Bitcoin SV’s growth is unprecedented in the digital asset sphere. However, a lack of self-reflection has literally killed other digital currency projects such as BTC, Ethereum and more in no time. To keep healthy criticism alive in the Bitcoin SV ecosystem, CoinGeek’s Michael Wehrmann caught up with Ari Kuqi for an interview.
Kuqi is an entrepreneur who, since the split of BTC/BCH, has publicly been involved in, funded, founded and ran Bitcoin applications with the latest being Legally Chained. Kuqi is also known for his critical voice on social media concerning digital currencies in general and specifically Bitcoin SV. While being an avid Bitcoin SV proponent himself, Kuqi does not hold back pointing out current flaws in the Bitcoin SV ecosystem.
Hello Ari! First of all, tell us about Legally Chained.
Legally Chained is an implementation of the Bitcoin Attestation Protocol which we use for our identity system. It’s a simple protocol for generic attestation of data, without the need to publish the data itself which enables you to decouple the signing with an address from the funding source address (ie: does not require any onchain transactions from the signing identity address) and allowing for rotation of signing keys without having to change the existing attestations.
This protocol can be used to create so-called webs of trust in which privacy is the main concern. It allows for selective revealing or concealing of (personal identifiable) data, putting the legal owner of onchain data in the driver seat.
We choose to implement this protocol in the form of a KYC check and an OAUTH, extendable with additional services like legal ownership of digital data. By linking legal verifications on a blockchain, we can attest for a KYC check for as long as the user’s government issued identification document is valid. This makes our service cheaper as we scale and makes it easier to comply to KYC/AML and privacy regulations for businesses.
Currently, Legally Chained is in beta and enables users to create an onchain identity and use this to legally sign and store documents onchain. Watch this video for a more in-depth explanation of the core ideas behind Legally Chained:
You are known for the SharkPool project. Kindly explain what the idea behind SharkPool was, how it has worked out so far and where you are at with it nowadays.
The idea behind SharkPool was to create an incentive for transaction processors of fraudulent digital assets to provide computation to create empty blocks on said assets, grinding all economic activity on it to a halt. Initially, it had an altruistic model in which anyone could create a bounty (without a clear incentive to do so) and reward transaction processors creating empty blocks on a certain digital asset. Because altruism doesn’t exist in nature, this model wouldn’t have worked past the initial “hype” stage so we looked at creating a “predator coin”; the idea of a coin with the same transaction processing algorithm as the digital asset it would target. This would serve as an external subsidy and relied on speculators assigning a value to the “predator coin”. Due to all the legal liabilities of issuing a digital asset, especially one with an economically disruptive goal like the “predator coin” relying on the same flawed perception of value as the fraudulent digital assets it would “attack”, this idea was abandoned.
We didn’t go further than testing the idea out on the BCH testnet, which resulted in annoyed developers and empty mining on BTCP, which at some point required 1500 confirmations at exchanges and went through a hardfork shortly after.
Should digital currencies fight each other in the SharkPool sense?
The core concept was disrupting the fundamentally broken protocols and directing economic activity to the Bitcoin ledger, which is something I believe needs to happen more. Apart from increasing transaction volume onchain, it would have a self-regulating effect in the industry where economically weak chains go bankrupt so to speak.
It might be that the implementation of that concept in the form of SharkPool is too aggressive (and legally questionable) but I definitely hope to see a higher failure rate in digital assets due to competition from others in the industry.
What did you think about the hash war in 2018, and what are your thoughts now looking back at it?
Foremost, I hoped we would see Nakamoto Consensus in action, rejecting (or accepting) changes to how the rules are enforced. I expected Roger Ver and Jihan Wu to play by the rules of the whitepaper and expected it would end with one chain surviving it. It was clear that proponents of changes to the protocol would go to any means to achieve what they set out to achieve, a split but I didn’t expect them to act in direct contrast to what they claimed they wanted to achieve.
Looking back, it showed BSV transaction processors to be superior, strategically forcing Roger Ver and Jihan Wu in a position where they had no choice but implement a checkpointing system, making BCH clearly centralized and controlled by a small group of people. Of course I would still rather had seen BSV transaction processors and patent holders to more aggressively protect their investment and grind the BCH fork to a halt but the current outcome is acceptable for anybody building on the original protocol.
You have tweeted “I prefer owning 100 companies with a million Bitcoin going in and out monthly over just owning a million Bitcoin.” That is interesting. Kindly explain.
I think wealth is in the value you are able to create for people, business and government. If you own 100 companies that are generating that kind of revenue, you’re providing a lot of value to the world in many ways for which you’re always proportionately rewarded as an owner.
Just owning a million Bitcoin doesn’t represent anything of value to me.
Could one say wealth is in the transactions (“million Bitcoin going in and out”) rather than in the ability to transact (“owning a million Bitcoin”)?
That’s definitely a good way of interpreting that statement. When we look at the amount of transactions onchain, it’s very low. This means there is no significant economic activity happening, there are no companies offering valuable services to people, business or government. If we end up in a severe economic recession, even the speculation on exchanges that currently drives the price will evaporate making ownership of Bitcoin not valuable.
What I have also found on your Twitter is this: “Bitcoin: a peer-to-peer accounting system.” What are you trying to say?
I think there still is too much an emphasis on the “electronic cash” use case, which is understandable since that’s still the only approach that is making people money in the form of speculation on exchanges. In my opinion, we should move away from the narrative that Bitcoin will “replace” fiat.
All use cases can be derived from an accounting system, including electronic cash. In my experience, the best way of viewing this technology is as a peer to peer accounting system with an immutable ledger and a native unit of account. Explaining Bitcoin in those terms makes it more appealing to government institutions and enterprise businesses that are currently discouraged by the strong focus on price of the Bitcoin unit of account and its capability of being used directly as “digital cash”.
You have been criticizing known Bitcoin SV apps. What is the problem with them in general?
I doubt anybody working on them actually read or understood the whitepaper. Most onchain apps are making the same architectural decisions as offchain apps, opening them up to the exact same vulnerabilities because they are not utilizing the ledger properly.
I had a conversation on this subject with Craig Wright going more into detail. It comes down to ability to scale; if you’re putting yourself between end users and the Bitcoin ledger, you’re creating a bottleneck with the same issues as current applications on the internet have.
To get more specific: What is wrong with Money Button?
The entire business model of Money Button is around a button (that is actually a swipe) being put on content (or services) as a paywall. This model didn’t work on Yours.org (from which Money Button is derived) and doesn’t work for any application built using it. It increases the barrier to attract new users for applications using it and isn’t suitable for anything more than a closed proof of concept of applications.
Also, their implementation of an identity system (paymail) is actually just a centralised handle system. Additionally, the way the @moneybutton paymails were marketed reminded me of how we saw domain names being sold; with an expectation of increasing value without any built in mechanism for specific @moneybutton paymails to be worth more in the future other than “squatting” a paymail and an issuing party profiting off of a secondary market.
What is wrong with Handcash?
The way Handcash thinks applications on Bitcoin should be built is according to the old vertical model. They literally call it “a super wallet in the cloud”, which concentrates all traffic to their server instead of directly to the Bitcoin network. The problem with this is that if transaction processors produce blocks bigger than what is average or if there is a sudden increase in users, their backend will not be able to handle it. We’ve seen this approach in the past and it always resulted in the same issues. When their “super wallet in the cloud” is down, all apps using it will be down too (the same as with Money Button and Planaria). This isn’t hypothetical, this is what happened with every stress test or actual increase in usage like when Twetch enabled following.
Next to that is the fact that they build walls around their users, making it impossible to switch services in an easy and convenient way for users.
What is wrong with Twetch?
The Twetch motto is “take back your data” and it prides itself with giving their users ownership of their generated data. Unfortunately, it does not give you any legal ownership since a private key is proof of access, not proof of ownership.
Apart from that, it does not take privacy seriously. I expect a next generation social media application to encrypt all data and let users selectively grant (and revoke) access to their content.
Twetch is on its way to fall for the same trap a lot of applications fall for; wanting to be a “platform” instead of a Bitcoin application.
In an interview with MetaNetTV published on Youtube, you stated that Bitcoin apps should not compete with processors (so called “miners”). Kindly explain that.
Most people that are building an application at some point see that they need something the transaction processors are not currently providing. This often involves storing the entire (or part of) the Bitcoin blockchain and parsing it for specific data. These application builders then decide to instead of just build an app, become a “platform” on which other people can also build similar apps with the “platform” providing the service they had a need for initially and built themselves.
I think this is a losing strategy because short term, it distracts builders from building apps that are useful today for something they think will have more value in the future. Long term, as soon as this service you’re offering becomes profitable, a transaction processor can offer the same service directly at much lower cost with much higher reliability.
How should Bitcoin apps be built in order to make use of Bitcoin’s true potential?
Application builders should seek to connect users directly to the network of transaction processors and have their applications solely rely on the existence of the Bitcoin ledger. By removing yourself as a middleman, you remove a bottleneck to scaling your application as the Bitcoin ledger scales. I again refer to the conversation I had with Craig Wright which goes deeper into the concept of having the Bitcoin ledger be the only “server” an application needs.
Currently, application builders can opt-out of the vertical Money Button, Handcash and Planaria approach by using the work of Dean Little who built “Unplanaria”; a way of building peer to peer applications that only talk to transaction processors when they’re making them money.
Another approach is the Xoken Node, a project by Nithin Mani. This approach has an emphasis on privacy and user sovereignty while preventing running into scaling issues for applications as the ledger grows.
You kind of trolled the Bitcoin SV social media sphere with a $5 per BSV price prediction. Whether you actually mean it or not, you seem to find current USD price valuation of Bitcoin SV ridiculous. Why is that?
It’s not really a price prediction, although if BTC were to go to 0 as some hope, BSV will go towards that price level. The current valuation compared to other digital assets is fine but we all know that these assets are heavily manipulated, this includes BSV. If we would actively seek delisting from exchanges that are regulatory non compliant and are manipulating volume to launder money, the price of BSV would be closer to its actual utility value and it would distance itself from the speculation, manipulation and anti-government image people, business and legislators have of digital assets.
Could a Bitcoin SV driven world—full Metanet usage, everything onchain—be possible with $5 per BSV?
I don’t see a reason why it wouldn’t be possible. Bitcoin is infinitely divisible, it also doesn’t require all transactions to be settled immediately. If two parties engage in many (micro)transactions, you can have a payment channel that has the same UTXOs going back and forth without final settlement (being processed in a block) until these two parties conclude their business. Also, there are plenty of use cases which do not involve any coin exchanging hands.
Could a low BSV price in USD terms as predicted by you actually help Bitcoin SV’s growth?
Yes. I believe a stable low price in USD terms would make BSV more attractive to ‘play’ on for application builders. It would also no longer incentivise hoarding of Bitcoin in the hopes of selling it later at a higher price. When I heard George Gilder say ‘fix the price’ I initially laughed but he does have a point and it is perfectly possible to price UTXOs at a stable USD exchange rate if we stop focusing on the ‘digital cash’ use case.
Simply seeking active delisting and only making the token available through regulatory compliant gateways, would naturally bring price to its legal utility value and stabilize it.
Would a high BSV price in USD terms slow down Bitcoin SV’s growth?
Yes. A perceived high price attracts mostly those that are looking to speculate on its value. We saw this with BTC, the higher the price, the more people you get wanting to buy it only to sell later at a higher price. It becomes a ponzi where old holders are trying to get new entrants to buy their coins instead of a utility platform where builders can express themselves in ways they could not on the centralised internet.
In what ways could Bitcoin SV fail?
BSV could fail if it doesn’t manage to distance itself from the ‘crypto industry’ and all the manipulation and regulatory non-compliance going on. It could also fail if in time, it’s not able to attract government subsidies for the existing economy to use it and if it’s not able to create value for current enterprise businesses to build on it.
I also think environmentalists are correct when they say Bitcoin is wasteful; it currently is. Due to the built-in subsidy and speculation on price, the network has more computing power than is justified by the economic activity taking place on it. If the ledger is not being used for meaningful exchange of value but only speculation on price, burning all that energy to produce a block does not justify the cost on nature.
Why did you chose to build Legally Chained on Bitcoin SV?
Because BSV is Bitcoin. It’s the only platform on which you can build an application that can massively scale and that puts the user in control while maintaining legal compliance. It’s also the only platform that will never change at its core, making it a stable foundation for anybody looking to build something that lasts through time.
I believe the only ledger that has any chance of saving the environment, improving human conditions and give all people a means of accounting and transacting value is the original Bitcoin ledger. Those are goals I happily contribute time, energy and money to.
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