WBD678 Audio Transcription
Justice in a Hyperbitcoinised World with Aaron Daniel
Release date: Friday 30th June
Note: the following is a transcription of my interview with Aaron Daniel. 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.
Aaron Daniel is an Appellate attorney and author of The Bitcoin Brief, a newsletter analysing Bitcoin’s effect on law and society. In this interview, we discuss how justice in arbitration can be applied in a Hyperbitcoinised World. We talk about systemic issues with current legal systems, and how using Bitcoin tools like Fedimint can enable arbitration to become decentralised.
“There’s this concept of ‘because you’re still in society you’re implicitly agreeing to the contract’...but there’s no opt-out; but, what if you could opt-in to your preferred society, with your preferred rules, with your preferred justice system.”
— Aaron Daniel
Interview Transcription
Aaron Daniel: The real estate market is still insane in Miami. Everywhere in the States, there was that pump after COVID and after the stimi checks, but Miami's like the only city that is staying high. Everywhere else has kind of moderated a little bit with the rate increases, mortgage rates are higher, but Miami's still up there. A colleague of my firm, just a few years younger than me, good job, we're attorneys, we earn a good living, Miami rates, and he can't buy into a house, he's priced out of a 3/2 family home in Miami.
Peter McCormack: Well, I mean this is a nice place and it's cheaper for us to bring five people here than get five people a hotel room.
Aaron Daniel: Yeah.
Peter McCormack: So, if we get five people hotel rooms, because you've got to give each one a separate room, you're talking, what, $400, $500 a night for a decent hotel?
Aaron Daniel: Yeah.
Peter McCormack: And then we need to rent a studio to be able to do this.
Aaron Daniel: Yeah, that's a big one.
Peter McCormack: And so you're talking $2,000 to $2,500 a night just on the hotel, then put in a studio rental, if we're here for 2 weeks, I mean you're probably looking $35,000.
Aaron Daniel: Right.
Peter McCormack: So, the rental of this, anyone listening would think, "That's crazy", but we paid $28,000 for 2 weeks, which at the time we were like, "This has got out of hand!" Normally, we rent a place for $10,000 to $12,000 when we're away on a trip. But it is more cost effective and also you get the benefits of all being together, we can play some pool, we can eat today, so that is an additional benefit, but it's a cost-effective way of doing it.
I was trying to do the maths on what this place would cost and estimate, and even if you're within $500,000, they essentially need to rent this out a third of the year to cover their mortgage. So, I think you have a couple of options: (1) you just buy it and rent it out all year; or (2) you furnish it but you don't keep all your nice stuff in here, your personal stuff, and whenever anyone wants to rent it, you get out. And it's mad; I don't think hotel occupancy's down, yet Airbnb appears to be have doubled inventory and they're filling.
Aaron Daniel: Yeah. Well then it's like, hotels suck now too because the whole reason you go to a hotel is there's cleaning service, the maids come through and you can get everything you need, and I just haven't found that to be the case anymore. Hiltons I know were just like, "Yeah, we don't do maid service anymore unless you ask for it", and every time I've asked for it, since the pandemic, they've never given it to me; I've never gotten my room cleaned at Hilton so I'm putting you on blast Hilton, I'm an Honors member.
So, we're just like, "Yeah, we might as well Airbnb because if I'm going to clean up after myself I might as well have my own place with a kitchen and cook". But yeah, the investment strategy makes sense to rent out homes in Miami now because it's a desirable place to come. So, the house across the street from me, I live a few miles away, this is kind of my neighbourhood, the house across the street from me is a short-term rental, the house directly next to me is going to probably shift to a short-term rental. There's a whole short-term rental complex four houses down from me, which is convenient because I don't have to have a guest room, I can just keep my family over there; it's nice, but also this is why middle class Miamians can't buy in a lot of these neighbourhoods. Then, where it's affordable, it's just very far away, it's down south; Homestead is still affordable, out way west, basically the Everglades, is affordable.
Peter McCormack: It brings another couple of issues then; there's like a new wealth divide.
Aaron Daniel: That's what it is.
Peter McCormack: If you can buy properties and you can rent them out and it essentially pays off the mortgage, it's great for you, what a pension if you're building a property portfolio or what an inheritance you're creating for your children. But in doing so, you're pushing people out who can't afford that. Secondly, it's causing a lifestyle problem for the local people in that, if you happen to be pushed out but you work in the city, you're essentially spending more time commuting, less time, away from your family, and then potentially there's less community cohesion, because where you live, if you're surrounded by short-term rentals, you're not getting to know your neighbours.
Aaron Daniel: Yeah, exactly.
Peter McCormack: I'm not saying I'm for or against it, it just is this kind of new paradigm, but I'm sure we can make a fiat argument for this that has caused this. We have had this low interest environment, we have had this mass print of the money, people need a spigot that's created this situation, but it does have real impact. I don't have this where I live in Bedford; Bedford isn't a place where people come on holiday, or rarely do.
Aaron Daniel: Now they do, now that you're there with the champions.
Peter McCormack: With the football team. Are you coming over?
Aaron Daniel: Just give me an invite and I'll be there.
Peter McCormack: All right. Well, we're moving the show; we're going to do a trial of hosting the show in the UK for four months from January, so if you want to come over between January and April, we will bring you over. We basically worked out the cost of doing this, moving the studio around the world, we could essentially pay for the guests to come to the UK. Well, I say pay, not business, but we can essentially do a, I don't know, say $1,500 credit, say, "Here's $1,500, and if you want to make a holiday of it or if you want to upgrade, that's up to you", and so we can bring people to us, they can come watch the football, and I travel less. Well, I say travel less, it means we can focus more time on making films, which we want to do more of. Anyway, we're distracting ourselves, man. Great to see you again, buddy.
Aaron Daniel: Good to see you, yeah.
Peter McCormack: How have you been?
Aaron Daniel: I've been all right, staying busy.
Peter McCormack: Well, you were on the show before.
Aaron Daniel: Yeah, about a year ago.
Peter McCormack: About a year ago, not everyone would have listened to that, and you're not out on Twitter.
Aaron Daniel: Yeah, not like you.
Peter McCormack: Trying to gain the audience, growing a crowd.
Aaron Daniel: No, I'm definitely not playing the growth-hacking game or whatever.
Peter McCormack: No. Just remind people who you are, what you do.
Aaron Daniel: Yeah. So, I'm Aaron Daniel, I'm a Miami-based appellate attorney. So my day job, I do civil litigation but at the appellate level, so you lose, you've got an order you want to appeal, then you bring it to me and I take it up to the next court, which is usually three judges, whether you're in state or federal court. I'm also a member of the Miami bitcoiner community. The BitDevs group just started a physical coworking space called Bitcoin Grove, that's the logo on the hat; if anybody wants a hat…
Peter McCormack: So, that's more like Bitcoin Commons, Bitcoin Park?
Aaron Daniel: Yeah, that's the idea.
Peter McCormack: Okay, love it.
Aaron Daniel: Yeah, and we're trying to do it very organically. So, the way it came about was Ras, who was leading the BitDevs Socratic Seminars, decided we needed a permanent space because we kept getting outbid for renting out the spaces we were doing it in, and so asked around and the place we were doing it had office space upstairs that the owners were using. So, we've now got office space, coworking space, big boardroom, one private office, a lot of coworking desks, and I'll tell you, it's an interesting example, and this was Ras's idea; it's an example of real-world value that Ordinals created.
Peter McCormack: Okay.
Aaron Daniel: I'll tell you the story here, it's pretty cool, it's kind of like this idea of these third spaces, I know you had Thomas from Pubkey on and he was talking about that, they're kind of seeding each other now. So, Ras is a collaborator with this Ordinals projects called Pokésats, which is Pokémon cards but Bitcoin themed, and they do auctions. And so Pubkey had an Ordinals auction a few months ago, and one of them, the Ordinals was a Pubkey card, that was the name of it, it looked like a little Pokémon that had like a key and a monkey. So, Thomas bought that for the Pubkey, and that money was donated to Bitcoin Grove and was the seed money that allowed us to open our doors. So, there's a nice synergy there; I like that.
Peter McCormack: So, it's a really good point you made. So, something I talked about on the show recently, this awareness of two things that have come together at the same time; the awareness of how much the state interferes with business. So, we did an interview yesterday with Nic Carter talking about Operation Choke Point 2.0 and what happened with some of the banks, and not so much Silvergate, but more, was it Signature?
Danny Knowles: Signature, yeah, that was the one that really got closed down.
Peter McCormack: Yeah, and how essentially it feels like the government tried to close down a business that was operational. And I've talked about, in the UK, as somebody who creates businesses, how the government and the banks make things really hard. So, there are two things. The banks make it very, very hard to open a bank account, you have to give an awful lot of information, and I have, in the time I've been doing this podcast, I've had three bank accounts closed down.
Aaron Daniel: Right, you were de-risked.
Peter McCormack: Yeah, I was de-risked. The first one was closed down because I refused to tell them what I was spending my money on. I was like, "If you have suspicion, go to the police. I'll answer their questions, but I'm not telling somebody in a call centre what I spend my money on. I'm an adult, fuck off!" I didn't say those words, but then they closed down my account. Then I had two business accounts closed down for the podcast, each time I was de-risked.
Now, one of them, TransferWise, froze my account after receiving a payment from one of my sponsors. They asked for evidence, I gave the invoices, the contracts, everything, even though I thought, "None of your business", but whatever. And they said, "We do not allow people to transfer money in and out of crypto exchanges to buy and sell crypto". I was like, "I didn't. They are a sponsor sponsoring me", and they said, "We don't care, we're still freezing your account"; they actually froze my money.
Now, if that freeze had have happened over the end of a month, say on the 28th, I would not have been able to pay my staff. It was midweek and I managed to get it unfrozen very quickly, and the only reason it was is I called them out on Twitter and somebody got in touch and said, "Basically, you don't want to fuck this guy off". I'm not flexing, I'm just saying you can cause problems, and they unfroze my money, but that's continued to happen.
Now, I operate a legitimate business, I have conversations, I sell some sponsorships to regulated companies, like it's a legitimate business; they're making business hard, so that's the first point. But I've become, I'm reticent to say this because I've always said I think libertarian positions are naïve, but I feel a very strong draw to the libertarians now because of the size of the state and what it does. So, I was explaining this to my son, is that we've worked so hard this last six years; last year was the first year I had a little bit of money at the end and I was able to buy another business, which was a bar, and now that bar is growing and I've increased everyone's wages and I realise I'm quite good at investing and running businesses. I think I do a better job than the government taxing me and redistributing it.
Sorry, this is a long explanation but it's important. So, I've come to this point that I should have realised a long time ago that actually I do a better job than you, leave my money alone and let me operate. The great thing about Bitcoin is what I'm seeing is, every four years, most people's net wealth is increasing and then what they're doing is doing really cool things with it.
Aaron Daniel: Yeah.
Peter McCormack: They are opening up a pub in New York and running Bitcoin meetups; they're opening up a workspace here; they've got a surfing thing in El Salvador.
Aaron Daniel: Exactly, yeah.
Peter McCormack: There's a football team in Bedford. Everyone is doing it, taking their money and doing more productive and great things.
Aaron Daniel: Well, that's what you're supposed to be able to do with your money, right?
Peter McCormack: Exactly.
Aaron Daniel: Isn't that the whole point?
Peter McCormack: And it's happening and I am so here for this.
Aaron Daniel: Yeah, it is great and it is a community, like you've said before, if you build a business that might not be just a Bitcoin business but integrates Bitcoin, you've got an audience there, you've got a community. Right now, we might disagree on things but we all agree that, as bitcoiners, Bitcoin's where we want to focus our energy and put our wealth, to varying degrees. So, it's cool that you've got that ability now, and it's not like a hack, it kind of is a hack, open a Bitcoin business and you've got a built-in customer base already, but I think it is just that natural economic engine that Bitcoin provides us as good, sound money, and that's great to see.
Peter McCormack: It is definitely a hack, a Bitcoin business is definitely a hack. This football team, without Bitcoin, doesn't get promoted last year; it's maybe a mid-table team that is trying to get people through the door, but it's a Bitcoin team, so it gets access to very large global sponsors who want to access the listeners of a show, of which there are millions, and it has people flying around the world to come and see the team. If you come over, you're going to come at a time we play, you're going to come to the game and you're going to love it. So, it's absolutely a hack.
We're essentially operating at the same level of teams in the National League, which are five divisions above us economically, but we're five divisions below, so it's totally a hack. And you've almost got this kind of organic, migrating community; I can come to Miami, I can call you up, call up Shay, say, "What's going on?" You're like, "There's a meetup here".
Aaron Daniel: Exactly, Shay runs the meetups here.
Peter McCormack: Yeah, he's a great guy, by the way.
Aaron Daniel: Yeah, he's amazing.
Peter McCormack: "We've got an event here, or if you need somewhere to work, come here. If you want to record a podcast, come here".
Aaron Daniel: Exactly.
Peter McCormack: We can go to New York, we've got the same with Thomas; we can go to Nashville, we've got the same with those guys; go to El Salvador. You guys can come to Bedford and do the same. It's like these nodes that are extending out.
Aaron Daniel: Exactly.
Peter McCormack: I'm totally here for this now.
Aaron Daniel: Yeah, it is great. So now, in Miami, bitcoiners come, hangout at Bitcoin Grove; we've got room for you, space for you, we'd love to see you. We have a lot of great events over the course of Conference Week, we have like a pleb day, do an industry day where folks, it was open calendar, put your name on the calendar, talk about whatever you want, projects that you find interesting that you're working on; we had a lot of great presentations. We also hosted the awards for the Plebfi Hackathon; did you hear about that one?
Peter McCormack: No, tell me.
Aaron Daniel: Yeah, Plebfi is something Jeremy Rubin and I think Andrew Yang is his name put together a couple of years ago, and it's just developer focused, and it was like $10 or something to go, and you have seminars all day long. And it was the same people who were presenting at the big conference, like Rob Hamilton was there with Miniscript and, yeah it was way out. Had a Nostr track and Ordinals track at Plebfi, and it was a small group, it was maybe like 50 developers and then lurkers, like me, who aren't developers.
Then after a day of seminars about these different topics, there was a hackathon, a 24-hour hackathon, and there were about I think eight teams, and the stuff that these teams came up with in such a short amount of time was -- so, the winning one is really cool, and I'm looking at this for the work I'm doing and we're going to talk about later. It's a Nostr escrow system called Celebrity Escrow. The conceit of it was, "You're on Nostr, everyone knows your npub, they can plug in your npub as the escrow agent and then plug in an amount of sats.
If there's a dispute between me and Danny, we put in our Nostr keys and Bitcoin address to hold the funds if we're going to bet on if the Heat are going to win the NBA finals, and then when the event happens and we have a disagreement and one of us isn't paying out, then we can DM you on Nostr, and be, "Hey, by the way, you don't know this, but you're our escrow agent and you're going to act as the oracle and release the funds, and if you do, you'll get a fee". And so then you can sign a message that's broadcast on Nostr, I believe, that will then release the funds one way or the other.
Peter McCormack: Can I steal the funds?
Aaron Daniel: No.
Danny Knowles: We can go halves though if you go with me.
Aaron Daniel: No.
Peter McCormack: That's fair.
Aaron Daniel: But this is an escrow system, and they did a good job of marketing, and it's a fun idea, but replace you with an arbitration centre, and now the arbitration centre is the oracle attesting to a decision; the attestation is a decision over a dispute that will automatically release funds between two disputants.
Peter McCormack: So, it's available, we can test this now?
Aaron Daniel: Yeah, just go to I think it's celebrityescrow.org and you can play with it; I don't think it's fully -- all the kinks aren't worked out but yeah, you can go check it out.
Peter McCormack: So, what are we going to test on, whether the Heat are going to win the finals?
Aaron Daniel: Yeah.
Peter McCormack: Are they going to get past Boston?
Aaron Daniel: Yeah, I think so, at this point.
Peter McCormack: We were there last night.
Aaron Daniel: Yeah, how was it?
Peter McCormack: It was the exact opposite of the game on Sunday. The game on Sunday, Boston, I might use crap terminology here because I'm not a basketball guy, but Boston couldn't finish. They weren't getting their three points, the crowd was loud and hostile, they were rattled, and then he couldn't miss. Who was the 55, the tall guy? Do you know the players?
Aaron Daniel: I've got to be honest, I don't; basketball's not really my sport.
Peter McCormack: But last night was the exact opposite; Boston couldn't miss and they defended well, Boston, and the Heat just missed a lot of chances.
Aaron Daniel: Yeah.
Peter McCormack: It was almost the exact opposite game. They need, what, three more wins?
Danny Knowles: Just one, isn't it?
Peter McCormack: Boston need three more?
Aaron Daniel: Yeah.
Peter McCormack: I've got to go to Boston, I'm Irish, half Irish.
Aaron Daniel: Are you? Okay.
Peter McCormack: I'm not Cuban.
Aaron Daniel: No.
Peter McCormack: Anyway, okay, so that sounds cool. Okay, well that should lead us on to what we're going to talk about.
Aaron Daniel: Exactly.
Peter McCormack: So, you're working on a paper?
Aaron Daniel: Yes. So, I'm working on a paper for a series called The Satoshi Papers, and this is an initiative by the Texas Bitcoin Foundation, that's Natalie Smolenski.
Peter McCormack: Amazing person.
Aaron Daniel: She's great.
Peter McCormack: Isn't she great?
Aaron Daniel: Yeah, I got to meet her and hang out with her in person over the conference and really had a great time. And Tuur Demeester's the other editor of this.
Peter McCormack: Wow, that's a powerhouse.
Aaron Daniel: Yeah, so I get to work with them on a research paper that's going to be peer reviewed. Yeah, I'm very excited about it; it's been a great process so far.
Peter McCormack: Natalie's my new favourite person in Bitcoin.
Aaron Daniel: Yeah.
Peter McCormack: We've done three interviews now with her.
Danny Knowles: Yeah.
Peter McCormack: Two solo, one with Gladstein, and she just blows my mind every time. Her understanding of Bitcoin and the relevancy to today and also her understand of the history of the US and the democracy and geopolitics, all of that together, she's such an easy person to interview.
Aaron Daniel: She's very good at explaining complex topics and integrating all these different, seemingly disparate topics in something that makes sense.
Peter McCormack: And she's working on her new book, which she told us about.
Aaron Daniel: That's exciting.
Peter McCormack: I think she said it on the show so we're not revealing it.
Danny Knowles: Yeah, we'll have to make sure this goes out after that show.
Peter McCormack: Yeah, make sure. Okay, so you're working on this paper?
Aaron Daniel: Yeah, and there's a bunch of authors and the series is basically looking at society and Bitcoin and how Bitcoin's going to affect society. So, you've got philosophers, philosophy professors writing, I think Avik Roy is also; you've had him on this show.
Peter McCormack: Yeah, Avik's amazing.
Aaron Daniel: He's writing a paper, I'm not sure his topic, but economics, and I'm kind of like the token lawyer, going to talk about legal stuff.
Peter McCormack: Well, I think everyone on that list is a token something; that's a great group of people to work with. I love the work FREEOP does; have you met Avik?
Aaron Daniel: Yeah.
Peter McCormack: I love him.
Aaron Daniel: I met him over the conference, yeah.
Peter McCormack: Yeah, I love the work they do. He was in our most recent film; again, another fascinating guy. It's this transition we've had over the last four years, there's this like wave of macro experts, philosophers, lawyers, accountants, human rights people, this wave of people that have come in has been incredible. And what I've found super interesting is that, when I first probably got into Bitcoin, it was like this ragtag group of cypherpunks and degen gamblers and hardcore bitcoiners. It was cool, but now Bitcoin's grown so much, there are a lot of people coming in and thinking about the real-world application of Bitcoin, what it actually means for every part of society, and I think it's just so fascinating.
Aaron Daniel: Right, everybody comes into Bitcoin and brings their experience and their expertise, whatever it is, whether you're a lawyer, really good at cutting mangos, everybody brings their expertise. By the way, I'm really good at cutting mangos, so that's just one of my specialties.
Peter McCormack: Are you just saying it?
Aaron Daniel: Yeah.
Peter McCormack: What's the trick with mangos?
Aaron Daniel: They've just got a really thick skin so you've got to use a sharp knife and have a technique.
Peter McCormack: I don't like mangos.
Aaron Daniel: You don't like mangos?
Peter McCormack: No. I like pineapples.
Danny Knowles: Aaron's brought us some mangos.
Aaron Daniel: I did bring some organic mangos from my house.
Danny Knowles: So ungrateful!
Peter McCormack: Well, let's try some; maybe it's different here, maybe it's different from the --
Aaron Daniel: No, I don't eat mangos that you buy at the store.
Peter McCormack: Oh right, are they different?
Aaron Daniel: Yeah. This is homegrown, organic, no GMO here.
Peter McCormack: We're going be judging how you cut these mangos, Connor.
Aaron Daniel: Yeah.
Peter McCormack: Are you going to show us? Show us how you cut a mango.
Aaron Daniel: Do you have a sharp knife?
Peter McCormack: Here we go. He's already got the excuses in.
Aaron Daniel: Bring a mango over here.
Danny Knowles: This is a first for What Bitcoin Did.
Peter McCormack: Yeah, this is a first. We've had pineapples and pears; we've never had a mango. Right, here we go.
Aaron Daniel: So, the trick is you've got to the cut top off first.
Peter McCormack: That's a bit of effort.
Aaron Daniel: Right, and then you've got to --
Peter McCormack: Please don't cut yourself.
Aaron Daniel: Yeah, then you've got to kind of peel it like an apple, like this.
Peter McCormack: You are good at cutting mangos.
Aaron Daniel: Yeah. And now here's the trick too, mangos are part of the sumac family, so if you're allergic to poison sumac and you have mango that has any of the skin left on it, you can have a bad reaction. So, is anyone allergic to poison sumac?
Peter McCormack: I've never even heard of it.
Aaron Daniel: Do you have poison sumac in the UK?
Danny Knowles: I don't know what that is.
Peter McCormack: Never even heard of it.
Aaron Daniel: Then this will be a test.
Danny Knowles: This is not how I would cut a mango.
Aaron Daniel: That's what I'm saying.
Peter McCormack: No, I would have cut it in half.
Aaron Daniel: You've got to be strategic.
Danny Knowles: You can't cut it in half because you've got to go through the stone.
Aaron Daniel: There's a pit in the centre.
Peter McCormack: I would have probably tried to cut it more like I cut a pineapple.
Aaron Daniel: See, you peel it like that and you've got to kind of just cut it around the pit.
Peter McCormack: Yeah, I would have cut it more like a pineapple. I find pineapple cutting annoying; I waste a lot.
Aaron Daniel: Then you can get a little extra.
Danny Knowles: I think I'm better.
Peter McCormack: You think you can cut this better than him?
Danny Knowles: I do.
Peter McCormack: Danny's coming for your mango crown!
Aaron Daniel: He's coming for my mango crown! We should have a race.
Peter McCormack: A mango-off.
Aaron Daniel: There's a little bit extra on there, but…
Peter McCormack: All right, let's try this.
Aaron Daniel: There you go.
Peter McCormack: If I collapse and…
Aaron Daniel: I don't know if this is --
Danny Knowles: Pretty good.
Peter McCormack: Yeah.
Aaron Daniel: Not doing it for you?
Peter McCormack: No, it's nice.
Aaron Daniel: Go in there and grab that big bite there.
Peter McCormack: Ten years ago, no chance Connor would have been eating this. His taste buds have changed. My problem with mangos, they're not sweet enough, they're a little bit almost vegetably.
Aaron Daniel: Now, that's really interesting because mango connoisseurs also agree that this varietal of mango I have is not quite as sweet as -- I see you've got some mangos next door that are growing, I think those are probably sweeter; those are bigger.
Peter McCormack: The taste changes as you chew through it.
Aaron Daniel: Yeah.
Peter McCormack: It's a bit kind of vegetably at first and then goes fruity.
Aaron Daniel: It's very fibrous.
Peter McCormack: That'll do, Connor, just grab one of those.
Aaron Daniel: Yeah, it's very fibrous. My wife makes a really good mango cheesecake, puree it up and yeah, mango chutney, yeah.
Peter McCormack: Connor had deep-fried cheesecake last night from, what was it, Man Vs Chips; fuck me, we had some terrible food! All right, so you're working on this paper?
Aaron Daniel: So, I'm working on this paper, and the paper is, when Danny and I were talking about what to call this episode, I think I might just change the name of the paper to this, Justice in a Hyperbitcoinised World, and thinking through the externalities that Bitcoin is going to create on the legal system, and also thinking about ways that we can plug in dispute resolution systems into Bitcoin natively to perhaps improve rule of law in parts of the world that don't currently have it.
Peter McCormack: Let's go back a step; talk about the current system for conflict resolution. Obviously, you've going to tell in context of the US.
Aaron Daniel: Yeah.
Peter McCormack: I'll try and imagine in terms of the UK.
Aaron Daniel: But just speaking generally about developed nations and how the civil justice systems work, it's whenever there's a dispute, we reduce the harms to money a lot of times. There is specific performance where you force someone to do something, but largely speaking, you get a money judgement as a plaintiff, and then the defendant, who's now the judgement debtor, has to pay whatever is owed. If you, as the judgement debtor, don't pay, there are legal devices available to the judgement creditor, and the writ of garnishment is one such device where I can take that writ of garnishment with the judgement and serve it on your bank or your custodian, and the bank has to turn over whatever assets you have to satisfy up to the amount of the judgement.
So, this is how the system currently operates, the civil justice system, and it relies on intermediaries, just like now. You can voluntarily pay, of course, your judgement, but when push comes to shove, you have to find the assets somewhere to satisfy the judgement. If I know you live in a house, I can go and start to foreclose your house, things like that. So, you've got intermediaries who are holding all your money, and they are basically facilitating justice, facilitating the transfer of funds to satisfy these judgements.
Now, what happens when you go to a, we're just going to say a hypothetical full Bitcoin standard, where we've solved scaling problems and everybody can self-custody in the entire world? Unless somebody voluntarily agrees to pay what they owe on a judgement, and there's no intermediary to go and enforce a judgement against, and so what's going to happen there? Obviously, I think we're always going to have intermediaries to some degree, there are going to be business reasons for them and we're seeing that now, people just feel more comfortable giving their keys to somebody else to hold because they don't want the problem. But you're going to have a growing portion of the population that understands they have an inviolable property right for the first time in human history, in Bitcoin, and they're going to take custody of their own keys.
So, that always kind of, not bothered me, but I was like, "This might be a problem for society moving forward if we have a justice system that is not going to furnish relief to those who've been harmed in certain ways". Now, the flip side to that is the justice system gets it wrong, and I've seen them get it wrong and I've had clients who've had gold coins seized out of locked boxes that they solely owned, to satisfy husband's judgements, and so having that inviolable property right is a good thing.
Peter McCormack: Hold on, didn't we talk about that last time?
Danny Knowles: Yeah.
Aaron Daniel: We probably did. Yeah, so it's important that we have this inviolable property right, but at the same time, I like the rule of law, I like having a system that is largely peaceful. Now, it is backed by the state's monopoly of violence, and we can get into that in a little bit, but I like having a peaceful to resolve disputes, because if you don't have a peaceful way to resolve disputes, you just fall back to violent anarchy, you disperse violence throughout the community.
So, I've been thinking about this for a while, and I wrote an article over a year ago, it was one of my first articles for Bitcoin Magazine about how is the civil justice system going to react to increasing self-sovereignty over wealth and the inability to enforce judgements against bitcoiners, basically. And what I realised was, you're going to see decreased due process on the front end, and I'll give you an example of that in a minute, and increased coercion on the backend after a judgement.
So, the decreased due process, we've seen this already, we saw it in Canada with the truckers' protest, because there were a lot of things that happened there. One of them was the state of emergency that was declared and freezing of assets. Another thing that happened was business owners in downtown Ottawa sued the organisers of the truckers' protest in civil court saying, "You've damaged our business", and it was a class action lawsuit. And in Canada, there's this really awful thing called a Mareva injunction, which the States doesn't have; the UK has it, that's where it came from.
Peter McCormack: We have a lot of awful laws.
Aaron Daniel: It is a prejudgement asset freeze of all of a defendant's assets to avoid dissipation during the course of the suit. So what happened was, whatever funds were left and seizable were frozen, all the assets of the organisers and truckers were frozen, who were defendants, before evidence had even been introduced into court. So, a plaintiff can get this injunction to freeze someone's assets even before the defendant knows they're being sued. In fact, that's when you're supposed to do it so that the defendant doesn't have time to dissipate the assets. So, the Supreme Court of the US has called this the nuclear weapon of the law.
Peter McCormack: What's that law called?
Aaron Daniel: This is the Mareva injunction; it was named after a case in the UK from the 1970s, some ship named the Mareva or something like that.
Peter McCormack: I mean, we have this thing in civil cases, say if you open up a case, say a liable case, it could be very expensive, you can be required to put down a certain amount of funds --
Aaron Daniel: Put a bond.
Peter McCormack: Yeah, it's kind of a bond; I can't remember what they call it; they call it something else. But anyway, put down a bond, so if you lose, then the funds are there are for you to pay the other person's legal fees. By the way, I have a huge detest of the legal system now, and we will talk about that off camera.
Aaron Daniel: Yes, I wasn't going to question you about that, but your experience, I will say is -- we're going to go on another aside here for a second -- but your experience is not unique, unfortunately. It seems like your country has a really inefficient and poor justice system; the incentives are off there.
Peter McCormack: There is that as well, but I also feel like it's a system that's been designed by lawyers with endless if and else statements in it that allow different points to be argued, reargued, pre-trial stuff, trial stuff, post-trial stuff, appeal, and it just makes things drag on and on and on and on to the point of being unaffordable or expensive. Whereas, I think you would more likely get a better resolution if you said, "We're going to meet on this date, we're going to be here for five days, you will both make your arguments in front of a jury of 15 people and we'll let them decide".
Aaron Daniel: Yeah.
Peter McCormack: I think for me, that would be a far more affordable and better system, but I'll talk to you about that off camera.
Aaron Daniel: Yeah, but the point that you're making, I agree with it, as an attorney, as an appellate attorney. What I'm looking at a lot of the time is procedure, like was this rule followed, was it not followed, and figuring out and understanding the way that the courts operate. And actually, for the last six years, I've been on the Florida Bar's Appellate Court Rules Committee and I've been Vice Chair for the last three years, and there we literally are assessing the efficiencies of the court and the trade-offs with due process and then crafting new rules for the appellate system to propose to the Supreme Court.
This is something that I know you'll appreciate. Last month, I was arguing one of these rule amendments to the Supreme Court and it was a rule that would allow appeals, direct appeals from orders on motions to dismiss, frivolous defamation lawsuits. So, in Florida, we have something called an anti-SLAPP statute; a SLAPP is a Strategic Lawsuit Against Public Participation, meant to silence folks for making statements that would be protected under the First Amendment and part of the public discourse. And the problem with SLAPP suits is that, by the time you get through all of these steps and procedures, as you were outlining --
Peter McCormack: Pre-trial, discovery.
Aaron Daniel: -- pre-trial, discovery, trial, post-trial, appeals, you have, as a defendant, even if you vindicate yourself and win, you've really lost because you've had to pay out fees the whole time to your attorneys, you've got the stress; just defending is chilling.
Peter McCormack: Yeah, the chilling effect, well it's just happened recently, there's a case in the UK between Arron Banks and I can't remember her name, and she rightly said this has a chilling --
Aaron Daniel: Yes, she made a TED talk, right?
Peter McCormack: Yes.
Aaron Daniel: And she got sued for what she was saying on the TED talk.
Peter McCormack: And he appealed, and because she hadn't requested the TED talk to be taken down, I think he was awarded £1.25 million and it has this chilling effect. We don't have First Amendment protection in the UK, but the main point I would be making is that most people who are going to be sued in this kind of scenario will not have the money to do this.
Aaron Daniel: Correct.
Peter McCormack: My litigation's still ongoing, there is an appeal on the 15th against the judgement, we'll wait and see. What I can say is it's close to bankrupt me. I'm fine because I've got a business and my lawyers are very patient with being paid, but the fees are just astronomical, more than £1 million. Now, I've been supported by some people and I've paid a lot myself, but it's --
Aaron Daniel: So, this is a systemic issue with the judicial system, and things like what I was talking about, this amendment would have allowed an appeal, an early determination in a SLAPP suit that it's a frivolous suit. You can basically, in Florida, if someone sues you for defamation, you can ask for an expedited determination that it's a frivolous suit and get a dismissal. But if it's wrong and it's not dismissed, there's actually no way to appeal that until the end of the case, in which case it doesn't matter anyway, so we were trying to, as a committee, allow appeals. But that's just a Band-Aid to the systemic issue which is, it's really expensive, it's really burnt some to litigate. We tell most of our clients to just settle, it's not worth hiring us, it's a really bad business strategy, but it's really not worth hiring us; you should just settle and take your loss.
Peter McCormack: But not all people will do that.
Aaron Daniel: No.
Peter McCormack: Some law firms will recognise that they know they have somebody who, once they're in, are trapped, and they will eventually spend all their money on it, and I think it can be quite the revenue channel for some legal firms.
Aaron Daniel: It goes back to incentives, it's a broken incentive structure.
Peter McCormack: Yes.
Aaron Daniel: The legal system has broken incentives. We are, as attorneys, and this goes back to just what's happening with fiat, we have growing inequality; it's harder and harder, we're raising our rates to try to keep up with inflation and the loss of value in our money and the growing costs, and if you're at some of these bigger firms, you've got pressure to bring in clients, you've got pressure to keep generating revenue because they'll take it out of your hide at the end of the day if you don't. It's not the way we practice, we're much more collaborative, but that is the incentive structure in most larger firms.
Peter McCormack: And the other issue is when you are recommending that people settle, this then becomes comparable to extortion.
Aaron Daniel: It does, and there is no incentive for an attorney to suggest settlement. There are studies that have shown that basically you've got just as good a chance of reaching an amicable agreement in a settlement at the very outset of the case, before any evidence is even out. The settlement outcomes are about the same if you mediate then as if you mediate after all the discovering evidence is out, because what a lot of attorneys say is they say, "Well, we need to see all the evidence, we need to get through discovery, we need to really make our arguments so that we can present those". But it's not about the arguments, it's not about the evidence, it's not about the discovery, it's about what's motivating you in this dispute, what's motivating me, and can we find some common ground in between, and that's not going to change necessarily when you get through all that litigation.
Also, you've got everybody stuck. If I've already paid $250,000 to my attorney to get to this post-evidence mediation, now I have some costs --
Peter McCormack: Also, but if you stop and you give up, you are then liable for the other team's legal fees.
Aaron Daniel: Yeah. In the States, that's not the default, it's the opposite, but functionally there's a bunch of different fee-shifting statutes and contracts often have fee-shifting statutes in them, and so, yeah, that's where we're at. It's against our interests, as attorneys, to suggest settlement, and that's a broken incentive structure. We have fiduciary duties to our clients, we have to look out for our clients' best interests and put their interest over ours, but we don't get paid if we do that.
Peter McCormack: But that's why I struggle to call it a justice system; probably be better calling it the legal industrial complex.
Aaron Daniel: It is.
Peter McCormack: Or the litigation industrial complex.
Aaron Daniel: Yeah.
Peter McCormack: And a lot of this becomes then a war of attrition.
Aaron Daniel: It is a war of attrition. And going back to the growing inequality, what it means is you've got kind of stratified access to justice. I think I was looking at some studies, it's like 80% of Americans in low income brackets, and I don't know what exactly the studies quantified that as, basically just don't have access to the legal service, they can't afford it. And so maybe they can go to their local pro bono sites and get access, and even in the middle class in America, it's anywhere between 40% and 60% also can't afford legal services; that's a problem, that's a real big problem.
Another study that I saw from 2021 said that Americans, it was something like 60% of Americans in the last four years had had a legal issue, and of those legal issues, only 49% had been resolved by the time of the survey. Basically, litigation in the court system becomes the battleground of the elite, and then everyone else is down here at the bottom.
Now, here's the thing though, all those legal issues that middle class and low income folks are experiencing, there was a study out of England and Wales, the courts of England and Wales, that something like 80% of all the cases that come through the civil courts fall into 12 buckets of common life events. So, what if you can create some kind of system that helps people get the services they need for those 12 life legal events? And now you just wind that access to the courts. The problem is, in my opinion, the folks who are looking at doing that and creating access to justice are trying to open the court doors wider and trying to get more people into the existing institutions, the existing state court institutions. But like we've just been talking about, the incentives are still off there.
Not only that, but that's great for those of us in the developed world who have access to state-run courts that are mostly fair, mostly get it right. But what about the 54% of people globally who live under authoritarian regimes; are those state courts fair? I don't know. I don't want to be tried in China; I don't want to be tried in Russia either. 4 billion people in the world live outside of the rule of law. The state courts are not facilitating globally, state-run courts are not doing the job of creating the rule of law, they're not a solid foundation to build any kind of justice system around; I think the evidence is now clear on that.
So then, that's what I'm looking at in my paper, what system, or systems can we -- because I think what's going to happen is you're going to have lots of communities, you're going to have online communities, you're going to have local communities that are all going to be able to privately resolve their disputes amongst themselves. And the way we get there is by anchoring dispute resolution systems, like online dispute resolution software, into Bitcoin, like I was talking about, with Celebrity Escrow. What if we replace the escrow agent with a private arbitration system that would then attest to a decision, one way or the other after reviewing all the evidence, and release the funds?
Peter McCormack: So, you want to disrupt the legal system?
Aaron Daniel: You either get disrupted or you're the disruptor these days, so I'd rather be the disruptor.
Peter McCormack: So, in relation to a hyperbitcoinised world, before we discuss how you resolve dispute resolution, do you have a thesis on what that world looks like in terms of the institutions that we currently have; do we still have democracy; do we still have a judicial system; do we still have a police force?
Aaron Daniel: Yeah, so the judicial system's going to persevere for a long time, all our institutions will; the idea is that we're going to slowly opt out. And so, if you're opting out into private dispute resolution, that doesn't necessarily shield you from being dragged into the court system, but maybe it's just, over time, when folks realise that it is more efficient and you can get better outcomes not in a state-run court, then they might just start opting out as well.
Peter McCormack: And state-run courts, I'm assuming similar to the UK, are too busy, things take too long, lawsuits can take years.
Aaron Daniel: Yes.
Peter McCormack: When you put it to the courts, have a court hearing, you can be given a date that's months, maybe even a year later, and so a more efficient, cheaper system with net better outcomes for everyone?
Aaron Daniel: Yes, and I'm not talking about the criminal aspect of this --
Peter McCormack: Yes, of course, yeah.
Aaron Daniel: -- because that's generally outside of my expertise, and I think that's a bigger problem; this is a big problem we're talking about, but that's a bigger problem. I think maybe the answer might be not replicating the current criminal justice system in a hyperbitcoinised world, but totally shifting the way that we treat those in society who are breaking the rules, and moving from this kind of retributive justice, eye for an eye, to a much more of a conciliatory justice system, like the Truth and Reconciliation Commissions in South Africa were fairly successful. Also, there were some Truth and Reconciliation Commissions in Canada between native peoples and governments having to do with basically forced adoption of native children. So, I think that's maybe, in the criminal sphere, what we need to move towards. America imprisons the largest percentage of its population --
Peter McCormack: Is it 2.1 million?
Aaron Daniel: -- compared to all other developed nations.
Peter McCormack: Well, that itself is a system of broken incentives.
Aaron Daniel: Private prisons.
Peter McCormack: Yeah, private prisons. I spoke to Lyn Ulbricht, she's the mother of Ross Ulbricht, and she's gone down that rabbit hole, and she says in some of these towns, the prison's the largest employer. And if you want to change the law so maybe someone who dealt marijuana really probably isn't a danger to society, is a huge cost burden to society, probably shouldn't be in jail, she said the biggest people, the biggest opposing force for that will be the Prison's Lobbying whatever, whoever Group; they will lobby against that, and they're influential and they're powerful because there's a lot of money to be made from locking people up.
Aaron Daniel: Yeah.
Peter McCormack: And that's a completely broken system of incentives. But even on criminal prosecution, we're seeing there are broken incentives. We've got a show that came out today about Roman Sterlingov; do you know the case?
Aaron Daniel: Yeah, I was at the conference when his attorneys gave their presentation, yeah.
Peter McCormack: Right, and there are broken incentives of prosecutors or people in law enforcement who maybe can end up with jobs or side businesses which work with the likes of Chainalysis. So, no direct accusation here, but again, another system of broken incentives. I mean, we live in a world of broken incentives right now. I'm reticent to just say it's just because it's a fiat world, I think it's also human nature, but it's a world of broken incentives which seems to benefit those with more money against those with less money.
Aaron Daniel: Yeah, that's where we are, so what are we going to do about it?
Peter McCormack: What are you going to do about it?
Aaron Daniel: We can stack sats, that's the first thing, but then what are you going to do with those sats; are going to be the mountain man architype? Sure you can stick it all on a Coldcard and go sit on your 15-acre plot of land with your war chest and your war room and your own private police force, or you can choose to live in society. But to do that, we do have to make trade-offs, we do have to agree to abide by a common set of rules. Now currently, we're all kind of forced into society when we were born and we don't really get to -- we have jurisdiction on arbitrage to an extent, now you can move kind of around the world, but immigration sucks; that's another show.
Peter McCormack: And again, easier the more money you have.
Aaron Daniel: Absolutely easier the more money you have, for sure.
Peter McCormack: You have a little bit more jurisdiction on arbitrage here in the US, across border.
Aaron Daniel: Yeah, you can move state to state.
Peter McCormack: Yeah.
Aaron Daniel: That's nice. You can just up and move, but again, you've got to have resources to do that. If you're at the low end of the income bracket, it's really hard, it's expensive to move, it's expensive to go find an apartment and you've got to put on first, last month's deposit; it's not ideal. So, when you're forced into a society that you might have been born into, and just by fate, and so when you talk about something like the social contract, well it's a social contract we've bestowed upon the state, the monopoly on violence, so that they can police us and so that we're not having to use violence against each other. But I didn't sign that contract, you didn't sign that contract. There's this concept of like, "Oh well, because you're still in society, you're implicitly agreeing to the contract".
Peter McCormack: Well, there's no opt out.
Aaron Daniel: But there's no opt out, right, but what if you could opt in to your preferred society with your preferred rules with your preferred justice system? So, take for example, Próspera in Honduras, the free city, they have an economic agreement, an economic development zone that they're partially autonomous, and it's a city that's by run by a private company, and they have a contract. If you want to go live there, you sign the contract with the provider.
They have an arbitration centre, and they say, "This is our arbitration provider", and you can go look at it, you can go look at their rule, you can go see who the arbitrators are there, you can say, "Okay, that seems fair, that seems efficient. I don't even have to go to the courthouse, they do it all online, and so if I have any business disputes while I'm there, that'll be fine".
Peter McCormack: How's criminal law handled there?
Aaron Daniel: Criminal law, I believe, is still run by the Honduran Government.
Peter McCormack: Okay, that's fine.
Aaron Daniel: I believe they do not have private security forces, but I guess there's nothing stopping, other than agreements with local jurisdictions.
Danny Knowles: It says here, "Próspera strengths the Honduran legal foundation by reinforcing it with the American criminal legal system".
Aaron Daniel: Yeah, so their arbitration centre basically applies the American Arbitration Association Code, and I'm not exactly sure which commercial laws they've adopted, but you can set your commercial law if you want, there are standard codes for commercial law. And what if, when you join one of these communities, one of these communities had something like a Fedimint -- I'm wearing my Fedimint shirt today --
Peter McCormack: Yeah.
Aaron Daniel: -- and when you joined, the expectation, or could even be part of the contract, is that you're going to deposit into the mint some portion of your funds, maybe you keep self-custody of certain Bitcoin, but now you're going to deposit some of your funds there, and those are the funds that are going to be essentially at risk of loss if you get into a dispute? And you're okay with this because you know that that's going to happen, you've signed the agreement, and you know that if you are harmed by somebody, you have the opportunity to have those funds transferred to you.
Peter McCormack: It's like your rental deposit.
Aaron Daniel: Right, exactly, but you can still use your funds for anything you want, it's not necessarily like a bond. And Fedimint's great, because on the shirt here actually, you can see at the bottom it says, "The Fedimint", and you've got all the different modules, Bitcoin; eCash; Lightning; stability pools, that's a cool one that was developed in a recent hackathon where you can make your stablecoins through Fedimint; Fedipool for mining; what is the next one is arbitration, your arbitration module, right? That's an interesting idea to me, and I think we're a long way for getting there, but I think we can take smaller steps and develop those dispute systems and the infrastructure behind it to link it into the Bitcoin network and iterate upon it as we go, and maybe get up to something like the community level; that's the goal.
Peter McCormack: Fedimint, interesting. So, the first time I sat down with Obi, a big shoutout to Obi and everything's he's doing, I didn't get it, and I think there were two things. Firstly, I thought the word "eCash" was a confusing word to use because it was a distraction.
Aaron Daniel: Right, altcoins or something?
Peter McCormack: Yeah, it was just like, "What do you mean this eCash thing?" when really it's just Bitcoin.
Aaron Daniel: Right, claims on Bitcoin.
Peter McCormack: Yeah, claims on Bitcoin.
Aaron Daniel: Digital claims on Bitcoin, yeah.
Peter McCormack: But also the second point was the use case tended to be like, if you're out in a village and you can't custody, you could have trusted members of the community, and I was like, "Well, it's giving up my custody". But what's starting to happen now, I'm starting to hear use cases that make more sense. So, the one we came to in the last interview, it was, say, the Bitcoin Conference. What if you could go in and you can deposit within the Fedimint for the conference and you have an eCash you can use the entire time you're there for buying your beers, your merch, going to events, full privacy over the event; and we have our Real Bedford stand and people can pay in their eCash, and at the end, we can withdraw ours back to Bitcoin. Okay, that's a great --
Danny Knowles: Can do all without Wi-Fi, like a lot of people traveling might not have a service.
Aaron Daniel: Yeah. Well, the offline payment's really cool; the alpha for Fedi has been released and I started playing around with that, and it's very rudimentary right now, but…
Peter McCormack: But this is another great example, and I think these examples now, better examples have helped me better understand Fedi now.
Aaron Daniel: Yeah, so business use cases for Fedi, move away from the community too. So, as an example of an industry that could maybe adopt Fedimint, and I talk about this in my paper, the Israeli insurance industry has a fully private dispute resolution system that the insurance companies have all opted into for fender bender auto subrogation stuff; no insurance claims from those ever end up in court in Israel. All the companies have opted into this system called Benoam, and they have private arbitrators who handle the different disputes, and the key is how are these decisions enforced; how is it fully private, because even if you have an arbitration agreement and you go and you arbitrate and you get a decision, all roads end up leading back to the state courthouse, because how are you going to enforce it if somebody reneges? You have to go get it enforced in court.
So, now you're back to a state-run court with all the failures we've talked about, state monopoly on violence, enforcing that decision. Benoam doesn't have that because all the insurance companies have basically created a clearing house system that has access to all of their accounts. So there are just claims being shifted around, funds being shifted around between the insurance companies, and it settles on a monthly basis, or what have you, and it's verifiable, they can verify it and I don't think it's open source, but they can all verify what's going on with their accounts and the decisions.
The decisions, some of them are public so that it creates kind of a precedent within this little micro judicial system and you can rely on those to make arguments, but nobody's actually sitting there in person, it's just a software programme; evidence is uploaded and maybe somebody puts down like a paragraph argument and then it'll go to one arbitrator or three if it's complicated, there's a review process. But because the system has control over the flow of funds, it is a fully private enforcement mechanism.
So, an industry like the insurance industry could adopt a Fedimint, and now everyone's got their funds in the Fedimint and it's probably more efficient that way than having monthly audits and this clearing house system, and you can have automatically enforced decisions; you're going to speed up the time between decisions by doing that. Obviously, you built in a little bit of time for appeals and review.
Peter McCormack: But it's just an efficient system of processing claims.
Aaron Daniel: That's right.
Peter McCormack: Arbitrating decisions and dispersing funds.
Aaron Daniel: Exactly.
Peter McCormack: It sounds brilliant.
Aaron Daniel: It's exciting stuff.
Danny Knowles: The question I've got with it though, well a couple of questions, one is if me and you have a dispute and I'm in Australia, you're here, we're not within the same federation and I self-custody all my Bitcoin, is that just tough?
Aaron Daniel: Yeah, that's just tough. Unless we're part of some shared community that has agreed to a dispute resolution system in advance, I'm going to have to try and sue you in state court. There are basically two main features that a kind of Bitcoin-native dispute resolution system is going to have, and these are two features that any fully private system needs to not rely on the state: you're going to need that flow of funds, control over the flow of funds; and you need a shared community with shared norms and ideally voluntary assent ahead of time.
So, Benoam, I just gave you that example; the prototypical example of this is eBay because eBay had PayPal, and so all the disputes between the sellers and the buyers could just get automatically deducted from PayPal accounts and transmitted between the two systems.
Peter McCormack: But the PayPal system had flaws.
Aaron Daniel: For sure.
Peter McCormack: Twice, when I was using eBay, I sold things, the person who bought the item waited until the end of the term, it was 60 or 90 days, and then that 60th or 90th day said, "I never received it"; they didn't have to provide any evidence. I had evidence of it being posted, I can't remember the details, they definitely received the items. I had the money taken from me by PayPal and dispersed back to them, like I was scammed.
Aaron Daniel: Yeah, of course. So, what was the dispute process like that; did you upload your receipts to something?
Peter McCormack: I can't remember the details. I could imagine it's probably a scenario where I didn't do some kind of signed, I just delivered it; maybe it was a T-shirt or whatever, something inexpensive. For example, Connor's helping me with the ecommerce for the Real Bedford, and when we get orders, we make a decision about what delivery, based on the value of the item. If somebody bought one of our Satoshi 21 shirts at $75, we'll pay the extra £1, £2 for the delivery; if they're buying one $10 T-shirt, we won't, and we accept there's a limited amount of risk. It's a bit like how Bitrefill has kind of a risk management for zero-confs.
Aaron Daniel: Yeah, exactly.
Peter McCormack: We kind of have the acceptable loss. So, I can imagine I didn't do, I just sent it, and they scammed, they scammed me. I know they scammed me because the reason I know is, say it's 60 or 90 days, you don't order something and on the 60th or 90th day go, "I never received it".
Aaron Daniel: Exactly.
Peter McCormack: Within four or five days.
Aaron Daniel: You're going to be like, "Where is this?"
Peter McCormack: Certainly within a week or two you're like, "Where is this?". And so I got scammed because the process was broken.
Aaron Daniel: Yes. So, you need to optimise that process in some way to provide more process.
Peter McCormack: Yeah, of course.
Aaron Daniel: And to have an actual review.
Peter McCormack: So you've got to iron out the kinks.
Aaron Daniel: You've got to iron out the kinks, and that's doable, and eBay's a good example because now we're getting kind of analogues in the Bitcoin and Nostr world, we've got these marketplaces, these peer-to-peer marketplaces that are being demoed now through Nostr particularly; they're built on Nostr, run on Nostr and sell physical goods, sell digital goods, so whatever you want. But there's no real escrow system for these marketplaces yet for large purchases.
There's a lot of risk that could be better allocated amongst the buyers and the sellers, and there's no dispute resolution mechanism because if you're deploying a peer-to-peer marketplace, ideally, as the developer who's deploying it, you want nothing to do with it after you deploy it, other than just fixing the software. You don't actually want to be stepping into the disputes; you ideally don't want to know what's being sold, you're just a provider of software.
So, what if we can create then these dispute systems that have panels of folks who can be jurors, maybe take jurors from the pool of buyers and sellers on that marketplace and now incentivise them in some way, maybe some fees if they participate in the dispute moderation panels, and then they can decide on these disputes themselves and be that oracle that attests to which way the escrow funds should be delivered?
Peter McCormack: Did you have a second question?
Danny Knowles: Yeah, but I think you just answered it; I was going to basically ask about the -- at the moment, we kind of have a separation of the power structure where you have the judge and jury, but I think you've pretty much just answered that.
Aaron Daniel: Yeah, and I'm kind of envisioning, for each community, be it an online marketplace or an actual physical location, there should be optionality, just like a module on Fedimint, which module do I want to plug in? I want a jury of my peers, so I want the folks who are on the review panel to be my neighbours, or I actually want experts, I want professional arbitrators. So, you can have a dispute resolution service, an oracle service that hires experts, and you can plug in and point at that oracle to resolve your disputes and create a marketplace with different options for different communities of justice providers.
Peter McCormack: If you wanted to use this system, you had a civil dispute with me, but it wasn't like Honduras, we hadn't put down a certain amount of money, or even in the Honduras system, how much would you have to put down to begin with; is it $10,000? But what if the dispute's over $100,000?
Aaron Daniel: Yeah, in that case, then it's kind of like, "All right, well you need to deposit more because you've got this judgement", and then, if you don't, then there are provisions for expulsion from the community basically; then it becomes like shaming, you're just going to be expelled from the community if you don't follow the decision.
Peter McCormack: Walk out the gates.
Aaron Daniel: Yeah.
Peter McCormack: "Get out!" Off to the zombies!
Aaron Daniel: Yeah, this is the way it works in Afghanistan; I've been studying up on what the justice systems look like there, pre and post American occupation.
Peter McCormack: Do we think the Afghanistani model is a good one? I don't know much about it.
Aaron Daniel: So, the one I'm thinking of is called a jirga, which is kind of just like a tribal council, so to speak, and the respected members of the community sit and hear the discussion, what the dispute is, and it's kind of a communal aspect. Everybody from the community comes around and anybody can ask questions about what's happening. And then, eventually, they'll be a decision amongst the elders, and they'll render the decision. Now, there's not a great process there because if you disagree with it, you might be able to make another case, but --
Peter McCormack: But as we discussed earlier, too much process means the system can be gamed in other ways.
Aaron Daniel: That's right.
Peter McCormack: It can be who has the most expensive lawyer makes the best arguments, or the war of attrition. I would rather have had my lawsuit arbitrated by a group of elders from the UK where we sat and made our arguments; I would have preferred that than the current system. What about if I just don't have the funds; what if the litigation's over $100,000 and I only have $50,000 and I can't afford? Can I mediate with you; what happens?
Aaron Daniel: Yeah, you could envision a system kind of like just right now where funds are just deducted periodically off of whatever deposits or income stream.
Peter McCormack: Streamed over the Lightning Network.
Aaron Daniel: Sure, streaming judgements!
Peter McCormack: So, this sounds like, at the moment, it's going to work for very niche individual use cases, like the insurance one makes sense, the private community on Honduras.
Aaron Daniel: Yes.
Peter McCormack: A state-wide system in the US or a nationwide system in the UK, it's got a lot of flaws. It's not saying it can't grow to that.
Aaron Daniel: And again, I don't think we're going to have a nationwide system, I don't want that; that's the problem right now, is the federal government's too big, they don't have my local community's interest at heart. I'm much more interested in my local village's elections because the decisions they make directly affect me, disposition of village property, are we going to build a new rec centre for my kids?
Even Tallahassee, the capital of Florida, doesn't know what's best for my community. Maybe my community would have preferred a longer mask mandate during the pandemic. Let the communities decide for themselves and the let the communities decide the dispute resolution system that best works within their set of norms, their shared set of norms. That's the fairest way to go about it, I think, instead of having this supernational or national level dispute system; that's not the goal.
Danny Knowles: It might also incentivise more local business, because you don't have to bake in a cost of almost an insurance on --
Aaron Daniel: No, legal risk is, for sure, a huge -- if you're a miner right now, do you want to go to New York or do you want to go to, I'll say Georgia; I was going to say Texas but Texas --
Peter McCormack: It's got some challenges.
Aaron Daniel: Got some challenges. Georgia seems to be incentivising miners to show up there. You have that legal risk that goes along with the regulatory risk, how easy is it to get sued and are the laws favourable to your business; have you adopted a certain set of corporate laws, like Delaware, that are favourable? That's a good point, it could be good for business. So, the niche that I'm focused on now that I'm actually trying to deploy something, I've got a project I'm working on called BitResolve, you can go to github.com/bitresolve, it is an adjudication system for FOSS, free open-source bounties.
Peter McCormack: Okay, great.
Aaron Daniel: So, right now, you've got a problem, I'm talking to developers, there are a few problems with the way that funding happens to incentivise open-source development. You've got the grant system and the sponsor system where Spiral is doing a lot of grants and sponsoring developers for a short period of time; OpenSats is another big player that's come on the scene; Brink, I think is another one, and that's great. But when you have these larger entities that are doing all the funding, you have a risk of -- well, they are going to influence the direction of development, that's just a given, and I think they would admit that, "Yeah, when we give a grant, we want them to work on Nostr, we want them to work on eCash. That's what they've worked on up until now; we want to keep them working on that".
So, there's a risk though of continuing centralisation among funding, because if I wanted to fund a project, I don't have the resources to review the work product that a developer creates, like I'm not a developer myself. So all these entities have due diligence committees and boards that actually look at the code and try to see if it works and if it meets their criteria. Since I don't have that ability, I'm just going to donate to OpenSats. Also, they're non-profit, I get tax write-off on that with OpenSats, so another incentive to donate to them and further centralise funding. I'm not ragging on OpenSats or anyone because they have a big board and they actually allow you to donate towards specific categories of projects, which is cool.
Peter McCormack: This would also work for white hat hacking where there are the bounties.
Aaron Daniel: That's exactly it.
Peter McCormack: I've seen it before, I don't know how much this happens, but the bounty you get changes depending on the type of exploit you find, but sometimes there are disputes over --
Aaron Daniel: Absolutely.
Peter McCormack: Or, "I should have had this bounty".
Aaron Daniel: How big of a bounty was it? Yeah.
Peter McCormack: And the person paying the bounty is incentivised to consider it a low one, but if you had a set arbitration system…
Aaron Daniel: Exactly. So, the system I put together is specifically for bounties. It's going to have a Nostr bounty board; those exist already actually, I've been playing around with them, they're pretty cool. You basically just sign a post with your public key and it'll go up there, you put all the criteria. There are front ends that will aggregate them, but also, like I was looking in my Nostr client, just like my Twitter-style client, and all my bounty posts came through there too. So, if your client supports it, you can see all the bounties as they're coming through.
The cool thing about that too, that system and the system I'd like to implement is you can zap the bounties and increase the amount of funds available to pay the developer directly.
Peter McCormack: I think, with Nostr, I felt like need almost like a Slack version of a Nostr where I can separate the things I'm doing with it, like, "Here's my social media Nostr, here's my arbitration system, here are all these different systems I use".
Aaron Daniel: Yeah.
Peter McCormack: I'm assuming somebody's probably been working on it.
Aaron Daniel: You could create a bounty for it and somebody will make it, I promise you. The idea is, if I'm putting up the bounty, I'm then going to put the bounty funds in an escrow, let's call it a Fedimint, maybe it's a discreet log contract or maybe you somehow implement the Miniscript system that Rob's been working on, because that allows for a type of oracle as well. So, the funds are in escrow, the bounty's up on the bounty board, anybody can see it, anybody can continue funding it.
Now the discretion has been removed from me, as the grantor, I know longer have the ability to say whether or not the bounty has been met. I can subsequently disagree with the review panel, but the discretion is out of my hands. Now, the developer has assurances that when they do the work product, they can then submit it, and they can submit it encrypted through the Nostr protocol to the review panel so that the grantor doesn't see the code.
The review panel that I have envisioned is kind of like developers who are incentivised through fees to engage in this review process, and you can tie reputation, like GitHub experience, to a public key; it's very easy to do that now. You can link your public key to a lot of different social sites, and one of them is GitHub, so that's a way you can make sure you're getting truly experienced developers to look at this. You can also make sure that the developers who are doing the review aren't the ones who are submitting the bounty and they're not gaming the system. So, the reviewers will basically say up or down, and then that'll release the funds one way or the other, and then they earn fees and then there's a coordinator that coordinates who's in the review panels, they'll get a fee too.
Peter McCormack: Do you know what's interesting about this, when we were talking about it beforehand, Danny said, "We're making a show with Aaron Daniel, and we're going to be discussing how you, in a hyperbitcoinised world, how do you ensure that people receive the funds after arbitration?" but I don't think that's what this show's about now; I think this is about decentralised arbitration.
Aaron Daniel: Yeah.
Peter McCormack: And a component of that is you need escrow, but that's not the interesting part, that's just a tool you need to make sure the funds go to the right people.
Aaron Daniel: Exactly.
Peter McCormack: The interesting part of this is you're decentralising arbitration and changing the incentive structures; that's fascinating.
Aaron Daniel: Yeah, that's the idea, exactly, decentralised arbitration, yeah. I'm going to encourage anyone, especially technical folks and developers, to go to github.com/bitresolve and look at my designs and look at my ideas and comment and start creating, because I think it's something that could help facilitate the open-source ecosystem as a whole, but also the Bitcoin ecosystem and drive some efficiencies in the funding process. That's where I'm going to start, and then hopefully we can iterate on different communities, different arbitration models and one day get up to that community level.
Peter McCormack: It's fascinating. By the way, I loved this, absolutely loved this, brilliant, okay. Anything else you want to send people to; anywhere else?
Aaron Daniel: My newsletter is bitcoinbrief.io; I write on all sorts of topics. I have stuff on the First Amendment and mining recently, some policy stuff as well, some monetary legal history up there, so, yeah.
Peter McCormack: Great, check it out. All right, man, well hopefully next time we'll do this in Bedford.
Aaron Daniel: Yeah, let's do it.
Peter McCormack: Let's do it. All right, man, thank you.
Aaron Daniel: All right, thanks.
