WBD425 Audio Transcription

Bitcoin Vs Altcoins 2 with Alex Gladstein & Erik Voorhees

Interview date: Thursday 18th November

Note: the following is a transcription of my interview with Alex Gladstein & Erik Voorhees. 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 discuss the ideological differences between Bitcoin and altcoins with Erik Voorhees & Alex Gladstein. We discuss the importance of Bitcoin, monetary policies, the political science of blockchains, and consensus & coercion.

“What I care about isn’t that Bitcoin succeeds, or that Ethereum succeeds, or that any specific project succeeds. What I care about is separating money from state; the entire financial system being built on market principles instead of coercion.”

— Erik Voorhees

Interview Transcription

Peter McCormack: Hi, Alex, how are you, mate?

Alex Gladstein: I'm great.  Thank you for having me, Peter.

Peter McCormack: No, any time, and always happy to have my friends on, so it's great to have Erik here as well, another person I love talking to about a range of subjects.  How are you, Erik?

Erik Voorhees: I'm good.  Thanks for having me on.

Peter McCormack: No worries.  I think this might be a little bit similar to what we did with Dan Held recently, which I thought was quite a productive chat.  I got a lot out of it anyway, and got a lot of good feedback.  I think we split the crowd.  You get half the people who think it's a good chat, then 25% of people disagree with you, Erik; 25% of people disagree with Dan; and a handful think I'm a moron. 

But it's good to get you two together, because I spoke very briefly about this to Alex in advance, because I was tagged in a post and always happy to host my friends.  Alex, the one thing you'd said to me is there is a lot you guys agree on.  So, whilst we're bound to get into the world of tokens and other protocols, there is a lot you agree on as well.  So, I feel like that's a good starting point.  I'm going to give the floor to Alex to kick off, and then I'm going to hand it over to you, Erik, if that's okay.  But seeing as Alex dropped me a little text that said, "Listen, there's a lot me and Erik agree on", I think that's probably a good starting point.  So, floor to you, Alex.

Alex Gladstein: Yeah, I don't want to make any assumptions, but I can only assume, based on what you've said over the years, Erik, that we agree that freedom is paramount and that it is likely that we are going to slip into a future of centralised control as our societies become more electronic, and that things like central bank digital currencies represent a grave threat to individuals, and that Bitcoin represents hope in many ways, to have money that's not controlled by governments or corporations, that's sovereign and that allows people to be their own bank and allows us to fight debasement of currency, as well as confiscation and censorship.

So, I'm a pretty optimistic person and I'm very excited about the Bitcoin revolution, and I would be a lot less optimistic about the future if Bitcoin hadn't been created.  I think that the fiat system, or as Alan Franklin calls it, "The degenerate fiat system", has a lot of flaws that the average person doesn't maybe appreciate, and I've been digging into that with my own essays and research.  But the dollar system has led to a lot of, honestly, just a lot of death and destruction involved with it, there's a lot of waste, and there's just this insane financialisation that has happened to our world, which doesn't have to happen, I believe, in a society of sound money.  So, I think that's where I'll start, and I imagine Erik agrees with quite a bit of that.

Erik Voorhees: Yeah.  I guess I would point to that poster on your wall, "The Separation of Money and State".  That was the name of my blog from years ago.  The entire reason that I'm into this stuff, the entire reason that I fell in love with Bitcoin, is not to make transactions more efficient, and I'm not an engineer so I can't really appreciate the technology as much as some people do.  I'm in this really for one reason, which is to separate money from state, and to do that without the permission of the state and to do that without the permission of voters, to simply build and build and build until the alternative is so good that the world ends up switching.

So, yeah, all that stuff that you said, that is inspirational to me, that is what I care about, and I'm glad that there are so many people like you that are fighting this fight alongside.  So, yeah, thank you for that introduction.

Alex Gladstein: Everything after this, where we will disagree, at least we agree on that, and honestly that's the most important thing, I think, moving forward.  Go ahead, Peter, sorry to cut you off.

Peter McCormack: Yeah, and you're two people I've learnt a lot from, regularly being guests on my shows.  I've hung out with both of you, I consider you both friends.  Erik, I've learnt a lot from you about libertarian ideas.  We've made three or four podcasts where you've shared ideas with me.  One thing that you said that I repeatedly use is this idea that you said, "Rather than getting rid of government, let's just make them smaller.  Let's start with 1% or 5%, because they never are", and I've often echoed that point and referred that back to you.

Alex, I've learnt so much from you about the problem with authoritarian countries around the world, and I've been to the Human Rights Foundation a few times with you, we've shared a number of ideas.  So, I've learnt a lot from both of you, I consider you both friends, and I'm looking forward to seeing where this goes.  I think there's a whole number of things we can get into.  We can talk about Bitcoin, which we're all broadly going to agree on.  There are alternative protocols, which we may discuss; there are alternative cryptocurrencies; there are memecoins, there are stablecoins.  There's a whole plethora of different things that are happening.  You can add probably CBDCs into that, and even fiat currencies.  We're in what Balaji told me is a time of currency wars, which itself is both scary and super interesting.

So, I just think a starting point of this is, I'm going to go to you first, Erik.  You started out as a prominent bitcoiner.  When I've been back to the old posts on the Bitcoin Talk forums and you get back to things in 2010, 2011, I've seen you there in the conversations; it's really fascinating when you see Satoshi and yourself and Peter Todd and all these names, which I've got to know over the years, all there discussing Bitcoin in the early days.  But it might be a good setup for you to talk about your road into Bitcoin, what was your eureka moment in it, because you were there so early. 

Then you started ShapeShift, which was a product I used early on.  I used to convert Bitcoin into EOS and this token into that token before I knew it was even you.  You moved into a world where you supported multiple currencies, and you've continued to do that, and it's something you've even tried to edge me towards and tried to explain to me why you think there will be a world of more cryptocurrencies and why I should share.  So, do you want to set yourself up with that?

Erik Voorhees: Yeah.  I was definitely a maximalist in the beginning.  Back in 2011, 2012, every other cryptocurrency was really like a clone of Bitcoin with a few variables tweaked, Litecoin being the obvious example, and Bitcoin was probably 95% or 99% of the market cap and the value and the transactions and everything.  I was annoyed with these altcoins that they existed.  I found it obnoxious at best, and I thought a lot of them were distracting from the core project and what we should care about.  The Austrian Economics theorem that money coalesces into one predominant form, I think is valid, and back then I thought that that was a very strong force, and so why are all these altcoins here?  Certainly, plenty of them were just outright scams. 

But my opinion has changed.  This is one of the major things that I've changed my mind about since getting involved with Bitcoin back in 2011.  The reason it has changed is because I've seen that many of these different assets are not just clones of Bitcoin with some variables tweaked; it's not 2014 anymore where Litecoin is the predominant altcoin.  The systems have gotten very advanced in different directions, and some of them are not trying to be currencies at all.

What they all have in common is that they are trying to decentralise control over value, finance and governance, and I think this is a broad and important category.  And I think that if you believe in decentralisation, and if you believe in a world with fewer gatekeepers, and if you believe in truly separating money and state, then this entire panoply of different assets, building in different directions with different development teams and different trade-offs, is a much more resilient, much more anti-fragile, and much more decentralised world.

So, this doesn't mean that I think every project is valuable.  The majority of them are stupid; many of them are outright scams.  But a couple dozen are really valuable and really important.  So, this is why I no longer consider myself a maximalist, and I think Bitcoin is stronger amidst similar technologies that are doing slightly different things.

Peter McCormack: I think what we could do is kind of work through some of the categories as well, because I think that would be helpful for people to understand, and just for the context of why I'm doing this, because this is still a Bitcoin show, I am still only a Bitcoin holder, I have no interest in other ones; but my show isn't just listened to my maxis, it's listened to by people who are interested in other cryptocurrencies.  They email me all the time, they try and convince me as well.  So, I'm always happy to do this, because I think if they can learn something from it, it's great.

I'm looking at the ShapeShift website.  Erik, it says there are 750 cryptocurrencies supported across 11 blockchains.  You just said then that a couple of dozen are valuable ones.  How does ShapeShift make a decision about which ones to accept, and would you even consider some of the ones they get on there, you would also consider that they maybe shouldn't be?  I mean, I've been a bit disappointed with the way, say for example, Coinbase has selected their coins.

Erik Voorhees: Yeah, I've been a little bit disgusted with their promotion of Shiba Inu, as many others have.  Look, I think there's a large amount of coins which are outright scams, right, and I define that as people who have no sincere or genuine interest in building a decentralised platform of any kind; they are simply promoting something to make a bunch of money and they plan and will disappear with it, and there's nothing there, it's all sizzle, no stick.  There are plenty of those.

Then there are a lot of projects which are genuine attempts, people that believe in what they're doing, but they're just foolish, right.  They're going to fail, they're mis-designed, they're not really providing any value to anyone.  Maybe there's 20 of them and only one of them can do it, so that's a different category, those are not scams, but they are not something that I would want to own, because I think they will fail.

Then there are projects which are both genuine and have a decent chance of actually providing value to people.  And then, there are a couple of projects which I would say have proven that they are here to stay and have succeeded.  I would put two coins in that category: Bitcoin and Ethereum.  They have gone beyond an attempt at success and they have both achieved massive success.  So, those four categories, I think, is how I would look at it.

Peter McCormack: Okay, great, I think they're good categories to work with.  Alex, I'm going to move over to you.  Just before we get into some of maybe your criticisms, or your critique of altcoins, just as a setup, it's probably helpful for people listening, I know a lot of people will know you, but just as a reminder of why Bitcoin is so important to you, especially with your work, your kind of eureka moment with everything you do with the Human Rights Foundation.

Alex Gladstein: Yeah, well originally, I got into Bitcoin because I saw human rights activists using it, and I think I had a superficial understanding at first.  I was like, "Oh, cool, you can do censorship-resistant payments that are private", and that was my original perspective.  I was like, "That would be very helpful for all these people who live under authoritarian regimes".

It took me a while, years I think, of just discussing, reading, learning, being a student, to understand that those are secondary almost features of Bitcoin, and that the most important part of Bitcoin is that it has a monetary policy that no one can control or modify, and that is what really distinguishes it in my book.  That is what makes it a revolution, is to have money that cannot be debased by a bureaucrat or by a bunch of bureaucrats, or whatever.  From there flows an incredible amount of value for human beings, which include the ability to have, hopefully in the future, anonymous digital cash transactions; which include Lightning Network and being to send value instantly around the world; which include being able to build all kinds of things on top of that.

But the very, very foundation, which took me years to appreciate, was that really this is about the creation of money and who controls the creation of money.  From there, I started learning about the history of money and I started interviewing people in different countries about their money and their currency, what happened in North Korea; what happened in Eritrea; what happened in Cuba?  You start to see patterns around the world that aren't taught in economic textbooks.  I mean, you don't learn really about the Cuban financial system in an economic textbook, you don't learn about these things, but you start realising they're just rug pulls. 

At the end of the day, there's hard money and there's soft money, and the governments have figured out ways to print the soft money for the people and take the hard money for themselves.  That's a very, very overgeneralisation of it, but across countless countries and decades and centuries, this is essentially what's been happening.  And it happened in our country.  The United States Government demonetised gold, first domestically, then internationally, and it got rid of gold out of the monetary system and it replaced it with our own debt.  I mean, this is something that I've been fascinated by more recently.

Erik Voorhees: Yeah, definitely the biggest rug pull ever.

Alex Gladstein: Yeah, Nixon defaulted on 50 billion promises to pay dollars for gold, and all of those countries were like, "Okay, I guess we have paper now", and that was the biggest rug pull ever.  Everything's just sort of downstream from that.  So my appreciation, without having any background in Austrian Economics, or any of that stuff, I came to it from a practical understanding, brick-by-brick, of just interviewing and learning through my own networks and backgrounds in the human rights space, based on authoritarian governments.

But then I started to realise that it's one big network, it's one big exploitative system, and that's why I have questions and why I challenge some of these other crypto networks, because I see the same power dynamics start to emerge there too.  I don't classify myself as libertarian, I may be more of a classic liberal, but I see corporations as maybe not just as bad; they don't have armies, so I won't get too carried away.  But I think it's about sovereignty, not just about being anti-state.

I think that corporations can end up controlling you too.  In fact, in many countries, in many developing countries, foreign corporations have more power than local government, right.  So, I think it's about, how do we build a future where we can protect ourselves from both corporations and governments, and for me that's Bitcoin, because I like analysing the governance models, and I like looking at these other crypto networks from a political science point of view; I think it's really illuminating.  I'll give a comic example, and then of course Ethereum is the big one where we'll have these nuance debates.

But when EOS was first launching, they basically had these block producers, and they ended up seizing all of them under the control of one party, and it reminded me of a coup d'état in political science.  So, you start to see how, in these different token networks, you start to see how the sausage is made and you look behind the scenes, and you start to look at things like premines and you start to look at things like proof of stake, and you start to see a lot of things that concern me.  So, that's where I hope to explore that area here with Erik in terms of, we'll call it "the political science of blockchains". 

The second thing I want to explore is proof of work versus proof of stake in the future; what happens as these networks get more valuable?  What does that mean for the individual participant?  And then, the third thing I was hoping to think about was, in the macroeconomic environment, how does Erik feel about, if Bitcoin's going to end up eating gold, real estate, and a lot of the store of value of a lot of things in our world, why wouldn't it eat some of crypto too?  So, a lot of people say, "Well, Bitcoin can't possibly grow as much as the other crypto"; I'm not so sure about that, if we think that Bitcoin is gravity and it just pulls things towards it in the long term.

So, Peter, I hope that helps lay some groundwork for some things that I hope to dive into, in any order really.

Peter McCormack: So, I think a good starting point will be Ethereum, because different people argue different things, but in some measures it is the second most credible cryptocurrency, in that it's survived six years.  The argument that, "Oh, you're going to be rug pulled next year and lose all your money", it doesn't seem to stand up.  I'm not a huge fan of Ethereum, but one of the things I've tried to question myself with these things is, what is it I'm against and what is it I want to happen?  So, I'm okay with these existing, but my goal is normally just to try to advise people of what they are, what they mean, what they stand for, what the risks are.

But for you, Alex, if you think about Ethereum, and it's something you're going to talk about and discuss with other people, what is it that's important to you with Ethereum that you want to communicate to people, and what is it you want to see happen?

Alex Gladstein: Well I think, again, just building on what I said earlier, I'm interested in who controls it and who are the participants and stakeholders, because I view proof of work as this incredible innovation that helps us separate money from state, and I've been watching the Ethereum community trying to move this project, which I would agree with Erik, clearly has succeeded on its own terms in terms of growth and spawning all kinds of projects.

Moving to the new consensus mechanism is concerning to me in a lot of ways, and I like to think, and I'm fascinated to hear what Erik thinks about this, but clearly it's given rise to the ability to create stablecoins and the ability to leverage and the ability to financialise outside of the existing financial system, this massive DeFi ecosystem.  And I'm trying to look at the DeFi ecosystem with something called "the hierarchy of money".

So we have, in the hierarchy of money, we would normally have, at least in the gold standard, you have gold at the top and you have currency which would be fiat currency, and then you have commercial bank deposits and then you have credit; you have this hierarchy of money.  So, I'm trying to look at DeFi and I'm trying to look at what is the hierarchy of money in DeFi and how stable is that?  What happens if there's a system shock; where does the money go?  Because, usually the money goes up the hierarchy when there are shocks.

I feel like, over time, this system will have a major crash of some kind and I feel like people are going to get hurt.  I know that that's speculative of course, but it just seems to be baked into the way it's built, that it's just getting increasingly levered up.  That reminds me a lot of what scared me the most about the legacy financial system.  So, yeah, I would love to hear Erik talk about that.  What are your thoughts around that?

Peter McCormack: Well, there's a couple of main points there.  Let's deal with proof of stake first, and I'd be really interested to hear your thoughts on proof of stake, Erik, and whether you have any concerns; because, one of the primary arguments against proof of stake is that it is rebuilding the current legacy system, where the rich get richer.  And as Alex says, proof of work creates that unforgeable costliness.  Is proof of stake something you support, or actually do you prefer Ethereum outside of that; where do you stand on that?

Erik Voorhees: Good question.  So, back to fundamentals and first principles here, what I care so much about with Bitcoin is that it is purely market based, there is no coercion in it, and all the success and growth that it can achieve comes about without coercion.  I do happily call myself a libertarian, and my primary moral principle is that anything done between two consenting adults which is mutual or voluntary is okay.  That's how markets form.

So, when I hear things, like allegations against some of these other crypto networks, things like how the rich get richer, or how a certain proof-of-stake system is not as good at Bitcoin and is just recreating the old system, that doesn't hold a lot of water with me, because the old system is based on coercion.  There's nothing in Ethereum that is based on coercion, period.  It is a market-based technology.  You can say it's inferior to Bitcoin in any number of ways, but it's not coercive.  So, both Ethereum and any other digital asset, to the degree that it is a peaceful market-based activity, it is already in order of magnitude more legitimate than the traditional system.

In terms of whether proof of stake is superior or not, I don't know.  I think it is different, I think it is riskier, I don't want Bitcoin to move to a proof-of-stake system.  I think Ethereum might destroy itself by moving to a proof-of-stake system, but I also think it might work, and then you're going to end up with these two blockchains that have different fundamental structures in how they achieve consensus.  To me, that looks like decentralisation, to me that looks like anti-fragility.  I would much rather there be two systems with fundamental different building blocks, because I feel like we need to have a little bit of humility over how this technology will work in the very, very long term; none of us really know.

I think it is somewhat arrogant to assume that every rule, or specification, set by Satoshi in the beginning is the optimal way to do it.  Maybe it is, but I want to have humility about that.  And what I care about isn't that Bitcoin succeeds or that Ethereum succeeds, or that any specific project succeed; what I care about is separating money from state, the entire financial system being built on market principles instead of coercion.  So, I like the experimentation.

I also think a lot of bitcoiners understand Bitcoin from an adversarial defensive posture, where they see threats everywhere, understandably so, and they want to think over the very long term, 100 years, will Bitcoin stand up to those threats?  Super important thinking.  I think there's a decent chance that when the environment becomes super adversarial with governments, one of Bitcoin's potential weaknesses is the physical footprint of mining farms. 

I don't care about the ESG stuff, I don't care about the energy usage, I think it's very valuable and important use of energy.  But from an adversarial perspective, the governments of the world could find 80% of the mining hashrate if they really wanted to and destroy it.  It doesn't mean they will and it doesn't mean that Bitcoin couldn't route around that somehow, but it is a risk.  And if the goal is truly replacing fiat and banks and governments with these decentralised systems and market-based money, I think you have to acknowledge that proof of work with physical mining is a risk.

Proof of stake can move around the world much more easily; there's no physical footprint.  And proof of stake has its own risks.  I think it has risks in coalitions, it has risks in concentrations of power that proof of work doesn't have in the same way, so I'm not saying it's like a panacea and I'm not saying it's better; I'm just saying it's different and it's worth the experimentation.

Peter McCormack: I'm going to have another couple of questions before I pass over to Alex.  In terms of how these systems, protocols work, how would you define a coercion within a protocol?  Because, we understand what government coercion is, but I did a long interview with Lane Rettig, who was part of the Ethereum Foundation, and there were things said on camera and things talked about afterwards which certainly felt like you could make arguments that there's coercion within the Ethereum Foundation.  What would you class as coercion here?

Erik Voorhees: Yeah, I mean I have a pretty high standard of coercion.  It's basically physical violence, or the threat of physical violence, or theft, or breach of contract.  Those categories of things I call coercive.  What's not coercive is, if you're part of an open-source software project and the majority in that project wants to do something and you don't, and so the project goes in a direction that you didn't want it to go in, that's not coercion, that's called market forces.  So, people I think often will ascribe the word coercion to just things that are inconvenient or unpleasant or they feel that harm them or that lost the money.  That's not coercion.  I reserve that for more intense interventions.

Peter McCormack: So, perhaps some of the things I discussed with Lane are perhaps in the area of unliveable, uncomfortable.  Alex, do you want to reply to that before we deal with the DeFi thing, because they feel like big, separate topics?

Alex Gladstein: Let me reply to the coercion and then the mining piece I think are both important points.  So, I think that I would agree that there's no coercion in Bitcoin, but that's a hard-won feature of the system.  It was not clear that that was going to be the case.  I mean, you had the majority of all the miners try to change the system in 2017, and they failed, because the system was able to resist.

In Ethereum, I would disagree, so I think there is coercion.  When you say breach of contract, no one knows how much ETH is going to be printed in two years, in three years, in four years, nobody; nobody has any idea.  You talk to the lead engineers, they're going to figure it out.  They're basically going to do their best to figure it out, and that's going to result in, again, a handful of people making monetary policy decisions for everybody else, and I think that's going to result in absolutely coercion.

I agree that probably most people want to move to proof of stake within that community.  Obviously the miners don't, but there's certainly a minority that doesn't want to go; they're going to have to go.  Now, if you want to say that that's democratic, fine.  Again, I'm not a strict libertarian, I want to leave room for progressive ideas, but it's certainly coercing some people that don't want to move to proof of stake.  So, I think there is coercion in Ethereum for sure, and to a much greater extent in the other coins, where there can just be arbitrary freezing and confiscation and theft.

As far as the mining piece, I also wanted to hit that.  What you described literally just happened.  The world's largest government literally just forcibly turned off, and we could see this, more than half of all the mining equipment in the world in a matter of days, and we saw the Bitcoin hashrate just absolutely plummet about 55%.  And Bitcoin was able to survive, because we live in a geopolitically rivalrous world, where not all governments are in agreement.

If we had one world government, I agree completely, mining wouldn't work; it would be too easy to shut everything down.  But we don't live in that world and we actually live in a world where other governments or jurisdictions were like, "Hell yeah, you should come here!"  So, let's say the US is the next one to crack down on mining, Iceland's going to benefit, or Norway's going to benefit.

Just when you look at the political science dimension of this, I think that mining is extremely resilient, especially in a world where, as Bitcoin rises in fiat value, costs to mine go down and more and more people can mine.  I think it's entirely possible that within the decade, you will have people walking into Walmart and buying an ASIC-type device and mining at home, and I think it's very possible that you'll have, basically when you buy a heating system for your home in the future, Bitcoin mining may actually be built into that.

So, I think that if anything, mining's going to make things more resilient, whereas proof of stake, as Ethereum increases in fiat value, I mean who knows?  Maybe Ethereum never moves to proof of stake; it's not clear.  But if it does move to proof of stake, you have a situation where power accrues to the stakers, as opposed to the people who aren't the average user, or whatever.  So, I think that these two things divide and I am just uncomfortable with that, and I think that's not really discussed enough.  So anyway, those are my responses, Peter.

Peter McCormack: Thank you.  Do you want to follow up to that, Erik?

Erik Voorhees: Yeah.  So again, I don't think that mining is a problem as Bitcoin does it.  I agree it is very resilient.  I'm very happy to see how well it has recovered after the China ban, and I agree that it generally can squish around the world to where it needs to, to wherever it is most hospitable; I agree with all that.  At the same time, we haven't actually hit the final bus anywhere close. 

Governments are not yet concerned that their money will be replaced by Bitcoin.  They have hubris that prevents them from thinking that, they have a lack of economic understanding and they think that fiat currency is superior for some silly reason.  We will get to a point in the next 5, 10, 20 years where Bitcoin starts destroying, or at least surviving while fiat destroys itself, and you are going to see a lot of global governments panic, and they will be extremely hostile to Bitcoin, and there could be a point where they try to go after the mining infrastructure.  And it's not just one country it's going after, but a global coordinated destruction of the Bitcoin Network.  I think there's a lot of potential for that not to happen, but it could.

If that does, I'm going to be very glad that we aren't only reliant on proof-of-work blockchains.  Again, back to the decentralisation perspective.  If we want this stuff to be resilient and last for 100 years, different principles being built into these different systems is going to be helpful in that regard. 

I think this is one place where we disagree regarding the coercion.  I don't think anything that happens in open blockchains is coercive, period, unless there is some kind of fraud going on.  So, maybe we just have different definitions there and we won't agree on that.  But I think open-source software protocols can't be coercive; I think that doesn't work.

Peter McCormack: So, how do you feel about the more flexible monetary policy that Ethereum has, and that it does seem to get decided by a smaller group of people, and there may be some influence coming in, I don't know, maybe it's some people at ConsenSys or whatever, but there are people that get to benefit from the changes in this monetary policy; how do you feel about that?  It doesn't feel like to me it happens in the best way, but I can't decide whether that's coercive or not?

Erik Voorhees: First, it's not coercive.  I agree that from a sound money perspective, Bitcoin wins hands down.  One of the slogans that the Ethereum people have been using recently is this ultra-sound money meme.  I'm a thumbs down on that.  Part of being sound money is knowing the monetary policy long term, and Ethereum's is not as noble as Bitcoin's, period, no argument there.

Again, I think if the question is, what is more conservatively a better money, Bitcoin is easily the answer to that question.  That doesn't mean that the entire Ethereum blockchain and everything happening there is worth less though, it's just different.  I hold more value significantly in Bitcoin than I do in Ethereum.  Part of that is because Ethereum is riskier.  They're making changes to things which are more fundamental than Bitcoin, and any person that's looking at that should realise that that's riskier, and that's okay.  It doesn't mean it's bad or wrong, it's just different and it's more risky than Bitcoin, so I'm with you on that point.

Peter McCormack: Anything else you want to add, Alex?

Alex Gladstein: Yeah, just I think it's a fair point to disagree, but open-source software can be coercive.  I mean, Bitcoin Cash, Craig Wright's thing, all that stuff's open source, yet there's a handful of people that can just arbitrarily change the rules.  In many open-source blockchains, there's a small group of people who can freeze funds and steal.  So, in an electronic world, it's not like just because there's no physical violence, you can't have coercion; that's my perspective.

In an electronic world, you can absolutely still have coercion and in fact, I think a lot of coercion's going to be committed online in the future, as opposed to maybe in the physical world, which is certainly better.  But I think that theft and debasement are certainly coercive and, yeah, I would be concerned about that.  But anyway, Peter, that's that.

Peter McCormack: Well, I'm just digging up the dictionary definition, "The practice of persuading someone to do something by use of force or threats".  Erik, would you not consider that you could create financial coercion, threats of financial implications for not making certain decisions?

Erik Voorhees: It depends what the code is sold as.  I mean, I agree that if you rug pull someone or steal their assets, or you put in some kind of back door, that can get into being coercive, for sure.  But Bitcoin Cash or BSV, I have no problem with Bitcoin Cash, I don't own any of it, but I think it's a legitimate project.  BSV, I consider a scam.  But even in BSV's case, I don't consider that coercive, it's just a stupid, scammy project that I would never own any of.

So, I think these definitions are important and there's nuance to it, but there's certainly things that can be bad form, or unethical, that aren't quite coercive; but all this stuff is so different than the traditional financial system where's there's actual coercion and people would be thrown in prison for not doing what the government says.  As much as I dislike Craig Wright, he's not like the government, so I put these things in different categories.

Peter McCormack: Well, in my world, he's worse than the government right now, but that's a different story.  So, another thing Alex talked about was fear of some kind of DeFi systemic collapse that could lead to a lot of damage to people.  Now, that website, I can't remember what its name is, but it lists all the DeFi rug pulls and all the collapses that have happened and the smart contract hacks, and I know that people are always working to improve these things.  But it does seem to be a very strange place, this DeFi place, that there's some people trying to create some amazing tools for people to have some new forms of decentralised finance, but also comes with a lot of risk.

My own brother got rug pulled recently and lost a bit of money due to a project.  Alex, do you want to just expand on your point again for Erik, and put whatever question it is you have for him?

Alex Gladstein: Yeah, so I'm interested in his reflection on basically, let's say, the stability of the DeFi system.  Right now, things are great, we're in a bull market, lot of juice going around, people are super levered up.  We're seeing basically a mutation of the existing legacy financial system, but just in a new way that is arguably even more financialised, super financialised we could say.  And if you analyse it from that perspective of the money hierarchy, we're talking about very high debt-to-capital ratio here, insanely high debt-to-capital ratio.

So, what happens when that system goes under stress?  Well, it doesn't have a central bank.  It's not like they would just mint more -- I guess you would argue they could just mint more USDC, or whatever, but I'm curious to see what happens under a stress scenario.  And that's where I think that the true nature of these systems will be exposed, as basically controlled by a handful of people and sort of insider games, where the overwhelming value accrues to a handful at the expense of others.  That's hidden during a bull market; we can't see that right now.  That's not obvious at the moment, but we will see.

So, anyway, your reflections on the money hierarchy and DeFi and what happens during potentially a future systemic shock?

Erik Voorhees: Yeah, good question.  So first of all, all this stuff is super risky.  Everything in DeFi is super risky.  It is not a mutual fund for your retirement, it's super risky financial technology, and if you are aping into something and it destroys itself, a lot of the blame is on you, because you are taking these risks.

I'm not concerned with leverage, I'm not concerned with wealth discrepancies, I'm not concerned with whether VCs are getting more than they should.  Those are all aspects of markets and not problems that -- I don't even know that those are problems, let alone problems that need solving.  So, if there is a lot of leverage in DeFi, that doesn't bother me.  It's a market; that leverage will get cleared out if it's too high.

Again, what bothers me is coercive government control of money systems and the exclusion of people from these money systems.  What I see in DeFi is an extension of the beauty that I first saw in Bitcoin, which is this open, borderless money system that the entire world can use on an open protocol that anyone can look at, that everyone plays by the same rules, that is available everywhere, and that no one can stop.  That's what made me fall in love with Bitcoin.

DeFi is that same thing; it's just doing it in more expressive ways.  And just as there are lots of scams and dangerous pitfalls in DeFi today, there have been lots of scams and dangerous pitfalls in Bitcoin.  And there were people back in the early days of Bitcoin that were just constantly pointing out all the risks.  There are still people that do that in Bitcoin, and I think most bitcoiners know that that comes with the territory.  This is frontier technology.

Peter McCormack: Erik, can I just ask, is there a slight difference there in that the scams within DeFi can be coded into the protocols, whereas the scams within Bitcoin exist outside of the protocol; you can't really code scams into the Bitcoin protocol?

Erik Voorhees: That's fair.  That is again why -- any crypto project is risky in somewhat proportion to how new it is and how well it's been code-reviewed by other people.  Any new project in DeFi is, by definition, far more risky than the base Ethereum chain, and that itself is riskier than Bitcoin.  You're just going further out on the risk spectrum.  So, yeah, it's risky; that doesn't mean that it's wrong.

Just as there were early Bitcoin exchanges that were scams, there are early DeFi projects which are scams.  The early Bitcoin exchanges that were scams doesn't make Bitcoin a scam, and the DeFi projects which are scams doesn't make DeFi a scam.  And it's been amazing to me to see the inability of bitcoiners to make that connection when they defend against that very same argument when it comes to Bitcoin.

Peter McCormack: I think just for me on that one, Erik, I feel like I can trust recommending Bitcoin to people and warn them of the scams outside of Bitcoin, but if they buy their coins, they hold their own private keys, they're pretty safe, their threat model is different.  I would be very nervous, especially for my friends, recommending some of maybe the DeFi stuff, because the threats exist inside the protocol, so they could do everything right and --

Erik Voorhees: You should.

Alex Gladstein: I think Erik is acknowledging that and that's kind of obvious.  We're not here to debate how risky DeFi is, everybody knows it's risky.  The thing is, when I look out around the world around me and as I grew up, I was a child first of 9/11 first, then of the Great Financial Crisis.  As I tried to make clear, to me the real revolution of Bitcoin is that in many ways, it can help fight currency debasement, and that's where Erik and I would agree, and that's ultimately its greatest power separating money from state in allowing people to be their own bank and have financial freedom; I mean, that's really key.

But to me, it's not the only problem with the world.  We think about the Great Financial Crisis, and we can talk about how fiat money engendered it or created it, but there was also the issue of the private sector selling toxic mortgage-backed securities to people who didn't really understand these things, and that's a problem.  It has nothing to do with libertarianism, I mean it's a market phenomenon, but I don't view it as good or healthy for society.  And, I hate to see those things recreated in this new, virtual world, and I think they're going to hurt people eventually.

Look, people are free individuals, they can do whatever they want; but I get worried when people are without proper education and looking in research, where they ape into this stuff thinking -- obviously, the best performing coins in the last year have been memecoins, right.  So, it's like, okay, they go into Shiba Inu coin, or Dogecoin, or whatever, and they don't think carefully about it.  I mean, look, they should have been stacking sats. 

In ten years, aside from in my opinion insiders who have inside deals, everybody would have been worth just stacking Bitcoin.  Yet, there's this culture out there of people who are like, "No, Bitcoin's boomer coin, it's boring, it's not going to do anything, it's like a dumb rock, you should totally get into all this other stuff".  I think there's going to be so much sorrow and regret over that perspective, which is really dominant in the crypto space, ten years from now.  Everybody's going to wish they just bought more Bitcoin. 

I mean, maybe you're fine, Erik, but most of these people are just going to get rekt, and right now it's so hard to see that, because we're in this blindingly vivid bull market where everything's fine, and people are like, "Whatever, Bitcoin's boring".  I worry about that and I feel like that's on us as a space to talk more about these things.

Peter McCormack: How much, Erik, should we be warning people about these types of risks?  I know you'll say this is markets, but we will see VCs, or is it a hedge fund, Multicoin, I can't remember which they are, but someone like Multicoin heavily promote something like Solana, and I know having to spoken to somebody when I was at DAS in London this week, they were at the Solana event in Lisbon and said it was full of 19-year-olds being pitched by VCs.  There seems to be this celebration that some things like that protocol could flip Bitcoin.

But there's two things I think problematic with that: one is that celebrating flipping Bitcoin, I think, personally I find it morally questionable, because is actually trying to do something that's super important for humanity; and the second thing I find even more concerning is the unbelievable returns that some of these venture capital companies can make off these protocols by getting in very, very early.  I'm sure I've seen someone like Multicoin turns, the rumour is, $20 million to $2 billion.  I'm not sure what it is, but something along those lines.  They get to essentially a seed round and IPO at the same stage, without even achieving product market fit.  I find that problematic, but I'm sure you're going to say that's markets.

Erik Voorhees: I don't find that problematic, unless they are being deceptive or lying.  I think they have every right to make their bet on Solana and to talk about the virtues of Solana.  Solana has gotten large, it has a lot of usage, and it might become a big thing.  I don't own any Solana, I don't want to take that bet personally, but I don't think it's wrong for other people to disagree and have a different opinion.

The people that are betting on the wrong things over the long term will lose; that's markets.  And I don't mind people making gazillions of dollars in open, transparent markets.  These are the most transparent markets that humanity has ever had; it should be praised.  I can't find myself getting upset at people risking their own money and capital on projects that they believe in.

Again, the line is fraught if people are defrauding others or lying or cheating or stealing, that's different, but a lot of this is not that.  And I think there's this perception that all these other coins just go to zero, or that they've only benefitted VCs.  I mean, if you actually look at the maths of all ICOs, all token sales and their prices today, it's not like they've made a little bit of money for retail.  This has been the greatest wealth creation for retail investors certainly in my lifetime, probably ever.  The fact that some VCs are making a bunch of money on it as well, okay, but compare this to what; the traditional financial world, where only Wall Street is making a bunch of money?  At least now, everyone has these open protocols and they can put their money where they think is important.

A lot of people absolutely get rekt, and people need to realise that buying Shiba Inu is dumb, unless you're just trying to gamble, and there's nothing wrong with gambling, and none of that makes any of those things better or worse than Bitcoin; they're just different and I wish bitcoiners weren't so afraid of that happening on the periphery of Bitcoin.

Alex Gladstein: I think what we're afraid of is people getting confused and scammed, certainly in some cases, as you'd agree that some of these things are scams.  But defrauded is an interesting word.  What irritates me is these VCs who are pitching Web 3.0 as if it's going to be this beautiful thing that's going to give freedom to everybody.  No.  All these things that VCs are pitching they're going to control.  They're going to have complete control on the back end of the system, and they're pitching it as if this is going to be some human revolution.  How do you feel about that; that doesn't upset you at all?

Erik Voorhees: Tell me more what you mean when you say they have control of these things?

Alex Gladstein: Meaning, they're based on protocols where the governance is that they get to make the decisions, not other people.  For example, let's look at a building block of the ecosystem, something like Dai or Maker.  I mean, Andreessen Horowitz has a very large stake in the governance of that project, and when they team up with the other VCs that are in that project, they can control the fate of that project.  And yet, that's an example of one of many projects that they're pushing saying, "This is going to create a new internet where Facebook doesn't have the power, where Google doesn't have the power, like in Web 2.0, but where you, the user, have the power". 

I just think this is disingenuous, because the user's not going to have the power and they're not going to own the governance and they're just going to be users.  There may be benefits, but I think it's extremely disingenuous.

Erik Voorhees: Let's explore this.  So, let's talk about Maker specifically.  Are you saying that you believe Andreessen Horowitz and/or a handful of VCs own more than 50% of the Maker token?

Alex Gladstein: I know they own a plurality, I don't know if it's a majority.

Erik Voorhees: Well, those are very different things.  A plurality might mean 5%.  I mean, this is an important point.

Alex Gladstein: Last time I looked at it, it was between 30% and 45% between three firms, but to be honest I haven't looked in a little while.

Erik Voorhees: Okay, and I don't know the specific numbers either.  I mean, look, I'll say this --

Alex Gladstein: And you know that most people don't vote, right, so what ends up happening on those systems is a lot of the smaller people don't even -- I mean, people own the Maker governance coin just as a speculative asset, not to use it.  So, what's happening is, yeah, sure, they only have 30% to 45%, but when it comes down to voting day, it's just like a democracy, nobody fucking votes, so they get to make the decision.

That's what I'm worried about, yes, I'm very worried about that kind of stuff happening.

Erik Voorhees: Why are you worried about people with tokens making decisions with the tokens they own?

Alex Gladstein: Because I don't want us to recreate Web 2.0.  I want people to be sovereign and free, and I don't want us to be slaves to VCs, just as I wouldn't want them to be slaves to governments.

Erik Voorhees: So, how is someone who uses Maker -- for example, I use Maker as a user.  I own Dai, I hold some as a stablecoin, I don't participate in the voting, but I could if I wanted to.  I fail to see the harm here.  If I feel like the governance of the Maker protocol goes in a bad direction, I can sell my coins and stop using it, or I can make arguments on the internet of why I should go in a different direction.  To me, that is just open, messy markets being markets.  That doesn't bother me at all, and I don't think it's fair to characterise that as people being slaves to VCs; that seems very unfair.

Alex Gladstein: Sure, then they shouldn't call it decentralised.  My point is in the disingenuousness of them claiming that it's going to be different.  Stocks are great.  People should be able to come together in a free market and do whatever they want.  My problem is in the messaging that these protocols are pitched as somehow decentralised and beyond government control and all this other stuff, and it's just not true and that's going to come back to haunt people at some point.

Peter McCormack: I can add some commentary on Maker here.  So, I've just dug it up that it was that a16z that invested $15 million and got a discount on the tokens.  Meltem comments on this, "According to a blog post, the $15 million will be used to fund the next three years' operating costs.  I'm sure people will think this is a great sign for the project, being able to recruit high-quality capital, but I think this is a massive failure in governance and project management.  No vote was conducted on this matter, despite governance being a core tenet of the project. 

"Perhaps even more troublesome is the 6% stake now in the hands of a16z.  Crypto appears to have simply been created out of thing air.  It is possible it came from 39% held by DAI Foundation, which ostensibly existed to fund development efforts.  But whether it represents new tokens, or a shift in control ownership, it did occur at the behest of the few, not many.  And while Maker is supposed to be created as needed for recapitalisation under the aforementioned collateral shortfalls, it is not, under its original conception, meant to be created to raise funds for development.

"What should concern folks is that the promise here is of transparent governance, but this looks anything but.  Given that the Dai stablecoin relies on Maker for its very stability, some scepticism is warranted".

Alex Gladstein: Again, Erik, would love to hear what you have to say, but Maker literally markets itself, the MKR token, as a decentralised, autonomous organisation for the Dai stablecoin.  Obviously it's not, so I don't know if that's fraud, but it's clearly disingenuous.  It's definitely not a DAO, it's not different from any other fiat-existing power structure.  I just have issues here.

Erik Voorhees: The last statement is definitely wrong.  To say that it is not any different from traditional fiat power structures, first of all we have to acknowledge that these things exist on a spectrum of decentralisation.  Alex, can you agree with that; decentralisation is not an either/or, it's a spectrum and a multi-variant spectrum; can you agree with that?

Alex Gladstein: Yes, but -- yes, go ahead.  Yeah, sure, I agree.

Peter McCormack: I don't, by the way.

Erik Voorhees: So, I think if someone wants to make the case that any particular project, Maker or anything else, is not sufficiently decentralised for what it's purporting to be, they can make that argument and they can express that view in the marketplace by not owning the token, or by shorting the token, or by convincing others to do the same. 

I don't think there's anything wrong with tokens moving into the centralised spectrum, or into the decentralised spectrum, they're just different and everyone can express their opinion on that however they wish.  Is it messy?  Yeah.  Will people lose money because they made the wrong bet?  Yeah, but that's markets and that just doesn't bother me.

The reason it's so different from traditional Web 2.0 is that these are borderless systems, and the participants of any of these systems at any given time are fluid.  So, you look at Facebook, which is headquartered in the US, closed source, and has a specific cap table of its investors, at least up until it went public.  You compare that with something like Maker, which is global, which is certainly more decentralised than Facebook, I would argue much more, which provides an important market service, a relatively decentralised stablecoin as an alternative to Tether, which requires money in an actual fiat bank somewhere --

Peter McCormack: We hope.

Erik Voorhees: -- a super important innovation that the market has liked.  I mean, I see that as an improvement.  Now, is it as decentralised as Bitcoin?  Of course not.  Is it a better money than Bitcoin?  Of course not.  Is it perfect or without risk?  No and all sorts of people will lose money making the wrong bets on this stuff.  But I see this cauldron of experimentation as so important and so valuable, and this is how markets build and iterate.  It's not through designing everything to be perfect, it's this messy process and over time, the markets sort it out.

Alex Gladstein: Okay, I guess just to conclude that section, I feel that there's a lot of disingenuous marketing that will mislead people, just as they would convince you to get an adjustable mortgage.  None of these things were illegal at the time.  Or, just as they would convince you as a pension fund, or as a municipality in Iceland to buy these amazing mortgage-backed securities, I have moral problems with them that are outside of just a pure, it's a free-for-all.  So, that's probably what differentiates us, is I have more of that progressive --

Erik Voorhees: Well, here's the major difference.  If Maker blows up, it's gone.  It's a market actor that goes away; there's no bailout.

Alex Gladstein: I don't know about that.  I mean, so USDC, Circle, just flipped, but for half of this year, the entire ecosystem was more than half supported by USDC.  You don't think Circle will get a bailout?  I think they'll definitely get a bailout.

Erik Voorhees: From whom?

Alex Gladstein: From the US Government, if they go under.  You don't think they'll get a bailout, just like Amazon got a bailout and all these other corporations get a bailout from the US?

Erik Voorhees: I don't know, I would hope not.

Alex Gladstein: Well, I can assure you they will; why wouldn't they?

Erik Voorhees: I feel like we've slightly changed the subject here.  We were talking about Maker.

Alex Gladstein: No, but Maker, as of three weeks ago, more than half of MakerDAO's liquidity was reliant on USDC.  So, let's say something happens and the company that mints USDC could go to the US Government -- what I'm trying to say is, it's all part of the system still; we haven't left the system.  It's just a mutation of the existing financial system.

Erik Voorhees: USDC is just fiat stablecoin backed by dollars and banks.

Alex Gladstein: And it doesn't concern you that these decentralised systems rely on USDC as this liquidity; that's not a problem for you?

Erik Voorhees: That's where the nuance is important.  These are not all the same systems.  There are stablecoins that are extremely centralised, like Tether or USDC; there are stablecoins that are partly centralised, something like Maker; and then there's even more newer, cutting-edge stablecoins, which are algorithmic, like the Terra stablecoin, or like the Haven private stablecoin.  So, the nuance is important here, the specific attributes of a given project matter, and the market has to suss this stuff out.  No one's claiming that USDC is some decentralised system.

Peter McCormack: Erik, you said earlier, and it was something I actually disagreed with, this idea of decentralisation being a spectrum.  I've always felt that that is a shield for things that aren't --

Erik Voorhees: Let's talk about it.

Peter McCormack: Yeah, so I always want to think, is something meaningfully decentralised, and is it directionally becoming more decentralised or centralised?  So, I always felt like something I like about Bitcoin is that there's a constant conversation about the decentralisation of Bitcoin, whether it's mining, mining pools, developers.  I mean, the idea that Brink was created by John Newbery is because so much of the development was in the US.  It was like, "Okay, we can build a development base and resource here in the UK".

The conversation about decentralisation never leaves Bitcoin, and it feels like every aspect of Bitcoin, anyone that's involved, is always thinking about ensuring it's maximally decentralised.  I don't feel like that's something I experience with other protocols, and Ethereum especially.  It feels like Ethereum just becomes more and more centralised, and the Allen Farrington paper identifies a number of risks that come within that, in that because it's not meaningfully decentralised, you talked before about if governments came for the mining farms; actually, coming for the full archival nodes that exist within data centres will actually be relatively straightforward.

So, when you think of decentralisation as a spectrum, it is something that I've always struggled with.  I actually have always preferred the idea as directionally, where is it heading.  And it feels like a lot of these protocols just become more centralised over time.  In some ways, the reason Solana is gaining ground on Ethereum is because it has become more centralised than Ethereum to solve some of their scaling issues.  How do you feel about that?

Erik Voorhees: So, you're using these relative words, like "more" or "directional", which is because it is relative.  I mean, decentralisation is relative.  Bitcoin today is more decentralised than it was on day one.  Ethereum today is more decentralised than it was on day one.  Ethereum today is more decentralised than Bitcoin was on Bitcoin's day one.

Peter McCormack: But, is Ethereum more decentralised now than it was two years ago?

Erik Voorhees: That's a fair question to debate, but by debating that question, you're already acknowledging that it is a spectrum.

Peter McCormack: No, what I am accepting is that day one, something isn't particularly decentralised, because it's new and they all go through a process of decentralising.  But then reality bites and decisions and trade-offs are made, and that's why I'm saying, directionally now, really where's it headed?

Erik Voorhees: That's a fair question to debate.  I wish that was the discussion.  Instead of the maximalists saying, "Ethereum isn't decentralised", instead of that, having actual discussions about what are the factors of Ethereum's structure which are more or less decentralised than they should be, and how can that be better or worse, that's an absolutely fair conversation to have.  But to say that something is not decentralised, just because it is not as decentralised as Bitcoin, I think is disingenuous.

Alex Gladstein: I think, look, it's semantics and, yes, we could look at pre-crypto currencies, like BitTorrent or the Tor project, or we could have arguments about these things and how decentralised they are.  I 100% agree it's a spectrum.  I think the question is just, which ones are decentralised enough to survive the state attack when it comes, and I think that you and I both agree it's coming at some point.  It already came for some people in some countries, right; it's going to come in different aspects in different countries at different times.

I think that we would probably disagree on the proof-of-work piece, because my reading of the game theory is that it's less likely that all these governments try to kill Bitcoin and it's more likely that we see more El Salvadors say, "Hey, we actually have a lot to gain from just adopting Bitcoin".  So, I think that that's really interesting to me.

But when it comes to these proof-of-stake projects, which let's assume that Ethereum will get there in the next two years, it concerns me that they won't be able to survive the state attack and even before then, that they can be manipulated.  And I think that this goes back to probably where I sense our main disagreements are; there are probably two.  One is around coercion and I absolutely think that currency debasement, even in an open-source currency, is still coercion, if someone else is making that decision for you.  I get it; you can leave the system and not get thrown in jail, so that's where one disagreement is.

Erik Voorhees: Can I ask, do you think it's coercion if the rules in the code permit it?  Bitcoin's code was very clear.  There is this limit of 21 million established by this decay function of the supply.  That's been there from the beginning.  Other coins don't have that same promise, so if they change their money supply, is that still coercion?  I mean, you can say it's less valuable as money, and I would agree, but would you call that coercion?

Alex Gladstein: I mean, if a small group of people are going to make a decision that a whole bunch of other people are going to have to live with that they don't like, yeah, I would say it is.

Erik Voorhees: But that's not how it works in any blockchain.  No group of people have to run any software that they don't want to run.

Alex Gladstein: That's not true with hard forks; that's not true though. 

Erik Voorhees: Let's talk about that.  Let's talk about the Ethereum hard fork.

Alex Gladstein: If you don't want to go to proof of stake, what are your options?  How's that going to work for you when that shift happens?

Erik Voorhees: So, just as in Bitcoin, if there are any group of people that want to run a different version of the code, they can do it, whether it's one guy in his basement that wants to run his own chain version, or whether it's 49% or 80%, it doesn't matter.  When there is a disagreement and people run incompatible software, they fork apart and they're both running what they want to run.  Neither side can make the other run anything that they don't want.

Ethereum Classic lived on and is a little bit of a zombie chain right now, but it had a go for a little while, and the people that really didn't like Ethereum's hard fork just kept on with the same rules.  There was no coercion.  They didn't steal any of their ETC coin.  That was the Ethereum that they had five days prior.  And, all that happened was that they ended up on the side of the fork that the market didn't prefer to go with, so they ended up losing out relative to the fork that the market did go with.

Alex Gladstein: I don't think that that was a market decision, but it clearly was a political decision.  I mean, look, you can argue that the US currency, you can argue that the world wanted dollar hegemony, because of the emergency of the eurodollar and all of these other things.  But at the end of the day, it was a political decision that the US Government made to force everybody to use it.

Erik Voorhees: But that's not at all how Ethereum works.  Ethereum is not imprisoning people or murdering people.

Alex Gladstein: I didn't say that.  I said there's a difference between a market incentive to do something and a political decision to do something.  It is absolutely going to be up to a small group of people to determine the monetary policy of Ethereum in the future.  It's not going to be a vote and it's going to be imposed, and if you don't like it, you're going to have to split off and obviously, that chain's not going to make it. 

Erik Voorhees: That's true with Bitcoin too; that's true with Bitcoin.  Let's talk about that for a second.

Alex Gladstein: Yeah, but the users control Bitcoin.

Erik Voorhees: If tomorrow, 60% of Bitcoin users wanted to change the money supply to 22 million, if that was the case, a hard fork's going to happen and the two chains are going to go off and people can use one or both or neither.  That is no more or less political than Ethereum.  If there's a consensus-breaking rule, the chain will split and you have both halves that you can do whatever you want with.  That's not political; that is market based.  It's every actor, whether they're a node, a miner, or a user, or an economic holder of the asset, they make their own decision.

Alex Gladstein: I guess I would just disagree.  In Bitcoin, it's not actually a vote.  I describe it as democratic, but it's not really a vote.  You, as an individual sovereign, get to choose which software to run and which blocks to accept and things like that.  That's not the case in Ethereum.

Erik Voorhees: Why?

Alex Gladstein: Because, in Bitcoin, the monetary policy is not something that a small group of people can just change.  And in Ethereum it is; in fact, it will be.  We don't even know what it's going to be.

Erik Voorhees: I can change the code in my Bitcoin client, and I would fork off --

Alex Gladstein: Yeah, but no one's going to run it; no one else is going to run it.

Erik Voorhees: Right, because everyone gets to make their own decision.

Alex Gladstein: Yeah, okay, well I guess we just disagree on that one.

Erik Voorhees: But what do you disagree with?  That fact is true in Bitcoin.  I could change the number to 22 million in my own code tomorrow and I'll fork off the network, and no one's going to use it because they're all not going to make that choice; and I could do the same thing with Ethereum.  There are lots of differences between these two systems, but that is not one of them.

Alex Gladstein: Okay, so if the Ethereum Foundation and the devs make a decision and they move the project in a direction and they impose a hard fork, anyone who tries to go against that is just going to lose their money.  The new Ethereum rate's going to lose.  There's no risk of that happening in Bitcoin.  These are very, very different, and that should be very clear to the people listening.

Erik Voorhees: Why is there no risk of that in Bitcoin?

Alex Gladstein: Because, that's the way Bitcoin operates.  There is no small group of people who can make a decision on behalf of everybody else.  We learnt this through the whole SegWit2x debacle.  Just because you have a lot of power doesn't mean you can change the rules.  Just because you have a lot of power in Ethereum does mean you can change the rules.  It's very, very important.

Erik Voorhees: Here's where we disagree.  In both Bitcoin and Ethereum and any of these blockchains, everyone has autonomy and sovereignty over their own software.  This is true universally.  And when there are two groups of people, whether it's 1% and 99%, or 49% and 51%, who have consensus-breaking difference in their opinion on what software to run, you will get a hard fork.  And what the market does after that is up to the market.

Sometimes, the hard fork becomes the dominant chain, such as in Ethereum's case.  The hard fork was what the market preferred and that is now what we call Ethereum.  In Bitcoin, it has had hard forks and the market didn't prefer that chain, so you have Bitcoin Cash, which has never been able to live up to what Bitcoin has achieved.  But the fundamental dynamic here, where two groups will split apart from each other in a chain, that is a fundamental principle of blockchains.

Alex Gladstein: Sure, I'm not arguing against that.  I'm just saying that the decision-making in Ethereum is political, not market driven.

Erik Voorhees: What does that mean?  I really want to understand what you mean.

Alex Gladstein: It's political, meaning politic, a body of people will make the decision for other people, and they'll be forced to comply, and I don't like that and that's not cool.

Erik Voorhees: Here's what would happen.  In Ethereum, if the Ethereum Foundation wanted to change a rule, they can propose that out to the community.  They can say, "Here's what we want to change.  Here's why".  All the miners will decide if they want to run that software or not, all the users will decide if they want to run that software or not, and all the holders of ETH will decide if they want to hold that version of the token or not.

The same thing in Bitcoin.  The Bitcoin Core development team could propose a change, and they could say, "Here's what we want to do and here's why", and every node operator in Bitcoin, every holder of Bitcoins and every miner can make their own decision of whether they run that software.  The only reason you're calling it political on Ethereum's side is because you don't like the Ethereum folks.

Alex Gladstein: No, that's definitely not true.

Erik Voorhees: Why is that political?

Alex Gladstein: There's a scientific difference.  The monetary policy does not change in Bitcoin and it changes all the time in Ethereum.  That's everything that matters right there.  It's the rules of the system; that's what matters.

Peter McCormack: Alex, I think you're talking past each other in that, I think Erik is talking correct technically on what happens, your point is more about the flexible monetary policy and why that isn't a good thing. 

Alex Gladstein: It's not just the monetary policy though, it's anything, any rule of the system.

Peter McCormack: I don't disagree.  Erik, what I was going to put to you with this, is there here actually, whilst you're technically correct, is there a cultural difference here in that most bitcoiners run a node?  You run a node, Alex runs a node, I've got four nodes here, two operational, and we really care about this.  So, when a decision's going to be made, we know it affects the node we run. 

Whereas, I don't really know anyone who runs an Ethereum node.  I'm sure there is the occasional person, but yeah, of course you do, but you need to.  The base on the business you have, you need to understand it.  But I'm saying there isn't really a culture of running a node.  If I go to have a beer with Matt Odell and if I wasn't running node, he'll lose his shit with me, and the community lost their shit with me, because I didn't have a node for years.

There's this thing, it's like, "Buy your Bitcoin, manage your private keys, run a node".  That isn't a culture that really exists within Ethereum.  So, do you think therefore it maybe is a little easier for the Ethereum Foundation to get decisions through because of that?

Erik Voorhees: Yes, and I think all of that is fair.  There's absolutely a cultural difference between the Ethereum world and the Bitcoin world.

Peter McCormack: That's the difference, I think.

Erik Voorhees: That is the culture of those human communities, that is not a difference between how forks work or consensus rules work, and that's an important distinction.

Alex Gladstein: I guess, to be fair, I'll say that a lot of this is semantics and maybe politics is the wrong word.  But I'm trying to describe what has happened and what I've observed and what may happen in the future.  And the reality is that some 70%, more than two-thirds of the synced Ethereum nodes are hosted on some cloud server.  And as Peter's pointing out, there is a cultural difference, and that matters, just as much as the technical stuff.

Peter McCormack: There is also, Alex, a process difference I've noticed as well.  With Bitcoin, if someone wanted to increase it to 22 million coins, they would discuss it with people, they would submit a BIP, it would be discussed and probably rejected very early on.  Whereas, the Ethereum Foundation, as a group, tend to pitch ideas as a group of people in a closed room, they have their phone calls.  I know this, because I had the conversation with Lane Rettig.  He was on the Ethereum Foundation and he explained it to me.

So, it feels like there's a group of people who try and decide, behind closed doors, what the future direction of Ethereum is, and then puts it out to a community.  Whereas Bitcoin, I think, is more individual.  I'm not saying it's right or wrong, but that's some of the difference, I think.

Erik Voorhees: The whole closed-door thing is funny when it comes to blockchains.  Nothing is behind closed doors.  When it actually comes to proposing things to communities, everything is open.  People use that phrase, closed doors, to vilify groups that try to talk before they present something.  I don't think that's fair. 

If you want to say that the culture of Ethereum is different, that the culture of Ethereum doesn't care as much about a hard money policy, you're absolutely right.  This is why Ethereum is more risky and is a worse form of base money than Bitcoin, and I'll agree with that all day long.  But you know what else is different culturally in Ethereum, is this idea of rapid innovation.  And it is because of that that we have some really amazing tools in the Ethereum community that don't exist in the Bitcoin world.

This house that I'm in, I bought with a loan from DeFi.  I didn't use a single bank.  Bitcoin never provided me that ability.  I think that's important.  I think it's amazing that DeFi has now enabled me to borrow money against a protocol that's open source, without using a single bank.  I think that's profound, and Bitcoin didn't deliver that to me.  That doesn't mean Bitcoin's worse, it just means it's different.

Alex Gladstein: So, you bought the house from somebody and they accepted what?

Erik Voorhees: No, I put up ETH in Aave, which is a DeFi protocol, I borrowed USDC out of Aave, and then I used USDC to convert it into a bank and then bought the house.  But the loan came against collateral without any banks involved.  So, I just pulled out a stablecoin against the asset, ETH, and bought the house.  That's super cool.  And, how can anyone who's pro-decentralisation and wants to actually see a financial system that is not operated by central banks and fiat, how can they look into that world of DeFi and think anything other than, "Wow, this is really profound and amazing"?

Alex Gladstein: I mean, you could have just sold the ETH and bought the house with dollars.

Erik Voorhees: And had a tax event?  I don't want to give $1 million to the government; I'm morally opposed to that.  Ethereum and smart contracts prevented me from giving $1 million to the government.

Peter McCormack: You just bought a $5 million house!

Erik Voorhees: Okay, fair enough!  You get my point.

Peter McCormack: I reckon you bought a bigger house than that.

Erik Voorhees: That is utility to me, both economic utility, in that I didn't move the money.

Alex Gladstein: And I didn't mean to imply that there's no utility in the space, I never said that.  What I do believe is that that activity you just described will be -- I think what's underappreciated is how much that's going to, in my opinion, come into Bitcoin over the coming decade.

Peter McCormack: I've got a question on that, Alex, just while I think about it.

Alex Gladstein: Yeah, go ahead.

Peter McCormack: So, I agree that does sound kind of cool.  I'm in the process of buying a house right now.  I have some Bitcoin.  To get the house I want, I probably need to sell a bit, sadly, and I don't really want to and I'm trying to avoid it.  But if I could easily just borrow against that Bitcoin and buy the house, that would be amazing.

But my question to you is, the chain of companies or things involved in that process that allowed you to do that, how many of those, if the SEC wanted to take out enforcement action against, could they?  And the bigger question therefore I'm asking is, is there a risk that all this stuff ends up becoming regulated and they just become new types of companies, and therefore they aren't really decentralised?

Erik Voorhees: The Aave smart contract cannot be turned off.  The Uniswap V2 smart contract cannot be turned off.  So, good luck, SEC.  They can't turn these off at all.

Alex Gladstein: But they could cause trouble for the Aave team and more importantly, the USDC was essential for you to do this.

Erik Voorhees: But it doesn't need to be USDC; I just used that because it was the most convenient at the time.  Let's say the SEC destroys USDC, what would I have done?  I would have taken out a loan in a different stablecoin, in Dai or in UST or in Haven or in something.  This is the anti-fragility that I'm talking about.  And when it comes to this DeFi stuff versus regulators, I'm going to be betting on DeFi the whole time, just as I've been betting on Bitcoin this whole time.

Alex Gladstein: So, what's one of the more innovative, most decentralised stablecoins that you could have used instead of USDC, for example, in your mind?

Erik Voorhees: I think the most decentralised stablecoin with a significant market cap is the Terra UST stablecoin.

Alex Gladstein: And you bank would have given you dollars for that?

Erik Voorhees: No, what I would have done is pull out UST and then I would have done an OTC trade with a number of OTC brokers I know to get dollars against it.

Alex Gladstein: No, I get it.  Just what Peter and I are getting at is there is a step there that requires a centralised, regulated thing for you to get the house.  I hope we live to see the day --

Erik Voorhees: It's not perfect yet.

Alex Gladstein: Right, but yeah, it is a big scientific breeding ground, there's no question.  And I hope to see a lot of innovation come to Bitcoin, and in fact I think we're going to get it.  I think within 36 months, I'm going to be able to download a free and open-source Bitcoin wallet, and peg a non-custodial amount of value to the US dollar; and I think that's going to change a lot of things.  And, we're going to see a lot of the activity that has happened in the current DeFi space come into that, and I think I'm quite excited about that.

That is fine, but I think that the reason why we're having this conversation was a comment that I think you made on a thread that I was involved with Raoul Pal, where we were talking about returns, basically, for people.

Peter McCormack: I have the thread here!

Alex Gladstein: I think that would be interesting for us to sort of conclude with, is that I think we clearly have -- there's been debates in this conversation about control and coercion, and there's been debates about what's right and what's wrong and where we want to see society in the future, and what we can just leave up to the market.  And I think different listeners are going to have different lessons from that stuff, I think that's fine.

But at the end of the day, I think what brought us together was this idea of this debate over returns.  And clearly, in the current bull market, these altcoins have totally crushed Bitcoin and Ethereum, memecoins mostly.  I mean, I think you're 750X up, if you were in Shiba Inu a year ago.  So, the question is, what does that mean, that these literal joke coins are the best performing asset of this space; and in a world where in the future, people like me believe that Bitcoin will start to eat into things like gold and real estate and government debt, why wouldn't they also start to eat into these other cryptos?  Or, how do you see that dynamic play out, would be what I'd love to hear you talk about?

Erik Voorhees: Yeah.  I think the shorter your timeframe, the more noisy things are.  So, while Shiba Inu is the best performing asset of the year, that doesn't mean much other than that gamble has paid off.  I'm not going to go bet on Shiba Inu over the next 20 years, but I'll bet on Bitcoin over the next 20 years, I'll bet on Ethereum over the next 20 years.  So, I think you have to be careful of, just let the noise happen; that's not what matters.  What matters is which assets will provide strong returns over a very long timeframe, and the vast majority of crypto assets won't, they'll fail, because the vast majority of new projects fail, the vast majority of start-ups fail, and that's okay.  That's called innovation and iteration.

This idea that everything ends up on Bitcoin was one that I believed back in 2012 and 2013, and just empirically I have acknowledged that that doesn't seem to be happening.  Now, will that trend change?  Maybe.  I'm open-minded.  Again, I own more Bitcoin than any other asset by far, so if it all ends up back on Bitcoin, cool, my bags are higher.  But empirically that's not what's happening, and people should understand that these blockchains are like engineering machines; they make trade-offs.

The trade-offs that Bitcoin has made make it not as great for smart contracts, but it makes it much better as base money.  The trade-offs that Ethereum have made have caused it to be this breeding ground for innovation, but it's also far more risky, and no one quite knows where the money supply will be in a year or two.  Less good as base money, but more good as an innovation ground.  I can appreciate both of these things as separate, and they're both important in the fight against actual state-based coercive money.

So, I'm just open-minded to it and I don't know where the future's going, I just know that this technology is amazing and inspiring every day, and that started with Bitcoin, but it didn't end there.

Peter McCormack: Do you want any final comments, Alex?

Alex Gladstein: Yeah, I mean, look, I got into this space through human rights advocacy.  I've seen the impact Bitcoin has made around the world.  The other asset ironically that has a meaningful impact that I've been charting and noticing is Tether, which is obviously -- very few people want to defend Tether.

Erik Voorhees: I will.

Alex Gladstein: Yeah, maybe you will.  I have to, simply because I've seen lots of Lebanese and Palestinians rely on it, because they can't get dollars any other way.  That being said, I know Tether is a timebomb.  I know it's lasted longer than everybody thought.  I mean, I actually, three years ago, was with one of the creators of it and they were like, "It's not going to last more than a couple more years", so even exceeded that person's expectations.

So, I think that we're in a transitionary phase where Tether, at least to me, has proven a humanitarian use case, but not a lot else.  I think that the number of people benefiting, and I know this doesn't matter to you, that's quite clear, and I don't want to say that -- look, if someone does really well, that's fantastic, I think that's great.  I think where I maybe differ is that I worry about the influence that can have on politics and on power, and I don't think it's just a matter of separating money from state.  I also think it's a matter of protecting the individual from other kinds of dominant power, which in a fully electronic world, maybe actually be more power than the traditional armies than we think about.

So, I just want people to be eyes open as we move forward, understand, and I appreciate and thank you for pointing out the risks involved in DeFi.  Again, everybody's having a great time right now, 100%; there's no question.  But we really see how these things are made when the systems come under stress.  So, we will see.  But I would just caution folks to just do their homework and be careful, and to not assume that the market conditions that exist now, that are honestly irrationally exuberant market conditions, will proceed forever; I think that's unsustainable.

I think that in general, for most people, Bitcoin is a better thing to learn about and spend their time on.  In ten years, I think they'll be more grateful they did so, and it's frustrating to watch people get roped into these other things, which honestly a lot of people are going to lose money on.  But it's everybody's personal responsibility and I do appreciate that side of what you're saying, Erik.  But again, a lot of my frustration with the crypto space is that I feel that it ends up being an insider's game and too many people are getting taken advantage of.

It reminds me a lot of what happened within the existing financial system, so I just wish there was more conversation around that, but I appreciate you having us on, Peter, thank you.

Peter McCormack: No, no worries, I appreciate both of you.  I've got to know you both very well over the last few years and love hanging out with you, love talking about this stuff.  Erik, do you want any final words, or were your previous words your final words?

Erik Voorhees: No, that's all good.  Alex's warning that people need to recognise that we are in a bubble is absolutely true.  Crypto is highly speculative and people need to go into this stuff with eyes wide open.  If someone is new, the first thing they should learn about is Bitcoin and understand why it's here, why it's important, why it's great money.  They don't need to venture beyond that until they understand those fundamentals.

But I think upon understanding the fundamentals, you can start to find value elsewhere.  So, I appreciate you having me on.  Alex, this was a great discussion.  Thanks for all your points and thank you for all you're doing for freedom.  Ultimately, I think we agree on a lot more than we disagree, so good to chat.

Alex Gladstein: 100%.

Peter McCormack: Thank you both of you.  I've taken a lot from this.  Erik, I always find you come with compelling arguments, things that I struggle to argue against.  And I think one of the realisation's I've come to with this is really that you're a markets guy, you want the markets to figure these things out and if people are hurt in the process, hopefully we warn them, but if they lose money, this is what happens with the markets, but you would rather markets figure it out than governments.

Alex, I think I'm probably a little bit closer to you in that I appreciate a lot what libertarians stand for.  I think theoretically, it all sounds brilliant.  I'm a bit more like you; I'm still a reluctant statist and I still reluctantly believe in democracy, for all its flaws.  But I also don't like the nanny state telling us what we should put our money in and what we shouldn't, because that comes down to where we are in the UK, where it's very hard to buy even Bitcoin, let alone any other cryptocurrency.

So, it's a really tricky area, it's a good area to debate, I think you both came with good arguments.  Love you both, appreciate you both coming on, and I think people will get a lot from this and I don't need to tell people where to find you, because I think everyone knows you two, so we won't worry about that.  Hopefully, I'll see you both in person soon. 

Alex, I've seen you recently, I'll see you again soon.  I'm not sure when I'm going to see you next, Erik, but it's been a little bit too long, so Miami maybe?

Erik Voorhees: Definitely Miami.

Peter McCormack: All right, I'll see you then.