Is Bitcoin complex? The whitepaper is quite simple. Everything that Bitcoin does to this world is not that easy to understand though. There are many questions and not many Bitcoins.
Time to ask someone knowledgeable. CoinGeek’s Michael Wehrmann had the chance to win Daniel Krawisz for an interview.
Daniel Krawisz can best be described as a one-man Bitcoin think tank. In his Streamanity and YouTube videos, as well as on Twetch and Twitter, he shares deep insights concerning Bitcoin, taking information theory, biological signals and more into consideration. Daniel Krawisz is also founder of the Satoshi Nakamoto Institute.
Hello Daniel! What did you mean by tweeting “Everything is falling into the Bitcoin SV black hole”?
Daniel Krawisz: Thank you for your kind words. Before answering, let me comment a little on what you said above. I am not a one-man think tank anymore because I have finally found good allies who can work with me and who value what I can contribute. My company MatterPool is a new mining pool. I lost the allies with whom I started the Satoshi Nakamoto Institute because they bought into “core” ideas.
The Satoshi Nakamoto Institute was not sufficiently aligned with Bitcoin. It was a mistake to make a think tank that was not also a mining pool. If we had had to run a mining pool, there would have been an immediate need to keep the network healthy. The Satoshi Nakamoto Institute Mining Pool, if it had existed, would not have been corrupted. If I had had a mining pool back in 2017, we would not have had small blocks, Segwit, or replay protection.
MatterPool will not allow Bitcoin services to be interrupted. All information we provide will be used as leverage to bid up the price of hash power. As long as our information is good, we can afford to pay more because we will know that the economy will improve as a result of our information.
As to physics, in quantum electrodynamics, the electromagnetic force is weaker than expected in classical physics as energy is higher. Gravity is the opposite. Gravity is synergistic. It becomes stronger than expected from classical physics at higher energies. This is part of the problem with developing quantum gravity. Perturbation theory fails to converge. New effects that arise from the synergy of gravity become important at higher energies.
Economics is like that too. The use of money enables people to benefit each other and specialize. As more people use money, people can specialize more and the money becomes more useful. The benefit of the Bitcoin economy is like the gravity of a black hole. People must think creatively and apply new knowledge about how to benefit each other in order to profit successfully. When everybody does this, the benefit is very strong and no one can escape it. Bitcoin is more beneficial than other forms of money. Bitcoiners are better at benefiting each other. They have stronger gravity.
In my video “Look Up At the Sky”, I said that, “All Bitcoiners are attracted by an inexorable force and that force is love.” When you have money, you are invested in other people. The money is less valuable if the other people are hurt. I want all Bitcoiners to be better off and more productive. That will make my Bitcoins worth more. All Bitcoiners want this if they know their real interest. The use of money makes people want to love each other. Bitcoin is better money.
You have mentioned that it is important for Bitcoiners to get more Bitcoins. Sounds simple. Why is it relevant to own more Bitcoin?
Daniel Krawisz: Money is a form of human cooperation that is efficient on large scales. Profit-seeking is how people cooperate. That means that they try to earn more Bitcoins. The way they do this is by serving each other.
Profit-seeking is the process by which prices change to approach real opportunity cost. The better prices are, the less everything is wasted. Each time a profit is made, the market learns. Through the profit-and-loss system, less efficient activities are replaced by more efficient ones. Profit-seeking in Bitcoin is different from profit-seeking in dollars because the same activity could be a dollar profit and a Bitcoin loss. When you profit-seek in dollars you are cooperating with the other dollar-profit-seekers. When you profit-seek in Bitcoin, you are cooperating with the other Bitcoin profit-seekers.
Bitcoin is no good unless people treat it like money. If Bitcoiners do not always want more Bitcoins, then they are not truly thinking of Bitcoin as money. The whole thing with money is that you always want more. That does not mean that you should be willing to risk anything to get more Bitcoins. All profit-seeking is risky. Entrepreneurs are looking for good risks that they can calculate better than other people. When Bitcoiners treat Bitcoin as money, they all benefit each other. That’s what creates the black hole that sucks everyone else in.
Let us assume a worldwide used Metanet, everything on chain, no primarily advertisement based internet anymore. How would we navigate in that kind of world, and how does one survive without Bitcoins?
Daniel Krawisz: Humans are a social animal. Humans mostly cannot survive without being part of a society. In a capitalist society, having money is what makes you part of society. Money is an investment in other people. It would be worth nothing if people couldn’t cooperate and form a society.
Bitcoin is a form of money that is different from every previous form because of the ability to associate indelible records with every payment that will always be available. There is no ability for anyone to create a memory hole. “He who controls the past controls the future.” In Bitcoin, the past is controlled by rules, not by any person. Thus, in Bitcoin the future is constrained by the rule of law, at least if George Orwell knew what he was talking about.
Metanet is the name for a specific protocol that I’m not very familiar with yet so I can’t comment on it more specifically.
In the advertisement-based internet of today, we all basically pay with our time. Every human capable of performing actions can use the god given time of one’s life to pay, even if poor in traditional monetary terms. In a Metanet world, this would not be the case though, as we would not pay directly with our time anymore, but with our Bitcoins. Could that be a cruel world in any way?
Daniel Krawisz: Life is hard. Human society is demanding. Every social system will be cruel. However, it is always better to be a customer than a product. With ad-based social networks, users are the product. The community of a social network must be such as to be acceptable to advertisers. In an ad-based system, you pay with more than just time. Mass-manipulation becomes part of the business model for an ad-based social network. The community of the social network cannot serve itself to the extent that it is being manipulated into being something acceptable to advertisers. Twetch’s incentive is to serve the Twetch community because that is its customers. The Twetch community can more effectively serve itself when it is not being manipulated.
Is there any such thing as altruism in Bitcoin?
Daniel Krawisz: I think that all apparent altruism is self-serving if it is sustainable. True altruism cannot survive. However, there are plenty of reasons for people to give voluntarily. Money cannot buy friends but philanthropy can earn friends. Friends are better than money. I believe that there is an altruism contest. This is a contradiction in terms if you believe that altruism literally exists. Rather, in an altruism contest, peoples’ individual interests are aligned with everyone else’s. People are rewarded for benefitting society. No one is required to participate in the altruism contest no matter how much money they have. The profit-and-loss system also aligns all individual interests and the altruism contest is above and beyond that. There is nothing special about Bitcoin in this regard.
Ryan X. Charles has stated that, “Bitcoin is going to be by far the largest computer ever (…) And what you can do with the biggest computer in the world is: you can actually compute bigger numbers.” Is it wrong to say the Bitcoin SV network “as a computer” is competing with—for example—AWS, IBM, Microsoft, Apple and Google for computational power?
Daniel Krawisz: Bitcoin is an abstract computer that is being emulated by many computers working together. Information companies like Google and Facebook are trusted systems of exactly the sort that Bitcoin can replace. They can choose what information to show people and they will not know the difference because they control their own databases. They are trusted not to create a Matrix-like false apparent reality that manipulates people. Bitcoin is in competition with them because Bitcoin can provide the same services they do and it is in the interest of Bitcoiners to do so. AWS is different because it rents servers. Bitcoin is not in competition with that. IBM, Microsoft, and Apple are in between. They are information companies but they also do other things that Bitcoin does not compete with.
Are Bitcoin SV apps incentivized to make use of “the Bitcoin computer,” meaning the Bitcoin SV dedicated transaction processors’ network for literally all of their app’s backend computations?
Daniel Krawisz: No. Bitcoin is for independent parts interacting harmoniously. We want to use the Bitcoin computer when we want to prove to different parts of a system a computation happened at a particular time. We don’t need it for literally all computation.
In one of your videos, you have been talking about biological signals and Bitcoin. Kindly give us an introduction to your thoughts.
Daniel Krawisz: The Handicap Principle is a fundamental idea in biology. It says that the only signal which can be transmitted reliably over an adversarial channel, in other words, one in which the sender can benefit from deception, is one that demonstrates opportunity cost. If the receiver of the signal can see that the sender is giving up on something else just to communicate, it is reasonable to think that the signal is worthwhile to listen to. Otherwise it would be a waste on the part of the sender.
This principle has many applications in nature but sexual selection is the most obvious. The peacock’s tale is the prototypical example. In his book The Handicap Principle, Zahavi describes many examples of such signals, including that communication between predator and prey, between males and males, and between males and females. I have done a video on this topic here:
In Bitcoin, many have failed to appreciate the function of hash power and see it as a waste or as something that is unnecessary. However, hash power is necessary for expecting honesty, in the same way that the size of the peacock’s tale accurately indicates his overall fitness. Proof-of-stake does not work because it allows manipulators to take over. Proof-of-work does not allow for this as easily. Bitcoiners need one another but without hash power, they do not know who they need the most and they can be tricked without it.
What kind of biological signals should Bitcoin SV be sending out, and what is it actually sending out right now?
Daniel Krawisz: The best handicap to be attractive to new people is to convince them that we don’t need them. Bitcoiners are better off because they have better cooperation. We are better off if more people join and we want everyone to join eventually, but we do not need them.
When I asked you for this interview publicly on Twitter, immediately a BTC meme-like NPC-troll appeared and called you a “betrayer.” What was that all about, and what biological signals are these kind of people sending out?
Daniel Krawisz: Bitcoin serves people, not the other way around. BTC does not serve me, nor does it serve anyone. Therefore, I have left it. BTC is a community that demands loyalty. Money must be loyal to me. I am not loyal to money. A community of people that are loyal to their money rather than the other way around is one in which no one is profit-seeking. Profit-seekers are loyal to themselves. They choose their money because the other people are genuinely beneficial. In BTC, no one is beneficial.
Earlier on when I wrote articles for the Satoshi Nakamoto Institute, I was popular in BTC. I learned later that the entire community did not genuinely want my knowledge. It only wanted to use me to pump the coin. When I said that BTC was no longer any good, they did not want to listen or treat me like someone with knowledge. Everyone just wanted to ignore me as hard as possible. BTC betrayed me.
Fortunately I was familiar with satire from having read books such as Don Quixote and Gargantua and Pantagruel. Satire is the genre for combating thought control. Information cannot be suppressed if it is presented in satire. Satire begins with stupidity. Anyone who tries to suppress it looks stupid. If they try to explain why apparent stupidity is actually a dangerous idea, they must explain what it is really saying, which they cannot afford to do. I made my show Bitcoin Stuff to create information that would pass through thought control.
I would like you to criticize Bitcoin SV. What could be wrong with Bitcoin SV in technical or economic terms, and what could be wrong with “the community,” the Bitcoin SV proponents?
Daniel Krawisz: The fact that you are asking is evidence that the Bitcoin SV (SV) community is healthier than Bitcoin has been at any time in the past. Success comes from thinking a lot about failure. I don’t want to say too much because anything that I know is wrong is a way for me to get more Bitcoins so I don’t want to criticize too much. At MatterPool we will be making many improvements if someone else can’t make them first.
There is an immediate need for the Bitcoin economy to wean itself from the subsidy and be sustainable. Thus Bitcoiners have been focusing a lot on building businesses and working hard to serve the outside world. That is necessary to avoid failure. However, it is also not enough to bring success.
Money’s primary purpose is to benefit each other. Bitcoin is unusual in that it has many possible services beyond money. However, when Bitcoin is serving the rest of the world, it is not serving its primary function. In order to do that, Bitcoiners need to benefit each other. That is what will make Bitcoin good as savings. That is true adoption.
Investment requires a holistic outlook of your life. It is important to have a job, but what good is it if you don’t have leisure time? Investment is not just about cash vs stocks. It’s about work vs play. The potential value of Bitcoin is very great but realizing that value requires more than just technical or business solutions.
Each money is a group of people. In order for that group to grow, Bitcoiners must be a group that other people would want to join. Culture is what drives adoption, as Jacob Sitowski has pointed out. Bitcoiners can use Bitcoin to make each other better off. They can use that benefit to be better people. That is the evidence that would rationally convince people that Bitcoin is better money.
Talking about criticizing Bitcoin SV and the people involved, let us bring up speculation. While in other digital asset “camps” such as in the BTC sphere, price speculation is not a topic, but the topic. In the Bitcoin SV realm it seems almost forbidden to even think about what Bitcoin SV could be in USD terms in the future. I get it, Bitcoin SV proponents try to distance themselves from BTC moon lambo gamblers, but is speculation not a natural thing to be intertwined with any asset?
Daniel Krawisz: There is nothing inherently wrong with speculation. Speculation is simply a bet on the future. To me the problem is not speculation but being wrong. Speculation is very good if you are right. BTC is a whole community of people living in a fantasy. Their idea of a BTC-dominated future cannot possibly happen. BTC has no economy. You cannot successfully speculate without being right about the real world more than you are wrong. It is very dangerous to live in a fantasy.
An economy cannot be built on speculation alone. That is just a bunch of people believing they are all wonderful without doing anything. Bitcoiners need to create an economy in order to be successful. Speculation is for people who rate their understanding of the future economy as better than others. In BTC, people lie to themselves and to each other about a future that is impossible and they are willing to drag each other into poverty before recognizing their ignorance.
What role does speculation have in the market, and how important is it for Bitcoin SV’s growth in general to have speculators involved?
Daniel Krawisz: Capital markets are a future prediction contest. The market is a system in which individual knowledge becomes collective knowledge. Those who act successfully on their differential knowledge (that which they know and others do not) become wealthier and simultaneously teach their knowledge to the market. The market is an integral that sums all our differential knowledge.
Speculation is an activity that pays out for pure thought. I congratulate anyone who is so intelligent that he can live on thought alone. Not many people can do that. An economy needs thought but cannot exist on thought alone. Furthermore, the market is always growing more intelligent. It is anti-inductive. Someone who believes they can live as a day-trader believes that they will always be more intelligent. That is not realistic. It is impossible for everyone over a long enough time span.
It is more realistic to think that you need a job that pays out reliably for your work and that successful speculations are not a reliable source of income but rather a bonus that is only available under unusual circumstances. The market usually knows better than you, but not always. When you know more than the market, you can earn a lot by teaching it what you know. Speculation is how you teach the market.
When the BTC/BCH separation happened, and later the BCH/BSV split, you were one of the very few people to point out it could be wise for a speculator to actually keep all forked coins. Is this thought still up to date or have you got another perspective on holding Bitcoin SV, BTC and BCH nowadays?
Daniel Krawisz: Bitcoin is a complex strategy game. During 2017-2018, the system was such that many choices led to bad outcomes. It was a risky time for everyone. Not splitting old UTXOs is a position aligned with the original Bitcoin, which had been fragmented. The daughter coins are required to serve me in order to win me over.
In my videos, I said that one chain would be like a gladiator that would fight and kill all the rest. This is necessary if Bitcoin is truly Byzantine fault-tolerant. There will be universal agreement with all honest nodes. They will find each other in one chain and destroy all the rest, which contain traitors. I did not know which chain that would be. I could see that many people were rushing to pick sides, whereas I could see that there were shenanigans on both sides. I believed that an opportunity would arise to split coins eventually but I saw none just then.
Investing is not like voting. If lots of people buy one coin over another, they do not automatically win. If the coin doesn’t work, they all lose. Investment is future prediction. With voting you pick who you want to win. With investment you want to pick who will actually win. I would not make a decision based on ideology. It seemed impossible to me that small-block high-fee coin could win but it was possible in my mind that people in BTC could face their mistakes and change their ways.
Since then, all honest actors have converged in BSV. I see no one else doing anything that is remotely competitive with BSV. I am anxious to see the other coins eliminated, especially BTC and BCH.
What did you think about the hash war in 2018, and what are your thoughts now looking back at it?
Daniel Krawisz: Before it happened, I believed that Roger Ver would give up and admit defeat. Unfortunately for him, he could not see that in his position, success was impossible. However, he was thinking too poorly about his own situation to be able to realize that. It is impossible to win a hash war by renting hash power. Roger Ver rented hash power and the miners he rented it from could use that money to build the infrastructure of any Hash256 coin that they wanted. They used the money to invest in the BSV ecosystem. Roger Ver lost all his money to create the appearance of strength without really having any. That will not work. Real strength is required to win. Strength is productive capacity. Hashpower is just a show of strength, not the real thing. If you try to show strength without having any, all you do is run out of energy. That is what happened in BCH.
At the CoinGeek Conference in London, famous economist George Gilder asked Dr. Craig Wright why there is a limitation of supply implemented in Bitcoin. It is safe to say George Gilder is aware of the scarcity argument. How would you answer that question though?
Daniel Krawisz: Inflation is not Byzantine fault-tolerant because whenever it happens, someone gets paid without doing any work and gets to take out of the economy without contributing to it. We have to trust that this person is not a parasite and will use this power to benefit the economy rather than mooch off of it. If we accept the notion that inflation can be legitimate, which I do not, there is no way in general to tell the difference between a legitimate inflator and a parasite. The power to inflate is so great that people would say and do anything in order to get it. It is better if we all decide individually who deserves money and give out of our own individual supply rather than allowing someone to take out of the whole economy.
Help us understand this, aside from the known scarcity argument. Gold for example has a market driven inflationary supply, so gold’s supply reacts to demand. Bitcoin’s supply does not. Is that a problem in any way?
Daniel Krawisz: No. Fixed supply is better. It is better for the price to react to demand rather than for supply to react to demand. Prices are communication that enables everyone to act harmoniously. Increases in supply are not. Increases in the supply of money always punish savers. Gold can be used as money only because the supply is very costly to increase and therefore it doesn’t punish savers very much. People who have savings are invested in the long-term future of the whole economy. Savings allow you to be ready for anything. We should want a society of people like that. A society that uses a fixed supply of money will be very future-oriented. That means it will become wealthy. That’s what happens when people think about the future for a while.
Help us understand the role of the Bitcoin tokens/coins in the Bitcoin network. Many think the only way to pay transaction processors (so called “miners“) is by transaction fees paid in satoshis. However, it is not unthinkable to actually pay transaction processors in fiat money directly off-chain. Does that mean fiat money could substitute satoshis?
Daniel Krawisz: No. You cannot pay with fiat to people who do not want to earn fiat. Bitcoin is better money. It is not as good to earn worse money. Fiat money is not Byzantine fault-tolerant. People who try to earn it will be hurt when traitors prevent honest actors from agreeing. Bitcoiners will not be hurt. Fiat money can only substitute satoshis as long as people fail to appreciate the difference. Fiat cannot become Byzantine fault-tolerant by being tokenized on the blockchain because there will still be inflation on fiat. People who use an inflationary money will not act to protect it. Bitcoiners will act to protect Bitcoin.
Are the satoshis truly indispensable for the Bitcoin network to run or not?
Daniel Krawisz: They are indispensable because without them there would be no reason to expect everyone else to act to ensure that the system survives. That is what Byzantine fault-tolerance means and without satoshis it is gone. People who have the token are invested in everyone else who has the token. Without the token there is no dynamic that creates loyalty toward each other. If the network is failing, or not doing as well as it could, anyone who knows how to improve it can afford to buy more and benefit when they become more valuable. With no token, there is no way to do that.
You have mentioned the “center of Bitcoin” a lot. What is that? And how does one get to the center of Bitcoin?
Daniel Krawisz: Network centrality for a given node is the degree to which short paths exist which go through it between any two other nodes. You find the center of the network by being the most in-between person. You become an in-between person by making connections to everyone else. I also think that consciousness arises from a centrality contest that takes place between neurons in the brain.
Last question. What is the “Emperor of Bitcoin,” and more important, who is it?
Daniel Krawisz: The Emperor of Bitcoin is a character I play on my YouTube show. The Emperor of Bitcoin is an insane person who believes he controls everything that happens in Bitcoin through his YouTube channel.
The Emperor of Bitcoin is inspired by Don Quixote. Don Quixote believed that he was a knight whereas to most other people he appeared to be nothing more than a homeless person.
The only difference between Don Quixote and the rest of the world is that Don Quixote is the only person who believes in his own fantasy. Everyone else lives in a shared fantasy about who is a knight. There is nothing objective about a person that makes him a knight. There is simply a shared agreement as to social status.
On his adventures, Don Quixote meets many insane people who are socially acceptable, unlike him. Their madness is the shared madness, so everyone acts like it is sanity. Later on in the book, some rich people decide they enjoy his fantasy and they go along with his delusions because they find it amusing. Sancho Panza becomes governor of an island, just as he was promised.
Don Quixote is satire. Satire is the genre for times in which thought control is overbearing. Satire begins with stupid imitation. Superficially, Don Quixote appears to be a nonsense tale that would amuse idiots. This is how it will appear to the majority of people. Only if you think a lot about it do you realize that anything profound has been said. Someone who wants to suppress satire invites questions as to what is so dangerous about it. The last thing that the thought-controller wants is to explain. That would simply spread the message.
I started my YouTube show during a time of thought control in Bitcoin. My show was designed to connect with anyone who wasn’t mind-controlled. The message would transmit through the thought control. Any attempt on the part of BTC Core idiots to engage with it or refute it would merely have made it more popular.
Cervantes began writing Don Quixote from prison. His book is the ultimate rebellion against political power. The book says that he, Cervantes, is more powerful than kings. He has power over ideas, whereas kings are still trapped in the shared illusion. He was right. Now it is 500 years later and Cervantes is a more important person than political figures of his day. Ideas matter a lot in the end. If you can act crazy long enough, other people will adopt your madness and it will become the shared illusion.
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