Wall Street technologist Jerry Chan of the Bitcoin Capitalist podcast joined Crypto Bitz for a chat recently, and talked about everything from the history of BTC to the lie of decentralization and the solution to government corruption.
Who is Jerry Chan?
Jerry got involved with Bitcoin in 2012 when he read the white paper and bought his first coins. At first, like many others, he didn’t think it would amount to much.
He noticed right away that the Bitcoin white paper appealed to greed and fear, the “twin horses of capitalism.” Working at Goldman Sachs at the time, Jerry instantly recognized that it was no run-of-the-mill theoretical white paper but was written by someone with a deep understanding of economics.
Why does Jerry object to the notion that BTC won?
Jerry objects to people saying that BTC has won the war for Bitcoin. His first reason for doing so is that the game is never really over in capitalism.
Bitcoin is only 12 years old. Likening Bitcoin to the internet, which was designed in the 1970s and took around 25 years to catch on, Jerry said that BTC maximalists might think they have won on a short time horizon, but it’s far from over.
Going deeper, Jerry asks what market BTC maximalists think they have won? There’s more than one market in capitalism. Therefore, saying the market has spoken and BTC has won is fallacious.
BTC early days—how did we get SegWit?
Crypto BItz host Britney asked Jerry to recall what happened that led to Segwit and elaborate on some of that history.
Jerry recalled that Satoshi Nakamoto himself stated that everything would end up in data centers and that this had already started to happen by 2016. He does not buy the idea that Satoshi didn’t foresee this. He also noted that Satoshi intended for the block size limit to be temporary. While Hal Finey may have been right in convincing Satoshi to add it in the early days, Satoshi ultimately only conceded temporarily.
As they approached the block size limit, Bitcoin split into two camps; the small blockers and the big blockers. Big blockers believed that Bitcoin was antifragile, whereas the small blockers were afraid to raise the block size limit in case Bitcoin couldn’t withstand it.
This debate led to SegWit. While many wanted the block size to be raised, Core developers did not permit it. SegWit was an attempt to solve ‘transaction malleability,’ allowing Core to develop a second layer system that they control.
While most of the miners agreed that a block size increase would be safe, Core developers convinced them to implement Segwit in exchange for a block size increase to 2MB later. After Segwit was activated, Core developers and Blockstream convinced Chinese miners only to run their node software. With the help of exchanges, the miners agreed. At this point, Core reneged on their agreement to raise the block size to 2MB.
Jerry believes that Core planned this because the Lightning Network is impossible without SegWit.
The cabal, Blockstream, Lightning, and the scheme to get rich
Jerry then goes into some of the history of how BTC came to be where it is today. He reminisces about how Satoshi handed the keys to Gavin Andresen and how Mike Hearn left in frustration.
In 2015, Gavin Andresen stated that Dr. Craig Wright was Satoshi Nakamoto. Immediately, Core developers revoked his access to Github and froze him out of the project. They promoted ideas that Gavin Andresen was a government spy and had been hacked and corrupted. From this point on, only those who subsequently formed Blockstream remained.
Jerry recounts that Gregory Maxwell published a paper about Bitcoin sidechains at around the same time. He believes that Maxwell misunderstood that Bitcoin could scale and secured financial backing to make it scale through side chains and second-layer solutions. This was the reason for Blockstream’s formation.
After some early business failures (because not many people want to do anonymous transactions), Blockstream ran with the Lightning Network. Jerry believes this is a disastrous system and that it would take everyone in the world to put their life savings into the system for it to approach Bitcoin’s capabilities.
“It feels like a bank account where someone else pays for their coffee and depletes my balance, and then my balance is restored with money from any old bank account I had somewhere else in the world,” Jerry said.
Jerry points out that when Blockstream backed the Lightning Network, he realized that it was an attempt to make money for its shareholders.
After all of the technical failures, BTC was clearly not working. Just on time, Tether came along and started buying up BTC, promoting the narrative of digital gold. This also enriched the BTC inner circle massively on paper, allowing them to run a huge influence campaign, hire developers and marketers, influence mayors and other politicians, and more.
Jerry points out that in most places, this scheme is not illegal yet, and that most of the people who are getting rich from it will continue to run it until regulators clamp down, by which time most of them will have exited.
BTC is not decentralized
BTC advocates promote the notion of political decentralization. Jerry likens it to a catchword and “part of the brainwashing campaign.” However, anyone who reads the Bitcoin white paper will know that decentralization is not mentioned in it.
Jerry likens the campaign to promote decentralization to Communist leaders who brainwash their populations and tell them just to trust them because things will be better under their plan. He also likens the way BTC works to Communism. By removing the incentive to upgrade mining hardware and compete for a greater share of transactions, we arrive at a state where nobody has any incentive to improve.
As for the lie that listening nodes like Raspberry Pis do anything of value, Jerry makes short work of it. He points out that if all the miners were to be shut down, the only thing left to mine would be Raspberry Pis, which would only have a fraction of the current hashpower, so could be easily subverted.
The misguided nature of anarchism and the need for law
In the final segment of the podcast, Jerry then points out that the anarchist fantasy is misguided. In the absence of the elected rulers, where no government exists, it will only be a short period of time before a mob takes over and rules by force. This has happened repeatedly throughout history in Cambodia and other places that have undergone revolutionary change. Yet, anarchist academics in their ivory towers believe it will be different this time.
Jerry believes this is why we must abide by the law and resist the siren call of anarchy and overthrowing the government by using anonymous cash systems. The democratic and other norms we take for granted are delicate, and systems like BTC could endanger it if they help subvert the law. He gives the following example: how could we stop people who are abusing their positions of power (such as corrupt officials) if we could not trace what they’re doing? Such individuals would be free to act with impunity, knowing that the records needed to convict them could not be traced.
Countering the argument that the opposite would be an invasion of privacy, Jerry points out that the government usually has no interest in what people are doing unless they have cause to investigate. However, privacy can still exist, but it’s different from anonymity in that when the authorities want to view records because they have a just reason to do so, they can.
“Do you or do you not support criminals?” Jerry asks. If not, you need visible records, which requires privacy rather than anonymity.
Lastly, Jerry points out that anonymous cash systems are actually dangerous to the very people who hope it will protect them from abusive governments. It is, in fact, abusive and corrupt governments that would benefit most from an anonymous cash system. Such systems would make it impossible to hold bad governments to account. It’s important to build Bitcoin with this in mind. On the other hand, total transparency (complete traceability) would eliminate corruption. This is the vision BSV promotes and is the vision of Bitcoin that Jerry believes in. “People will use this tool to hold governments accountable,” he says in closing. For example, putting government financial records on the blockchain would allow for a more honest society to flourish.
Watch: CoinGeek New York panel, Government & Public Sector Applications on Blockchain
New to Bitcoin? Check out CoinGeek’s Bitcoin for Beginners section, the ultimate resource guide to learn more about Bitcoin—as originally envisioned by Satoshi Nakamoto—and blockchain.