HomeBitcoinMagical Crypto Friends ep. 13: On Bitcoin maximalism, fungibility, and more

Magical Crypto Friends ep. 13: On Bitcoin maximalism, fungibility, and more

Since its debut, the Magical Crypto Friends show has been about busting scams and promoting the small block philosophy. However, the November 2018 episode (the thirteenth in succession) is surprisingly serious and presents the four Bitcoinists reaching points of disagreement. Also, the amount of time spent slamming ICO platforms or BTC forks is uncharacteristically small, as the focus is mainly on the state of Bitcoin and what should be done for its improvement. This topical shift may be due to the 10th anniversary of the Bitcoin Whitepaper, but reasons can also include the current status of the market in relation to technological developments.

After having a lot of fun during the one-year anniversary of the show, the anthropomorphic animals get serious discussing fascinating topics about the future of Bitcoin, Litecoin, and Monero. And in this particular episode we find out that Litecoin may add confidential transactions within a few months, while Monero is much more decentralized in development than we thought. Furthermore, we benefit from debates of an almost Socratic dimension on the nature of Bitcoin maximalism and the unquestionable necessity for fungibility.

The sections below describe some of the most important moments of the show. And even though it’s highly recommended to get your information from the primary sources and avoid the interpretation of third parties, you may still find important points that keep you up with the opinions of some of the most knowledgeable minds in the cryptocurrency space.

Fluffy Pony, Ezekiel, and bulletproof transactions in Monero

But after that, the only ongoing source of humor can be found in Fluffy Pony’s insistence to be called Ezekiel (a direct reference to Forbes Middle East, who put the face of Ezekiel Osbourne on the cover and featured an article which presented the Australian entrepreneur as the founder of Monero). Otherwise, the Monero Enterprise Alliance director of operations talks about bulletproof transactions in Monero. He mentions that bulletproofs have been on the XMR testnet since December 2017, and once they become part of the main net implementation they reduce transaction sizes by 80-90%. The result can also be seen in transaction fees.

When Charlie Lee inquires about downsides of this upgrade, Mr. Spagni is confident enough to deny the existence of any issues. According to his expertise, bulletproof transactions follow the same security model as the original Monero architecture, but contribute with efficient data compression. Whale Panda is curious to know if this technology is to be used on Bitcoin, but Fluffy Pony quickly replies that BTC doesn’t use confidential transactions and won’t get this type of upgrade. On the other hand, Blockstream’s Liquid Network is eligible to use bulletproofs – and thanks to this mention, it’s jokingly implied that Mr. Spagni would receive a special bonus from the premium tech giant which supports the development of BTC.

Lightning Network in Monero

Monero is the third big cryptocurrency project to receive Lightning support, and Riccardo Spagni reveals that there are Tari Labs developers who collaborate with Matt Corallo in order to make this plan come to fruition. Nevertheless, the addition of the second-layer settlement network isn’t an emergency for the privacy-focused coin, and the implementation will only be made after rigorous testing and in a moment when the technology is mature enough to ensure uncompromising security.

In terms of primitives, XMR has multi-sig and lock times, but lacks in the payment channels department. Yet according to Fluffy Pony, the addition is simple in terms of implementation. He also praises the fundamental technology of Lightning Labs is terms of modularity and maintainability just before dealing with a joke about Blockstream and how Liquid is a Jack of all trades.

EOS, Ethereum, and immutability

The joke about Liquid’s capabilities inadvertently lead to a comparison with EOS. It’s mentioned that Daniel Larimer’s latest project was proclaimed not to be a blockchain due to its lack of immutability, and Fluffy Pony adds that the research was basically conducted by the Ethereum Foundation in order to slam the competition. There is a subtle irony in this situation, as ETH is the result of the DAO bailout which concluded with a hard fork to roll back the blockchain.

Whale Panda takes the situation a little further by suggesting that consensus is a fluid concept just like genders. The response is equally ridiculous and hilarious: “Consensus was inside of us all along” – Fluffy Pony, 2018. Yet Samson Mow manages to push the envelope to a greater extent, suggesting that the idea belongs to Craig S. Wright (much like plenty of blockchain patents). In one of his conference presentations (which Mr. Mow pretends to have briefly gazed), Prof. Faustus has spoken about the power within us.

Bitcoin maximalism getting toxic

Whale Panda, as the bona fide show host that he is, suggests that they should move on to a more important topic: the claimed increased toxicity of Bitcoin maximalism. It’s quickly implied that Mr. Spagni (aka Ezekiel) was deeply hurt after a series of heated Twitter exchanges with BTC maximalists who frowned upon him for supporting Monero and simultaneously siding with Bitcoin, so he is given the floor to speak.

After the sarcastic remark about being hurt, the Fluffy Pony states that he believes in Bitcoin’s success and there is too much brain power, money, and support in the king of cryptos for it to fail in its purpose. Furthermore, he says that altcoins are much more likely to fail. Yet the middle ground which he identifies is given by the small niche of people who are educated enough to demand sound money.

Human imperfection always finds a way to destroy something that is good or dissolve benevolent ideas into greedy actions, and this is one of the reasons why Mr. Spagni feels skeptical about the oneness of Bitcoin as a form of money. Governments won’t disappear just because a minority of people can see behind the curtains and understand what is going on, as regular folks will still demand for more intervention due to their helplessness. In the view of the Monero proponent, there is always room for other projects to step in and supply to a certain demand which a monopoly can’t always cover.

The discussion gets a lot more interesting as Samson Mow implies that the same kind of argumentation can be taken word for word by scammers in order to justify their otherwise despicable activities. Fluffy Pony mentions that nobody can stop something from getting developed, and the fact that there is a critical core of people who point out the weak spots is actually beneficial for the technology at large. Maybe that failures happen, but there is a lesson to be learned from every project and some of the good features can be passed on to the surviving initiatives.

The comparison is taken to the field of open-source development: just because Ubuntu is more popular than Debian, it doesn’t mean that the Linux project has failed or lost its vision. Having a diversity of more or less original projects is part of the programming ethos and, in the opinion of Fluffy Pony (or Ezekiel), switching from operating systems to digital money shouldn’t make that much of a difference.

Whale Panda adds that he mostly agrees with the views expressed, though he believes in about three blockchain projects and hopes that Bitcoin would be the succeeds and remains the dominant one. He also uses the example of Tone Vays’ harsh double standards in regards to the activity of Vitalik Buterin involvement in Ethereum – who was a dictator when he was too involved, and a “Dan Larimer” when he said he would be taking a back seat in the development. Bitcoin maximalism makes sense to the extent that you want BTC to be the most successful and valuable of all cryptocurrencies, but there will always be altcoins to provide complementary functions.

As part of this Socratic dialogue on maximalism, Fluffy Pony tries to redefine the term and appropriate it according to his own beliefs: a Bitcoin maximalist isn’t a monopolist who believes in the unquestionable BTC monolith, but somebody who advocates for dominance (which can also be 60% of the market). Advocating for the existence of only one project is just “too much” for the president of the Monero Enterprise Alliance.

Charlie Lee briefly intervenes and suggests that the term of this type of monopolistic mindset should be “mono-crypto-theist”, thus pointing out to the religious-like belief in the supreme coin. Whale Panda contributes with the rather derogatory dimension of the term “maximalist”, which is also the first meaning which was pushed forward by Vitalik Buterin in his article.

The floor is given to Samson Mow, the OG Blockstream shill who probably fits best under the textbook “BTC maximalist” label. The distinction that he makes is between projects with substance and those without substance. He goes on to point out that Monero and Litecoin are legitimate in their intentions and technological developments, while Bitcoin Cash is pure marketing. Therefore, the critical point of this discussion is established within the boundaries of “purpose”.

Charlie makes a brief intervention to say that, in his opinion, there is room for only three cryptocurrencies: Bitcoin, Litecoin, and Monero. The debate is ended by a remark about an underwhelming Las Vegas conference, which reignites the creative spark for a potential Magical Crypto conference event.

Wasabi Wallet vs Samourai

Whale Panda begins talking about Wasabi, a new CoinJoin wallet which provides more privacy than other previous projects. As a way of taking a cheap shot at Jimmy Song and his rather unpopular opinion about using traditional financial services for daily use, Samson Mow says that he uses credit cards instead of Bitcoin.

On a more serious note, Samson praises the development of Wasabi and says that they took notes from a London conference and delivered a product which brings new privacy features to the market.

When asked about the differences between Wasabi and Samourai, the Blockstream CSO implies suggests that the latter has been partially dishonest in its marketing due to promoting privacy features that aren’t fully baked.

In order to complete the argument, Fluffy Pony adds that privacy in Bitcoin isn’t a clear purpose and various teams come up with disparate solutions which need constant testing and may ultimately not succeed. Therefore, the healthy approach would be to see Samourai and CoinJoin as experiments to attain privacy that shouldn’t be trusted as much as dedicated privacy coins. Unless a large majority of users adopt a type of privacy technology, we find ourselves in an experimental phase where the market decides what kind of solution gets used.

Bitcoin fungibility

Inevitably, the discussion about privacy features in Bitcoin is succeeded by a debate on fungibility. If an exchange like Coinbase receives a mixed transactions which can’t be properly traced, they might become suspicious and even refuse your BTC because they may associate the coins with illegal activities.

Samson agrees and argues that the perception of privacy is wrong, as it begins from the assumptions that only criminals use it in order to hide. Otherwise, if no offence is committed, then why even try to use private cryptocurrencies? Mr. Mow sees two solutions for this issue of attaining fungibility: either centralized exchanges and regulators change their outlook on private crypto transactions, or privacy issues become a mass-adopted default.

Fluffy Pony contributes with an intriguing concept of polarization: that we might soon have throughputs which accept privacy as a human right and allow transactions without KYC requirements, as well as more draconian institutions which require full disclosure about identity and history of trades. The hopeful turning point is given by the acceptance of privacy as a fundamental human right, which Mr. Spagni hopes would happen soon.

Charlie Lee adds that he appreciates Monero for its privacy exclusivity, as there is no way to opt out of having a private transaction, the fungibility is consequently greater, and this pushes cryptocurrency exchanges to make amends in regards to their stance on privacy.

Riccardo “Fluffy Pony” Spagni continues by saying that ultimately Monero pushes regulators to find a middle ground and negotiate for the sake of finding the most convenient solution where privacy is preserved, but they also get some information.

An interesting comment is made by Charlie Lee, who mentions that he could add a privacy feature in Litecoin for the sake of increasing fungibility. Unfortunately, there would be no way for it to be a default for every transaction, as the community in itself is decentralized and it’s up to every individual to decide what kind of transaction they want to make. As a response, Whale Panda says that there shouldn’t be a middle ground in privacy, or else the project will turn into another iteration of Zcash (whose privacy features are optional and more expensive).

Nevertheless, the Litecoin creator hints at a soft fork which enables confidential transactions, and it may take place “in a few months, maybe next year”. As a bona fide Bitcoin testnet, Litecoin would experiment with this feature which extends the only quality of sound money that Satoshi Nakamoto’s legacy lacks: fungibility. And this comment in itself is why the Magical Crypto Friends show matters: news regarding BTC, LTC, and Monero emerge for the first time in an informal and non-hyping environment.

As a true and proud Blockstream employee, Samson Mow informs everybody that Liquid is already doing confidential transactions, but his attempt is quickly retorted by a comment which points out that a sidechain is not a cryptocurrency in itself.

Monero fungibility and addition to Trezor

Still on the topic of fungibility, Fluffy Pony gets congratulated for managing to fulfil the requirements to get Monero added on the list of supported Trezor coins. Mr. Spagni mentions that it was him who merged the pull request after Trezor wrote the code, and shows gratitude for the comments.

When the argument about Monero’s centralization emerges, Mr. Spagni distinguishes between the various layers of the community: among others, one can find the Core project, the GUI, the websites, the Monero Research Labs. As of November 2018, the Fluffy Pony is the maintainer of only one of the projects, despite having a more active leadership role in all of them in the past. There currently are maintainers and contributors who received prerogatives in each one of the projects, and even in the case of the Monero Core division (on which Mr. Spagni still works) there are substitutes to get the work done whenever he is not available.

The 10th anniversary of the Bitcoin Whitepaper

In the case of such a special anniversary, it’s only natural for these four bitcoinists (but not necessarily maximalists) to inquire about the way they celebrated the event. Samson points out that he wrote an article for Coindesk, but Whale Panda suggests that he doesn’t read that outlet as a news source.

Yet the agreement between the four anthropomorphic animals is that the true celebration of Bitcoin is on January 3rd, when the genesis block was mined. Fluffy Pony presents the funniest and most absurd proposition for a celebration: he and his wife went to dinner and they read the whitepaper out loud to each other. Clearly, this is a witty joke.

Charlie Lee presents his unique way of celebrating the 10th anniversary of the Bitcoin whitepaper: he dressed up as a Litecoin mascot at a convention and fought against a similar Bitcoin mascot. He also spent time taking pictures with people who had no idea who they were talking to due to the convenient incognito mode.

Decentralized exchanges

Once again, in order to conduct the debate, the participants have to define the terms. Fluffy Pony points out that the term “decentralized” is used loosely, and sometimes it just implies that the central authority isn’t holding the private keys for the coins. Therefore, it has the right to ban users from certain jurisdictions, but cannot take away funds, freeze them, or control them.

This is clearly a delicate topic, and more developments have to be made in the field of non-KYC entities which allow users to trade between cryptocurrencies without requiring personal information or discriminating on the origin of the IP.

The performance of Bitcoin during a global recession

Bitcoin was created in the aftermath of a financial crisis and its design is meant to resist pressure from political entities that can inflate or radically change its policies according to short-sighted goals. The idea of being governed by code isn’t entirely novel, but BTC is the first implementation which works.

But in this regard, three different perspectives are being presented. First of all, Samson Mow distinguishes between recessions and depressions, as the latter is much more severe. In either case, he is convinced that Bitcoin wouldn’t really be affected by the dynamics of the traditional financial market.

On the other hand, Whale Panda is convinced that Bitcoin becomes interesting for regular folks in the event that a hyperinflation occurs in order to once again bail out the banks. Finally, Charlie Lee has a more pragmatic perspective which concerns the media and how it shapes narratives: if televisions and newspapers decide to promote Bitcoin as sound money that’s immune to the bad policies of the governments and central banks, then it might turn out to be a big hit. Otherwise, we won’t be seeing much of a difference.

Nevertheless, the events in Venezuela, North Korea and Palestine should give us a hint about how regular folks react in situations of hyperinflation.

Written by

Vlad is a political science graduate who got a little tired and disillusioned with the old highly-hierarchical and centralized world and decided to give this anarchistic blockchain invention a little try. He found out about Bitcoin in 2014, had to do a presentation about it at Sciences Po Paris in 2015, but was too foolish to buy any. Now that he’ll never be a crypto millionaire and hasn’t acquired his golden ticket to lifelong financial independence, he’ll just write op-eds on various topics.

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