WBD624 Audio Transcription
Do Ordinals Make Bitcoin Better or Worse Money? With Rob Hamilton
Release date: Monday 27th February
Note: the following is a transcription of my interview with Rob Hamilton. 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.
Rob Hamilton is a co-founder and the CEO of AnchorWatch. In this interview, we discuss ordinals and ordinal inscriptions: what they are, how they work, what risks and benefits do they present to Bitcoin, how would we mitigate negative impacts, and how the rest of the ecosystem is responding.
“Bitcoin exists. Any sort of moralistic lens of perspectives of what it should be doing is a conversation, but Bitcoin works as this anarchic system where there’s no one in control, and everyone gets to use it however they want; and if people can’t do that the project fails.”
— Rob Hamilton
Interview Transcription
Peter McCormack: How delicate are you, Danny?
Danny Knowles: Not that delicate.
Peter McCormack: How much did you have to drink?
Danny Knowles: I don't know, I didn't it was that much, but I had a martini.
Peter McCormack: Well, how many drinks at dinner?
Danny Knowles: Two, but one was a martini.
Peter McCormack: You only had two drinks through a whole two-hour meal?
Danny Knowles: We weren't even there that long; I was arguing with Junseth the whole time.
Peter McCormack: What were you arguing with Junseth about?
Danny Knowles: I actually will not say that on recording.
Peter McCormack: Oh!
Danny Knowles: Not for me, but for Junseth!
Peter McCormack: Well, this is part of the show now, people are going to want to know; what did Junseth say?
Danny Knowles: Well, you'll have to come to What Bitcoin Did Live!
Rob Hamilton: That's right. I love your inclusion on the show now more formally.
Danny Knowles: Especially the Patreons are the most fun one for that.
Peter McCormack: It's been a good thing bringing Danny in.
Rob Hamilton: Yeah. I think he's, well you've already said this before, like your conscience.
Peter McCormack: Yeah, a little bit.
Danny Knowles: Sometimes.
Peter McCormack: Well, there are two things that piss me off about it. The first one is Danny always asks such good questions and I'm like, "He asks one a fucking show!"
Danny Knowles: It is easy then.
Peter McCormack: It has to be a good question if you're asking one a show.
Rob Hamilton: Yeah.
Peter McCormack: But also, the thing when we go to events now, people are like, "Oh, where's Danny?" and I'm like, "Oh, he's not here", and they're like, "Oh". Well, fuck Danny! No, it's been really good. All the emails we get now are written to Peter and Danny pretty much.
Rob Hamilton: Love to see it.
Peter McCormack: Danny has a stalker on YouTube.
Rob Hamilton: Oh no, that's a problem.
Danny Knowles: Derek S.
Peter McCormack: Derek S.
Danny Knowles: A bit shoutout Derek S.
Peter McCormack: The man is definitely smoking something.
Rob Hamilton: I bet all of your fans are stone sober.
Peter McCormack: No, mine are just psychopaths.
Rob Hamilton: Yeah.
Peter McCormack: The anti-fans.
Rob Hamilton: Yeah.
Peter McCormack: Actually, they're dying down.
Rob Hamilton: Are they?
Peter McCormack: Yeah.
Rob Hamilton: You know why? Because you've just fucking moved on.
Peter McCormack: Yeah.
Rob Hamilton: You don't give them power, and they're just going to scream into the void?
Peter McCormack: Yeah, we were talking about it yesterday, weren't we, with HODL, it's like, what did he say, "A standing army destroys itself".
Rob Hamilton: Yeah.
Peter McCormack: And they've kind of imploded and I think just the whole world's moved on from like, "Yeah, let's be toxic".
Rob Hamilton: Well, yeah, we'll talk about that on the show.
Peter McCormack: Well, the show's on, we're recording.
Rob Hamilton: Like we're live?
Peter McCormack: Yeah.
Rob Hamilton: We're doing it.
Peter McCormack: We don't tell.
Rob Hamilton: Oh, you did a stealth rip on me?
Peter McCormack: Yeah.
Rob Hamilton: All right. Yeah, I think it also came a lot too for your management on Twitter, being able to communicate to people; you're less combative in giving attention to every troll that says something mean to you, and that removes their power, and that was Danny, there you go.
Peter McCormack: They love Danny; we used do our little therapy sessions every morning, I'd go for a walk, call Danny as I walked around Bedford Park saying, "They're so mean to me".
Danny Knowles: "Danny, we have three followers on Twitter who are being mean me!"
Peter McCormack: Yeah.
Rob Hamilton: "Spokane Hodl was rude to me!"
Peter McCormack: "Fuck Spokane Hodl, he's a dick". Have you met Serious.HODL?
Rob Hamilton: No.
Peter McCormack: You have.
Rob Hamilton: Okay.
Peter McCormack: I've rebranded American HODL to Serious.HODL; have you not noticed his Twitter's got really serious now?
Rob Hamilton: Yeah, I think his rebirth onto Twitter, he's just taking a different perspective of what he's there for.
Danny Knowles: We've got a serious New York soundtrack going on in the background.
Peter McCormack: Well, shut the fuck up, New York! Every time we come to New York, it's just noise everywhere.
Rob Hamilton: It's just a big shitshow, yeah.
Peter McCormack: But like his rebirth, I think he's so smart.
Rob Hamilton: I think he also is a bit atoning for his sins because his irreverent hilarious style, he had a bunch of left-curvers copy them not realising that you have to have tact and intelligence to be funny and rude, and people were just like, "Oh, I can be rude and get social following"; then it turned into this very negative feedback loop where you would, instead of having interesting ideas or different perspectives, it was just who would be the biggest dick?
Peter McCormack: Yeah.
Rob Hamilton: And then it became a way of a badge of honour of just being a dick, and then you don't really have much of a culture on being a dick.
Peter McCormack: Yeah, and one of things I've really appreciated with him is, we a lot of offline conversations where we hang out, and he's actually very practical and realistic about the world we live in rather than people who are just like, "Bin the government!" and all the kind of standard bullshit you hear, this expectation that Bitcoin fixes the entire world all the time, and, "If you don't agree with that, then you're a cuck". He's actually very practical in the background.
Rob Hamilton: Yeah.
Peter McCormack: He's very realistic about the world and I appreciate him for that.
Rob Hamilton: He's a good man.
Peter McCormack: He's Serious.HODL.
Rob Hamilton: He is, yeah. He's a very interesting guy; I got to hang out with him a lot more in Clubhouse, and when the idea came up around me starting a company, he was first money in, he was like, "Rob, let's just do it, I believe in you, go shoot for it". He's been an amazing person to get advice from and perspectives from. The man is more than just the Twitter name, and I think maybe Serious.HODL's a little bit of showing that other side of him.
Peter McCormack: I like it; I think he should wear a suit and a tie now. Anyway, how have you been, man?
Rob Hamilton: I'm doing well.
Peter McCormack: It's good to see you.
Rob Hamilton: Yeah, it's good to be here.
Peter McCormack: It's nice to have your wife here.
Rob Hamilton: Yeah.
Peter McCormack: Hi, Abby.
Rob Hamilton: Hello, Abby, yeah. She now knows all my internet friends aren't just made up in my head!
Peter McCormack: We're going to talk to Abby later, I'm going to embarrass her. Good to see you, man, always good to see you. So, we're going to discuss ordinals. So, the setup is that I've kind of seen the debate happening, and when anything like this kicks off, everyone takes a position, right?
Rob Hamilton: Sure.
Peter McCormack: And I couldn't take a position on this because I was watching these arguments and thinking, "I don't give a fuck", because I don't give a fuck if people want to post jpegs to Bitcoin, but I also don't give a fuck if people -- like some people are like, "This is bad for Bitcoin: Bitcoin's about money, this is loading the blockchain", whatever their reason is. I was also like, "Well, go and figure that, go and figure it out". I took little interest in it, but my interest is now growing because a lot of people I like and respect are saying, "No, this is cool". And a couple of things that stand out to me that I really like about it is it's making Bitcoin a bit more fun.
Rob Hamilton: Yeah.
Peter McCormack: I used to explain Bitcoin, being a bitcoiner in crypto is like going to Vegas and going to have a meeting in a glass room where you're having a very boring PowerPoint presentation and you've seen everyone outside the glass room running around having fun.
Rob Hamilton: Yeah.
Peter McCormack: That was what it was like to be a bitcoiner, and bringing in a bit of fun's kind of cool, so that's peaked my interest, I think that's kind of interesting. But also I'm very sympathetic to the side that we're trying to create the best money in the world, does this get in the way of creating good money; are there negative externalities that affect this being good money? The only thing I don't like is I've seen some almost religious condemnations of this which I think it's just like, "Fuck off, I've no interest in that", but I don't know much about this; I've not spent much time looking at it. So, let's do this, explain it like I'm a foetus, let's go straight in.
Rob Hamilton: Let's do it, yeah. So, the Ordinal Project was started by Casey Rodarmor who is a long-term Bitcoin developer, he's the leader for the San Francisco BitDevs meetup, he took over after Alex Leishman left, from River, and he's been, for a very long time, involved in Bitcoin on the technical code level. He also took interest in generative art; he started playing around and seeing that there were informed people that were buying and selling NFTs and creating art on Ethereum, and he wanted to understand, I think at a high level, how this can be done with Bitcoin. The Ordinal Project gives everything single satoshi, since the beginning of the Genesis block all the way to the end, a unique number.
Peter McCormack: That already existed, or the Ordinal Project has made that happen.
Rob Hamilton: The Ordinal Project brought it into some sort of consensus layer where you and I can come to agreement as to what each number was.
Peter McCormack: It's like serial number on a banknote.
Rob Hamilton: Very similar to that, yeah, and the idea is that this, as an idea, could have existed since the start of Bitcoin. All of the code that Casey's done, all of the Ordinal Project stuff is entirely independent of Bitcoin in that Bitcoin doesn't recognise any of this stuff. Bitcoin recognises a transaction; is it valid or is it not valid?
Peter McCormack: So, where does the serial number, the ordinal serial number exist?
Rob Hamilton: Yeah, so the ordinal software, Ord, is what's applying this layer, and to run this software, you have to run an entire full node and index every transaction that's ever happened.
Peter McCormack: So, is this additional code or something you download onto your node?
Rob Hamilton: On top of Bitcoin, it's like a layer that sits on top of Bitcoin.
Peter McCormack: Okay. So, some questions on that early on.
Rob Hamilton: Sure.
Peter McCormack: If you are a giving serial number code to every single satoshi, what does that do for things like Wasabi?
Rob Hamilton: Well, it really doesn't matter in a sense that the serial numbers that are following on top of this stuff have a very simple way of doing accounting, and if I were to use Wasabi or Samourai or JoinMarket, some sort of CoinJoin, I may be trading my serial numbers, but I'm not holding the same serial number across the CoinJoin; I'm basically like I give you $100 bill with the serial number 5 and you give me a $100 bill with the serial number 7.
Peter McCormack: Is there anything in there that would make someone like Chainalysis' life easier?
Rob Hamilton: No, because only people who care about the ordinal software are even looking at this.
Peter McCormack: Right, okay.
Rob Hamilton: So, if you never run the ordinal software and you have one Bitcoin, you just have one Bitcoin; it's not like the serial number's tracking you across time.
Peter McCormack: Okay.
Rob Hamilton: But this is, to give a fair charitable side of the debate, this is one of the concerns though, is that if enough people start using ordinals, a lot of people start building on top of this protocol, that there would be some case to be made that those serial numbers matter. But the reality is that an overwhelming majority of Bitcoin users and the actual coins themselves pay no respect or care to any of this.
Peter McCormack: But if one person is running it, then every satoshi does have this kind of serial number, and at any point, if somebody found a way or thought that information was useful for tracking something, they could download the ordinal software and follow it along.
Rob Hamilton: Yeah, right. So, if you didn't use an ordinal software and they were trading some of these jpegs that are floating around, you could use the ordinal software to follow the jpeg across the blockchain.
Peter McCormack: But if the ordinal is applying this kind of serial number to every satoshi, is it doing it from the point it sees every one, or is there already a unique identifier that is attaching it to it?
Rob Hamilton: So, it actually starts all the way at the Genesis block; the first satoshi ever mined in the Genesis block is ordinal number 0, and there are a 100 million satoshis in a Bitcoin, so the first block went from satoshi number 0 to satoshi number 5 billion, 50 Bitcoin, and then the next block went from 50 billion and 1 to 100 billion; you do this across the entire blockchain in every single transaction as it comes in.
Peter McCormack: Sorry to be dumb, but how does it attach it to that satoshi? No, I think I know, I think I understand, because the software has identified them at that point and then is then following them.
Rob Hamilton: Yeah, exactly, the software's following it across time.
Peter McCormack: But hold on, say Genesis block, you sent me a half a Bitcoin, say you mined the Genesis block -- actually, you can't send Bitcoin from the Genesis block, can you?
Rob Hamilton: You can't, it's a specific part of the code that you can't actually use the Genesis block coins that are in there; Satoshi locked them specifically.
Peter McCormack: So, block 1, you want to send me half a Bitcoin and so that's 25 billion satoshi.
Rob Hamilton: Sure, 25 Bitcoin, 25 billion satoshis.
Peter McCormack: Yeah, sorry, you want to send me half the block, so it's 25 billion, how does it know which satoshis are which?
Rob Hamilton: Well, I'm so happy you asked. I can do an example here of what it looks like right now, or how it would work in a Bitcoin transaction. So, I'm going to make this very simple, and I'm going to say we have a six-satoshi transaction and I have six cards. So, here are my satoshis on my side of the transaction, I own six satoshis, right? The way it works, in normal Bitcoin today, is let's say I want to send you three, I send three to you, one, two, three, right, I give two to myself back in change; that's how Bitcoin works, you have to spend an entire transaction when you use it. So, if this is the input side, my six satoshis, I'm giving Peter three, right here, I'm giving two back to myself as change, and this one is a miner fee, so the miner takes this one and it pays for the transaction.
Peter McCormack: Okay.
Rob Hamilton: That's how a normal Bitcoin transaction works today. If I may, I was actually at Bitcoin Park last week with Casey, and we were talking about ordinals, doing some code that we can talk about while we're here, but he also gave a gift for me to give to you.
Peter McCormack: Oh wow, okay.
Rob Hamilton: So, he ran the special ritual, he rubbed it against his node, he said some magical words, and these are magical ordacles, like spectacle ordacles. So you need to put these on and I'm going to put on my own pair too, and we're going to go into the ordaverse, all right?
Peter McCormack: How do I look?
Danny Knowles: You look great.
Peter McCormack: Do I look cool? Udi would be proud of us right now.
Rob Hamilton: That's right. So, now we're going into the ordaverse. Here's what it actually looks like when you're running the ordinal software. Each single satoshi now has a unique face value, and we're using playing cards here, for those at home on an audio. The first time I went through this, I had all the cards face down because they're fully fungible, the protocol knows no knowledge of anything. But now, if I want to send you a transaction with ordinals, you can actually see each of these cards has a different value, I have a joker, a queen, a ten, an eight, a five and a four. Let's say I have my six satoshis here and I'm now going to send you one, two, three, I'm going to keep these two for change, and this one goes off as a miner's fee.
Peter McCormack: Okay.
Rob Hamilton: So, this is how the ordinal software looks, it goes throughout the entire blockchain's history, and when you run the ordinal software, you actually get to put on these magical sunglasses and you're able to actually see the individual numbers, but to everyone else who's not using the ordinal software, this is all invisible, it just looks like face-down cards.
Peter McCormack: Okay, and does it work because when you do that send, it sequentially knows those?
Rob Hamilton: Yes, these are now yours, those three are now yours.
Peter McCormack: These three are mine, if I'm going to send, say, 1 satoshi to Danny, that's always the first one?
Rob Hamilton: Yes. So, this is called the first in, first out, FIFO.
Peter McCormack: Right, okay, and that's how it can --
Rob Hamilton: Keep track.
Peter McCormack: Right, that makes sense, I understand now, okay.
Rob Hamilton: So, first in, first out, so this is just straight ordinals; we haven't talked about jpegs, we haven't talked about any of the crazy data stuff, no Dick Butts yet, we're going to be getting there soon, but this is actually where, if you'd like, I can talk about what that actually is.
Peter McCormack: Okay. Do I need to keep these on?
Rob Hamilton: Well, if you want to see the ordaverse.
Peter McCormack: Okay.
Rob Hamilton: It's okay, we can go back to the normal world if you want.
Peter McCormack: No, that's fine.
Rob Hamilton: Okay. So, when you have all of these transactions, you're able to do things like embed data. So, everything we've talked to up this point is an ordinal, just the number order.
Peter McCormack: Can we go back a step?
Rob Hamilton: Please do.
Peter McCormack: So, say I've sent you half a Bitcoin, does it really just know which is the first one and the last one and it's making an assumption on the ones in between?
Rob Hamilton: No, because as you go further and further throughout the history of the blockchain and you have people sending 1 or half of 1 or quarter of 1, they start breaking up into chunks.
Peter McCormack: Yeah, but what I'm saying, before it breaks, does it only know the first and the last; is it saying in there I've got 1 to 50 million or something?
Rob Hamilton: No, every single transaction has its own mix. So, I could send you a Bitcoin transaction right now, and before I even talk about the inscriptions, this is really interesting, you can actually start seeing, "Oh, I just sent you 1 Bitcoin", maybe 10 million sats, like 10% of that are coins that are from this year, came from a miner earlier this year, they're freshly-minted coins. Some of them though, in the middle of that stack, could be from 2009; you may even have a rare ordinal.
Peter McCormack: We're going to come to that.
Rob Hamilton: Yeah, we can talk about that. So, what's really interesting is, when you start ordering things, you start getting some interesting things in. All of the sats, a regular one, is common because they're very widely available; an uncommon satoshi though maybe one that is the first satoshi found in a block.
Peter McCormack: Hold on, I want to go back one step, sorry.
Rob Hamilton: Sure.
Peter McCormack: If I send 1 sat, we know that 1 sat, what its number is.
Rob Hamilton: Yeah.
Peter McCormack: And the ordinal knows which one.
Rob Hamilton: Yeah.
Peter McCormack: But when I send half a Bitcoin and there are 50 million sats in there, does the software itself create those 50 million sats and therefore number them?
Rob Hamilton: It creates the numbering, but the numbers are not --
Peter McCormack: Because when the Bitcoin transaction sends, the Bitcoin software doesn't recognise each sat individually.
Rob Hamilton: Yeah.
Peter McCormack: It does?
Rob Hamilton: No, well it does in the sense that it makes sure that your outputs look like your inputs to make sure you're not printing extra money.
Peter McCormack: But it doesn't identify each sat separately, so surely the ordinal software only knows that it only can identify the first and the last one.
Rob Hamilton: No, it's actually not true. So, the way the ordinal software works when you download it and you run it, it starts at the first Genesis block all the way to present, and it's numbering every single one as it comes into existence from the miners.
Peter McCormack: Yes, in the software, right?
Rob Hamilton: In the software.
Peter McCormack: Yeah, in the software, so it's creating them there. But what it's really doing, to me it has to be a hack; when it's doing it, it's like I know that's 50 Bitcoin and I know the first sat and the last sat, but I don't know the in between ones, I create them my end and I know them at the point they get split up.
Rob Hamilton: So, if it's fresh from a miner, they are all the same sequential number, but over time, it's kind of like breaking change; if I give you a $100 bill and you give me back five $20s and then I go and give one of those $20s to like the gas station for something, I've now broken the order of those. If you give me five $20 bills and it's bill one, two, three, four, five, I give bill number two out of my pocket to someone, and then that person spends that number two and it goes off somewhere, I now have one; it breaks up like that. So, it's not always a, "I have 1 Bitcoin, it must be from 0 to 100 million".
Peter McCormack: No, I get that, but what I'm saying is, at the point where the ordinal software goes, "Right, here is 1 Bitcoin, here is 100 million sats", it can definitely know individual sats, identify them and in an individual basis.
Rob Hamilton: Yes.
Peter McCormack: But what it has to do is it say, "I know there are 100 million sats here, I'm going to number them", but it can only actually truly identify an individual sat at the point it's been broken up.
Rob Hamilton: The serial number's assigned when it gets mined in a block.
Peter McCormack: Yeah.
Rob Hamilton: So, that's when it usually is given its serial number, if you want to call it that, for like the dollar example, that's when it gets made, and then it just follows it across time; that's what it's doing going forward.
Peter McCormack: Do you understand what I'm saying here, Danny?
Rob Hamilton: I'm a little confused.
Danny Knowles: I am a little confused as well, to be honest.
Peter McCormack: What I'm saying, if I send you 1 sat, the ordinal knows that sat and what that individual number is. If I send you 10 sats, how does it know the in between ones because Bitcoin software doesn't separate.
Rob Hamilton: But the ordinal software does.
Peter McCormack: Yes, but it has to be an assumption.
Rob Hamilton: It makes an assumption with this first in, first out accounting method.
Peter McCormack: Yes, now you get it.
Rob Hamilton: I think we're on the same page now, yeah.
Peter McCormack: Do you understand what I'm saying?
Rob Hamilton: I think we got there, yeah.
Danny Knowles: I think so, yeah.
Peter McCormack: Okay. I feel like I'm asking you a good question here.
Rob Hamilton: Do you need to take off the magic ordacles? Do you want to take them off, leave the ordaverse for a bit?
Peter McCormack: No, what I'm trying to understand is what is Bitcoin software, what is other software and how relevant it is to Bitcoin.
Rob Hamilton: Sure.
Peter McCormack: Because, if this software is saying these are individual sats and it's given them identifiers, but if the Bitcoin software doesn't actually identify individual sats, then this is just a different piece of software making its own assumptions.
Rob Hamilton: It is a different piece of software making its own assumptions.
Peter McCormack: Yeah.
Rob Hamilton: Absolutely; it's a shared hallucination.
Peter McCormack: Yes.
Rob Hamilton: We're all agreeing on this together.
Peter McCormack: Okay, I'm good.
Rob Hamilton: Exactly, all right.
Peter McCormack: 45 minutes in!
Rob Hamilton: So, very quickly, just on the ordinal side before talking about the jpegs, you can have, "Oh, this is the first satoshi that was mined in a given block", that's maybe uncommon, and then you can have, "Oh, I have the first satoshi that came after a difficult adjustment", that only happens once every two weeks, that's more rare, and then you can have the first satoshi after a new halving.
Peter McCormack: Yeah, and that's like people who collect banknotes with serial numbers on.
Rob Hamilton: Yeah, and I was listening to a podcast, Bitcoin.Review with Rijndael and Rodolfo, NVK and Casey, and they were talking about, you know, a lot of people in Bitcoin are just natural collectors. So, maybe you want to collect some satoshis from every single exchange hack, Quadriga, Bitfinex; since you know where the hack happened, you know all of the individual serial numbers that were involved in that hack, maybe you want to collect that. Maybe I want to collect a couple of satoshis from my wedding day; you can find little fun things that you can use to commemorate occasions, and you're applying this new shared hallucination to be able to collect different satoshis that have value to you uniquely.
Peter McCormack: Yeah. So, I bought a print by a Russian artist, it's a limited 50, I knew the distributer, so I asked for number 1 because number 1 is always the most popular and it's always worth more.
Rob Hamilton: Right, yeah.
Peter McCormack: Or it's first edition prints of books.
Rob Hamilton: But all the prints are the same but this one's the first serial number, exactly.
Peter McCormack: It literally says "1 of 50" on it.
Rob Hamilton: Right, exactly, so it's arbitrary because the art is identical, it's the serial number on top of it that people assign more value to.
Peter McCormack: Okay, so you could argue there's a net negative if people start hoarding satoshis based on numbers because we want this to be money?
Rob Hamilton: I think I would reject the term "hoarding", what are you when you're hodling Bitcoin?
Peter McCormack: You are holding to spend in the future.
Rob Hamilton: Yeah.
Peter McCormack: To make use of it. But when you're hoarding, you may never make use of it.
Rob Hamilton: Well, there are a couple of things I have thoughts on that. So, I think holding it and then maybe eventually passing it down to your child or selling it off in a collection later, it may not be in the literal sense of, "I'm going to use this to go buy groceries", but it's still legitimate use case in that it's my property, I'm going to hold on to it, and by restricting, more people hold on to it. This is the whole idea around you want to hold it and then there's less available supply, and the price goes up. So, this is part of hoarding, as a term, that's part of the whole Number Go Up thesis.
Peter McCormack: Yeah, but I'm not a huge Number Go Up thesis guy any more anyway because my view on Bitcoin, when I talk about Bitcoin -- I did a presentation at the football club the other day and I was like, "Bitcoin is the best money that's ever existed", so therefore, there's a trade-off here between does this make this the best form of money, or are there some selfish incentives that can slightly make it less great money? And I think giving people a reason to hold certain satoshis and hoard them, we use the term "hoard them", I think is a selfish decision, personal decision, selfish, that works against Bitcoin being the best form of money.
Rob Hamilton: Well, I think the desire to hold Bitcoin helps with it being the best form of money because this is like Gresham's law, if I had bad money, I want to get rid of the bad money and hold on to the good money.
Peter McCormack: Yeah, but the reason to hold it is different now, it's because some superficial human reason, but it's not about best money.
Danny Knowles: When people collect special coins, does that ruin the dollar as a form of money?
Peter McCormack: The dollar's already ruined; it's shit money already.
Danny Knowles: But that's not the point.
Peter McCormack: But it is the point because what I'm saying is we're trying to create the best form of money.
Rob Hamilton: So, this is actually, I think, an even further zoom out. Bitcoin exists; any sort of moralistic lens of perspectives of what it should be doing is a conversation. But Bitcoin works as this anarchic system where there's no one in control, and everyone gets to use it however they want, and if people can't do that, the project fails.
Peter McCormack: No, I completely agree, but what I'm just saying is, just my empathetic side is, are we trying to create the best form of money that ever existed; do we make it less good by giving people to hoard it, which has nothing to do with money and purely to do with superficial human reasons?
Rob Hamilton: I don't think that's a bad thing; people are going to use it for whatever they need to, and I think this is a very important point that I think the stuff that's going on with ordinals right now, whether it's a flash in the pan and I have some thoughts on that -- ordinals, in general, I think it's almost a change of the guard from a narrative element in Bitcoin.
Bitcoin will still be sound money, it'll still be something we all talk about as a good, strong form of money, but ordinals are changing the narrative of what it is to be using Bitcoin and what is Bitcoin for, and I think this is something that we're seeing, kind of a sea change of narrative right now on how people use and think about Bitcoin.
Peter McCormack: Well, it's in a debate.
Rob Hamilton: I think the debate settles.
Peter McCormack: I don't think it's settled yet because I can step outside of this as somebody who doesn't give a fuck either way and I do not think this is a settled debate. And the reason I don't think it's settled is I put a question out yesterday on Twitter about it, the same one out on Nostr, and I got very different replies on Nostr.
Rob Hamilton: Yeah.
Peter McCormack: On Twitter, it was very much like, "Yeah, this is great", with some negatives; on Nostr, it was very much, "This is fucking stupid", with a few positives, so it's far from settled.
Rob Hamilton: I think this is what I mean though by a narrative change, because the people that are there are classes of 2017, 2018, maybe even earlier too, there are a lot of old-school bitcoiners on there, but they have this sound money primacy thesis about what Bitcoin's supposed to be. And the reality is that the people that are using it now for inscriptions and jpegs and all of the silly collecting stuff, they're part of Bitcoin; they're using Bitcoin, they're following the rules of Bitcoin, and they're here to stay.
Peter McCormack: But Bitcoin evolves and changes.
Rob Hamilton: Yeah, it does, I think this is part of Bitcoin's evolution, and from my perspective, I actually personally would love to have smaller blocks. I'm never going to have smaller blocks, but that's just my wish list. We now live in a world though where these are valid Bitcoin transactions, we can't censor or remove them, they're following the rules of Bitcoin, so we have to live to exist with them.
So, rather that seething and coping, just accepting that this is the current state of play, we had a block size increase during SegWit in 2017, and then BIP 342, which was part of Taproot, removed the script size limit, which is why you're getting these very large transactions now they're being embedded. You can't undo those changes easily, so we have to accept this is the new state of play, and this is what I mean by a narrative shift.
Like you said, people who are having fun with Bitcoin, playing around it, it has nothing to do with money. People are touching and playing with Bitcoin now with no care for the digital gold thesis, they have no care for sound money as a narrative, they're having fun doing art collections and jpegs and being irreverent and making silly memes on the blockchain, and it's just like they're here now, you can't kick them out, and I think this is part of that narrative sea change.
Peter McCormack: Well, two points on that; firstly, there are people who are definitely pro NFTs on Bitcoin who were definitely mocking the Ethereum people for NFTs a year ago. People have flipped their perspective on this for a selfish reason because they think it's good for them, right, and then they mock people; it's a hypocritical position to take. Fine, but it's a hypocritical position to take. I value their opinion less because I think their actions are more based around personal Number Go Up than wider adoption and benefit of sound money for a wider community.
Like yesterday, we were making our show, we're doing a new three-part beginner's guide, really simple one, and one of the questions we said is we talked about why Bitcoin's good money and why it benefits people. Well now let's look how it's maybe different for people in the developing world because they have a different use case.
Rob Hamilton: Sure.
Peter McCormack: So, I'm beyond the Number Go Up now, I don't care anymore; I care about the widespread adoption of Bitcoin that benefits people's lives. So, the point I'm trying to get to is, I'm not trying to be combative, I've not taken a position, whatever side you take I would argue the other side. So, if we're trying to create sound money, if we're trying to create the best form of money, I have to at least kind of push back against this. When you say it's here and we have to accept it, is that 100% true this cannot be undone, there's no technical way to undo this?
Rob Hamilton: You could fork off.
Peter McCormack: No, can it be done without a hard fork?
Rob Hamilton: It can be done with hard fork, what you would need to do though is --
Peter McCormack: Without a hard fork.
Rob Hamilton: Without one?
Peter McCormack: Yeah.
Rob Hamilton: You'd have to have all the of miners agree not to touch this stuff anymore, but the miners are now getting transaction fees.
Peter McCormack: So, you don't always just have to have the miners, No2x proved that.
Rob Hamilton: Sure.
Peter McCormack: The point I'm trying to get to is, I'm not trying to argue against you and have the debate right now, what I'm trying to say is the debate isn't settled, the debate might go on, it may get to a point where there is a debate about, actually is this good for Bitcoin or not; if it isn't, is there a way of getting rid of it and will people get rid of it?
Rob Hamilton: Yeah, so the way you could get rid of it is if you had a bunch of users come together, do a user-activated soft fork, and say, "We are going to censor and not acknowledge the existence of any ordinal inscriptions"; it could be done.
Peter McCormack: Which is exactly what happened during the Blocksize Wars and largely contributed to the failure of the hard fork.
Rob Hamilton: Yes, but again, we should walk through this for a moment then. Okay, you have a coalition of people who want to ban this, also I'm going to repeat Rizzo about this, he calls this "The Degens' Paradox".
Peter McCormack: I think we have to be careful of the language here because you're saying "ban this" and it's instantly like a pejorative; when actually, I think some people out there want the best, soundest form of money and they think this is like a net negative.
Rob Hamilton: I understand and sympathise with the idea of that, but again, so how are you going to do it? If you want to have the users put forward a change, your option is to fork this behaviour out the network, which means I will not recognise any ordinal transaction at all.
That then means though you would have, the moment a block was mined that had ordinals, and you pick a block height, say a block height of a million, we're going no longer do ordinals, if that block has ordinals in it, you have a fork in the network now; you have people who decided to break off from the network and not recognise ordinals exist and you have people who decided that they wanted to stay, and now you have a fork, just like you had with Bcash. So now you have to understand how committed are you to this? And this is me coming from a sense of acceptance of, I'm not trying to change consensus. The ordinal stuff is not breaking technical consensus of the code.
Peter McCormack: I know, but I think you're more likely to see a social campaign first.
Rob Hamilton: Sure, but there's not enough demand there because you need more than just the users, you need the miners to cooperate with that. So, then you need miners to act against their own interest and have lower transaction fees to make this work. Maybe you offset it by making a smaller block size. If there was a smaller block size, there's less space to get into the next block so transaction fees go up, so maybe that offsets it.
Peter McCormack: But that would have to be a hard fork.
Rob Hamilton: Would that have to be a hard fork?
Peter McCormack: Yeah, it has to be a hard fork.
Rob Hamilton: No, you can have users all opt in and say --
Peter McCormack: I'm almost certain because I discussed this with Luke Dashjr because he wants 300k block sizes, and I'm pretty sure the only way to can do that is a hard fork.
Rob Hamilton: Well, you could have all miners agree just to not publish blocks that are over 300kb, and then that's a user behaviour, it's not actually changing any lines of code. If all the miners agreed, "Hey, we're not going to make a block any more that's over 300kb", you could do it, but you need all the miners to agree to it.
Peter McCormack: Yeah, I don't see that's going to happen.
Rob Hamilton: If you want to make it a rule, it has to be a fork.
Peter McCormack: Yeah, I just don't see that one happening.
Rob Hamilton: I agree, and I'm coming from a place of acceptance that Casey put a lot of thought into the design of this to do it within the design space and rules of Bitcoin.
Peter McCormack: Yeah.
Rob Hamilton: And because of that, if you don't like it, you are the one that's changing the rules of Bitcoin. When there's an application of moral or social narratives on top of the technical code of Bitcoin, that's when you're like, "Well, is this good for the sound money thesis?" And it's like, well, the sound money thesis is not literally in the code as in this must be the primacy use case of Bitcoin. We apply narratives and say, well, there are certain characteristics of Bitcoin, the limited supply, the controlled issuance, the difficulty adjustment that benefited a sound money, but there's nothing in the code that says it must be sound money.
Peter McCormack: No, but for some people, I imagine this is a really important point on a maybe ethical level for them.
Rob Hamilton: Sure.
Peter McCormack: When Rosa Parks sat at the back of the bus or the front of the bus, I can't remember; what were the rules?
Danny Knowles: Front of the bus.
Peter McCormack: Yeah, she broke the laws of society.
Rob Hamilton: Yeah.
Peter McCormack: And when I bought cannabis oil for my mum, I broke the laws because I thought it was the right thing to do.
Rob Hamilton: Right.
Peter McCormack: Some people may see this as we're trying to bring sound money and this might be a net negative.
Rob Hamilton: But we're talking about the actual changing of the rules of the code. The Bitcoin blockchain works because we all agree on consensus.
Peter McCormack: Of course.
Rob Hamilton: If you change consensus, that's a very scary place to be and you will cause a fork if there's a disagreement.
Peter McCormack: But that's what I'm saying, social campaign first.
Rob Hamilton: Sure.
Peter McCormack: All I'm saying is I don't think this is settled.
Rob Hamilton: I think there's too much support from all of the miners, many of the users. There is a small subset of users right now who believe, in the general world of Bitcoin, that would want to actually have a fork because a fork is very serious, it is putting your skin in the game, money on the table saying, "After the fork happens, I'm going to sell the other fork's coins". So, if you have ordinal-free, ordinal disrespecter and ordinal respecter, you have the basechain right now --
Peter McCormack: I think the ordinal one wins right now, but I think it's purely selfish.
Rob Hamilton: Well, Bitcoin works because everyone has their own selfish motivations. No one's altruistically acting within Bitcoin, the code itself. We have agents like you who believe in things like bringing better money to the developing world, but that's you individually, that's not the Bitcoin code doing that. And I think this is just the messy thing; it's rough consensus, it's messy, it's sloppy, and it's a very serious thing if you're going to change it. I think Bitcoin works because everyone is selfishly motivated. If it required an altruistic lens, it would require external maintenance to keep it going and the project would fail. Bitcoin works because everyone is selfish.
Peter McCormack: Hold on, I think we've got to where we are over 13, 14 years of Bitcoin because of altruism.
Rob Hamilton: In what way?
Peter McCormack: I mean a lot of people have had to make sacrifices to work and build Bitcoin, develop Bitcoin. Anyone who took a job or worked on Bitcoin Core instead of taking a high-paid salary at Google, that was an altruistic action to create better sound money.
Rob Hamilton: I think people just find it as an interesting software project. I don't think people in like 2010 were like, "I'm going to work on this to be able to get sound money of the world", they found it as an incredibly unique software project to work on. There may be some people who do that as well.
Peter McCormack: There is definitely altruistic work within Bitcoin. When you make a donation to a developer, that's altruistic work.
Rob Hamilton: Yeah, I donated to Luke Dashjr and those coins did not move until the day of his hack, they literally sat there in an UTXO and then I heard he got hacked and then went and looked at my old addresses.
Peter McCormack: Just think you're wrong saying there's no altruism in Bitcoin, I think there is.
Rob Hamilton: The code itself, the protocol moves forward without requiring altruism. The protocol exists because of greed; miners are not mining out of the goodness of their heart. They may have business decisions and reasons where they may mine unprofitably for a certain period of time because they believe in a longer thesis of Bitcoin. The miners propagate each new block out of their own selfish interests because they're able to make a profit.
I hold on to Bitcoin because I have a selfish belief that it's going to be worth more in the future and it's going to be able to help me provide for my family. And this is where Bitcoin is an anarchic system, we each have our own senses and motivations, but it's all out of our perception of what we want. There's no sort of ethnical committee of Bitcoin saying, "Well, we haven't don't enough allocation of resources over here. We need to deploy stuff over here", there is no governing body that's deciding the moral ethnical code of how Bitcoin should work.
Peter McCormack: Yeah, I'm just personally much less in that camp of my actions within Bitcoin being selfishly based. I'm much more now focused on how we get this out to the people who really need it, and my only concern on ordinals is that, are they a net positive or a net negative for having good sound money for the world? And I don't know the answer to that now.
Rob Hamilton: I think if you also look at it, I think there are projects like Fedimints and Lightning that are able to provide scaling layers and access to Bitcoin in different ways that don't have to interact on the basechain. Bitcoin block space is a limited scarce resource; it's open, anyone can use it, but it's limited. It's something in the neighbourhood, if you wanted to get every single person in the world on Lightning, it would be like seven years to do that, and that's only if a channel opens; I'm not sending you money, we're not doing any sort of Bitcoin transaction.
So, Bitcoin necessarily was always going to come to a place at some point where the block space was going to be full and Layer 1 transactions were going to become expensive. It was the only way Bitcoin, as a project, was going to survive as the mining subsidy gets halved and halved and halved. This is what people used to joke about the mining death spiral, they're like, "15 years from now, you're going to earn half a Bitcoin in a block", and all of a sudden now, it's not enough money to actually subsidise the miners. You needed a robust fee market for Bitcoin to work in the long run, it was necessary, and I think what happened with ordinals is it pushed that up way faster than anyone expected.
The meme pool may never clear again, so the meme pool being where all the unconfirmed transactions sit. Three weeks ago, you'd be able to get in the next block, pay 1 sat for a vByte which meant you paid maybe 5 cents for a $1 million transaction, those days are over.
Peter McCormack: A very high time preference there.
Rob Hamilton: Right, but if you wanted to clear faster, you would be able to do now like, I think it's like 10 or 5 sats or vByte depending on what time of day it is. What's really interesting is that the financial transactions on Bitcoin are much more economically dense than the ordinal stuff. If I want to send you $1 million, it's a very small bit of data; if I want to put a 400kb jpeg, that's a lot more data, and I have to pay for those fees, and I have to compete with me sending you $1 million for 25 cents, they have to compete with that and pay full freight on the transaction side. There is the SegWit discount we can talk about, but we haven't even talked about inscriptions yet.
Peter McCormack: Yeah, I know, sorry, just this stuff's really important. So, we're very early in people using the Bitcoin blockchain for jpegs.
Rob Hamilton: Yeah.
Peter McCormack: Probably the volume's quite low.
Rob Hamilton: There have been 100,000 of them made in the past 3 weeks.
Peter McCormack: What if there were millions; what actually happens at that point?
Rob Hamilton: Well, give it a couple of months.
Peter McCormack: But can we get to the point where some people can't even afford to open a Lightning channel?
Rob Hamilton: What do you mean by "they can't"?
Peter McCormack: Well, it becomes so expensive. So, say you're some dude in Africa who's got like $50 of Bitcoin and transaction fees of $50.
Rob Hamilton: Yeah, but this is where Fedimints come in and also using custodial Lightning services or using the Galoy money way of the Bitcoin Beach where they have the one node that runs it for the whole town. You're going to have to have scaling solutions like that because each individual person was never going to be able to use Bitcoin's blockchain on the base layer.
Peter McCormack: So, I'm not a fan of Fedimint by the way.
Rob Hamilton: Okay.
Peter McCormack: I'm really struggling with Fedimint because it sounds like to me we're undoing all the good things we've said about "No your keys, not your Bitcoin"; I've just really struggled with it.
Rob Hamilton: Well, this is an interesting conversation about scaling, genuinely, this is actually a kind of an artefact of the Blocksize War because the big blockers said, "I want to be able to have every single transaction freely available so anyone in the world can pay very low transaction fees", and the other side of that said, "We can't scale to a global money and sort every single time you're buying a cup of a coffee for 8 billion people around the world". So, this was part of the necessary trade-offs of the fork wars, you were not going to be able to have everyone interact with cheap basechain Bitcoin.
This is what I mean about ordinals is permanently changing how we view and think about Bitcoin, and this is a sea change narrative from the sound money narrative to whatever this new era is because the blocks are now full, block space is now being aggressively bid by people using it for non-monetary use cases; it's going to take years for us to fully wrap our mind around what does that look like from a Bitcoin security use case and narrative and how we sell it to others. It was just necessarily always going to happen. I think a lot of people thought it may have been five to ten years from now, and it's just happening today.
Peter McCormack: Okay. Let's keep going.
Rob Hamilton: We can keep going, yeah.
Peter McCormack: By the way, I might even be pro ordinals, I'm trying to wrestle with it.
Rob Hamilton: I'm just at a place of acceptance that this is all Bitcoin technical consensus, and I am not going to fork off the network, so I have to live in a world where these exist, that's where I'm coming down on it. You can't put this back in the box, I'm not going to run or disrespect a node because it's futile because all you need is the miners to continue including these and somewhere around 15% to 20% of nodes not running that and it's going to work anyway. People may want to individually delete some data off their own nodes because they don't want to hold the jpegs; the problem is then you're not validating the whole transaction history because you need to have all of that data sitting there to make sure it's a valid transaction.
Peter McCormack: Is there a scenario here where we're potentially bloating the blockchain, within the rules, but to the point where the hardware requirements to running a node become a little bit more challenging?
Rob Hamilton: Well, yeah, we're going to probably start requiring like a 2TB hard drive instead of a 1TB hard drive.
Peter McCormack: Do we know how quickly that might happen? Well, what's that, about 550MB a day?
Danny Knowles: You've lost me.
Rob Hamilton: 4 times 144 blocks in a day is half a gig a day, times a year, that's 210GB a year. If every block was maxed full, that's 210GB per year.
Peter McCormack: Okay, so every four years, another terabyte?
Rob Hamilton: Yeah.
Danny Knowles: But that's pretty significant when we're at like 500GB after 14 years or whatever it is.
Rob Hamilton: Yeah, I think it's around like 650GB or 700GB right now, but yeah.
Peter McCormack: So, in another eight years, people might need a multiple-terabyte drive?
Rob Hamilton: Yes, but this is also where I think the actual real problem here was the block size increase with SegWit which, not to get too technical with the details, but --
Peter McCormack: It gave us too much.
Rob Hamilton: And now we have 4MB blocks if you use a lot of witness data, which is exactly what ordinals do. So, to try and bring this to the actual jpeg stuff --
Peter McCormack: Hold on, we shouldn't just skip over the fact that every four years, people are going to need another terabyte for their hard drive. You may be in a scenario where people have got 1TB at the moment, we're at 500GB and they knew they were pretty good for a few more years, and now, in two years they're not, and then this might lead to a lower node count.
Rob Hamilton: Yeah, well people are saying in ordinal's community that, "Not your node, not your jpeg", so if you actually want to hold on to your jpeg, you need to have a node because that's where the data's being stored. Additionally, I think the happy path, if you were trying to find some sort of brokering between the people who don't like ordinals and the people that are enjoying ordinals, is a block size decrease. I think that's the way you would be able to bridge camps and being able to -- the ordinals will continue to exist, but we're not going to bloat the blockchain as much with extra data.
It gets tricky then because then, if you do that, large ordinals, if people are trading these for value, they get kind of grandfathered in before the rules change, so they become worth more. So, this is like the degen paradox Pete Rizzo was talking about, like if you try to change this behaviour, you're going to increase the speculative people that are trying to mint these before they get removed.
Peter McCormack: Yeah, and then my question would be, well now jpegs, what next; contracts? All kinds of things could end up --
Rob Hamilton: This is fascinating, yeah.
Peter McCormack: Yeah, it is interesting because it's permanently etched in the Bitcoin blockchain, these things that people want to put in there. So, let's go down a different scenario, okay, it's starting to get bloated, starting to get really, really full and things aren't getting in, and then there's a new block size increase debate, it's like do we now need to go to 8MB? Potentially a discussion. Then, how long do we get to a scenario where we start struggling with things like Ethereum has where we have latency issues?
Rob Hamilton: I don't think we're getting a block size increase.
Peter McCormack: You don't but think about it like this, I'm just mapping a potential scenario, the people we had on the podcast four years ago, if we have them on now, some of those people, they don't get a lot of listens, a lot of downloads, the audience has changed.
Rob Hamilton: Sure.
Peter McCormack: Imagine we bring in hundreds of thousands, millions of new users, degens who love jpegs, imagine the miners start loving it, imagine everyone starts thinking, "Oh yeah", there's a big consensus starts, a social consensus, "Yeah, let's increase the size of the blockchain", and the old, less influential people who were always from the same set of principles, their voice gets edged out and this newer group starts to be quite dominating; what if we do go to 18 and 16, what if we do start to make some of the mistakes of Ethereum because we've pushed so hard for this, everything's changed so hard that we forgot the original principles? I'm just saying it's a potential scenario.
Rob Hamilton: Understood.
Peter McCormack: And then we don't have nodes, we have people who are struggling to create nodes; we have Eric Wall doing Twitter threads on how he tried to create a node for Bitcoin but he couldn't; we go to datacentres; we centralise.
Rob Hamilton: I think these are the necessary coalitions across Bitcoin that have to kind of remain vigilant, and I would say that the best way to price out all of the jpegs is more basechain economic activity in Bitcoin for financial use cases because they're much denser, your fees go much further, I can send you $1 million for 25 cents, or I can spend several hundred dollars for a jpeg.
Peter McCormack: It's going to take time to get there though.
Rob Hamilton: It'll take time to get to where?
Peter McCormack: More dense economic transactions.
Rob Hamilton: More people using Bitcoin, yeah.
Peter McCormack: You can't force them.
Rob Hamilton: No, you can't force it, and this is back to Bitcoin not having any rules, I think that, at this high level, we're just starting to kind of draw the lines of what this future space could look like. For me, I think even if you have a bunch of people coming in and they're printing jpegs and they want more of them, it gets prohibitively expensive as the fees increase.
So, as more people start trying to put jpegs on the blockchain, the fees go up and it gets harder and harder and harder to justify spending $500, $1,000, $10,000; as the Bitcoin price goes up and more demand is in there, you're going to price out a lot of the jpegs and you're going to have to be a lot more deliberate if you're going to do this stuff. And to your point earlier, it's more than just jpegs, people are actually writing code and putting it in the blockchain as well.
Someone made an ordinal inscription, that's the jpeg stuff which we will get to, they specifically wrote code that allows you to view inscriptions within the inscription, so they're writing code now that can actually interact with the other inscriptions. And I think you're going to start having people understanding and playing around, like what is it actually to use this tech for not just pictures? I think pictures are just the easiest thing because it's what everyone already knows from the rest of crypto, but there's a really interesting opportunity, now that this exists, what are other use cases?
I also want to just call out a really important point; one of Casey's big motivations for starting this project was people were buying jpegs on Ethereum and users were being duped.
Peter McCormack: They were buying the hash.
Rob Hamilton: They were buying a hash to a pointer sitting to an S3 server or something like Arweave, which is its own token that has design flaws, because once the token falls below the price of cost of storage, people just turn off their Arweave nodes and then the nodes disappear; it's like BitTorrent.
Peter McCormack: This is a real NFT.
Rob Hamilton: This is a real NFT. So, for Casey's perspective, an inscription, which is this actual embedding of data on the blockchain, has to be endogenous to Bitcoin, the data has to sit there because people are now saying, "Oh, what if I wrap my own token and I use the ordinal stuff and I point it off to this other chain over here?" It's not an inscription, you're trying to make pointers and references that don't exist on Bitcoin, and that's out of bounds. Casey doesn't want to support that, most people don't want to support that; it has to be endogenous to Bitcoin so I can download a node and have it.
Peter McCormack: But can you stop somebody doing it?
Rob Hamilton: Well, you never can stop someone from doing it, this is all social -- just like ordinals are all just a shared hallucination, these rules of like, "What are the rules?" are all shared. But also, people are talking about now uploading 3D gun files into a block, you can get that under 4MB, you can actually have it so anyone in the world can have access to a 3D gun print.
Peter McCormack: Is that a potential self-own that we're asking for trouble?
Rob Hamilton: Well, here's the other thing too from a Bitcoin history lesson, people have been able to embed arbitrary data into Bitcoin since it began.
Peter McCormack: Yeah, but it's a little bit more overt now.
Rob Hamilton: You're making maybe the barrier to threshold to enter easier, but ultimately, this stuff always existed, people were using stuff in OP_RETURNs, people were putting stuff in bare multisigs, so they would make a multsig transaction on chain but the keys were garbage, they were just using it to pump a bunch of data in there.
Peter McCormack: Has anyone put any child porn in this yet?
Rob Hamilton: So, not on the ordinal stuff that I'm aware of. I've heard stories that, years ago, like 2013, 2014 or something, someone may have done that; I didn't personally go to verify that and look for it.
Peter McCormack: Yeah, you don't want to do that.
Rob Hamilton: Right.
Peter McCormack: Is that, again, a potential risk?
Rob Hamilton: In the sense it's a risk that it's now on a node and this is what everyone's been saying that, because it's on a node, then it becomes illegal to run a node because it has child porn on it.
Peter McCormack: Yeah.
Rob Hamilton: So, this is where I would say that it's not like the literal jpeg is sitting there. So, can I use this an opportunity to talk about envelopes and inscriptions?
Peter McCormack: Yeah.
Rob Hamilton: So, the way this actually works, technically, is you do a Taproot transaction, and with this Taproot transaction, you use Bitcoin's programming language called Bitcoin Script, and you do your send and then you add extra data with something called OP_FALSE, meaning not true, OP_IF, and OP_IF says, "If the previous statement is true, run this code", but since it's OP_FALSE, OP_IF, your node skips over entirely; it doesn't try to validate it because it's garbage data. And then you push a bunch of binary data onto the chain. So, it's not like you literally have the image sitting there, it's in a very obscure format that isn't directly accessible. It's not like I can go to my Bitcoin folder and see the images that exist.
Peter McCormack: So, how do you see the images?
Rob Hamilton: You would have to run extra software to actually parse through all of these binary zeros and ones to make it look like an image.
Peter McCormack: Just isn't that just want computers do, they parse information to display a jpeg?
Rob Hamilton: Yeah, computers parse information, but my point being is that if you just run a Bitcoin node and you're just using it for financial transactions, that just looks like zeros and ones and you're never actually interfacing or interacting with it.
Peter McCormack: If I had this on my home computer, isn't it the same until I plug a monitor in? If my hard drive was found with child porn on, not saying I have child porn by the way, but if my hard drive said I had child porn in it but I've had no monitor plugged in, isn't that exactly the same?
Rob Hamilton: I don't think, because the file exists somewhere on your computer.
Peter McCormack: I'm saying all it is, all the file is is a bunch of ones and zeros itself, it's a computer that interprets it on a monitor to be an image.
Rob Hamilton: But you instruct the computer to interpret that.
Peter McCormack: By switching it on and opening it up, but the ones and zeros still exist.
Rob Hamilton: Yeah, I think this is going to be something that is going to get fleshed out a bit more, but my point being though that this already was available on Bitcoin, and I understand your point that's more accessible, I understand that.
Peter McCormack: It's more obvious now.
Rob Hamilton: But this is not a new threat vector, this is already something that was there.
Peter McCormack: Yeah, but now it's more real; what we have New York Times, "Bitcoin blockchain, the new home for paedophiles?"
Rob Hamilton: You mean the journalists are just going to kept being disingenuous with the narratives?
Peter McCormack: Yeah.
Rob Hamilton: Well, Bitcoin is a movement to change the world's money in a very real sense.
Peter McCormack: Yes.
Rob Hamilton: Right, it is.
Peter McCormack: It's a movement to change the world's money, not to change the world's art and jpegs.
Rob Hamilton: Yeah, it is, but my point being it's an open pool and I'm not the lifeguard setting the rules, so if people are going to use it for those use cases, I can't stop them for using it because Bitcoin is an anarchic system, I can't touch it.
Peter McCormack: No, I understand, I just feel sad about it.
Rob Hamilton: I think it's something that we have to accept and kind of understand what the future state is because the cat's out of the bag, you can't change this.
Danny Knowles: What if it wasn't a jpeg, it was like a Wikileaks file that's then immutable?
Peter McCormack: What's your point?
Danny Knowles: There are like stupid use cases and maybe more interesting use cases.
Peter McCormack: No, my point being is are we now creating a place for self-own, a place for people to attack the network, to spam it with stuff, to put stuff that's not particularly -- like guns are illegal in the UK, now it's a place where you can download 3D printed guns and things. I'm just saying there's lots of -- there you go.
Danny Knowles: This was from a long time ago.
Rob Hamilton: But this is my point, but also I disagree with the word "spam", if you pay the transaction fee, you're participating in the rules of the network, so be it, it's not spam.
Peter McCormack: Satoshi Dice played by the rules but it was considered spam.
Rob Hamilton: Yeah, people considered it spam, they were valid transactions though.
Peter McCormack: Of course, I get that, but we can post-rationalise anything by saying that, but at the same time, if we're trying to create the best money for the world, if we're trying to create apolitical money that makes the world a better place, I'm just not 100% sure this is a net positive or net negative. If feels like it's just swinging to the net negative for me, but I'm not anti it yet.
Rob Hamilton: Yeah, I think it's net negative when you view it in the lens of the money narrative.
Peter McCormack: Yeah, and that's the thing.
Rob Hamilton: And Bitcoin, it's like a hydra, a many-headed dragon of many things.
Peter McCormack: Bitcoin's money.
Rob Hamilton: Bitcoin's information that we use as money.
Peter McCormack: I consider the work I do to communicate and educate people on why Bitcoin's the best money.
Rob Hamilton: But this is what I mean by it being a narrative change, because this is a necessary narrative change in how everyone's going to think and talk about Bitcoin.
Peter McCormack: Why is it a necessary narrative change?
Rob Hamilton: Necessary is the wrong word. I think this is kind of the impasse we have is that I make an observation of how it exists and you're looking at it through a lens of -- it's an ought problem, I'm saying this is and you're saying it ought to be.
Peter McCormack: No, I think what I'm saying is Bitcoin moves slowly, very slowly, right, and this feels almost like an accidental by product of Taproot that wasn't foreseen and now we have it.
Rob Hamilton: Yeah.
Peter McCormack: I think it's potentially unfortunate, and I worry about the attack vectors that come from this that attack the network, attack bitcoiners, attack its use case of money and potentially take it down a road that maybe leads to more centralisation, and ultimately it might get to a point where Bitcoin fails as a project.
Rob Hamilton: Well, let's take a step back for a second, we know the North Korean government has gotten Bitcoin and hacked it and used it for stuff; what is a, if we're going to apply a moral lens to this.
Peter McCormack: Hold on, it's not so much a moral lens.
Rob Hamilton: Or a narrative lens, like a narrative supremacy.
Peter McCormack: Let me tell you why I reject that, it's not a moral lens, it is a goal to create the best money in the world.
Rob Hamilton: But then I go back and say, okay, so North Korea gets to use it to kind of perpetuate their dictatorship; is that okay?
Peter McCormack: I'd rather not know.
Rob Hamilton: What do you mean? Not knowing doesn't mean it doesn't exist; you can't just pretend it doesn't exist.
Peter McCormack: But that's a by-product of money, so if it's money, it's money for enemies, but it's still money, and anything is a weapon, anything can be a tool, a weapon, depending on how you point it, right?
Rob Hamilton: Exactly.
Peter McCormack: You cannot create the best money without that money being accessed to other people, but if it's jpegs and other weird shit that stops it being as good money, that is a concern of mine, and if it's something where we could see the narrative change, which means the old guard is out and a new guard is in, and that new guard may be a little bit more Roger Ver in style, and eventually lead to blockchain bloat, centralisation because nodes can't afford to run multi-terabyte nodes, and we end up going down that; it's a concern of mine.
Rob Hamilton: So, hardware costs trend down over time and that's why, when I was a kid, I had like an 8GB hard drive and now I have a 2TB hard drive in my backpack; Moore's law, that stuff continues to scale. I think we also need to understand that Bitcoin, finding this use case of a like a decentralised hard drive that anyone can use, I got that from Junseth, it can be used for good too. There are now Tank Man images on the blockchain forever, people could coordinate dissident campaigns and oppressive governments using this as a decentralised hard drive knowing that the government can never fully delete it.
Peter McCormack: I'm not even arguing against that, again sorry, I don't mean to be a dick about this but I'm going to try and stay laser focused, is it a net positive or a net negative for creating the best money in the world? Everything comes down to that; do we risk making this less good money by having it as a jpeg system?
Rob Hamilton: I think this fixes the Bitcoin security budget problem for the long term.
Peter McCormack: It doesn't have a security budget problem.
Rob Hamilton: It doesn't today.
Peter McCormack: Yeah, but we don't know, like that was a fear every halving, we don't know the price of Bitcoin in four years.
Rob Hamilton: This de-risks it.
Peter McCormack: This could always have been done at a later date.
Rob Hamilton: Yes, I agree with that.
Peter McCormack: Yeah, I'm saying Bitcoin does not have a security budget problem.
Rob Hamilton: Today.
Peter McCormack: It won't tomorrow, we don't know when anything --
Rob Hamilton: We don't know.
Peter McCormack: Yeah, and so what we're doing is we're trying to potentially fix a problem we don't know exists that might never exist with something that might damage it.
Rob Hamilton: I think there is a genuine concern because of all of the unknown unknowns that 20 years from now, there are people using Bitcoin, you don't actually have enough miner subsidy to protect the network anymore. A robust Bitcoin fee market was always necessarily going to have to happen for the health of the network, and what used to be the narrative was that we would get additional user adoption over time to bring more people onboard to be able to protect that.
Now we have a buyer of last resort of Bitcoin block space that will always be keeping that fee pressure up, which will increase the value of using Lightning, because if you can open up a Lightning channel, you can amortise the cost of your Bitcoin transaction over years and years and years of that channel; you do one transaction fee to open it and then you're using Lightning for the rest of the time.
Peter McCormack: Fees are going up, aren't they, every cycle, the amount collected in fees, both in Bitcoin terms and dollar terms? We did that with Sam Wouters, didn't we?
Danny Knowles: I think it depends on when in a cycle you pick, maybe on average though.
Peter McCormack: Yeah, on average, yeah. So, we don't have a security budget issue at the moment.
Rob Hamilton: Yet, but halving is like, if you want to keep it at parity, every halving you have to double the Bitcoin price to be at place, and that's a very precarious place for this to continue working, the price has to double.
Peter McCormack: So, for the next halving, we have to trend somewhere between a base of $30,000 and $140,000.
Rob Hamilton: Okay.
Peter McCormack: That's perfectly achievable.
Danny Knowles: But what if it doesn't, and what about in 40 years' time?
Rob Hamilton: Right, and then another four years' time?
Peter McCormack: Your saying, "What if it doesn't?" it's the same as me saying, "What if a new guard of bitcoiners campaign and get to us to 8MB blocks and we just have less nodes?"
Danny Knowles: Well, to the point of the price doubling every four years, it can't double every four years forever.
Peter McCormack: No, but it doesn't have to double every four years forever, the fee market has to keep increasing to a point where it's uneconomical to attack the network. It's been uneconomical to attack the network for a long time, okay, so that's all it has to do, so it doesn't have to double every time. We might need like three more doublings and we're good. I find it a real hard justification for something that may be decades down the line that we need something now that adds risk to this being the best form of money, that's what I struggle with. So, I always come back to my just very simple question; is this a net negative or a net positive for creating the best money ever?
Danny Knowles: I think you should talk to the pruning that might be available.
Rob Hamilton: Yeah, the pruning point's good in that the witness data today, and this is talking about what makes the best money, is the best money part of it, everyone being able to independently verify the entire supply of everything; because today, if you use the Bitcoin default spec, so you download it and you start running it, it runs a file called assumedvalid. So every six months, there's actually kind of a stamp saying, "At this height, this was the Bitcoin hash", it makes sure you're on the right path.
You actually don't verify all of the signatures if you're running the default software right now, and with all of the inscription stuff sitting in the witness, it's something that's pretty trivial to prune out where you can maintain your economic nodes for the things you care about. And maybe, if you're in the developing world and you don't have a big hard drive, you don't need a full archival node of every single Bitcoin transaction ever; maybe what's good enough for you is you can validate the state and the validity of your transactions that you're holding and you're receiving.
This is an idea of being able to just focus on, instead of being the decentralised database for everyone to get a full sync from you, you just are looking out for, "This is what I need to personally verify the quality of my money that I'm spending and the quality of the money I'm receiving", and pruning is a really great way to make it much more economical so it's not just a zero to one, it's not a binary of do you have a Bitcoin node or not; there's a whole spectrum in the middle.
Peter McCormack: Yeah.
Rob Hamilton: I think the fact this stuff is all sitting in the witness and you can discard it anyway, after a certain block height, you can just kind of throw this stuff away and make a security assumption saying, "300,000 blocks have gone by; I'm pretty sure if someone was trying to pull something funny, a single node in the entire network would be able to call it out and end the whole fraud".
So, it's a very good security trail because you only need one honest actor to have the actual on his blockchain to be able to say, "Oh, that's an illegitimate transaction, that person doesn't actually have that money", and you, as an individual, because you're going back to the use case in the developing world, you can just have your small node that validates everything that you need directly for yourself.
Peter McCormack: So, do you think ordinals and inscriptions make Bitcoin better money?
Rob Hamilton: I think that's a really big question. I would say that people that are speculating and holding on to rare ordinals and inscriptions, all this stuff, reduces the available supply out for trading, which makes it better money because people are having higher demand for it.
I think, on the other side to your point about the runability, usability of a node, it makes it harder to be decentralised because it increases the software requirements. I am still putting my thoughts around this. I actually started playing around with ordinals because you asked me to come on the show to talk about them, so I went and downloaded an ordinal node and started playing around with it.
Peter McCormack: That was Danny!
Rob Hamilton: Was it Danny? There you go! Yeah, so Danny asked me to do that, so I started playing around it, and then I just happened to be in Bitcoin Park last week and I got to meet Casey and was coding with him. And very funny, I think also not just as the money but also within the crypto communities, people have started actually moving their assets from Ethereum to Bitcoin.
Peter McCormack: Jason Williams; I saw that.
Rob Hamilton: Yeah.
Peter McCormack: By the way, I fucking love that, I absolutely love that.
Rob Hamilton: Can I tell you the story behind that?
Peter McCormack: Let me just say one more thing; I like the fact you're wrestling with this because I am. I am really wrestling with it because I see the fun and the cool side of it.
Rob Hamilton: I see these.
Peter McCormack: Yeah, and I also see using the blocks; I can see every single use case for that, but when we try and create the best money the world has ever seen and it's decentralised, the very first pillar, and if this pillar breaks, this is like your central column, is that it has to be state-resistant.
Rob Hamilton: Yeah.
Peter McCormack: And anything that potentially centralises us and damages state resistance concerns me the most, and I don't know enough, but my suspicion is this could be a centralising force which damages that pillar, and that's what worries me.
Rob Hamilton: I think we have to remain vigilant in primacy over that, and I think everyone who appreciates Bitcoin for its different perspectives also wants to preserve that; I even think the jpeg people want to preserve that, they want to make sure that they can have access to all of this stuff in the far distance future because otherwise it has no value today if it's going to get captured tomorrow. And just from a cultural observation, this is something that, in this current conversation is important, but I view this lens in politics, culture, life in the larger sense; the side that's having more fun is going to win.
Peter McCormack: I do not buy that at all.
Rob Hamilton: Well, hold on, just hear me out for a second here, specifically having an enforcement structure adds friction and cost to interactions, whereas if someone's having fun, they're going to be self-motivated to keep on doing what they want to do. And if you're talking about like meme warfare, whoever's being silly, fun and irreverent, they get to have fun whereas the other side is trying to police and control that behaviour; that's a cost to try and police and control behaviour, and because of that, the side that's having fun just has a natural momentum about it, whereas there's an inertia trying to kind of control stuff.
Peter McCormack: I think you'll change your mind on that point in the future.
Rob Hamilton: Okay.
Peter McCormack: I think you shot from the hip there, and I don't mean to be rude.
Rob Hamilton: No, I've been thinking about that for a while.
Peter McCormack: But I don't buy that in the slightest, I think the crypto degens have been having way more fun first for years, like I watched the Solana boys, and I've been to Art Basel, these people are having a lot of fun; they've had more fun than us for years. We've won because we created the best money; we have won, by the way, it's not which wins, we already won.
Rob Hamilton: Well, I agree with that.
Peter McCormack: And we won because we created the best money, fun had nothing to do with it.
Rob Hamilton: Well, no, Bitcoin culture is fun though, I push back on that.
Peter McCormack: It is fun.
Rob Hamilton: We have our own fun.
Peter McCormack: Yeah, but we don't have as much fun.
Rob Hamilton: What do you think the whole "have fun staying poor" thing came from? We're having fun because the number's going up and we're all having fun in Bitcoinland because we get to laugh at all of them and all their clownish acts. We're having fun taking the responsible path, but the culture is having fun with it. I understand and respect your point about it can feel sterile at times.
Peter McCormack: But this bit of fun is immeasurable and subjective.
Rob Hamilton: Well, let's talk about some fun here because I was at Bitcoin Park, I was talking with Casey, he said the first person that sends a Bored Ape Yacht Club or a CryptoPunk over to the Bitcoin chain as an inscription will be a winner, like a legend forever, and Jason Williams said, "Help me", and Jason was like, "I want to burn my monkey. I have a monkey, I have a gun to my monkey's head and I want to execute him".
Peter McCormack: "I want to burn my monkey!"
Rob Hamilton: So, then I pulled Casey aside, I was like, "Hey, I have someone who wants to burn a monkey". He was like, "Are you kidding me?" I was like, "What do we do; what's the next step?" He's like, "We write the code".
Peter McCormack: I can't believe you didn't call me and we burned by Rare Pepe.
Rob Hamilton: We can do that next.
Peter McCormack: Oh no, that was already on Bitcoin.
Rob Hamilton: It's on counterparty, yeah. So, Casey grabs me by the shoulder, we walk over to a corner and we start talking about what this is. Casey comes up with the term "teleburn", a teleport burn. So we start designing like, "Okay, how could you do this?" and without getting too technical, you take your inscription ID, you make an inscription ordinal on Bitcoin, you get a unique ID, you hash it and you shrink it so it fits as an Ethereum address and you just one-way send it.
Casey tested it by burning his Rodarmor.eth. He took Rodarmor.eth and just shipped it off to his Genesis inscription. He's only made one inscription, it's the first inscription, it's called Day of the Dead like skull. So, he did that as a test, and then we went over and we burned Jason Williams' $500,000 Bored Ape Yacht Club. His perspective is that it has transcended all of the controversy of the racism and antisemitism that project's been seeing and it's now transcended to the bright orange future.
Peter McCormack: I do love this stuff.
Rob Hamilton: Yeah.
Peter McCormack: Anything like this, which completely destroys the use case of Ethereum, I love. Ethereum's last cycle was NFTs, that's really what it was, and they're going to have to come up with some new bullshit next time. What was it; IFOs?
Danny Knowles: Yeah.
Peter McCormack: Initial Farm Offerings.
Rob Hamilton: Yeah.
Peter McCormack: They're constantly going to come up with new shit, and we beat them on money and now we beat them on jpegs. I love the fact that we constantly beat them.
Rob Hamilton: Yeah.
Peter McCormack: I fucking love it! But the "but" remains, the Dick Butt remains.
Rob Hamilton: The Dick Butt remains, yeah. So, the Dick Butt is really funny too.
Peter McCormack: 50 Bitcoin!
Rob Hamilton: Well, Rijndael didn't actually sell it though, did he?
Peter McCormack: HODL told me he got offered it for 1 Bitcoin, didn't buy it, and it's now listed for 50.
Rob Hamilton: Yeah. So, Rijndael's great. So, Rijndael's one of the guys from Clubhouse and I was busy working and doing everything I was doing at my company and I heard all this stuff that was going on about ordinals and Rijndael was like taking about, "Oh, hey, here's a video; I put a Dick Butt as the second inscription after Casey", and he put it on a SATSCARD; have you seen the SATSCARDS from Coinkite?
Peter McCormack: Yeah, there's a Real Bedford SATSCARD.
Rob Hamilton: There are Real Bedford SATSCARDS. Well, I actually want to one-up that, I wanted to give you a present and get this on before the end of the show. I have a SATSCARD here for you.
Peter McCormack: Have you inscribed the Real Bedford logo?
Rob Hamilton: Absolutely.
Peter McCormack: You motherfucker!
Danny Knowles: Here you go.
Peter McCormack: Oh, you're out of order, love it now, fuck it!
Rob Hamilton: There you go.
Peter McCormack: Oh man! And I own that?
Rob Hamilton: It's on the card.
Peter McCormack: So, I can sell that?
Rob Hamilton: Yeah.
Peter McCormack: I wonder how much it's worth.
Rob Hamilton: I was at Bitcoin Park and I was like a DJ taking requests, making inscriptions for everyone.
Peter McCormack: Well played.
Rob Hamilton: Thank you. Absolutely. Now, you have a Real Bedford, and two years ago I gave you the Rare Pepes on the Opendime, and now you have an inscription on a SATSCARD with the Real Bedford logo.
Peter McCormack: Every time I see you, I get a present.
Rob Hamilton: Yeah.
Peter McCormack: Okay, question, you've done that.
Rob Hamilton: Yeah.
Peter McCormack: Say I inscribe one, which is the one?
Rob Hamilton: It's whatever value you want to assign to it. I would assume, from a provenance perspective, one coming from you would be -- it's all shared hallucination, it's subjective value. We've left the world of objective Bitcoin transactions to this aesthetic taste, and which I think is one of the most exciting things in this Ordinal Project that you're now on the Bitcoin playground, you're at my house now. And (1) you have to use Bitcoin transaction to make this whole thing work, (2) I think what we're seeing initially with all of these kind of copy/paste jpegs over from the Ethereum projects, is just the first move because it's just the easiest thing to do.
I think it's a way to have Bitcoin culture and aesthetics as part of the art, and I think that it's just very early days in understanding what that's ultimately going to mean and look like. So, yours would probably be worth a good amount relative to some sort of collector. I'm not a collector; I actually have made a bunch of inscriptions for people making requests for me to make them for them because they knew I could do it. I haven't made one for myself yet.
Peter McCormack: Yeah, I still have zero interest in this.
Rob Hamilton: I think this one those though, description number six, what is it? If you scroll up a little bit there.
Peter McCormack: Six bazillion.
Rob Hamilton: 69,971; that is the one that was on the What Bitcoin Did show, so that has provenance, that's yours, I gave it to you at this time and place; it has some sort of relative timestamp. If you make one, it'll be inscription number 110,000 or something.
Peter McCormack: So, there are two, there's like a which came first, but also who did it?
Rob Hamilton: Yeah.
Peter McCormack: So, like, if I ignored yours and did one, someone's more likely to buy mine.
Rob Hamilton: Sure, but I'm also not even selling, I just gave it to you, right, like you have it now on that SATSCARD.
Peter McCormack: You could have sold it to me.
Rob Hamilton: Well, why would I?
Peter McCormack: Because I'd give you like 6 Bitcoin for it!
Rob Hamilton: Exactly.
Peter McCormack: Do you know what, I could put every player in our team on there and I could sell them and that would raise money for the team.
Rob Hamilton: Yeah.
Peter McCormack: Like, I see these things; I still don't understand why people buy them beyond thinking they can flip them.
Rob Hamilton: I'm personally not an art collector, I couldn't tell you.
Peter McCormack: But I am.
Rob Hamilton: My wife's here, she can tell you that I'm not collecting art, I'm not buying art, I don't have the visual aesthetic lens for all of that stuff, I'm much more on the technical side. Really, I guess, value is in the eye of the beholder and understanding. Like maybe Jason's monkey that he burned, he teleburned from Ethereum to Bitcoin, maybe, as a first, that means something. Maybe the first inscription, like Casey's inscription, worth a lot because it was the original one. The Dick Butt is the second inscription ever made, it was the first person that made one that wasn't Casey, like you just said before, being listed now for 50 Bitcoin.
I think it's very entirely possible there's an immediate craze because of all of the NFT jpeg people coming over and ploughing their capital and trying to play around in these markets, and this very well could fizzle out, it could.
Peter McCormack: Do you think there's any link between the price runup recently and this, or do you think it's completely independent?
Rob Hamilton: Oh, interesting.
Peter McCormack: Because we had a runup yesterday.
Rob Hamilton: I think the global markets are too complicated to assign it to this stuff specifically.
Peter McCormack: Okay.
Rob Hamilton: Possible, sure, if you had some whale that was like, "I'm now more bullish on Bitcoin because of this use case", sure, but a market is made up of millions and millions of participants in Bitcoin that are buying and selling, it's hard to say this is reason why.
Peter McCormack: How are the ETH people responding to this?
Rob Hamilton: I think they like the opportunity but then, when people do stuff like the teleburn, they view it as an attack on the Ethereum network because they're destroying the asset on the ETH side and they've moving it over to the Bitcoin side.
Peter McCormack: I mean, that's kind of why I'm asking about it; are they seeing this more of a threat? There's more value to holding it on Bitcoin than there is on Ethereum.
Rob Hamilton: Well, I think it's pretty objective.
Peter McCormack: Yeah.
Rob Hamilton: The data permanence of this is not up for debate, whereas Arweave goes down, IPFS goes down, you have much more resiliency of it. I think a lot of the attention to value is because now this is on Bitcoin and people in Bitcoin find this interesting, which is a much larger capital base than Ethereum, it's like double the size. Maybe not all of the actors that are using Bitcoin for this stuff care about this stuff, but there, I think Bitcoin has legitimacy, and anyone who's involved in cryptocurrency as the gold standard, it is the best blockchain that exists, and the fact this now exists here has a lot of people trying to chase and trying to understand and play in that space.
Peter McCormack: What do you think, Danny?
Danny Knowles: I'm firmly on the couldn't really give a shit either way, and the point really for me is that, what are you going to do about it anyway?
Rob Hamilton: That's my take.
Peter McCormack: So, then I would want to speak to somebody who knows something can be done, and said, "This is what you could do".
Rob Hamilton: What you would do is you could do a fork.
Peter McCormack: Yeah, like I'm saying, it's like what are the steps for that; how do you build consensus?
Rob Hamilton: There is no rulebook, this is the thing about Bitcoin and why even something like Taproot, which everyone cryptographically believed this is a good thing to do, there was a whole meta debate on how do you even activate it because there is not set attack path, because people view it as an attack.
Peter McCormack: Yeah.
Rob Hamilton: The idea, if you're changing Bitcoin -- American HODL's had this metaphor; have you ever seen Independence Day when the mothership opens up its door?
Peter McCormack: Yeah.
Rob Hamilton: The mothership opens up its door and that's when it's vulnerable. When you're changing the rules of Bitcoin, that's when it's most vulnerable on this technical consensus layer. There is no set like, "Oh, well, you get 10,000 signatures and then you do a BIP", there are no rules.
Peter McCormack: Who was that Romanian bitcoiner who drowned?
Danny Knowles: Oh, I can't remember his name; he was a bit of a lunatic?
Peter McCormack: Yeah.
Rob Hamilton: Mircea Popescu?
Peter McCormack: Yeah, didn't he still run like version one of the software and he hated every version since?
Rob Hamilton: Something like that, yeah.
Danny Knowles: Well, you were telling me about Luke Dashjr's version of Bitcoin Core.
Rob Hamilton: Oh, Bitcoin Knots?
Peter McCormack: Yeah.
Danny Knowles: But this is basically the same thing, he's taken every conservative option throughout, but he's still running the Bitcoin Protocol.
Rob Hamilton: Yeah, so Bitcoin Knots censors Satoshi Dice transactions.
Peter McCormack: Interesting.
Rob Hamilton: Right. So, people can run these implementations, here's the problem though, you can maybe, on the peer to peer, like I have a new transaction I want to send and you want to censor that, but if it's in a block, you have to accept it otherwise you break consensus. So, you can try and have soft social pressures, but if it gets into a block, you have to accept it or you have to fork off.
Peter McCormack: Who were the anti people; I'm going to guess, it's going to be Pierre Rochard, Adam Back, Francis Pouliot, Luke Dashjr, not sure on Odell, I've not seen him talk about it but I can imagine he's kind of --
Rob Hamilton: He did Citadel Dispatch and he was kind of poking around, I think. I think initially, everyone had the healthy reaction of, "What the heck is going on here; is this an attack on Bitcoin?" I've seen Pierre and seen others say like, "We're now in an evaluation phase"; they're not looking to fork right now, but they're collecting data, like Pierre does really great infographics and charts talking about, "Here's how much transaction fees and the meme pool is related to ordinal stuff versus normal transactions". You don't want to hastily make another change and then find out that you made an even bigger problem.
Peter McCormack: Yeah, I think the wait and see is actually a good point.
Rob Hamilton: It is the way to do it.
Peter McCormack: Dylan LeClair put out a really good tweet.
Danny Knowles: Let me pull it up.
Peter McCormack: Yeah, when he was talking about block space usage.
Rob Hamilton: Yeah. I've been also running my own analytics of just looking at the meme pool, the unconfirmed transactions and seeing, out of the low fee ones, over half of them are these ordinal inscriptions.
Peter McCormack: So, people who are pro this should admit they were never really anti NFT, they were just anti Ethereum.
Rob Hamilton: Yeah, this is platform maximalism versus monetary maximalism.
Peter McCormack: Yeah.
Rob Hamilton: If you believe Bitcoin is the best platform and everyone should be on Bitcoin, but they're all part of the Bitcoin camp, they all run the Bitcoin code and they're all consensus with each other.
Peter McCormack: It's hard to disagree these are very interesting charts from Dylan.
Rob Hamilton: Yeah, Taproot usage now is like, what, 15% when it was maybe 1%.
Danny Knowles: When it was zero.
Rob Hamilton: Yeah, it was under 1% a month ago.
Peter McCormack: Yeah.
Rob Hamilton: I mean, there was that funny Eric Wall tweet, his 2023 predictions was Taproot adoption would like double to 2%; he was being glib and now it's 15% a month later.
Peter McCormack: Suck it up, Eric! But Eric would like this; hello, Eric.
Rob Hamilton: Well, yeah, it's part of that irreverent fun, and I think you have to openly acknowledge a lot of this too is just trolling a lot of people.
Peter McCormack: Yeah, I mean, I've seen Udi do it.
Rob Hamilton: Yeah.
Peter McCormack: With his Bitcoin Wizards.
Rob Hamilton: The Taproot Wizards.
Peter McCormack: It's kind of funny. Yeah, that's the other thing, it is kind of funny, and then going back to the thing, like a standing army destroys itself, let's have some fun, we've got nothing to fight over, let's have some fun, let's enjoy it. Like I say, if you've got anti here, pro here, and you've got the middle line, I'm just on the anti but not so much I want to do anything about it; I want to observe. I think my concern's pretty clear.
Rob Hamilton: I think Bitcoin is resilient and it's handling this new influx of new transaction types and use cases, and the network hasn't broken. So, first off, the software right now is still functioning, this hasn't broken Bitcoin.
Peter McCormack: Yeah.
Rob Hamilton: I think the responsible thing to do is collect data, give it a year, because if this is a flash in the pan, then there's a whole hullabaloo of changing code over nothing, so give it some time to see the permanence of this, if this actually isn't a fad, if it's actually going to be an enduring element of Bitcoin, you then can have time to walk through and think about what are the right things to do to change that?
Peter McCormack: Yeah.
Rob Hamilton: I personally think it's going to be a block size decrease because the last thing you want to do is say, "Oh, we're going to censor ordinal transactions", because what you're going to do then, it's a cat-and-mouse game, you're just going to change what it looks like and you're still going to be able to get it anyway.
Casey put a lot of thought into make this as minimally invasive as possible, like it doesn't bloat the UTXO set, which is something that's more of a tight constraint than block space, because the UTXO set, all of the unspent transactions that exist in Bitcoin, have to sit in local memory. What people used to do, in like 2012 or even earlier, they used to do just random public keys and just like garbage transactions to represent data, and then that pollutes that permanently. So, for someone who did that stuff back in 2012, that can never leave local memory, which is much more scarce than hard drive space.
Peter McCormack: Fair.
Rob Hamilton: I think it's a wait-and-see approach to understand is this a flash in the pan if it continues to grow in adoption? I think at least for the next six months to a year, this is going to be ripping for a while. I think a lot of people are entering and playing around with this stuff, but we should be really careful before we make a consensus change. And if it comes down to a consensus change of decreasing the block size, I'm here for it, I want smaller blocks.
Rodolfo talks about this, if you can get to 300kb blocks, you can do all of your block relay over AM radio. If you could do it all over AM radio, you don't have to worry about if the internet goes down, you can start broadcasting blocks to everyone, and it makes it much more resilient. That's the ultimate side I want to be on is as this decentralised technology being able to survive and be resilient, that's my top priority. I then also live in a world of, this exists and I can't change and I'm not going to fork off my coins to do that.
Peter McCormack: Yeah, I wouldn't fork off. I come down to what will be will be, but I think it's worth debating.
Rob Hamilton: Sure. I think this is starting an interesting conversation. The meme pool may never empty again, it's possible it will; at the moment it just becomes so cheap to send these like at 1 sat per vbyte, you can just send such large amounts of data that someone now is going to use it for a use case always, like someone's going to find a way, whether it's putting photos of their dog -- you've seen the OP_RETURN bot on Twitter? So, OP_RETURN, just very quickly, you can actually put arbitrary text into a Bitcoin transaction, it doesn't actually --
Peter McCormack: Oh yeah, so this is where they know there's a certain block and they celebrate and they put a --
Rob Hamilton: Yeah, go like, "Oh, it's my wedding day", right, there's a little message; this is just the higher scale version of that.
Peter McCormack: Right.
Rob Hamilton: Instead of using 40 characters or 80 characters, you're now using full images or scripts or texts, but people have put games onto Bitcoin, like Zork, which was one from like the 1980s, it was like a text RPG, like, "Go north, pick up sword".
Peter McCormack: Yeah.
Rob Hamilton: It's there, one of the inscriptions is just a JavaScript code running Zork.
Danny Knowles: I think they did Doom as well.
Rob Hamilton: Yeah, Doom.
Peter McCormack: Hold on, I'm old enough that they were the games I played when I was a kid.
Rob Hamilton: Yeah.
Peter McCormack: They literally were.
Rob Hamilton: Man, you are old!
Peter McCormack: I am old. My first computer was a BBC.
Rob Hamilton: Like the British Broadcasting Channel?
Peter McCormack: I don't know if it's the same company, but it was a BBC, and my first game I ever played was called Manic Miner.
Rob Hamilton: Manic Miner?
Peter McCormack: Yeah. Bring up Manic Miner screenshots. Yeah, there was a little character you had to --
Rob Hamilton: Was it American HODL has a bounty, he wants to get lemmings as an inscription? Yeah, people are going to find use cases to throw this stuff on there now, so we have to wait and see. Ultimately, I think, Bitcoin is strong enough to survive this, it's just going to be a bit of a social question of how you get coordination on making any sort of change to route about this.
Peter McCormack: There you go.
Rob Hamilton: Look at that computer.
Danny Knowles: Was this really your first computer?
Peter McCormack: My first computer; I remember my dad coming home from work one day with it. You used to have floppy discs or cassettes; the cassettes were a fuck! You'd put the cassette in and it would take about 10, 15 minutes to load the game and could fail. Search for Manic Miner.
Danny Knowles: I'm pretty sure this has come up on the show before.
Peter McCormack: It's the first game I ever played; I remember it. These games were so hard, I only think I got to about level eight.
Danny Knowles: I like the lemmings.
Peter McCormack: You know you get the emulators, I still go and play this game on an emulator, still trying to complete this game.
Rob Hamilton: Wow!
Peter McCormack: 40 years later!
Danny Knowles: Still not done it?
Peter McCormack: Still not done it.
Rob Hamilton: Well, a really quick plug, Hell Money podcast, that's Casey and Erin's podcast, they've been doing a lot, they've been talking about the ordinal stuff for a while, I want to push them out.
Peter McCormack: Yeah, please do, and do you want to shill your company?
Rob Hamilton: Yeah, so very quickly, the company I founded last year, coming up on a year now, yeah, AnchorWatch, which is a nautical term referring to the crew of sailors who watch the ship at night, well that's an anchor, and we're building an insurance company for actual Bitcoin. We are using some really interesting technology with our wallet, Trident Wallet, using Bitcoin Miniscript to allow us to have more advanced Bitcoin scripting scenarios to have multi-institutional custody.
So, you can do really interesting things like key hierarchy. So, in a legacy 2-of-3 multisig, we have the three of us here, let's say you're a customer, your concern, if you hold a key, I hold a key, Danny holds a key, is that we can go run off with your money, but we can actually set this up on chain, no fork required, so that your key must sign plus one of the two of us.
Additionally, you can add things like "and" and "or" statements, so you can add different tiers of a vault security where you can do things with time locks where, let's say, a very straightforward example everyone has thought of before around this stuff is a decaying multisig, so you can have a 5-of-5 and then if the money hasn't moved in six months, it becomes a 4-of-5, and then in nine months, it becomes a 3-of-5, and a 2-of-5, right. So, you can add resiliency to the ability for you to secure your Bitcoin and have much more flexibility.
Danny Knowles: You could have vesting like that as well.
Rob Hamilton: Yeah, you could do escrow, you could do employee distribution of bonuses and stuff, yeah. Our core thesis is that we're going to be enabling a lot of this Bitcoin smart contracting language that exists today have those hard rules as code, and blend that with off-chain governance and compliance for insurance use cases because today, insurance in general, you leave all of your money at one custodian, and it's a very legacy banking model of thinking about how you'd want to secure your money. Why wouldn't you want to have a distribution of multiple parties that can distribute that risk? And as you distribute the risk, you can actually bring insurance to Bitcoin.
Today, the insurance markets are very undercapitalised, underdeveloped where you may have a large custodian, and they are not insured for the amount of money you have there. So, maybe you're getting 5 cents on the dollar or something if there's a mass loss event, because if that one custodian has a loss, everyone has a loss. You could have some sort of segmentation and tranches, but just very likely, in the correlation likelihood you're going to have a loss, there are going to be many, many, many losses. So, we're tackling a hard problem, I think, for just Core Bitcoin financial infrastructure.
Peter McCormack: Well, if you come to London, maybe we'll talk about that.
Rob Hamilton: Yeah, we'll be swinging by Lloyd's soon enough and I'll maybe catch a Real Bedford game.
Peter McCormack: We would love that, man. All right, Rob. Great to see you, man.
Rob Hamilton: Pleasure having me on.
Peter McCormack: Sorry to be so argumentative, I didn't mean to be a dick.
Rob Hamilton: It's all right.
Peter McCormack: It's the first time I got into it.
Rob Hamilton: Well, listen, this is a tough conversation and I think we're just starting to understand and kind of explore what the debate space is now. I wasn't trying to bring this is as a debate, I was trying to bring more just forward of this is how the technology works, but I can understand where you're coming from and trying to explore the deeper ideas beyond how the tech works.
Peter McCormack: Well, it's the first time I've really spent any time thinking about it, so I was like figuring it out in my head as you were explaining it, because I've just avoided it for a while, but yeah, it is what it is. Thank you for coming on, man. I appreciate you.
Rob Hamilton: Thanks.
