WBD233 Audio Transcription

Next Level Bitcoin Privacy with Alex Gladstein & Chris Belcher

Interview date: Tuesday 16th June 2020

Note: the following is a transcription of my interview with Alex Gladstein and Chris Belcher. I have reviewed the transcription but if you find any mistakes, please feel free to email me. You can listen to the original recording here.

In this interview, I talk to Bitcoin developer Chris Belcher and Alex Gladstein, the Chief Strategy Officer at the Human Rights Foundation. We discuss financial privacy as a human right, Bitcoin privacy, financing devs and Chris’ work on Coinswap.

“The evolution of Bitcoin privacy has gone from creating doubt, to hopefully, in the future, making it impossible to link coins to a person. That is the key.”

— Alex Gladstein

Interview Transcription

Peter McCormack: Hi there Alex, hi Chris. How are you both doing?

Alex Gladstein: Doing well Peter, thanks for having us on.

Chris Belcher: I'm very well, thanks.

Peter McCormack: Good to get another English voice on. I didn't actually know you were from England Chris, which his great because we don't have enough English people doing this stuff! Everyone will know Alex because he's been on my show three or four times and he's been on my other show Defiance, but Chris, you haven't been on before, so for listeners of my show, just tell them a bit about you, what you do, how you're involved in Bitcoin?

Chris Belcher: So I'm a Bitcoin open-source developer and I work on a couple of projects in Bitcoin to try and build useful tools around Bitcoin. So people might have heard of JoinMarket or Electrum Personal Server, they're the two big things I'm known for, I guess and generally, I work on Bitcoin privacy. I wrote a Wiki article that explains as much as I can about privacy. Yeah, that's the summary of me essentially. I try and improve Bitcoin!

Peter McCormack: Fantastic! Well the reason we've got you both together today is, I got an email from Alex and HRF, I think it was... Was it last week, Alex?

Alex Gladstein: Yes.

Peter McCormack: Yeah, last week, announcing that the HRF has launched a privacy-focused developer fund which is great and that they're going to be supporting some of your work Chris, which is amazing. So we'll start with you Alex, just tell us a little bit of the background to creating this fund because it's pretty cool man.

Alex Gladstein: Yeah, it's something that's been on my mind and on the mind of the Human Rights Foundation for a while, is that currently if you are a developer working on, whether it's Bitcoin Core or other key Bitcoin projects, your current source of funds is either going to be intermittent, unpredictable small donations from fans or corporate contracts from big corporations, like exchanges for example and it would be really nice to see investment in Bitcoin research from non-profits, philanthropies, family offices and especially academic institutions and we just haven't gotten to that point yet.

I firmly believe it will happen, I firmly believe that in the future, 5, 10 years from now, every major university worth its salt will have a Bitcoin program project. But we're just not there yet. We've had the DCI, which is limited in as much as it's one of the only ones out there. But I really wanted to have HRF play a role in this and luckily a Bitcoiner, who had been following our work for a while, got in touch with us, he wants to stay anonymous but he said, "I want to endow HRF with some funds to allow you guys to start supporting Bitcoin development with an eye on privacy" and he specifically wanted to support more core work as opposed to second layer technologies.

That was an amazing thing to hear and of course, what we did is we pow-wowed and talked to some experts and friends and heard from them about who they'd recommend we'd support and Chris' name came up unanimously and we had been of course, very intrigued by the CoinSwap revitalization of that idea that had been dormant for a long time and his commitment to making it happen and then his explanations why it could be, if implemented properly, really groundbreaking.

At HRF, we're obviously looking at how can we make better tools for human rights activists around the world who are at risk and there couldn't be a more important tool in my mind than making Bitcoin more private, because when you make Bitcoin more private, you make it more resilient, you make it more decentralized, you make it more resistant to state attack and you make it more usable. All these things are intertwined.

So really excited to start this, not only because hopefully it will help make Bitcoin stronger, but also because hopefully it will have ripple effects in the wider ecosystem and encourage more and more people to get involved with Bitcoin funding. Maybe one day you see Amnesty International funding a Bitcoin dev, that'd be great! But we're a way away from that, but we can start with this.

Peter McCormack: Well it's a very cool thing that HRF is doing and it's very cool that you've got Bitcoiners supporting you with this. This question will go to both of you but I'll start with you Alex, I'm going to word it slightly different for you, but why is privacy so important? You and I discussed this recently, we shared a panel at the Messari online event with another Chainalysis company but just talk to me why privacy is so important with regards to finances.

Alex Gladstein: Yeah, to me you have different kinds of privacy. You have communications privacy, data privacy and to me, financial privacy is so existential, I would say. If we don't have financial privacy, we're not going to have democracies or open societies in the future, and this is because of technology and advancing technology. This wasn't the case maybe 30 years ago, but now we have exponentially growing and adapting and evolving AI in big data algorithms that can sort all these data points about citizens and their behaviours and starts to model them and allows governments and authorities and corporations to both influence, incentivize and also predict what citizens and individuals are going to do

 In that climate, we face an end-game where if we don't have privacy, we will all become sheep. It's completely inevitable and it's like the totalitarian end-game. Maybe it's kind of a frog boiling in water scenario where we all just get used to it. But one day, you'll wake up and you'll have no freedom left. If we have financial privacy and privacy in other forms, then that's impossible because if you want to build a Big Brother, the Big Brother needs to eat your data. If it's not eating your data, it can't grow very large. So we can protect ourselves and make it more difficult for authorities to arbitrarily know stuff about us that they don't need to know.

If we make it impossible for them to do mass social surveillance, then they can't do social engineering and the slippery slope doesn't end in concentration camps and gulags like it has done for the Chinese people in Xinjiang. If we have privacy, we can stop that slippery slope and there's nothing more important to me, in today's day and age, when it comes to our technological advancements and how fast we're growing in that particular area, than privacy. It's our single best weapon against that sort of horrible, dystopic outcome.

Peter McCormack: Chris, you as a Bitcoin developer, privacy's obviously something important to you. You wrote, what was it, 21,000 words on it on the Bitcoin Wiki?

Chris Belcher: Yeah, that's right. I completely agree with Alex that privacy is essential for human dignity and freedom and all those things. Another thing, on a technical level, privacy in Bitcoin is also essential for fungibility, that's these properties of money that it has to be divisible, portable, durable, all those things and something on that list is fungibility, which is that every unit is the same as every other unit. Every gold atom is the same as every other gold atom.

If Bitcoin doesn't have that, that means you won't be able to accept payment in it without, for example, running a big blacklist or consulting some kind of centralized database. If that nightmare scenario were to happen, that you can't accept Bitcoin without talking to Chainalysis, for example, then the decentralization would end, then it would no longer be a decentralized currency. So just from a technical level, it's essential for the project to succeed.

Peter McCormack: But why yourself, Chris, were you drawn to the privacy aspect of Bitcoin, because as a core developer, I expect there's many different aspects of Bitcoin you can work on, but is there a specific reason that you felt drawn to privacy?

Chris Belcher: Yeah, I just thought it was important and a big unsolved problem. The way I thought that Bitcoin solves this problem of the double spent problem, of which coin is spent first. But as a side effect and as a cost, every one's transaction is visible to everyone else and it just seemed like a big unsolved problem and quite an interesting thing to work on and important, so I went in that direction.

Peter McCormack: All right, Chris. The next thing I need to talk about with you is on a personal level. I've said to you, my show it tends to be designed for... Dan Held put out a Tweetstorm today, he said that I'm at the top of the funnel, I create a broad and open show for as many people as possible. But in doing so, in terms of Bitcoin myself, I'm a Bitcoiner, I have been for three years, I hodl Bitcoin, but I don't take care of my privacy.

When I look at something like your 21,000 word Wiki, I'm like, "This is amazing! I should really read through this." But then I'm like, "Oh, this is just going to be too much work." I end up just ignoring it and kind of accepting for myself that privacy is something I don't personally have right now. It's almost something I'm waiting to be completely abstracted away from me. Is that the ultimate goal? Or do you think as a Bitcoiner, this is something I should take responsibility for?

Chris Belcher: Well for the privacy Wiki, that wasn't aimed at common users. I was actually aiming at other developers...

Peter McCormack: Phew!

Chris Belcher: Because, all the information was actually out there. It was in academic papers and it was in talks and it was in blog posts, but it wasn't ever collected all in one place. So it meant if there was a wallet developer or some power user or like someone running a business who wanted to take care of their privacy, there's no one place they could actually look. That was my aim for doing that and a few other reasons as well, but that was the main aim. So yeah, I agree with you that one day, there should be a... Someone will build a wallet or all the merchants will take these privacy things, it will be the best standard and an ordinary user will just download something on their smart phone or their computer and it will just work and it will be as private as they can be.

But of course, there's a limit to that, because generally on hardware, if you have certain hardware, then there will be limitations in that as well. For example, on a smart phone, different apps might spy on you and then send information by phoning home to a server and if they can spy on your Bitcoin information, then that will be a privacy break. So ideally, developers will solve the whole problem, but users will have to do something. Maybe they'll just not choose certain products to have.

Peter McCormack: I guess there's a range of things. People can spy on you and know that you're a Bitcoiner, spy on a network level or on your phone, but there's also the ability to spy on, where you're spending your Bitcoin and the transactions you're doing. I guess there are different problems that's solved in different ways.

Chris Belcher: Yeah, that's right. I emphasize this quite a lot in blog post that every user, if they're interested in this, has to think about that model, that who you're actually hiding from. Are you just hiding so that your neighbour doesn't know that you buy, I don't know, something embarrassing? Or are you hiding from the Chinese government? They're two different threat models and you have to think about that when you choose which tools you use.

Then they will have different solutions. So for example, if someone wants to be really, really private, they might have an application which runs over Tor and it's a lot slower, it has a latency and uses more bandwidth. That might not be necessarily appropriate for everyone. If they're threat model is just their neighbour, maybe they don't need Tor.

Alex Gladstein: Yeah, and just to comment on that, I think that we have precedent legally, morally, conceptually for what private money looks like and that's cash, paper money and when you buy something with paper money, you don't reveal anything about yourself. When you make a purchase, the merchant doesn't know anything about you and that was fine for many, many decades, millennia etc. Now we're entering into a new age where if you do a swipe or insert your card or potentially in the future, pay with a chip in your wrist, retina, whatever, you're going to be revealing a lot about yourself.

As we definitely move to an era where we're not going to have paper money anymore, we need to think really hard about how can we have cash-like digital payments? In many ways, the crux is, can we have payments that aren't natively connected to our ID stack? So Bitcoin's use case, in my view for human rights advocacy and for helping us avoid the surveillance state is connected to its ability to not be connected to a big ID stack, which is why Chris' work is so important. So if all of a sudden, you can make Bitcoin payments or Lightning payments or second layer Bitcoin payments that are pseudonymous, so two numbers transacting and no one can see into that and figure out how to connect that to your personality, then we have a defence mechanism, we have a shield and then you can think of specific examples of this.

A lot of people like to criticize Bitcoin and say, "Oh, well Chinese miners control Bitcoin and they can just censor your transactions." Well first of all, let's not even get into the mining piece but a lot of people fail to see, if a Chinese miner conglomerate wanted to censor my transaction to you Peter, they'd have to know which UTXOs are mine. How would they do that? Now, if I practice good operational security and in the future a lot of people are using stuff like CoinSwap which I'm sure we'll get into, they can't know what transactions are mine, and therefore they can't censor what I'm going to send you.

So privacy is really, really important also for Bitcoin censorship resistance and I think that's something quite important to underline because in the coming years, I think in Bitcoin there's going to be a new civil war over privacy. I think there's going to be arguments that some Bitcoiners are going to say, "We don't want more privacy, because we want the number to go up and we want regulated relationships with banks and with investors and we want to go to Wall Street and Main Street etc" and you're going to see them trying to push away from this narrative of private money, that's uncensorable and kind of dark.

I think that's the next big civil war here, and we need to grow the troops on our side, on the side of human rights and freedom and that's why we need to support people like Chris, because ultimately, they're the ones that are going to make this possible.

Peter McCormack: Actually, just on that point Alex, do you worry at all that a bigger focus on building privacy into Bitcoin gives the state more of a reason to attack Bitcoin or even want to outlaw it?

Alex Gladstein: It's inevitable and it's inexorable. We should think about it like the battles we've had both legally and culturally over, for example, PGP or encrypted messaging. So at first, these things were attacked by the government, by people in the media as tools for child molesters or terrorists or whatever and over time, we've seen cultural acceptance of encrypted messaging to the point where you have even someone like Michael Hayden who has a huge background in the US intelligence industry saying that it's essential for Americans to have encrypted messaging. 

You have military brass using it, American Chief Intelligence officers saying it's important for our... That's my country at least, for Americans to have, and you have more widespread merchant-based private sector adoption of it for different reasons. But again, you have WhatsApp, Facebook Messenger, you have all these big companies with hundreds of millions of users, Zoom too, getting pressured to adopt encryption. So it will go in this way where if we can learn anything from the battle over encryption, at first, it will be widely attacked and criticized. But over time, I think privacy and Bitcoin will force its way into success.

Peter McCormack: Nice! All right, I do want to know a little bit more about CoinSwap Chris, but before we get into that, can you tell me what it's like as a developer working in Bitcoin in terms of getting funding because obviously, getting the support from the HRF is great, but historically what has it been like for you working on open-source work such as this?

Chris Belcher: Well to be honest I started doing this when I was a student. So I was doing my PhD and then I went in some of my spare time, I programmed on this stuff and then I already had a PhD stipend to fund me and over time, it was... I had a donation address, of course and you'd get small donations coming in, and occasionally you'd get a more substantial one that would last and it would be big enough to live on for a few months or something.

Peter McCormack: Fantastic!

Chris Belcher: That would vary, so it can be quite volatile. You have to take a bit of a risk but I guess I always had in the back of my mind that if I do run out of money, then I'll just find a job and then I'll show them my GitHub. So that kind of kept me going and I always lived quite cheaply and also when the Bitcoin price went up a bit, that helped. It's just that, it's kind of risky, but worth it, I'd say.

Peter McCormack: It is kind of a beautiful thing how there is this kind of pay it forward mentality within Bitcoin that people want to support it, whether it's little bits here or there or whether it's early Bitcoiners who are helping fund work like Chaincode Labs. It is a really beautiful thing, what you have in Bitcoin and it's very cool that obviously someone like the HRF are doing this as well. Alex, at the HRF, are you are opening up the fund for other people to donate and support as well?

Alex Gladstein: Yeah, the general structure is as follows, again, received an initial kick-off gift where we're going to make several grants out of that, Chris is just the first one. Then moving forward, we started a crowdfunding campaign, which has already been somewhat successful. If you go to hrf.org/devfund, you can see. There's a BTC PayServer option where you can donate Bitcoin and then you can donate fiat via a fundraise link and if you go to the fundraise link, you can actually see the ticker.

So we've already raised I think, more than $15,000 for this fund moving forward and I think that, as we get to the end of the summer, hopefully this fund will be in a place where it can support ongoing grants, maybe quarterly, to different projects around the world. So that's kind of how it's set up and structured.

Peter McCormack: All right cool. Well listen, let's get into CoinSwap. Chris, tell me about CoinSwap, tell me what I need to know about CoinSwap, how it works, what it's used for and try to keep this as simple as possible because I'm one of these people just needs it explained in the most basic way.

Chris Belcher: Okay, so CoinSwap is a privacy protocol. Now the first thing to realize is the CoinSwap makes you think there's some kind of trading involved and there's nothing like that. It's just a way of sending Bitcoin and the way it works technically, is that you send your Bitcoin to someone else and they send their Bitcoin to you, like the same amount and there is some quite interesting, a novel, smart contract in a way that, what that means is the other person can't steal your money and you can't steal their money. So if you send them, I don't know, 15 Bitcoin, you're definitely going to get back 15 Bitcoin and there's no way for them to steal from you.

The effect of that means, that when some adversary's looking on the blockchain, they'll see your transaction going somewhere and a transaction that the coins belong to you and the coins are coming to you, but the two transactions are not linked at all. The transaction graph, as they call it technically, is not linked together. Your coins are just mixed with someone else's. Another interesting thing about this is that these transactions can look exactly the same as any other regular transaction that's on Bitcoin that's happening every day.

That means that if someone is just making a regular transaction, if they don't care too much about privacy, then anyone who's analyzing the blockchain now has doubts because they'll always have to consider, "What if this person I'm tracking actually used CoinSwap?" They probably weren't using it, but if there's a 5% chance that they were using it, then all my maths, big data gathering is not going to work, because 5% is too big of an error rate. So it's those two things that are really important, that it's invisible and that it's unlinked.

Peter McCormack: Right, I'm going to ask some basic questions here. So if I send out 15 Bitcoin and then 15 Bitcoin comes back to me, is that not obvious what's happened there?

Chris Belcher: Because of the amounts, you mean? That 15 and 15?

Peter McCormack: Yeah.

Chris Belcher: So that was a big... So CoinSwap was actually written about in 2013, and that was one of the problems that they had with it. You could use amounts correlation to un-mix it, but there is a way I wrote about in my recent blog post, which is you have multi-transaction CoinSwap, which is I send you 15 Bitcoin and you also send me 15 Bitcoin, but not in one transaction. So you might send me seven Bitcoin, another transaction you send five Bitcoin and the final one you send three Bitcoin.

That adds up to 15 and that means anyone who starts with me and says, "Right, I see Chris' 15 Bitcoin, I'm going to look for some other Bitcoin." They're never going to find anything. If they do, they'll find a 7, 5 and 3 mixed with all the other transactions. So this multi-transaction CoinSwap is what breaks that problem and it breaks amounts correlation.

Peter McCormack: But does that mean I have to always look and find somebody who wants to swap a similar amount or is there like a marketplace for these whereby it all just happens for me?

Chris Belcher: Yeah, the ideal is that it will be really simple for the user to use. That they just want to... If the user wants to send, I don't know, 0.1 BTC or whatever amount they're sending, then they press a button "Send" and it just works. The way that functions is they'll be this thing which I'm calling a liquidity market, which is they'll be other people out there who run these market makers, are what I'm calling them, out there and they'll be happy to make a coin swap with you for any amount and all they ask is a small fee.

They know they can't lose their money because the smart contract, they can only earn this fee if they have their computer running on all the time and if they have some Bitcoins. So because the risk is very low and that means the fees we expect that people will be asking in this marketplace will be quite low, because anyone can do it. If you have Bitcoins, you just make money from this and money will come flooding in.

So then what would happen in practice is your wallet, they'll connect to this marketplace and say, "Okay, I want to CoinSwap 15 Bitcoins" or whatever it might be and they'll be 10 other, 100 other, 1,000 other users and you just choose one or a few and do a CoinSwap with them and pay them the fee and you get exactly the 15 Bitcoins or whichever amount you were wanting comes back to you.

Peter McCormack: So it sounds to me like an exchange but without ever actually trading in and out of another currency. You're just trading one for one Bitcoin all the time.

Chris Belcher: Yeah, that's it exactly and the idea comes from it. It's a financial idea. When you go on an exchange now to trade Bitcoins for dollars, you don't wait around if you want. You can just press Buy and Sell and that works because on the other side of the trade, they're also called market makers and they're always happy to do a trade for dollars for Bitcoin and all they ask is a bit ask spread, the different between their bid and their ask.

That's how they make the money and because it's quite a low risk to do, to make a market, so you have loads of people doing it and there's loads of liquidity on exchanges. It's that same idea, but instead of trading Bitcoins for dollars, you don't do a trade, you do this CoinSwap protocol.

Peter McCormack: So how is this different from a mixer?

Chris Belcher: In some ways, it's similar to a mixer in those old... You're talking about those centralized mixers from 2011?

Peter McCormack: Yeah.

Chris Belcher: They're similar in that both of them you send coins there and you get coins back and it's different in the way that the mixer can steal your money. That's happened all the time through history that people want to mix. They send coins and the mixer just disappears, never gives them their money back. Another way that it's different is generally in these things, the mixer is only one entity, it's some guy on the dark net somewhere. If he's spying on you, he can spy on you because he sees your coins coming in and your coins coming out. In this CoinSwap plan, this design, I had a scheme where instead of using one market maker to do the CoinSwap, the user will do a route.

So in the blog post, I wrote there will be Alice and she does a CoinSwap to Bob and then Bob's coins get sent to Charlie and Charlie's coins get sent to Dennis and Dennis' coins get sent to Alice, where Alice wants to send them. That means instead of one person being able to spy on the route, you need to get into a situation where these makers, Bob, Charlie and Dennis, are all colluding and only if they're colluding can they actually un-mix the whole transaction, otherwise they don't have enough information to.

Peter McCormack: But I guess like an exchange, the more liquidity it has, the more users, it becomes almost impossible to 1) collude and 2) to track.

Chris Belcher: Yeah, there's actually in the blog post, there's a design thing to stop them and to make an economic incentive so they don't collude, which is fidelity bonds. That's kind of technical, I can maybe get into that a bit later, but the long story short is that it's a way to create a market incentive, so that if someone wants to collude, if someone, for example, wants to run multiple bots with the intent of spying, then it will cost them more money.

They'd make more money if they just ran one bot. That's the way to do it to make most money. Doing anything else means you leave money on the table, therefore there's an economic incentive to not collude.

Peter McCormack: Like a proof of work situation?

Chris Belcher: Yeah, it's very similar to that. It's the way fidelity bonds work is they're a way of sacrificing value in the way that proof of work sacrifices value and it's done in a way that can be proved to a third party. So what happens is these makers are asked to do a sacrifice. They don't have to, it's a market mechanism. They do a sacrifice of value and they show it to the world and then the user will choose makers which have the biggest sacrifice. The crucial part of it is that the sacrifice goes... In math, it's quadratic in maths.

So if you have a sacrifice of 5, then the total value will be 5 times 5 which is 10. But if the person who had these 5 Bitcoins, if they actually ran 5 bots, each one had 1 Bitcoin each, so 1 + 1 + 1, then it will be 1 squared + 1 squared + 1 squared, which adds up to 5 and 5 is much less than 25 from before. If they put all their Bitcoins into one bot, the value they'd get would will be 5 times 5 which is 25 and if they split it up, the value they'd get for advertising would just be 1, or it would just be 5. That's where the lumping together comes from.

Peter McCormack: Okay, so I guess my main concern when thinking about it is similar to a mixer. One of my old sponsors was a wallet called DropBit and their CEO Larry Harman, back in 2011, '12, the time you mentioned, he had a mixer called Helix. Alex, you might have a thought on this, because he was arrested on money laundering charges for operating the mixer. So do we worry here about the fact that this might be considered money laundering by the government and therefore you could face legal challenge?

Chris Belcher: Yeah, I do want to mention I'm not a lawyer, but I understood that the problem of Larry of something was that he was directly advertising to dark net users, that he said, "Come and use my website to mix your drug money and it will be great and I won't grass you up to the police or whatever." That was my impression, because there are legitimate uses for privacy and money laundering has a much wider of definition than just you don't want people to see what you do with your money.

Alex Gladstein: The bigger point is that essentially, non-custodial mixing software is not really subject to the same regulation. Coin Center, a non-profit in Washington DC, has written a lot about this. Whereas Larry's case was that he was taking custody of your funds, therefore he was subject to all sorts of financial legislation and rules and laws and because in this case, in the CoinSwap case, the other person is never taking custody of your funds, much like in any other kind of...

Whether it's a CoinJoin etc, then the same rules don't apply. So that's the key difference. It's very, very important to differentiate custodial from non-custodial mixing, which is why CoinSwap is so important.

Peter McCormack: Chris, is CoinSwap something I can play with right now?

Chris Belcher: No, right now it's just in the design phase. I'm working on creating it for Testnet first and then designing and it and making it. My personal plan/hope is to have a release in 6 to 9 months that people can play with it and work on it. Even then, that will just be for Testnet.

Peter McCormack: What will be the best practices be for people using it? Is it a case of whenever you receive Bitcoin, you should immediately use CoinSwap and send to a different address?

Chris Belcher: Yeah, just an example, if you got your Bitcoins from someone who knew lots about you, I don't know, if you're an employee and you got paid in Bitcoin or if you bought from an exchange that has all your information and you could CoinSwap, then that would stop the other person seeing what you did with your money.

That could be a good thing. But maybe if you just Bitcoins from another place, maybe you don't have to. But an interesting point there, because CoinSwaps look the same as regular transactions, no one will actually know what you did. You could just go and spend them normally and the other person might think, "Oh, maybe he used CoinSwap and we don't actually know."

Alex Gladstein: Just a clarifying question, Chris, from my end that I've been wondering about, and that's obviously very important that no one knows looking at the blockchain that it's a CoinSwap, because right now, if you do a CoinJoin with equal outputs, it's kind of obvious. So that's a big improvement. But can you just talk about basic CoinSwap. Is it such that party A sends to party B and then there's a party C that sends back to D, which party A also controls? You would just have multiple addresses in the same wallet? Or how exactly does that break the transaction history?

Chris Belcher: So in the routed case, the user, Alice who I'm calling in that document, they would organize the CoinSwap. So for example, Bob and Charlie, they'd have money going from Bob to this CoinSwap address, which is under their joint control and Alice would do all the organizing for that. So she'd pass all the messages between Bob and Charlie and they would never directly talk to each other over the wire, over the network.

A good thing about that is then Bob and Charlie don't know if they're talking to another market maker or if they're talking to Alice directly. Either of those two cases are identical. So they don't know if they're the first, or they're in the middle or they're the last person in that route.

Alex Gladstein: Right, but in terms of Alice's case, does she get back change? Or nothing at all?

Chris Belcher: No, nothing at all. She'd send coins to the first one, Bob, and then she could get coins from the last one, Dennis, in my example.

Alex Gladstein: But those coins go back to their original address or a different address that she controls?

Chris Belcher: Different addresses to avoid address reuse.

Alex Gladstein: Perfect, okay, that's just what I wanted to clarify.

Peter McCormack: So there's a few things I'm aware of with Bitcoin privacy, CoinSwap obviously that you're working on now and I've also heard of CoinJoin and PayJoin. They're not anything I've actively used yet. I had a look at CoinJoin, but it was just a little bit too confusing for me, using it within Samourai. So one of the things that are good probably for me and people listening, especially people who haven't really dabbled in their own Bitcoin privacy. Can you explain the differences between these and what the pros and cons are of the different technologies available?

Chris Belcher: Okay, so I'll start with CoinJoin. So CoinJoin is much simpler than CoinSwap and the way it works is that many people, many different users come together and they create one Bitcoin transaction for all of them. So a very common kind of CoinJoin is called "eCollab for CoinJoin" and that's where all these users, say there's 10 users, all of them will put money into a transaction and they'll get exactly the same amount of Bitcoins out. I don't know, let's call it two Bitcoins, they all get two Bitcoins.

Then for someone looking on the blockchain, it's impossible to find a linkage between the inputs and the outputs and so the upside there, is that was simple to actually create. So these protocols have been known since 2013 and they're quite easy to actually program to do and you don't need much programming state or anything like that, they're good as a first step for privacy. So CoinJoin has a few downsides and one is that they're very obvious what's happening because these transactions, they're much bigger and they have these characteristic equal outputs.

So in the example I just said, they'll be 10 outputs and they're all worth two Bitcoins each. That kind of pattern doesn't really happen ever on the blockchain, maybe by accident, but it happens all the time with CoinJoin. So there's another type of transaction called PayJoin and that is a different kind of CoinJoin but it doesn't have an equal output. The way that works is that works whenever there is a sender and receiver relationship.

For example, a customer and a merchant. If I'm the user and I want to buy something from a customer, I want to buy a hat, for example, what I can do is then me and the merchants, so the customer merchant can together create a CoinJoin, which is we can create one transaction which has both of our inputs and both of our outputs and what the effect there is that it screws up an assumption behind blockchain analysis, which is that all the inputs to each transaction are owned by the same person. So it purposefully breaks that assumption.

Another effect it has, it hides the payment amount. If the hat that I'm buying cost $5 then it won't be obvious then that amount, that $5 won't be visible on the blockchain. So that has an advantage over the equal output CoinJoins in that it's not visible, that PayJoin's also look like a regular transaction.

Peter McCormack: Right, okay. That's how some service providers have been able to identify CoinJoin coins and have essentially been rejecting them?

Chris Belcher: Yeah, there was a few cases. I think Binance or something rejected CoinJoin, or at least something. So there's a slight debate of whether that case was before they were CoinJoins or because they were related to and address which was used in the Wasabi CoinJoin implementation, but we can't really tell because Binance won't really tell us. But the principle that they are detectable is still there, even if Binance wasn't detecting them today, there's nothing to stop them or anyone else detecting them in the future.

Alex Gladstein: To be clear, if you're a Coinbase and one of your users is consistently either coming into the Coinbase account wallet with coins from an equal output transaction or consistently withdrawing to coins that end up in an equal output transaction, Coinbase may, in the future, just decide to ban that user because they're worried about the US government regulation etc. They aren't, to our knowledge doing it now, but they could, which is why it's really important to develop CoinJoin technology that does not have equal outputs.

Peter McCormack: If Coinbase was doing that Alex, they are still making a certain assumption based on blockchain activity. They don't actually have proof.

Alex Gladstein: Yeah, I think that's what a lot of people who spread fear, uncertainty and doubt about Bitcoin miss, is that at least in a democratic society, where you'd have to take these cases to a court with a judge, all this stuff is assumptions. So at the end of the day, the judge is going to have to basically figure out, with all the evidence that's been presented, can I prove that these coins were Peter's? Or can I prove that he CoinJoined? The best you can do is prove with a reasonable degree of doubt.

So what we're trying to do is create as much doubt as possible and eventually, create the even ability to link these coins to a particular person. So the evolution of Bitcoin privacy has gone from creating doubt, to hopefully in the future, making it basically impossible to link coins to a person. That is the key, that's where we want to get to.

Peter McCormack: See Chris, some people would say I'm a lazy Bitcoiner and perhaps I am. Perhaps I've got a lazy attitude, but I'm also always trying to think of ease of use for other people and I just want to get to a point whenever I send new Bitcoin to a wallet that I hold, I just want to press a button, just one button that says CoinJoin or CoinSwap or whatever it is, and it's all just done for me. Do you think we will get to that point?

Chris Belcher: Yeah, I think there's a big hope but that's what I designed around, that it won't even be called CoinJoin or CoinSwap or any other technical name, it will just be called "Send" or maybe "Send Privately" or something, because I agree with you. If something's really hard to use, people just won't do it or if someone needs to do it, they'll feel they won't be able to do it and then they'll self-censor.

Peter McCormack: Do you think there's a possibility there for that one step further, that my coins could go through a CoinSwap on the way into the wallet or on the way out, every time? I'm not even thinking about it at that point or do you think privacy is a thing you would want to be able to choose?

Chris Belcher: Well a problem with it happening automatically is because this costs fees. It cost CoinSwap fees and miner fees and the wallet has to explain to the user, why their balance just went down. Just from a user experience point of view, that's probably not a good idea. My vision and my changes that a user could choose, do they want to send a transaction that's a bit cheaper but is less private, or one that's a bit more expensive and is more private and then when they're choosing what to send, they choose one based on their needs at that time.

Peter McCormack: Yeah, that makes sense. I guess if this is hugely successful, could this lead to congestion in the blockchain? Is that something you've had to think about?

Chris Belcher: Oh yeah. Actually today... So CoinJoin transactions, they're implemented today, people use them and I've seen certain Tweets, I don't know how true they are, but something like 5% or 2% of some blocks are taken up just by some CoinJoins. So obviously the demand for privacy is there. I think everyone I talk to about privacy, they're all keen, they're eager, the demand is definitely there and I think CoinSwap helps with that because it's more efficient with the blockchain.

So the way these equal output CoinJoins work, they're much bigger, they use more block space and they also... People typically do more than one of them. So for example, in JoinMarket's implementation of CoinJoin which I worked on, by default, it does about 10 or 15 CoinJoins and each individual CoinJoin is much bigger and that can be replaced by just one set of CoinSwap transactions.

You do it once and that will be enough. These 15 CoinJoins are still not as good privacy as one set of CoinSwaps would be and is bigger on the blockchain. So efficiency's improved. In fact, one place where the privacy actually comes from, the reason the privacy is better is because it's taking away information from the blockchain. So the two goals of reducing congestion and protecting privacy go together there.

Alex Gladstein: Just to build on that, and to give your listeners Peter, an understanding of where we are with the state of usability is right now, I can just very quickly walk through what I've done, which I think is very simple and doesn't require any technical expertise. If you have an Android phone, unfortunately doesn't work for iPhone at the moment, you can just download an app called Samourai. It's a wallet, it's a Bitcoin wallet and it will appear to you no different really than perhaps like a Blockstream Green wallet or Dropbit etc.

The interesting thing is let's say you withdraw to this wallet from wherever you bought your Bitcoin from. If you're a normal person, then you bought it from something like Coinbase or Square and you would withdraw the Bitcoin to this wallet and then from there, you basically press a button and enter a CoinJoin and it enters into one of these equal output CoinJoins that we've been discussing. Then what happens at the end is you choose the pool you want to go into, whether it's a 10th of a Bitcoin or a 0.05 Bitcoin pool etc.

So these are increments of today, about $500 or $1,000, you can choose and then you put some Bitcoin in and then you wait a little while and then it's a matter of hours or a day or so, and then when that's done mixing, you now have a squeaky clean, 0.05 or 0.1 amount of Bitcoin. Then you can send that to cold storage or to any other wallet you want. So this today is fairly usable and I would say it's pretty easy, but it's more steps than I'd like.

In the future, especially if Chris and others are successful, there will be a one click function where you withdraw your money from an exchange and it does a CoinSwap, which is as we've heard, is even better than an equal output CoinJoin and then you pay a small fee and then all of a sudden you've got your Bitcoin that's not traceable. So I think that's where we're headed, but just to give your listeners an idea, you can already do this with a pretty easy to use phone app. It's pretty exciting!

Peter McCormack: That's pretty cool. I'm not on Android, so I can't see that, but perhaps you can show me next time I see you, Alex.

Alex Gladstein: Sure!

Chris Belcher: It can also be done on a desktop.

Alex Gladstein: Yeah, of course.

Chris Belcher: Not with this wallet but there are other wallets that can do it.

Alex Gladstein: Yeah, Wasabi, which has a different model than Samourai and I encourage people to experiment with both. They're often warring with each other as it stands, which is, I think, healthy. We all want competition. But Wasabi uses a slightly different model, but they have a really good desktop wallet, which is very interesting and it works the same way. But I just think that bringing Samourai to the mobile phone was a big deal and in the next couple of years, you're going to see, especially if Chris is determined, you're going to see mobile wallets that have CoinSwap built in.

Again, you may have to pay a fee, a premium for privacy and we can discuss that, but it's all about having that option and if enough users, 5% of users are doing some sort of CoinJoin or CoinSwap, then again, like what Chris said, it just creates doubt in the mind of anyone trying to do surveillance and it prevents them from making those assumptions that allow them to link transactions together and de-anonymize people. That's what we're trying to do, prevent authorities from de-anonymizing users. If they want to de-anonymize me, they should have to go get a warrant from an authority and go through a legal mechanism and investigate me like they would today.

What we want to prevent is, from them just being able to mass snoop on people, without getting a warrant in an unconstitutional way, at least in the American context. That's what we want to prevent. That's what they're able to do now through relationships with exchanges etc, they're able to mass de-anonymize people if they want to. We want to remove that technical ability from them so that they have to go through these traditional approved reasonable mechanisms to de-anonymize people. That's the key, we're just trying to preserve a state of legality that's reasonable and prevents mass surveillance.

Peter McCormack: What is it with wallets, they're always fighting each other! Doesn't matter whether it's a hardware wallet or a software wallet, they're always fucking fighting each other.

Chris Belcher: Well, it's because they're in competition. They get fees when people use them, when people use CoinJoins or buy their wallet, so it's kind of natural I suppose, for them to argue a bit on Twitter.

Peter McCormack: Yeah, but it seems like they're at it more than any other sector within Bitcoin.

Alex Gladstein: Chris, along those lines, do you view CoinSwap as something that you think will be pioneered or championed by one particular wallet at first? Or do you think it's something that really will be something that can be adopted by existing wallets in a way where you've got three or four options.

Chris Belcher: Yeah, ideally I'd like to get everyone on to use it, so the design I have in my project is that it will be a software library at the end, that existing wallets could build in and then you won't need to make a whole new wallet, do anything like that. You'll just use your old wallets which will have this new button, ideally.

Alex Gladstein: Amazing!

Peter McCormack: So Chris, what are the next steps? Are you working on this on your own? Have you got anyone helping you? You said perhaps 6 to 9 months to get some kind of a beta out, do some test out. Tell me what's going on for you, now.

Chris Belcher: So right now, I'm designing how the thing should actually work on a technical level and from there, I'll start creating it in Rust language and make a release. That's what I'm doing right now. The blog post that I wrote that got a lot of attention was also the design document, just like these are some of the general principles of how we should do this.

So they'll be multi-transactions, they'll be routing and then the actual details, I'll need to still figure out. I almost did a way there, but you really need to nail it down because the thing is, if you get it wrong, then people can lose money. So you have to be quite careful.

Peter McCormack: All right, damn, well listen, good luck with all of that, it sounds amazing. Alex, nice one on the HRF, that's important to this. I do have some other things I want to talk about while I've got you both here. Firstly Chris, tell me about Sci-Hub.

Chris Belcher: Sci-Hub's really interesting, that's another thing that Bitcoin donations are used for. So the way academic publishing works, the way scientific paper and academic papers come out is they're published with journals and you can read the journal if you're in a library. So if you're related to a university or in a big institution, they pay a subscription to journals and that ends up... Firstly the journals are a bit of a monopoly. It ends up costing loads of money to these universities and secondly, it means that not everyone can use them, you can only use them if you're associated with an institution.

Sci-Hub is, I think our way of summarizing that is you could say it's the Pirate Bay of academic publishing. So if you go to the Sci-Hub website, you can find almost any paper that's been published out there. It's run by this great woman from, I think, Russian or Kazakhstan and it's a website you can just go to. The reason it's related to Bitcoin is she accepts donation in Bitcoin, that's the only way she could be funded because all PayPal and Visa and all these other people have just censored her because what she's doing is against... It's like Torrenting, it breaks copyright law and they want to shut that down.

But even though it breaks the law for these things, I still think it's a massive public good. I know from my point of view that my work would be basically impossible... Well, much, much harder at least, if I'd had to... Because I'm no longer associated with the university, I can't just go online and find a paper for some maths equation that I was trying to solve. It's really funny, the other day I needed to find a paper that was written in 1963 and it solved a polylogia normal function I needed to solve

 I just couldn't find it anywhere that I had... It was on, I think The American Mathematical Journal and they were was charging $50 to read the paper or something silly that was just out of my reach as an independent researcher. So I just went on my Sci-Hub and it was there.

Peter McCormack: So what's the general ethical view on this.?

Chris Belcher: I think it's funny, the only people who benefit are these publisher monopolies. So from what I... All the academics I know, no one's a big fan. The thing is, they want their work to be as visible as possible to everyone and then universities want their work to be as visible as possible to everyone and they also don't want to pay the massive monopoly fees and then people who fund the universities, so either their taxpayers or their benefactors, they also don't want to be paying loads of fees, they don't want their money to go to this monopoly. So I think there's basically a consensus amongst everyone that this kind of thing is ethical and is good.

Peter McCormack: I guess we've two links to Gregory Maxwell here then, right? Am I right in thinking he originally came up with CoinSwap and he was he involved with Aaron Schwartz in the dumping of, what was it, JSTOR documents on the Pirate Bay or something?

Chris Belcher: Yeah, I think so. I haven't read of that in a few years, but from what I remember, Aaron Schwartz uploaded loads of these papers and it was exactly the same kind of thing, papers you couldn't get anywhere else but only going through this publishing monopoly. He put them onto Pirate Bay and... No, it wasn't him, it was Greg Maxwell put them on Pirate Bay and Aaron Schwartz was... I forget the details, but somehow they were both involved.

Peter McCormack: I seem to remember that sadly, about Aaron Schwartz.

Chris Belcher: That's exactly the same issue there, with academic publishing.

Peter McCormack: Yeah, that's really interesting. It also made me think a little bit about of Wikileaks and what happened with Wikileaks.

Chris Belcher: Yeah, trustless donations and censorship resistant donations are a really big feature of Bitcoin. So it's natural that these kinds of places will use them.

Peter McCormack: All right, let's do a little bit more on privacy. I recently did an interview with Jonathan Levin from Chainalysis. Obviously, that's not a company that Alex is a particular fan of, myself, too. I don't usually give people a hard time, but I did give Jonathan quite a hard time on the show, but I don't know if you listened to that show but I know you certainly added some commentary about it, Chris. You were particularly irked by Chainalysis when Jonathan was out doing the interviews. Can you summarize your thoughts about it?

Chris Belcher: Well I suppose my main thing there is that it's not necessarily about Chainalysis, but more about blockchain surveillance as a technology. I know that when Jonathan went on your show, he could say things like, "Oh, we don't have any personal information, we're not doing this stuff." The thing I kept thinking was, "Okay, it's not you but I'm sure there's a Chinese version of Chainalysis and they do actually spy on people and get all their personal information" or there's a Venezuelan or an Iranian version of blockchain analysis.

So the technology's out there, you can't just rely on one company saying, "Okay, we're going to be ethical" because, loads of other people won't be. Then there's also the issues of if their technology gets too well adopted, then it will destroy the fungibility of Bitcoin, that Bitcoin will just stop working as a money. It won't be usable anymore if everyone has to consult the centralized database.

Peter McCormack: Can you make them obsolete?

Chris Belcher: I hope so, that's one of my aims!

Peter McCormack: What do you think, Alex?

Alex Gladstein: That's why we wanted to support Chris and we'll be supporting other projects in the area of Bitcoin privacy. It's sort of a cat and mouse game, but if we don't advance and evolve on the privacy side, then the surveillance side will gain the upper hand and that's not something we want to see.

If we want to see the ability of free information and activists being able to receive donations without being crushed etc in the future, which is essential for the life blood of our societies, as we know them, as open and free societies, then we're going to need financial privacy in the future. I would just say it's like an overriding priority here.

Peter McCormack: Good. Well fuck you, Chainalysis!

Alex Gladstein: Also something about the Chainalysis folks is that they claim that they... Because I debated recently, one of the Elliptic guys who created that other company and they kind of have this view where they're responsible for Bitcoin's success. That's their marketing pitch and they're like...

Peter McCormack: It's such bullshit.

Alex Gladstein: "If we didn't' exist, then Bitcoin wouldn't' be as popular" and it's just a facile argument. It doesn't really make much sense and it's unfortunate to see them saying that. So I really hope they get obsoleted or as I invited them, to join our side. They should take their skills and knowledge about the Bitcoin blockchain and help strengthen it against spying. That would be a great turn of events and it would help them sleep better at night.

Peter McCormack: Yeah, well I was moderating that one Alex and I think you were particularly savage. I think something along the lines, you did something like, "You need to reconsider your life choices or come and work for the good side, blah, blah." It was a pretty harsh take down!

Alex Gladstein: He was very nice about it and he said he had a lot to think about, which is good. I want them to be thinking a lot about what they're doing and them to just know this is not some moral high horse they can be on. No, there's no high horse for them. They're squarely mercenaries, and they should be referred to as surveillance companies. They want to be proud about being a surveillance company, great, they can go do that. But they should not be allowed to go around and be treated as positive people in the Bitcoin space, they're enemies of Bitcoin. That's the full story.

Peter McCormack: Fair enough. If anyone's listening that's working for a blockchain analysis company, go fuck yourself. You're not a Bitcoiner, reconsider your life choices. I think that's a fair summary. Right, one last thing I want to talk to you about. Alex, you sent me an article about the Zebelleion Rebellion, which is actually fascinating. I couldn't work out if that was almost like some kind of Sci-ops piece to discredit Bitcoin.

Alex Gladstein: Well, it was very exaggerated. It was a writer who's paid for the clicks and he took a look at a totally... It's not a classified paper, it was like a training manual developed by an arm of the US government, and there's two paragraphs in this paper about a scenario where, in the future, dissidents or anti-government activists create a pseudonymous crowdfunding campaign. So you could think of it today if Black Lives Matter or something like that decided that they wanted to start a campaign to fund their work that was not traceable.

They were worried that the government was going to stop them, which I think is not out of the question, if you actually see what's happening now in different cities. In Hong Kong, this has already happened and if you donate to Spark Alliance or one of the groups that's supporting the Hong Kong protest movement and your employer finds out, you can get fired. This has happened in Venezuela, if you supported the student movement or something like that in Venezuela, and the government found out, you get fired. This is highly problematic for societies that have high public sector job percentages, about 40%, 50% of the people work for the government.

This is really, really problematic. But in the case of the United States or the UK, what we don't want is for citizens to be afraid to support anti-government peaceful protestors or dissidents or critics of the government or people investigating government corruption. We don't want them to be afraid of donating to those causes or supporting them financially and they will be afraid if they can be de-anonymized. So this is the key thing, the US government drew up this little futuristic story about a scenario where a resistance movement broke out across the US that was funded in a way that was not stoppable. Yet, that's kind of like the dream, that's the dream!

That's the idea of what we could achieve here is that incumbent governments can no longer control the financial flows to the opposition. We want this to be equal footing, that's what Bitcoin does is it really provides equal footing. Everybody can get donations, it means no one can just be in a position of power such that they can restrict donations of one side and it's not saying one side's morally better than the other, it's creating a new architecture of money where no side can say, "Oh, we're going to turn off the funding flow to the other side." Not happening any more, as long as Bitcoin can remain private and fungible, which again, is why Chris' work is so important. But yeah, I really want to hear what Chris has to say about Zebellion as well.

Chris Belcher: Yeah, no I mirror all those points. Just one thing to add is, it's not actually a very new thing. So in the past when cash was much more popular, you had a fungible and private way of donating that if you wanted to donate to some charity or some political cause, you just give them bank notes, that just worked. So this thing of donating to a cause you believe in privately is not really very new. Cash has existed for centuries, so there's that point there.

Alex Gladstein: Yeah, I just have one more subject to take the opportunity to hit while we're all on here.

Peter McCormack: Let's do it.

Alex Gladstein: Okay, so and this is just something I'd love to hear Chris' reflections on. Number one, how does CoinSwap have a relationship with Lightning? Does it help Lightning and does it help opening Lightning channels? Does it help make that more quiet, more unobservable? And what are your thoughts on Lightning? And then number two, why aren't you working on a privacy coin?

Why not just make a coin that's like a Monero or a Zcash or GRIN or whatever? Why have you chosen to stick with Bitcoin and not say, as those folks have, that Bitcoin's useless and it's never going to be private enough and therefore, we're going to create something else. Love to hear your thoughts on those two topics.

Peter McCormack: I'll let go the second one, I actually had it in my list of questions, why can't we just use Monero?

Alex Gladstein: Exactly.

Chris Belcher: Okay, so the first one is how it relates to Lightning. CoinSwap is fundamentally an unchained technology, but when you send a CoinSwap transaction, you send to a Bitcoin address and you don't send to a Lightning invoice. So I think they help each other. So Lightning has privacy things and it has privacy improvements I'll get to, but they are quite degraded if the on-chain, blockchain layer has degraded privacy, because then it will always be possible, for example, to see who owns a certain channel transaction and then from there, even if it's harder to get the Lightning transactions, the spy can still see who owns the channel.

Another thing with Lightning, if someone wants to stop the privacy benefits of Lightning, they can just not accept it. They can say, "I'm only going to accept on-chain Bitcoin." For example, an exchange like Coinbase or something, that say, "We're only going to take Bitcoin on-chain because we think we can spy on you and that will be that." That won't be possible when CoinSwap exists because you'll just get paid to an address and it will look like a regular transaction, you can't tell what's happening. In a way that isn't true of Lightning, because to accept Lightning, the receiver also needs to adopt Lightning. Now for the privacy benefits of Lightning, I generally think they're very good.

So in that privacy Wiki that I wrote there's a huge part of it that's taken up by things like address re-use and the common inputs ownership heuristic where multiple inputs owned by the same person or how to track change addresses or think, "Will the mystery shopper attack?" and all those things just disappear when you use Lightning. There's no change that they're tracking, because there are no change addresses in Lightning. There's no address for use because Lightning doesn't use addresses in the way that Bitcoin does. So all those problems just disappear.

However, Lightning has its own privacy issues and they're related to how... So nodes have to connect to each other, directly over the wire and send transactions that way. That's still ongoing research, so what are the privacy trade-offs there? But there definitely are some ways to attack Lightning privacy. So it's not a cure-all but I think it's a lot better than using the blockchain. Now for privacy coins like Monero, my view of why didn't I start an alt-coin and pump it and get rich, was I kind of wanted to make the most difference. In my view, because Bitcoin has the biggest network effect, so any user who comes to, if they want to make a censorship resistant transaction, they're going to go through the currency which has the most liquidity and the most users and the most places to send it.

So for example, this is a concrete example, people in these privacy alt coins, they often say, "Okay, well Bitcoin has this taint problem. Your coins get tainted, then you're screwed." I think the reason they're really concerned about that is because their coins are only accepted in maybe five exchanges in the world and nowhere else. So if one of those five exchanges blocks them, then that's a problem because they've just lost a huge amount of their customers. But with Bitcoin, because Bitcoin is accepted in so many places, that if one exchange or something blocks you, you can go to the street and sell it for cash. You can go to an ATM, you can go to loads of places, but it's so much more decentralized economically, that things like tainting and censoring are much harder to do anyway.

So that's already a big advantage that Bitcoin has because of... Just to reiterate, the network effects is this thing where systems like social networks or technologies that are based on networks are more valuable the bigger they grow. So for example, the phone system. People phoning one another is more valuable the more users it already has. That gives an advantage to the first mover, to the system which is already the biggest. So in this case, Bitcoin is already the biggest and has a disproportionate advantage to other alt-coins. So another reason I think privacy coins are not very useful is technology eventually changes.

So in the Monero example, the way that works is there's decoy inputs to... You have a transaction and it has inputs which are not just yours, they belong to other people and the way the cryptography works is that nobody else can tell who these inputs really belong to, if they're yours or if they're someone else's. So firstly, that was made before Lightning, that was made before people really understood about miner fees and efficiency of blockchain and that kind of thing and now we have Lightning, which also has a really big privacy advantage and Monero's kind of left behind.

They can't have Lightning and it needs all kinds of updates to get Lightning. They're just stuck with technology from 2014, basically, when it was made. Now we have new things, we have CoinSwap, we have Lightning and I think they're much more productive to try to build them on Bitcoin, where they'll be really useful, rather than just making a new alt-coin for every new technology that someone invents.

Peter McCormack: That's a fair answer.

Alex Gladstein: Just to build on that, I think the idea here is that in the cryptocurrency space, no one's going to be delisting Bitcoin. The coin is the Sina qua non. You're not going to have an exchange and not list Bitcoin, that's just not going to happen. It is the thing that defines the entire space. It's the largest coin by far, it's the most popular coin by far and that will be the case. So you're not going to have a situation where a company's going to be like, "Oh, Bitcoin's getting risky, let's de-list it." That's just not happening. That's why it's so valuable for people to make Bitcoin the most private coin.

If we can continue to bring privacy to Bitcoin in a way that's relatively unassailable by attackers, then we sort of won in that case. Whereas if you start an alt-coin, and you may have good intentions, I have no doubt that a lot of the people promoting these other coins have good intentions, in fact, many of them do. The problem is that they can just get de-listed and then that really just limits their ability to change the world.

So with Bitcoin, it's kind of like the Trojan Horse idea. Let's get everybody to accept Bitcoin because they believe in it as a speculative investment, and they can make money on it and everybody's going to be very excited about that. However, inside the Trojan Horse is this cyberpunk technology that is changeable, is evolvable, is growing, is getting more powerful and it's becoming a much stronger privacy technology. So you have all these people like Paul Tudor Jones or whatever, saying they want to have exposure to Bitcoin. They're not even owning Bitcoin, they're going to own essentially an ETF of Bitcoin or something like that.

But at the end of the day, they're talking about Bitcoin as an investment which is great. All these people can talk about Bitcoin as an investment, what they don't realize is they're strengthening this crazy, radical, cyberpunk tool that's going to allow individuals to have sovereignty and privacy over their payments and their savings in the future and that's really cool. That's a very interesting game theoretical effect that hasn't really been discussed or studied much yet, but it's like the institutions that are coming into Bitcoin, they're not going to be coming into Zcash or Monero or GRIN or whatever.

They're coming into Bitcoin because they view it as this digital gold thing that they think they can make a lot of money from. The side effect of that, that they're not talking about, maybe they realize it, some of these people definitely don't realize it, is that they're strengthening this really incredible cyberpunk tool. So the more we can pour into investment and privacy, resilience, decentralization into Bitcoin, the more inevitable it becomes as a tool for the masses.

That's at least what I believe. So I have no doubt that folks that are working on the privacy coins, some of them have their heart in the right place. Others are just, as Chris said, trying to get rich. But some of them have their heart in the right place and ultimately I think they're going to realize that maybe the best thing that they've done is experiment with a particular kind of privacy tech that can be brought to Bitcoin later.

Peter McCormack: Wasn't one of them celebrating the other day, was it Zcash or Dash people were celebrating that Chainalysis is now able to track them/ I'm trying to remember which one, but it was ridiculous.

Chris Belcher: They were celebrating it.

Peter McCormack: Yeah, they were celebrating. It was almost like they'd made it! I don't know which one.

Alex Gladstein: That's the other thing... There's a lot of things in this conversation, it could be its own podcast, but alt coins are inevitably centralized, so there's a small group of people who make the decisions and that's what I'm excited about, about Bitcoin. There isn't a small group of people who make decisions, it's by social consensus. Very, very different from any other alt coin project where you have a small group of people who make the decisions. To me, it's like the difference between corporate money and the people's money.

All these other projects are corporate money, a small company essentially runs things and they can make a decision, for example, like you mentioned just Peter, have a partnership with a surveillance company or whatever, no one in Bitcoin can make the decision to have a partnership with a surveillance company. That's not what Chris Belcher signed up for, you know what I mean?

Peter McCormack: Of course. Actually Chris, I've got a question for you on Monero. So my own personal journey was I was a full Bitcoiner and shit coiner at the same time when I discovered Bitcoin and I understand why people do that. I think there's expectation that people will suddenly discover cryptocurrencies and are instantly a Bitcoiner and I don't think that's completely practical. But over time, I came to the understanding of why Bitcoin matters and everything else is pretty much bollocks.

But there's always been something about Monero, I've kind of thought, "Well, I don't hate it," and I understand why some people support it and like it and the way it was born and the purposes for its existence seem pretty cool etc. I always thought, "Well, look if there was a scenario now, where I needed to do an anonymous transaction, if I needed to go on the dark web, perhaps a treatment or whatever. I would possibly use Monero because I would feel like I've got greater privacy." But is there anything you can do with Monero that you can't actually do now with Bitcoin if you know what you're doing?

Chris Belcher: Yeah, I think you could do everything if you know what you're doing. You could be very private in Bitcoin. But the problem there is how easy it is for users. So to be completely private in Bitcoin, you'd probably have to read a little bit and do things like avoid address re-use and use CoinJoin and stuff and in Monero, that's a lot more automatic. But really when I think about this stuff, I think of the next 10 years, the next 20 years.

So Monero has the next year, but it's scalability is much worse, so that translates to security. Monero's security is much worse, that the full nodes are needed to defend the system from having its rule changed. They'll get harder and harder, they'll cost more resources to run it as time goes on. It gets harder faster, than Bitcoin gets harder, if you see what I mean.

Chris Belcher: The resources are not on the side of Monero. So yeah, today you could probably...

Peter McCormack: I wouldn't hodl and hold onto Monero long-term, but the point being is if I had to do a transaction tomorrow, can I just buy 20, 30 Monero if I need it, do the transaction and just use it more as a medium of exchange rather than a store of wealth? So I'm not worried about the long-term, but what I'm getting at is that there are people in the Monero world who will claim that... Even my feed got attacked the other day by Monero people talking about something to do with privacy.

It got kind of spammed where they'll say, "Well this is why you need Monero." That was really the question. If I need to do an anonymous transactions, are there the tools out there now that I can do that? I can CoinJoin or swap my coins and use Tor, are the tools out there that you can do that? I guess you're saying they are, which is pretty cool.

Chris Belcher: Yeah, I think so. With what we know with today's technology, I think yeah you could.

Peter McCormack: Great, all right...

Chris Belcher: There's another thing to point with Monero is because it has fewer users, you have less people to hide in the crowd.

Peter McCormack: I see, I understand! All right, cool, well look, this has been great. Brilliant as expected! I knew Alex would bring the fire as he always does, but I really appreciate getting you on Chris. I really appreciate what you're doing, it's very interesting. Stay in touch, I'd like to more about it when you get closer to launch and to have a play with it as well.

There's a few things I obviously need to do my side to up my skills in the knowledge and the privacy area. Before we close out, Alex, can you just tell people how they can find out more about this fund and how they can support and donate and follow yourself? Then when Alex is done, Chris, just tell people how they can also support your work and follow what you're doing.

Alex Gladstein: The Human Rights Foundation has created the Coin Development Fund to support privacy, resiliency in the Bitcoin network. If you live in America, given that HRF is a 501C, a charity, you can actually make a tax-deductible donation to this fund which I think is pretty significant. I'm not aware of any other way to do that if you're an American and you want to get a tax write-off on a donation to support the coin development, I think this is the only way to do it.

Hopefully there will be more. It would be amazing if there were 20, 30 options, but at the moment, it looks like we're on the cutting edge here. You can to go HRF.org/devfund to learn about it. We'll be making more gifts later this summer and we'll be raising funds on an ongoing basis to support people like Chris and we're going to hopefully look at... Folks have a very global scope for this, so we're going to be trying to support developer in many different countries and hopefully this is a supplement to what's happening right now with companies.

So there are lots of great companies out there and there are also exchanges that are starting to support Bitcoin development, ranging from Bitmex to OKCoin to Square Crypto to Blockstream. There's starting to become kind of a core group that is doing this more and more often and I think that's really wonderful and hopefully we can help diversity that and again get more universities, research centre, non-profits, philanthropists to get involved.

Chris Belcher: For me, you can follow my work. I have a website, it's BitcoinPrivacy.me where I have links to GitHubs and other profiles that I work on and that's the central place you can find me. There's also a donation link page if you want to support me directly.

Peter McCormack: Amazing, great stuff guys! Thank you both for coming on. You both have a free and open access to come on this whenever you want. If you've ever got things you need to tell me, just give me a shout. I love what you're both doing, so always welcome. It's great to see you both and Chris, we're in the same country, we should probably have a beer sometime. Alex, when the planes are flying, I'll see you again pretty soon!

Alex Gladstein: Yeah, quite the pleasure to be on here with you guys. I think that Chris is working on something that in 20 years from now, will be a very important piece of the privacy infrastructure of the world and we should keep an eye out on what he does and thanks for your time.

Chris Belcher: Yeah, thanks for your support!