency keeps failing as an experiment over and over again and I want to talk pre-Bitcoin as a potential solution, what other forms of money have existed, which in history have been better? Is gold better?

Nick Szabo: Well it was more trust minimized, but it had some severe flaws. Shells were a form of collectible and money dating back as far as you can... Long before written records and into the archaeological record and stuff. If you dig up some shell, that kind of looked like jewellery, what were they using them for? The way I read history, that was kind of the common ancestor of modern jewellery and modern money.

Their kind of functions were fused. But of course, the evidence for that is you can only go by the archaeological evidence. Once you get into written records, you see that for example, silver, basically silver jewellery was being used to pay legal fines and you can read the Old Testament, it was being used to pay for real estate deals. So silver was in very common use long before coinage was invented. Then gold has an even higher value transactions and wealth transfers. So this stuff dates way, way back.

Peter McCormack: If fiat currency keeps failing, why does the experiment keep continuing? Is it because it works long enough for the cycle of government?

Nick Szabo: It's tempting to print your own money and have people making profit that way. Governments can gain revenue that way and lower their interest rates and arguably, if you're in the middle of a war and you need to win the war, you throw other longer term concerns aside and you print as much money as you can to buy as many weapons as you can and pay as many soldiers as you can.

Peter McCormack: But we're not in a time of war now, so what's going on? Is this more about retaining power?

Nick Szabo: Well yeah. Okay, there's a thing called the Cantillon effect, that money doesn't just flow from a helicopter, that's not actually how they do it. It actually goes to specific people. Some people get the money and other people don't. Maybe you can tell there's a connection between that and inequality and unfairness in the financial system.

But some people are going to get low interest rate loans, like a corporation can go out and get a 2%, 3% loan. But Joe Blow has to pay 20% on their credit card. So that's a Cantillon effect at work, you're either close to the money spigot and you get money out of the money spigot at cheap rates or you're far away from it and you pay high rates.

Peter McCormack: Would that be different in a free market though?

Nick Szabo: Well, it wouldn't necessarily be equal in a free banking system like Selgin and White propose, but once Bitcoin reaches 21 million, that's it, nobody's getting more money. So right now the miners are the first in line and if you can do a proof of work, then you're first in line at the money spigot.

Peter McCormack: Okay, one of the interesting things I'd really like to know from you with regard to Bitcoin, before we get into some of the other topics I've got listed is, what are its drawbacks? So for example, one for me, just one problem I see with Bitcoin is that it's arguably discriminatory because you need technology for it and perhaps in a place like Venezuela where people want to see Bitcoin as a solution, which it isn't because people there don't really understand how people are using money, but if you think in terms of Venezuela, they have big power outages.

If you have a big power outage and your only wallet is your phone and you can't charge your phone, you essentially don't have money. So there's a couple of drawbacks, the fact that it's entirely technology-based right now is a drawback.

Nick Szabo: Right, so yeah, there is a correlation between financial problems in your country and poor internet access in your country and so unfortunately, if you have poor enough internet access, Bitcoin can't help you nearly as much. The reason I was talking about digital centralization is it does have one advantage and that is they can reverse transactions.

I mean it adds a lot of bureaucracy and legal risk and locality to things, because it becomes more legally vulnerable and independent now, but it's also an advantage in that sometimes the transaction was wrong, it was extortion, it was some other activity that you want to reverse and with Bitcoin, you can't do that.

Peter McCormack: You kind of can, if the miners collude on a block re-org.

Nick Szabo: But they don't though.

Peter McCormack: They've talked about it though?

Nick Szabo: They've talked about it. So yeah, it would certainly add a huge amount of cost to Bitcoin if that became a practice and it would take away a lot of the value in Bitcoin and you're moving in the direction of banking and why would you want to do that? Banks already do that really well.

Peter McCormack: Do you think in some ways though, so the fact that you can't reverse transactions, I think is a positive and a negative, you can see it both ways. You can see it as a positive because the chargebacks have been a hell of a problem in business. But at the same time, there are times where probably, some kind of reversible transaction is useful.

Nick Szabo: But there's a moral hazard problem, which is that if you can reverse a transaction, then you're sloppier about the transaction and we see that with smart contract programming too, is that if you think, "if I screw up this enough, it'll get reversed", then you're going to be a lot sloppier in your smart contract programming. We have a long way to go before we have good practices in smart contract programming! But anyway, there's a moral hazard involved if you know that there's a possibility things can be reversed.

There's also risk involved, political activists can get a hold of that to reverse things that neither of the parties want reversed, but the third party doesn't like. So there's just a huge amount of costs and risks added when you do that. So Bitcoin is going in a different direction, I think a superior direction, it's actually a conservative thing in that it operates like the way money did for 99% of history. The digital centralization is a radical new experiment and Bitcoin is saying, "no, we want an alternative to that radical experiment."

Peter McCormack: Yeah, because when it was shells or beads or necklaces, you couldn't reverse your transactions then, there was no central bank then.

Nick Szabo: Correct.

Peter McCormack: Yeah, stupidly I never thought about that. What is it you don't like about central banking?

Nick Szabo: Well, I mean there's a lot of things not to like about it. The Cantillon effect certainly causes a great deal of inequality and unfairness in our economy for starters.

Peter McCormack: But there is lots of inequality in any economy.

Nick Szabo: Sure, that's not the only source of inequality, but it's a big, very underrated one. But just the very creation of money is very asymmetric, it's not throwing money from a helicopter to everybody here, that sort of thing.

Peter McCormack: Yeah, but I also don't think that's something... I know we don't want to get into this kind of area, but it starts to sound a little bit almost socialist, like the fair distribution of money, blah, blah, blah. That's not something also, I think you would believe in either?

Nick Szabo: No, I believe in free enterprise, but having basically a quasi-government monopoly on the issuance of money and then doing it in such a profoundly asymmetric way, is not my idea of free enterprise!

Peter McCormack: Of course! Okay, back to Bitcoin, any other negatives that you look at and you think about? There's so many positives, but anything where you look and think this is a problem?

Nick Szabo: So the fact that money supply can be changed with a hard fork. You need a very strong anti-hard fork ideology, of the kind, for example, Greg Maxwell endorses.

Peter McCormack: Do you prescribe to none?

Nick Szabo: Right, it should absolutely be the end of the world, is the alternative before you hard fork really, because that's a line you shouldn't cross.

Peter McCormack: Because of risk of creating a new coin?

Nick Szabo: Yeah and there's a lot of issues with other coins, but that's one of them, is that they don't understand the higher risks and costs of crossing that line.

Peter McCormack: Doesn't Monero hard-forks every 6 months or 3 months or something, I can't remember. But I heard that it regularly hard forks.

Nick Szabo: Yeah and then I don't know what they're doing. Did they change the money supply? Did they do this? Did they do that?

Peter McCormack: I mean there aren't too many scenarios where you would need to hard fork...

Nick Szabo: It's much simpler to me if I know, "well they haven't hard forked, therefore I know that there's a bunch of things about it that they haven't changed."

Peter McCormack: Yeah, I mean the main potential hard fork Bitcoin would have been a change in the block size, right?

Nick Szabo: Yeah.

Peter McCormack: Actually, I found it so interesting to hear you talk about that, I think it was on the Ferris show where you said, "the people who are debating it, shouldn't be and that should be left to the engineers" and it became a hotly, discussed debate.

Nick Szabo: Yeah, because if the passengers are debating on how to set the flaps on the airplane! Now there's things like division of labor and expertise and so forth are important for.

Peter McCormack: I know it's an old topic, but do you think it'll ever come up again or do you think the 1MB limit is fine? That size is a permanent size of the block forever, we can do everything we need in layer two on top of that?

Nick Szabo: Yeah, it's pretty good. If I was going to err on the side of changing it, I would err on the side of making it smaller.

Peter McCormack: Like Luke!

Nick Szabo: But I think it's pretty close to being right, right now.

Peter McCormack: You would err to smaller blocks, to become even more decentralized?

Nick Szabo: Right, to allow even more full nodes in more places.

Peter McCormack: Interesting! Luke gets a lot of stick for that. He came on the show as well and another thing he said to me, is something quite interesting. He believes that about 80% of people should be running full nodes who are using Bitcoin and we're probably less than 1% actually. Do you agree with that?

Nick Szabo: No, I think it needs to be a lot of people in a lot of places. That's another problem with the internet connectivity problems in the third world, is that it makes it a lot harder to run a full node. Blockstream satellite helps there, but then there's another trusted third party involved with that, so it's an imperfect solution.

Peter McCormack: We've got mobile phones now, the HTC One is it?

Nick Szabo: Yeah, so you don't want to make their life harder. It's not worth the fork to make their life a little bit easier or certainly not worth a fork to make their life harder either.

Peter McCormack: Okay. All right, so I guess there's no real scenario that you consider is worth a fork right now?

Nick Szabo: I mean there's certainly potentially ones like quantum resistance for example.

Peter McCormack: How much of a threat do you think that is though?

Nick Szabo: I mean it's largely unknowable. I don't think it's any sort of imminent threat, there's a lot of fundamental error things that happen there that they probably won't be able to solve. But it's not impossible.

Peter McCormack: We've got time! Okay, so with regards to Bitcoin, obviously again, I've seen you talking a lot more about Bitcoin online, which is great again. I'm very much into trying to talk to wider communities and my friends and people who aren't very technical, who don't really think about the money system, who when they come to Bitcoin are going to be scared shitless. I'm really interested in that. What are the things that you think when people, the misconceptions people have about Bitcoin that you regularly come across?

Nick Szabo: Well, the most common one is that it's a form of retail cash that you pay for coffee with and it's basically PayPal, but its own currency. Every currency in the world is a multilayer thing where you have settlement systems and retail payment systems and they're at least two different things, there's a lot of other systems too. That falls out of computer science, you can't do everything in one protocol. You can't combine the security and the throughput and all that together in one protocol.

Peter McCormack: But going back to the white paper, it did talk very much about peer to peer, electronic cash.

Nick Szabo: Lots of white papers have talked about all sorts of things that didn't really turn out.

Peter McCormack: Of course, but you have these people who say, "well this is what Satoshi said, blah, blah, blah, blah." I guess you prescribed the fact that it doesn't really matter what the white paper says, it matters where people are taking it?

Nick Szabo: Right, so this is based on computer science. So this part of it certainly, I mean there's an ideological aspect of about trust minimization that is based on some level of belief and a certain point of view. But this part is computer science. This part, the computer science tells you what to do, compatible with trust minimization, as you have to have the value of bringing the value of trust minimization to it.

But given that you want to have that trust minimized, censorship resistant, globally seamless layer one, that means you can't do a bunch of other things in layer one, you have to do them in layer two.

Peter McCormack: So what about all these other protocols that are trying to do everything on layer one and have big blocks? From a computer science angle, what are they getting wrong? What are they not understanding?

Nick Szabo: Well the trouble is, is that it does work in a small scale. You can pay 10,000 Bitcoins for a pizza, that worked back in back in the early days, but doesn't scale. You would pay for a little micropayment today using Bitcoin, you can pay for that with Lightning for example in layer two.

So anybody can start out and have a little coin that's not used very much and there's no problem. The trouble with technological scaling, is that once you get bigger, the fees go way up, security can be compromised if you let the transaction throughput go too high and if it becomes centralized. We're seeing that within Ethereum, where a lot of it runs on Infura now.

Peter McCormack: Yeah, well we'll talk about that as well. So you don't think we can get to giga-mega blocks?

Nick Szabo: No!

Peter McCormack: All right, so one of the things that I've come to understand, because I wasn't sure on Lightning when I first discovered it, is that the first layer really is about just securing the protocol and it's all about security. So do you feel like we'll get to a point where the base chain will calcify, it won't have any more updates? Do you think that's a good goal?

Nick Szabo: No, because there's always technological improvements to be had, such as Schnorr signatures and the possible threat from quantum. There's all sorts of possibilities where you might want to revise things in the future, but certainly they have to be something big to do a fork, you're not going to just do something for just an efficiency improvement or something.

Peter McCormack: So if you look where we are with Bitcoin now, it's 11 years in. Obviously, it's amazing how far it's come, right? Are you a little bit surprised?

Nick Szabo: Oh yeah, because so many things failed and it was just our little brainstorming group on the internet back in the 90s.

Peter McCormack: How big can it get now though? Do you believe in this kind of hyperbitcoinization that can now actually happen? Do you see a trajectory where it can happen?

Nick Szabo: Yeah, it's a possibility. There's all sorts of possibilities that involve lots of messy politics that I couldn't possibly predict!

Peter McCormack: One of the things that a lot of people talk about is, "oh, mass adoption, mass adoption" and then Nic Carter put out that, "mass adoption is not the goal" and I've started to see, again we talked about this earlier, I talked about the fact that there is this school of thought that this is great because anyone who wants censorship resistant money or wants to save and not have their money taken by the government is great.

But there is this other school of thought, that this is a tool to separate money and state and take power away from the government. Do you sit in either camp? Do you have a preference of it at all?

Nick Szabo: Well I don't think you can take all... There's tons of ways governments can enforce their laws and collect taxes and so forth.

Peter McCormack: But they can't print more Bitcoin?

Nick Szabo: If central banks disappear, that certainly reduces revenues an d I think that's largely a good thing because that increases the revenues of everybody else effectively. So in general, that's a good thing. If you're a government employee or a politician who's more enamoured with politics and with your constituent's interests, then you're going to be opposed to that kind of thing.

Peter McCormack: Do you think it's possible to wipe out central banks?

Nick Szabo: Well that's a really long-term thing. People talk about Bitcoin having a network effect that locks it in, well it doesn't have a strong network effect against alt coins that are as good as Bitcoin, hardly any of them are, but it doesn't have a strong network effect there, as major fiat currencies like the US dollar and Euro have. Those have lots of lock in effects

 So a lot of it just depends on how much rope central banks have! Central banks keep jumping from one experiment to another, and so what they're doing keeps evolving, they're doing negative interest rates now, which is historically unprecedented. So central banking and fiat currency does seem to be journeying from a historical point of view into ever stranger territory. But how much rope they have left, I don't know.

Peter McCormack: Yeah, it doesn't sound like negative interest rates are a good idea! That to me indicates something's severely wrong with the financial system.

Nick Szabo: You have to break a lot of expectations and probably a few laws too, that you have to change to get to that.

Peter McCormack: Well it's good that we've got Bitcoin here right now then! So you've talked a few times during the interview, and I'm going to swing back and forth I know, but you've mentioned alt coins. So you certainly don't come across as a maximalist, which is a big thing for people.

So how do you feel about alt coins? Obviously there's a lot of scams and bullshit. I don't believe everything that isn't Bitcoin is a scam, because I believe some people have honest intentions, I think they just might be stupid ideas. How do you feel about, firstly the broad cryptocurrency ecosystem and then specifically what kind of projects are you interested in?

Nick Szabo: Well I'd love for the privacy coins to work, so Zcash, Monero and Dash. There's some good things about those and then there's some probably not so good things that come from trying to make privacy and [Inaudible] work together.

Peter McCormack: Do you have a preference?

Nick Szabo: I don't have a preference because there's a lot of technicalities that I haven't dived into.

Peter McCormack: I find Monero most interesting, I think because if it feels most like Bitcoin, if you know what I mean. I think Zcash sometimes feels a little bit like a corporate coin and Dash has...

Nick Szabo: I mean there's so many dimensions to these things, like probably Zcash is the best technology of the major privacy coins at this point, but then there's some other things about it that might make you skeptical.

Peter McCormack: Did you work with Zooko at Digicash?

Nick Szabo: Yeah, well I didn't work with him there, we were both there at different times. Then I hung out with him with the cypherpunks a fair amount too.

Peter McCormack: Okay, so what about Ethereum? Because previously it seemed like you were positive about it and then a little bit recently, not so much?

Nick Szabo: As advertised, it had a lot of potential, like a Turing complete smart contract and platform is incredibly useful. I've thought of a ton of useful things to do with it, you can't do with Bitcoin. But in practice we've seen it centralize and we've seen the attitudes of the leadership change. Lord Acton has the phrase, "power corrupts" and you could rephrase that as, "centralization corrupts" and as a coin becomes centralized, the attitudes of the leadership change.

It's in their self-interest, they love to talk about game theory and self-interest. It's in their self-interest now to preach a pro-centralization ideology kind of cryptically, because their followers don't believe that, but kind of cryptically that's what they're starting to do.

Peter McCormack: Okay, there is a spectrum of decentralization. I think the goal of decentralization is something you can't turn off, right? Is it possible that Ethereum can be semi de-centralized, in that it could have a few nodes operate around the world that means it's very difficult to switch off, but still offers benefits to the users? Or is just the whole idea dead?

Nick Szabo: Well the main benefit of it is dead because you could run this centrally, like a cloud service and it would have some utility, but it'd be very, very different from what Bitcoin's utility is and it would be very different from what a actual trust minimized, smart contract platform would have. So I wouldn't necessarily say that it doesn't have utility.

Centralized banking has utility, but its utility is very different than what Bitcoin's utility is and the risks are amplified because bankers know how to do digital centralized stuff as much as anybody does. I'm not convinced the Ethereum people know how to do it and it requires a whole bunch of subtle bureaucracy and subtle things, this whole quagmire about governance.

Bankers know how to do governance, but nobody in the crypto space knows how to do governance. So if you see in the crypto space, people talking up their governance and you really like that, just go back to banking! That's the people who know how to do governance.

Peter McCormack: I saw one of your threads, where you were talking about something and every time somebody mentioned governance, you said, " if you bring up governance, I'm going to block you!"

Nick Szabo: They're like zombies, they're endless!

Peter McCormack: Okay, but you have this interest in smart contracts, we can't do Turing complete smart contracts on Bitcoin, well one person thinks you can, but we can't, right? So you have this interest, do you think therefore that somebody needs to work... So with Bitcoin, someone has focus on building a monetary protocol and as a group of people, have tried to keep it as decentralized as possible.

Do you think that's an achievable goal with smart contracts? That someone should look to create a smart contract platform, but every design decision, similar to Bitcoin, is aimed at maximum decentralization or do you think with smart contracts it is just not possible because they will always scale to something that becomes centralized?

Nick Szabo: Well, it's definitely difficult. I'm not going to say it's impossible because there's lots of subtleties in the computer science, lots of things remaining to be explored and improved and I can't say I've dove down into all the different platforms out there that are promising these things. It's certainly possible, or well I think and hope it's possible, but it's harder than it looks.

Peter McCormack: Do small contracts have to be fully decentralized to get the benefit from them?

Nick Szabo: Well to get the globally seamless trust minimization benefit, yeah! Because otherwise it's just going to evolve back into politically controlled banking.

Peter McCormack: Okay, it sounds like you're kind of drifting away from it now as an idea?

Nick Szabo: Yeah, unfortunately I haven't seen anybody doing it right. I think Ethereum Classic and RSK probably have a better ethos about it, but whether the technology is up to achieving it, is maybe another matter.

Peter McCormack: The one thing I've always thought about with smart contracts, is that it goes back to almost that point with being able to reverse transactions. I've always worried whether companies really adopt smart contracts on immutable ledgers?

Because if you can't reverse it and there's some bug or mistake that ends up costing, it's no joke to even say tens or even hundreds of millions because that has actually happened in Ethereum. So I always thought because it's not foolproof, because code has bugs, do you really want to have smart contracts that business is built upon, where this can happen? It seems very risky.

Nick Szabo: Well yeah, you certainly want to have a much more careful... Part of the reason I'm soured on smart contracts is the standardization of Solidity, that's just not a good smart contract language. It's just basically a normal programming language, roughly speaking. So they have better things going on and better practices going on with medical devices and airlines and there are places where people die, if your code has bugs in it and you can't just go upgrade it if it's in hardware or it's an ASIC for example.

So there's lots of places actually that are [Inaudible 01:06:45], where you program once and it's got to work the first time you install it in hardware, because you're not going to change it before it breaks and kills somebody. So there's actually a lot of situations like that already, that smart people can learn. But they do sometimes kill people! I don't think the current smart contract community has the best practices. I think they can learn from these other areas that have been doing this a lot longer.

Peter McCormack: I've looked at something like Ethereum and said that to me it just seems like they're trying to put too much information on the Blockchain. If you're trying to put too much information on the Blockchain, it centralizes and we know it's centralized around Infura. Isn't it a shame that somebody just doesn't stand up and say, "you know what? Yeah, we got this wrong. We fucked up. We can't build this."

Nick Szabo: Well there's way too much inertia. There's a whole huge culture built up around it now and a lot of people's wages are dependent on the belief that that stuff works.

Peter McCormack: Just kick the can down the road?

Nick Szabo: Yeah.

Peter McCormack: But the truth sets you free man! How long can they continue with this? All right, well then we should just get back to Bitcoin, because if none of these are going to work then...

Nick Szabo: Well I should say that I'm not saying it's all broken or something, I'm just saying that there's a lot of risks involved and I don't think it's suitable for large amounts of money and it's got a lot of risk of centralization. It risks evolving to something a lot more like banking, a lot more bureaucracy and locality and so forth, than something very different from Bitcoin.

Peter McCormack: And then, who cares! Okay, so I'm going to get back to Bitcoin. One of the biggest things my friends always say to me is like, "it's useless because it's volatile" and they're scared to buy. What they're scared to do is buy it and lose 80%, so what do you say to people about that? I know what you say, you talk about four year cycle, right? You need to build belief, but do you think this will keep happening? Do you have this fundamental belief that it will keep going?

Nick Szabo: Well, I mean if you look just at the price and the history of investments in general, sure it's a gamble. I can understand why a normal Wall Street person would think it's just gambling, because price only gives you so much information. But if like me, you've studied the history of money and you realize it solves these historical problems, like validation has always been a problem, assaying gold and all these precious metals has always been very expensive. 

With Bitcoin, not everybody's going to run a full node, but lots of people can run full nodes and that solves a historically huge problem with money that hasn't been solved in nearly as good a way before, the ability to loot gold. The Aztecs collected tributes and they looted people and they were looted by the Spanish and then the English looted the Spanish...

Peter McCormack: And Nixon looted the Americans!

Nick Szabo: So it was not the most secure thing. With good key management, multisig, other techniques that people are developing, and this is a work in progress, it isn't necessarily Bitcoin itself, but a work in progress of key management, we can solve a lot of that problem too as well. So these are historically important problems with money that Bitcoin is solving or can solve for the first time in history.

Peter McCormack: But do you empathize with people who struggle with it being not a physical thing? I did with music, right? I was still buying CDs for two years longer than I should have and now they're all in a cupboard, I don't use them and eventually I got to MP3s. It's the same transition, it's the same logical transition in your mind in that you're going from a lump of gold or physical notes, even your debit card feels like money.

Nick Szabo: Well it feels like money because you started using it as money. Before you started using it as money, it didn't feel like money.

Peter McCormack: But it's so different, Bitcoin is so different. When we've spent our whole lives having a belief, which is wrong, but that money has value because of our government, we have that belief. We're not all cypherpunks!

Nick Szabo: Well that's true, but everybody can look at a price chart though. So if you look at the price chart, it reflects these fundamentals. Now there's lots of other things, you can look at the price chart and the fundamentals aren't really there and it's a bubble. But I see fundamentals being there.

Peter McCormack: Has your opinion drastically changed with any aspects of Bitcoin in its life? Are there any parts of it where you've had a very strong change in opinion?

Nick Szabo: I was skeptical of price schedule at first, because it was a very different thing than what I had designed, but it doesn't seem to have been an issue!

Peter McCormack: Nothing else?

Nick Szabo: No, I was very happy with the consensus protocols, much better than what I was using for example.

Peter McCormack: How rigid are you to the rules of Bitcoin? So for example, if there was a significant block re-org, say a thousand block re-org, how would you feel about that and what do you think the reaction should be to that?

Nick Szabo: Yeah, that would be a huge deal! That would be a big problem. There's more people down in the technical expertise of how likely that is and what you do to respond to it and stuff, than I am. But certainly that's something we would try to prevent.

Peter McCormack: All right, so looking forward, as we said, we're coming up to 11 years actually. The white paper actually came out on my birthday, on Halloween. Yeah, it came out on my birthday and I wasn't aware of it because I didn't buy any, but funny enough, I was in Vegas and on the 10th anniversary, I was in Vegas, so it was just this weird coincidence.

Well it's not that weird actually, because it was my 30th and 40th birthdays. Where are you going to go on a big one?! But we're 10 years in, where do you see Bitcoin in 5 or 10 years? In your mind where, how far do you think we can go with this?

Nick Szabo: Well, I mean there's a lot of unpredictability. For many years, the government has been very hands off with it and that's pretty surprising. But it's not too surprising considering how hard it would be to actually effectively crack down on Bitcoin. But seeing how they just went all guns blazing after Libra, that right there, we knew they would do that.

They did that against E-gold and Liberty reserve. Now those were smaller things, but they were certainly also energetic in taking them down. There's a huge unknown in the politics because the politics so far to Bitcoin has been friendlier than that and there's various reasons that could be. Part of it is because it is very difficult to impossible to regulate at least the core part of it, it's pretty easy to regulate the exchanges and some other aspects of it. But I can't predict politics better than anybody else can.

Peter McCormack: But it's quite interesting as well because I watched the Senate testimony hearing. It would be interesting to know what your view on Libra is. I didn't hate it as much as everyone else did, the general consensus.

Nick Szabo: 20 years ago, before... How long has it been? Anyway, before I came up with Bitgold and even after that was still a theoretical possibility, that still would be a big improvement. Well I don't know about big improvement, but improvement probably over central banking and the way things are done now, maybe. It's certainly a step, but that's 20 years ago and we've made so many advances that Libra has ignored, that's preposterous today.

Peter McCormack: But I didn't see Libra as a backward step from fiat. For me, it was kind of like fiat, Libra, Bitcoin, and if it became a bridge to introduce people to Bitcoin, I was kind of okay with it. I also felt it was just a natural thing that was going to happen. It was natural for Facebook to create something like this.

Nick Szabo: Probably, yeah.

Peter McCormack: It seemed like a stupid thing to fight and then watching the Senate hearing, it was quite interesting that there's some pro Bitcoin senators and it was quite interesting to hear some of that. I don't know if you noticed some of that?

Nick Szabo: Yeah, Bitcoin is part of the reality now. 20 years ago, it was this preposterously obscure fringe stuff and now it's very mainstream. It's been all over the financial TV networks and the newspapers and stuff for many years now. So that makes a big difference, it's a reality on the ground and Libra is not a reality on the ground, it was just a proposal. So that was the time they could kill it.

Peter McCormack: Yeah, well I think it will come back. So I always said I feel it would just be a stable coin, it would just be a dollar stable coin.

Nick Szabo: Yeah, I mean it's in competition with Tether and those things.

Peter McCormack: And to be honest, in some ways it made more sense. It seems like a lot easier and I think they'll do that. The interesting thing on the regulation side, do you worry about it? Also is there part of you that actually kind of wants them to bring the fight to you, as a bit of a cypherpunk, like "come on, let's have it. Fucking try and take us on!"

Nick Szabo: No, I'm enough of a libertarian to not want that stuff. It's something Bitcoin can resist, but it's not necessarily something particular people in Bitcoin can resist and it could cause a lot of harm. So certainly it's not something I wish for. But on the other hand, we live in a very politically far from ideal world and lots of people in government do hate what we're doing and you got to be prepared for it.

Peter McCormack: Do you think things are getting better or worse? I don't know if I'm noticing it because I'm getting more into Bitcoin and the people I meet, but I'm definitely noticing a growth in libertarianism. But it might just be me spending more time around libertarians. Do you see a time where that will become a viable third political option?

Nick Szabo: I mean it's come and gone. There was a big thing with Ron Paul and so forth, but there is such an interconnection between government and mass media outlets and there's so many people and other parts of the country that are dependent on it or their favorite issue needs government to do it for them.

Peter McCormack: So we need a libertarian news network!

Nick Szabo: So I think Bitcoin itself to some small extent comes with that ethos. There's plenty of people without that ethos, but it may help spread it a little bit.

Peter McCormack: We need a libertarian Roger Ailes, to take over a network, bring Bitcoin to people! I don't think we fully answered it, but where do you see Bitcoin 5 to 10 years, what is your best hope?

Nick Szabo: Well, I think what happens is that it moves up and out the food chain a little bit. So banks themselves have been very resistant to it so far, but at some point they start converting probably in less developed countries.

The internet connectivity improves in various parts of the world and internet connectivity may not improve, there may be political barriers to even that, but assuming it does, then Bitcoin use in these places is going to improve along with it and that makes it more viable and there's a lot more need for it, in various parts of the world, than there is in the developed world where most of the people using it are at right now.

So I think there's a lot of room for growth there and in those places, more formal institutions, banks and so forth are more likely to start using it than they are here. If you're in a wartime situation, like I said, we designed Bitgold, Bitcoin, B-money, that whole ethos is designed from the bottom up security and to have it globally seamless and independent. Along with that comes some nice features in wartime.

So for example, you're a central bank in Ukraine, you got this big pile of gold, you don't want the Russian tanks coming in and getting it. Your reserves are much more secure in the form of Bitcoin than they are in the form of gold. But that depends on some bad political instability that you certainly would not wish for, but certainly historically is possible.

Peter McCormack: Yeah and a shift in mindset to think, "we want Bitcoin and not gold." Bitcoin still not mainstream enough, certainly at a state level yet...

Nick Szabo: Right, well some people have to be hitting ahead with reality. If you're censored via bank, as people increasingly are, and by the way, that's one of the risks of digital centralization, is people get censored and the political activists from various points of view are starting to discover that you can go to banks and get your political enemies shut down and people doing things you don't want them to do, you them shut down.

You don't necessarily need to pass a law, you can convince some regulators or convince some politicians and then they lean on the banks and boom, that's your de facto law right there. That's increasingly happening because digital centralization makes things so vulnerable to that. So that's another trend and it depends how fast that grows because every time somebody gets censored, boom, that's a reality over the head, they become a Bitcoin fan.

Peter McCormack: Have you met Andrew Torba from Gab.com?

Nick Szabo: I have not met him, but I have read what he's gone through.

Peter McCormack: Yeah, they switched off everything and it happened very quickly, almost to the point of coordination between all the groups. So interestingly, I've come across a few people because of this, and this is why I'm doing this other show as well, because I want to touch on this. But yeah, they lost every single platform and they went to Bitcoin and now he's a huge Bitcoin fan because of this.

Probably very similar to what happened with WikiLeaks, right? But also I actually had it when I was talking to a sex worker, she got de-banked, she got kicked off PayPal, she actually got de-platformed by Coinbase as well, so she had to independently accept Bitcoin.

Nick Szabo: Yeah, I mean those are the real world cases. It won't be political ideology so much as many cases for many political different points of view like that, that cause people to switch to Bitcoin or at least to consider it.

Peter McCormack: I do wonder if any governments are accumulating... Well, we know of some.

Nick Szabo: So for example, a war is the version of a government being hit over the head. Sanctions might be another example.

Peter McCormack: And that started to happen, right? So we're hearing, I think is it five countries? So we know of North Korea of course, we've heard of Venezuela stealing mining equipment and also using it to get around sanctions. I think Iran, Syria and there's probably one more, I wouldn't be surprised if Russia are using it and perhaps they are already using it. Perhaps it is already existing, because sanctions are state level censorship, right? Interesting.

Nick Szabo: Yeah and it shows why governments also would be motivated to shut it down or try to come after it in some way. So on one hand, that motivates people to use Bitcoin and on the other hand it increases the risks involved.

Peter McCormack: We live in really, really fucking strange times. I don't know if you're feeling it?

Nick Szabo: Oh yeah! Well I mean our society is running so many radical experiments in parallel and we're just kind of hurdling into the future mostly blind. Everybody thinks they know what's going on or pretends they know, but we're going blindly into the future.

Peter McCormack: And everyone's pissed off! Like everyone's angry and fighting. One of the things I'm looking at quite a bit, and I mentioned you before, I'm just looking at global warming as an issue, and this is more just to explain my problems. It's not whether global warming is an issue or isn't an issue, it's that I can't find any truth. I'll go one side and a bunch of people say, "oh, here's some sites with information, you're wrong, you're a fucking idiot!”

Then I'll go to the other side and I get exactly the same! I'm finding that on multiple topics, whether it's global warming, gun rights, sex worker rights, abortion, any of these very complicated issues, there's no middle ground. Everyone's just like, "raaah, fight!"

Nick Szabo: Yeah, the more complicated things get, the more people over simplify it, because we have finite brains.

Peter McCormack: But the internet has allowed people to find each other, find a voice...

Nick Szabo: And people convince themselves that they understand things that they don't!

Peter McCormack: Well I'm guilty of that as well to be honest.

Nick Szabo: Oh it's a universal.

Peter McCormack: It's really hard to kind of take a step back sometimes and just say, "well hold on, I'm getting a bit too confident for myself, where's my area?" But it's really, really strange times and it's really interesting. We're watching the nature of money change in front of us, we are watching very different political outlooks. Obviously I am aware you are a fan of Trump, I've certainly had my opinion change of him, not a fan, but I've had my opinion change of him. We've got Brexit in the UK. What do you make of everything that's going on?

Nick Szabo: Well, again, it's far too complicated to be able to understand and predict more than a fraction of it. One of the interesting patterns that's common to Hong Kong and Brexit that I find interesting for my legal studies, is that it's common law versus civil law.

So with Brexit, England invented the common law tradition, a very ancient tradition there, but Europe is a civil law, Roman law tradition and that has come into a pretty severe conflict and that's a big part of the motivator for Brexit. Brexit has at least that the tacit support of most of the lawyers in Britain because that's what they learned, is the common law and they don't want a bunch of people from an alien legal system coming and telling them how to do things.

That erupts just all over in politics and the legal system and stuff, but it's also the same in Hong Kong. They have the British common law tradition and then China borrowed their law from Germany, which is a civil law tradition. So that's actually, and at certain levels, the same kind of conflict as Brexit. So I see some patterns like that that are interesting, but the world of politics is so complicated, I'm not going to claim some great ability to predict these things.

Peter McCormack: Well no, but when you talk about patterns, is it this week we've had demonstrations in Barcelona, Lebanon, Chile, it just feels like, across the world now everyone is... It almost feels like to me as if Hong Kong has said to people, "you can fight back! You don't have to take the bureaucracy and the bullshit." Do you get that feeling?

Nick Szabo: I guess, but I'm not there. My father fought the Hungarian revolution, which was somewhat at least tacitly encouraged by the United States and for some reason Hungarians believe that the United States might come help them and of course the United States, wasn't really in a position to help Hungary, so that was a lost cause and the Russian tanks came in.

So in terms of in my personal hemisphere, I sort of see Hong Kong through that lens. We can all say we support them and all this, but how would we actually possibly help them without risking nuclear war? So I do wonder where they're getting their mojo and motivation from to fight, what seems to me like a lost cause, but all power to them, whatever power they can get!

Peter McCormack: Did I read at the moment that the current president of Hungary is not a good dude?

Nick Szabo: No, so this is a similar issue of the Trump issue.

Peter McCormack: Please tell me, because I don't know, I only read about it recently.

Nick Szabo: There's tons of people that hate nationalism basically.

Peter McCormack: It's a shame thing, right? If I went back to the UK now and... Like I'm pro Brexit and a lot of my friends hate me for it and I've learnt more about Trump here. Again, I'm not a fan, but I've learned more about him and I know if I express that back with my friends back at home, they're going to shame on me and treat me like I'm a Nazi.

Nick Szabo: Well let's put it this way. So I have a fondness for Hungary and Hungarian culture, partly because my father was close to it, but he lost it, he did not teach us Hungarian. So there was a little genocide going on there, in so far as that... Now that language is very rare, it's a non-Indo-European language, it's distantly related to Finnish, it's distantly related to some languages in Siberia which have already basically died out, so it's a very unique culture and a unique language. I would think from just an objective point of view on, my view is not objective, because my dad is Hungarian.

But I would think just from an objective point of view, it'd be a great loss for humanity to lose this culture. But that's what you do, if you invite a bunch of people in who don't share the religion, don't share the race, don't share the language especially, you are going to lose that culture. There's no reason for people to learn Hungarian in Hungary, except that their neighbors speak it. If their neighbors aren't speaking it anymore, they'll lose their culture.

So if you care about preserving culture, as a lot of Hungarians do, as the Hungarian president does, then I would think that current immigration restrictionist, Hungarian culture is a very good idea. But that's very different from the American point of view, kind of multiethnic, multilingual, everybody's welcome kind of thing and more diverse the better.

Peter McCormack: All right, interesting! I'll have to read a bit more about that than. All right, well listen look, one thing I want to finish on with you, I got into a debate this week with somebody relating to Bitcoin SV and what they were talking to me about is Moore's law again. I've heard Moore's law come up and people talk about "big blocks don't matter, because we have Moore's law." But then I was reading about that Moore's law isn't eternal.

Nick Szabo: Right, well there's a fundamental limit in physics called Heisenberg's uncertainty principle, that sets a limit...

Peter McCormack: This is a good thing to finish on!

Nick Szabo: It's one of these very unfortunate things in physics, like Einstein's limit to the speed of light limit, that was really awful. It's even more awful than the speed of light limit, it's a limit on how precise you can make things and almost every technological breakthrough in human history from the industrial revolution to computers, semiconductors, has been based on making things more precise.

But unfortunately the smaller you go in scale, the more things get funny and imprecise, relative to your scale. So that's Heisenberg's uncertainty principles. Now ‎Feynman wrote an essay, I think in the 1940s, called "plenty of room at the bottom", where he said, "yeah, there's Heisenberg uncertainty principle, but it's a long way away from here, we've got a lot of improvement" and lo and behold, we did have a lot of improvement, Moore's law, this exponential increase in precision and speeding transistors and so forth.

But that is coming to an end. Right now sadly, we are reaching Heisenberg's limit, at least as far as semiconductor technology is going. I just bought a new Mac recently and it's basically the same as the Mac I bought in 2015, costs the same and has the same capabilities. That's never happened before in my life and that's because we're reaching physics' limits and that's happening now. It's going to come to an end, it is coming to an end.

Peter McCormack: What's the implication?

Nick Szabo: Well, the implication is, for example, during the block size debate, people were saying, "oh Moore's law, so we can expect X% improvement in this, Y% percent improvement in Y." These turned out to be very over optimistic and to project that kind of thing in the future, it's much more likely to be flat. Now there is somewhat orthogonal directions things might go, like quantum computing, but the traditional semiconductor classical computing, certainly is reached an impasse right now and maybe there's some room for improvement still, maybe there's not much.

But the next hundred years, as the laws of physics... We don't discover something in physics, we live through an era just like the industrial revolution and transportation, people lived through the era where people were going to space in 1960s, we thought, "oh transportation, the speed people are traveling is increasing at this exponential rate and so we'll be zipping at light speed through the universe in a few decades."

Well no, there's actually physical limits and there's actually this huge gravity world that we live on, and no, we don't have these space colonies and flying cars and all that stuff, people thought because there's physics limits to these things and practical limits that people haven't figuring out how to get around. So we're reaching that probably with computation right now and it's going to be a lot more boring and sad, in terms of, than I've experienced in my lifetime.

Peter McCormack: So we're going to hit a plateau in technology advancements, unless it would require... You're saying it would require new physics or just maybe different chip design?

Nick Szabo: Well, I mean quantum computing is not new physics, but it's a new application of quantum computing that finds a new set of parallelisms that aren't available in classical computing.

Peter McCormack: How much have you looked into quantum? I'm assuming you have?

Nick Szabo: A little bit, but like any of these things, it's a very detailed, esoteric thing that I am not possibly an expert on or like an expert in the field. But it does have a lot of barriers in terms of noise and error, that may or may not ever be overcome.

Peter McCormack: So we're going have a boring next 40, 50 years or the rest of our lives?

Nick Szabo: Yeah, I think that the really exciting progress in my life was computation and software is eating the world. Now there's a lot of improvement left in software because we have this bloatware that came up, like every time Moore's law doubled the speed of something, Microsoft and other companies were right there to completely obliterate that advantage with bloatware.

So there's all sorts of inefficiencies in software that probably can be overcome and that'll be probably a more important source of efficiency improvement over the next hundred years than hardware.

Peter McCormack: Maybe we don't need hardware? You talk about software eating the world, Bitcoin eating the world would be a very exciting thing, because that would be a very significant change to society. So maybe that's the next advancement.

Nick Szabo: Well eating the financial system maybe!

Peter McCormack: Can it do anything else? Is there anything else in there that interests?

Nick Szabo: Rolled up in what?

Peter McCormack: Like in Bitcoin. So for example, identity, do you find that an interesting...

Nick Szabo: Oh no, Bitcoin goes in the opposite direction. It doesn't depend on any identity, it doesn't need it, it doesn't implement it. It avoids it because it's a tar baby, it's a terrible quagmire to get into.

Peter McCormack: But people are building identity into Bitcoin?

Nick Szabo: Right, because the traditional banking system requires identity. So people come with the traditional banking mindset of, "you got to have identity." Well, no actually in Bitcoin you don't have identity, that's one of the brilliant efficiency wins of it, it's that whole human quagmire and bureaucratic mess you don't need!

Peter McCormack: Well I think the only other big area of interesting tech that a lot of people seem to be interested in is AI and the implications and automation.

Nick Szabo: That's a large, basically software known, like how does our mind work? How much can we implement that into software? Now there were projections about Moore's law that computers would reach human capacity, although the comparisons are actually quite dubious, because they work quite differently. 

We're going to fall short of those because Moore's law is not going to keep up with those projections anymore, so that kind of sheer hardware capacity thing is going to stop somewhat short of human capacity. But we don't know how intelligence works and the mind works for the most part and so it's anybody's guess as to whether this lesser, or what was deemed a lesser computational capability that we are going to probably plateau at, will be sufficient for human level AI.

Then of course, because software can already do a bunch of things much better than humans, if it can do what we can do as good as us, then of course it's better than us.

Peter McCormack: It will get rid of us then, it wouldn't need us! So Terminator can happen.

Nick Szabo: But again, that's a big unknown, as we don't really know how the mind works for the most part.

Peter McCormack: Are you interested in AI and do you share any of the fears about it?

Nick Szabo: No, it's mostly marketing hype. What I will hear about AI just on Twitter or so forth, is what other people hear about Blockchain on Twitter, it's not reality!

Peter McCormack: What does excite you then? What are the things that you're thinking about outside of Bitcoin. I know you love Bitcoin come on, but what other things are exciting you or are worth investing your time into?

Nick Szabo: Well I study a lot of history, just stay grounded on that. Prior to Bitcoin, I was interested in other things like space development, I worked at the Jet Propulsion Laboratory, so I was really excited to see the tail first rocket SpaceX thing, that's a nice breakthrough in that.

Peter McCormack: Have you read into the Scramjet?

Nick Szabo: I haven't heard about advances in that recently.

Peter McCormack: So it was in the news yesterday, that a jet that could get you from the UK to Australia in four hours.

Nick Szabo: Yeah, if they can get that to work! They've been trying to get at work for decades, so if they can get it to work or not, I don't know. They do use it in missiles and so forth, but there are some barriers limits to... Not least of which is the thing that killed the Concorde, was super sonic booms and nasty loud things like that.

Peter McCormack: Yeah, that was interesting about Concorde. I watched a documentary about that the other day and the fact that we've not had another supersonic jet since. But the sonic boom, you couldn't do it over certain cities, it had to be over the sea?

Nick Szabo: Right and they consume more fuel, which in our era of concern about global warming is the opposite direction of where most people want to go.

Peter McCormack: Doesn't a Scramjet, not consume traditional fuel?

Nick Szabo: No, it has to burn fuel.

Peter McCormack: I thought it had to burn oxygen as well though or something? At a certain speed, it would be more efficient than a traditional engine?

Nick Szabo: It might be more efficient.

Peter McCormack: So you don't think we're going to be colonizing Mars?

Nick Szabo: No, I mean that's a huge quagmire. If you study how economies work and how complicated they have to be just to support a really simple thing. For people who think that kind of thing is simple, there's an essay out there called "I, Pencil" that goes into detail about how complicated and how many people are involved directly and indirectly necessary to just create a simple pencil.

Peter McCormack: There's not one person who knows how to create a pencil, I heard about that!

Nick Szabo: Unless they spend 10 days whittling one pencil or something very inefficient like that.

Peter McCormack: I don't see it as something in my lifetime anyway. Nick, look, this has been fantastic. I really, really appreciate your time. I hope you don't do another interview now for a couple of years and when you do, it's me again! No look, I really appreciate it, people are going to love this. It's a real honor for me to have you on the show. You can finish out, tell people whether they can read your work and follow you.

Nick Szabo: So my blog is at unenumerated.blogspot.com, although that's old stuff, I don't update that very often these days. I'm on Twitter at @nickszabo4.

Peter McCormack: All right, appreciate you coming on man!

Nick Szabo: Thanks!

THANKS

A big thanks to my WBD Maximalist Patrons for helping support the show: JP Petit, Logan Shultz, Seb Walhain, Steve Foster, Tony, Gordon Gould, David Burlington, Jesse Powell, Bitcoin Tina, BitHyve and Wiel Menger.

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