Stephen DeLorme: How Does Bitcoin Consensus Work? Part 2 - Atlanta BitDevs - (EVNT007)

Bitcoin is difficult to change. How do we reach consensus to change it?. Stephen DeLorme covers Part 2 of the Bitcoin Consensus Analysis Project, highlighting both technical and social layers of reaching consensus. Learn about the roles of various stakeholders in the Bitcoin ecosystem including economic nodes, investors, media influencers, miners, protocol developers, users, and application developers. Discover how stakeholder powers fluctuate throughout the upgrade process, potential risks of bounties leading to chain splits, and methods to gauge community sentiment.

Chapters

• 00:00 Introduction to Bitcoin Consensus and Bounties
• 00:51 Event Recording and Podcast Information
• 01:18 Sponsor Message: ATL BitLab
• 02:26 Introduction to Bitcoin Consensus Analysis Project
• 03:44 Recap of Part One: Soft Forks and Hard Forks
• 04:56 Activation Mechanisms and User Activated Soft Forks
• 07:05 State of Mind and Stakeholders in Bitcoin
• 13:52 Stakeholder Influence and Consensus Change
• 32:15 Investor Influence and Economic Nodes
• 34:02 Power Dynamics in Bitcoin Consensus
• 36:28 Self-Custody and Investor Power
• 37:53 ETFs and Economic Power
• 40:33 Consensus Change Process
• 42:10 Measuring Social Consensus
• 49:01 Alternative Consensus Clients
• 51:31 Chain Splits and Their Implications
• 57:55 Bounties and Miner Incentives
• 01:03:51 Final Thoughts and Conclusion

Links

• Stephen
  • X
  • Nostr
• Bitcoin Consensus Analysis Project
• Part 1 of the Bitcoin Consensus Analysis Project

Transcript

[00:00:00]

Stephen DeLorme: So you have a new rule block and new rule block, and then miners start, you know, mining these legacy rule blocks. Um, and, uh, they, they, they get into this idea of a bounty. So the idea is, let's see, a consensus change, uh, has just been confirmed and like, you know, the last block or whatever.

And as users, we're all gung-ho and it's like, yeah, they just, you know, you know, activated some like really cool new op code that like allows me to secure my Bitcoin in some novel and interesting way. So I'm gonna send it to like, you know, this particular address and lock my coins up in this newly activated op code.

Okay. What you've just done there is you've created a bounty on your coins. You have created a bounty, um, that incentivizes malicious miners to change the rules and use the old client,

This podcast episode is an event recording. If you're listening to the audio version, you might be missing some context from the speaker's visuals. You [00:01:00] can find the video version at atlbitlab. com. That's A T L B I T L A B dot com. There might also be audience questions or other background chatter that's not audible.

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All right. So we're here to talk about the Bitcoin consensus analysis project. This is part two, and this is gonna be the last part. We cover this. We don't want to beat this thing to death. Um, Nitesh uh, covered the first part, um, of this.

Um, we, we were trying to schedule this out in advance and we couldn't quite work the schedule out to where he could, you know, present both of them in a concise period of time. So I offered to take the second part. So, um, and it's a, I'm happy to do it because it's a very fascinating paper. So, uh, this is basically, as it says, analyzing [00:03:00] Bitcoin consensus.

It's risks and protocol updates. So what the authors of this paper tried to do is they're trying to analyze, uh, how, uh, people in bitcoin. Reach consensus, both at like a social level and at a technical level, um, to, uh, make changes and upgrades to Bitcoin. Um, and you know, there's a lot of, you know, discussion.

Uh, somebody was just mentioning me before this, that there's apparently a lot of more soft fork chatter going around on Bitcoin, Twitter today or something. So, you know, this is something that keeps coming up again and again. But I think this is one of the first, um, attempts I've seen to really break down, not just the, like, how does it work at the code layer, but how does it actually work at the social layer.

Um, so I'm gonna do a brief recap of what Nitesh covered last time. Um, in the first half. And I highlighted some stuff. One thing that, uh, he spoke to us about was soft forks and hard forks. And the, the, the basic idea with [00:04:00] soft forks and hard forks is this is, uh, you know, when you are making a change to Bitcoin's code base, a soft fork is kind of like a, a, um, a backwards compatible change.

And a hard fork is a not backwards compatible change. So, uh, a soft fork is it, it tightens the rules typically. Um, it, it, it might, uh, you know, make the rules tighter or more restrictive. It's not gonna loosen the rules, though. Um, and, uh, so yeah, the, the idea is, uh, like a hard fork is always going to, uh, result in a chain split.

Typically it's going to, um, result in this situation where, uh, you know, uh, Bitcoin nodes that fail to upgrade their software will not be able to participate in, in, uh, that same blockchain. So they'll have to have their own, you know, split of the blockchain. Soft works don't necessarily have to result in, in a chain split, but in certain situations they, that could happen.

Um, we'll, we'll dig into chain splits a little bit more as we get deeper [00:05:00] into tonight's, uh, Nitesh also walked us through some activation mechanisms. The earliest one was flag day. It was like, you know, at this date, uh, or at this block height, the, the change will take effect. Um, that kind of worked when, you know, Bitcoin was like 10 nodes on the network or whatever.

But then we started introducing this idea of like miner signaling and stuff like that, like BIP nine. So it's this idea that a miner can actually signal that they're ready for, uh, a hard fork by putting, you know, some metadata in their, their block header and all of that. And then we get into this idea of user activated soft forks, which is this idea that, that, that we call 'em the users, the people actually running Bitcoin nodes, not necessarily the people, uh, doing miners.

They could actually, uh, you know, run a Bitcoin node that, that activates a soft work. They could run a modified Bitcoin client or an updated Bitcoin core, um, that, you know, uh, you know, basically accepts blocks that, uh, have this new change. So, um, do you, is there a question back there [00:06:00] that I see. Can you say the question again?

AUDIENCE: I was just wondering like, um, there were, there's like a lot of soft works in the early days of Bitcoin development, right? Like sometimes Satoshi they say that Satoshi released a version, wouldn't even say what it was, what it fixed.

Stephen DeLorme: Yeah. Were there a lot of soft works in the early days of Bitcoin's development?

That's something I'm actually a little, yes. Bitcoin did change a lot. Like Satoshi in the early days was able to kind of unilaterally make changes, um, because, you know, there, there was hardly anybody on the network, right? And so, um, you know, Satoshi was able to make a quick change, you know, get on Bitcoin talk or whatever, say, Hey, I fixed this or whatever, and, uh, it, it would work.

Um, I'm not actually sure if those, uh, qualified as soft forks or maybe some of those might have been hard forks. I'm actually not sure on that. Um, my, my thought is some of those might have been hard forks, but I'm [00:07:00] open to being corrected on that 'cause I'm not entirely sure. Um, cool. I'll move on. The other kind of, you know, things that Nitesh covered last time was state of mind.

This is like, I'm gonna try and blow this up. Can, can everybody like see this text? Okay. Yeah. Is that good? Okay. State of mind is kind of like the, it's they, they abbreviated. SOM, you know, you can, uh, I think some real engineering minds worked on this paper. Um, so som one, passionate advocate for change. SOM two, supportive of a change, uh, som three, apathetic or undecided.

Uh, four is unaware. Five is not supportive, but not to a degree to spend time, money, resources toward fighting it. And then six is passionately against a change and willing to expend resources and exercise power to fight it. So as we're getting more into tonight's stuff, it's like you have this idea that like, one and two are kind of like pushing in the direction of supporting a change.

Uh, five and six are pushing against that change and like, like three and four are kind of in the middle. You're either unaware or you're [00:08:00] apathetic. So one and two or four, five and six are against three and four are in the middle. Neutral question,

AUDIENCE: just to clarify, when you talking about the state of mind, that's really more relevant to like bed 32 time changes?

Correct.

Stephen DeLorme: It's relevant. It's, it's describing the, the, the actual people. Mm-hmm. Um, and it, it would be relevant to BIP

AUDIENCE: context and attachment to what happening.

Stephen DeLorme: It would be re it would be relevant to the bip. The bip. Was it 34? Was that it?

AUDIENCE: I thought it was 39.

Stephen DeLorme: 39. I'm sorry. 'cause I get them all confused 'cause they're all freaking numbers.

34 Oh 30 Uh, yes, it would be relevant to the bip. 34 changes that like where a miner actually, or I'm sorry, I meant to say BIP nine. I guess it would be relevant to both of 'em. BIP 34 is, uh, block versioning and BIP nine is miner signaling. So yes, the state of mind would be relevant there because the person operating the mining equipment does have to determine, am I for this?

Am I against this? Am I empathetic? Um, and it would also be relevant for user activated soft forks as well, because the person [00:09:00] who needs to choose whether to upgrade or not upgrade their Bitcoin note has to choose am I for it? Am I against it? It's relevant for all of them. It's basically for any person.

It's relevant. Yeah.

AUDIENCE: Question. So, um, I remember back in the day, um, you know, there used to be a way to basically signal in your node, uh, you could do a user agent comment and just, you know, put a a basically a message to the other node operators in there.

Stephen DeLorme: Hmm.

AUDIENCE: Signaling for or against different things. I mean, you could put it whenever you want.

Stephen DeLorme: Interesting.

AUDIENCE: Um, is that still a thing as far as, you know, trying to gauge consensus from the, my perspective about the user agent comment?

Stephen DeLorme: I'm actually not familiar with the user agent comment one.

AUDIENCE: Really?

Stephen DeLorme: Yeah. I'm not sure.

AUDIENCE: Old school, this is going back a long, long time.

Stephen DeLorme: Yeah. Interesting.

AUDIENCE: But yeah.

Stephen DeLorme: Huh.

AUDIENCE: It's called user agent comment and it's just a, basically an option in the configuration file

Stephen DeLorme: mm-hmm.

AUDIENCE: Where you can add that and then add a note, you know, so,

Stephen DeLorme: and it'd be like a what, like a, you know, plain English note basically. Yeah. Oh, pretty much. Very interesting. I'm not aware of that. Okay. Another question [00:10:00] right there,

AUDIENCE: just to add real quick to that. Uh, what Nitesh's going last time though is they primarily look at who's accepting the updates to understand the popularity of our for providers.

Right. That accurate.

Stephen DeLorme: Look at Yeah. Who's accepting it. Yeah. But, well, it'll get a little bit comp, it'll, it'll get a little complicated as we get into it tonight.

AUDIENCE: Gotcha.

Stephen DeLorme: The other kind of, I guess final point to cover after state of mind, just to recap from what Nitesh said, was these different stakeholders, economic nodes, these are, to put it simply, 'cause I don't want to get too bogged down by the details here.

Think of these as companies like exchanges that facilitate the transfer between Bitcoin and other currencies, um, uh, investors. So that's basically anybody who invest in Bitcoin. So if you have a cold storage wallet with, uh, you know, Bitcoin under your self custody, you are an investor. Um, if you are someone who is holding Bitcoin on an exchange, well, yeah, it's not the same thing as self custody, but you're still an investor.

Or if you're someone who is like [00:11:00] managing an ETF, um, of Bitcoin, again, some people feel diff, you know, certain ways about this, but under, at least, uh, in their paper, they classify all of those as different types of investors, and they do differentiate between those different types of investors. In the pa uh, uh, the paper, obviously people, self custody investors are a little bit more nimble.

They can act a lot more quickly than say, someone who's managing an ETF. But, um, they, uh, they're, they're all kind of in this bucket of the investor stakeholder. Uh, then you've got media influencers. So just think of these like, um, podcasters, like the Stefan RAs, Natalie Brunes, Peter McCormack, McCormack of the world.

Um, you've, uh, got your, uh, miners, obviously people, whether you're running a single mining rig or whether you're operating like a pool or whatever. It's kind of like that's the, that's the, the idea. Uh, it's, it's miners can signal for certain changes. They can direct their hash power in certain places. [00:12:00] Um, then you've got your protocol developers.

These are your people, uh, working directly on the protocol itself. That typically means people writing code for the piece of software known as Bitcoin core. It could also be other things like other alternative implementations like BTCD and hypothetical future Bitcoin clients that don't even exist yet, but.

Protocol developers are working directly with the Bitcoin protocol itself, so just think of those as bitcoin core devs. And then you have users and application developers. That's our final stakeholder category. And that might sound a little bit weird here because there might be, you know, you might, uh, think of yourself as like, well, I'm just a plebe.

I don't know a lot about code. I just like to huddle my Bitcoin. And then you have someone like Chad who's like made a cool SATs, gg, uh, lightning, you know, streaming app, and he's entering a top builder, and you're like, well, there's a difference between me as a Pleb and Chad as an application developer.

Well, actually, according to this paper, you're actually in the same category. Um, [00:13:00] and, uh, you're, you're, you're both the same stakeholder. And the reason behind that is even application developers. Um, even if you write the most complicated web application in the world that interacts with lightning and does all this cool stuff from the Bitcoin protocol level, you are a user of that protocol.

So it's like if you're just a pleb with a lightning, like a Bitcoin wallet and your Bitcoin wallet is talking to a Bitcoin node, Chad has built a cool web application, but at the end of the day, it's talking to a Bitcoin node. Bitcoin nodes are the only actual true participants in the Bitcoin protocol.

So whether you're just an average Joe user or whether you're an application developer, uh, according to, um, the, the, the way they've structured this, y'all are just users, application devs are just fan, a fancier way of saying a user, a Bitcoin user. So on the same bucket.

Okay, I'm gonna get us into tonight's actual content.

So that was kind of the, the, the, the high level recap of what Nitesh talked, [00:14:00] um, uh, uh, LA talked about last time. So now we're gonna get into, now that we've kind of set the groundwork, state of mind, stakeholders, hard work, soft works, activation mechanisms, how is consensus achieved? And so, as they say, I'm, I didn't prepare a formal slide deck because I felt like the paper did such a good job of laying it out in plain English that I didn't feel the need to repeat it.

So they say Bitcoin consensus change is not achieved through formal governance, but through complex interplay actions and reactions among stakeholders, each with their own unique powers and incentives, they say this process is iterative. So one stakeholder group will do something and then the other stakeholders are kind of waiting to see what they do.

And then another stakeholder group will come in and do something and then another stakeholder group will react to that. So it's this kind of back and forth process. And so SegWit was, um. You know, well, that was kind of a contentious, uh, uh, change in, in Bitcoin's history that was, uh, around the time of the Bitcoin cash fork for those, um, you know, who may, may not be [00:15:00] familiar with the, the technical word SegWit, um, but they describe it like this.

So, protocol devs implemented the SegWit code merged into Bitcoin core. They advocated for its benefits. Um, they also wrote about the risk of ASIC boost, a method to increase the efficiency and profitability of mining That would be incompatible segue. They disclosed bugs and errors in alternative clients such as Bitcoin Unlimited.

They played a crucial role in the technical discussions in public communications that shape the broader communities' understanding of the upgrade. And then again, the miners. So miners initially showed low support for SegWit, um, but as the market demonstrated weak demand for competing proposals like Bitcoin and limited and SegWit two x, so miners face pressure to signal for SegWit.

Um, 84% of the hash power in 2017 supported the New York agreement, but it didn't gain enough traction. Uh, then you get into the economic nodes. What were they doing? Well, exchanges like bitfinex listed futures markets for Bitcoin Unlimited and SegWit two x. You might remember that for those of us who joined us for the, uh, block size wars book, um, this allowed [00:16:00] for price discovery that highlighted the economic viability or lack thereof of these forks.

So by creating a futures markets for these potentials, forks, they, they, you know, allow this price discovery. Um, that's the power that only the economic nodes have. Um, they also decided how to list these forks overwhelmingly opting to list them under separate symbols. So they didn't call these forks, Bitcoin or BTC, that called them something else.

Um, and then major, no, you know, the economic nodes supported the New York agreement, but then they get faced with this grassroots backlash, and so they wind down. Um, you have investors, investors express their preferences by trading futures, contracts for different forks. Um, you know, they, the sell off of futures for seg and bu that that indicates a market preference.

Um. And, uh, the, the market preference is kind of like saying don't change the consensus rules. Um, and you know, when you have that many investors selling off the future, that, that puts pressure on the other stakeholders groups. This is a quick little market showing the, um, the futures markets. Then you got [00:17:00] the users, so the users, um, they advocated for it on social media for on, you know, forums, other places.

Um, then there's also this discussion of user activated soft forks. This idea that what if we have a, uh, A-A-A-U-A-S-F client and the users can decide to activate, uh, seg themselves, um, without needing to get the miners involved or wait for miner signaling. And, you know, I, I, I think, uh, what, what they talk about a little bit in the paper here is there's not really a lot of evidence that the UASF itself played a crucial role in SegWit.

But it was kind of like, you know, perhaps one of these almost like a, a, you know, an kind of like a, a, a negotiating tactic. It's like, Hey, we have the UASF, we can do this. Ultimately, segway was activated by other means, but because the UASF there was kind of thrown out there, it's kind of like a negotiating tactic.

Um, and then the influencers, you know, they, they advocated, you know, for and against Segway. It depended on the podcast you were listening [00:18:00] to. Right. Um, these people end up, uh, you know, uh, shaping the, the, uh, how people feel about these things. And, you know, they say here that the, the influencers and media outlets played a role in, uh, helping to reject the New York agreement.

So that's just kind of like how all these stakeholders, um, you know, uh, uh, you know, exercise their powers, uh, in alignment with their various incentives. Yeah. Question,

AUDIENCE: uh, it seems like, does Bitcoin Cash still have a lot of value in in, in, and why, why is that the case

Stephen DeLorme: still? I don't think it has a lot of value.

It, I don't know what the price is off the top of my head. It's certainly not a hundred KI checked,

AUDIENCE: it's been up, it's down 1% over five years,

Stephen DeLorme: down 1% over five years. Yeah. Yeah. I don't know why it has a lot of value or why people see it as, some people see it as having value. I mean, I'm, I'm, I'm choosing my words carefully.

'cause I think it's, personally, I think it's worthless. Um, I think, you know, there's pro I I imagine it's gotta be kind of [00:19:00] weird if you did, if you, if you did go all in on Bitcoin cash after that fork, and just like if you sold your Bitcoin and turned it into Bitcoin cash, there's, you know, maybe, maybe you have this, like, hope that it's eventually gonna go back up one day and, and there might be people holding on, um, in that regard.

I, I mean, again, I just don't know how that market has enough liquidity for that. I think there's also just a good bit of brand confusion too. Personally, and this is just my opinion, I don't really know, but I, I, I think there's a situation where people get into Bitcoin for the first time. So they Google search Bitcoin and it's like, hey bitcoin.com and they have Bitcoin and Bitcoin cash and it makes them seem like equal things.

Um, kind of, so yeah, I, I don't know. I, I don't know why it has, but it's certainly compared to the Bitcoin's market cap and valuation is nothing at this point. Question? Yeah.

AUDIENCE: Going back to the, um, the, uh, financial, the, the exchanges, you said that they literally created [00:20:00] futures options on the various branches

Stephen DeLorme: Yeah.

AUDIENCE: To try to gauge

Stephen DeLorme: mm-hmm.

AUDIENCE: Price, discovery and, and desirability, I guess.

Stephen DeLorme: Mm-hmm.

AUDIENCE: So it sounds kind of like, that for me sounds kinda like the, like predicted or like one of these other types of like social, like outcome gambling sites that we see now that it's a lot more prevalent.

Stephen DeLorme: Oh, like a prediction market?

AUDIENCE: Yeah.

Stephen DeLorme: Yeah. So, I mean, I think that's a good point. Yes. I do personally think it's, it. I think. Starting a futures market for something does feel, feel somewhat similar to a prediction market. I think it serves a, a similar, well maybe on a financial level, it's not exactly the same thing.

It does serve a pretty, very similar social purpose. Yeah, exactly. You're gauging the opinion of people with skin in the game. That's a great point. Um, so here's kind of like talking about segue activation. It's a lot of the, the stuff we just were looking at there, but it's put in more visual form.

So it goes to these key dates from [00:21:00] February 28th, 2015, uh, all the way through November 8th, 2017. Um, and it shows the different stakeholders here and it shows when they use a power. And so this is what I mentioned earlier, lightning paper published. This is users and app devs according to. The, you know, the authors of, of this paper that's, uh, that that's actually, you know, light, uh, somebody working on a lightning protocol or lightning implementation is actually a user of the Bitcoin network.

Um, so they're exercising a power by saying, Hey, what if, you know, we did this like kind of layer two thing instead. Um, then you have miners and economic nodes, you know, trying to do this Bitcoin, um, XT client thing. You have some protocol devs involved with that too, because I don't, I can't remember the names, but some protocol dev must have been involved in that.

Um, you know, you get Hong Kong Roundtable, Bitcoin Classic, you know, um, you know, the, uh, miners are involved in this discussion here. Uh, Bitcoin Unlimited, you got the miners, you got [00:22:00] exchanges, you have people talking about it on podcasts and stuff. Um, you know, you got the, the, the New York agreement. This has got, you know, you got miners, economic nodes, investors, users.

Um, you know, this was kind of like a, a, an agreement that took place before the Consensus Conference in 2017. It was kind of a secret industry meeting where like the bunch of people from all these different companies got together to try and, um, you know, discuss a Bitcoin fork basically.

I think that that was one of the things that was really, there was no protocol developers that I'm aware of, uh, involved in the New York Agreement, which is part of what made the New York agreement a little bit, uh, controversial, is that it was kind of like, you know, um, you know, again, this is always a, a debate that, you know, like a philosophical debate.

There are some people who are like, oh, well, the. You know, Bitcoin protocol developers are like an elite few who get to dictate what happens with this. And, um, you know, but then the, the counterargument about is like, well, no, the Bitcoin protocol [00:23:00] developers are the people who put in the proof of work to demonstrate they actually know how this technology work and their opinions matter.

Right. So, um, but yes, this was kind of, I, I mean, I see it as kind of a result. Revolt against the protocol devs. Yeah.

AUDIENCE: Um, so this is all well before my time, so I really don't know a lot about the conversations that happened. My understanding is that you basically had a bunch of big economic actors, like some miners, and it's some big exchanges who thought that best thing for Bitcoin for their businesses would be to increase the block size was a hard fork.

Stephen DeLorme: Mm-hmm.

AUDIENCE: And they lost. Um, my question is, had they pursued a soft for, and they recognized that hard forks were no good, like absolutely no case can. They were saying some other conversations coming right now around like OP_CAT or op, like CTV, um, do you think that the lesson would [00:24:00] be the same, the result would be the same?

Stephen DeLorme: Hmm, that's a good question. So if they had tried to pursue, if the miners and other, uh, economic node actors had tried to pursue a soft fork instead of a hard fork, would the lesson be the same

AUDIENCE: without protocol developer consent? Like, like core, core, like the big for contributor consent, they were against it, but they went with anyway they up cap, for example?

Stephen DeLorme: That would be interesting. Uh, I, I think the lesson might be the same still. Um, because the thing about it is that a, a soft fork could still result in a chain split, uh, either way. So I think that like hard forks are definitely. Uh, contentious and Bitcoin, but Soft Forks are contentious as well. Like hard forks are almost kind of like, I feel like they're kind of like, it's kind of like the Overton window has shifted to where they're not even discussed anymore.

Whereas with Soft Forks you can still, like soft Forks are like in [00:25:00] the Overton window, I feel like, but they're still, they're still like considered risky and dangerous. Right.

AUDIENCE: The risk is, would be, I guess, from the perspective of the user that they use the soft fork and there isn't actually a majority of hash power behind it, and they're funding getting stolen through a

Stephen DeLorme: Yeah.

Yeah.

AUDIENCE: So I guess the, the risk in that regard is not that you have like two versions of Bitcoin, but rather just the user loses their money.

Stephen DeLorme: Yeah.

AUDIENCE: Um, and so I, I just find it interesting 'cause like, like there's, there's this lesson I feel that was learned and I, and just well before time, I don't really know what happened.

But it seems like we almost maybe swung in a direction which was maybe too strong the other way, which is there is no role for economic actors in this process. It's purely an open source thing led by the core developers. When you could make an art, you could had it on differently. Maybe the less would be that [00:26:00] there is checks and balances, but, um, anyone can contribute to core, anyone can for it and

Sure.

Yeah. Question

maybe to refre, uh, maybe, uh, to rephrase, uh, Joshua's, uh, question, is it possible for large economic actors to like force a change in, even with protocol developers not wanting it? So,

Stephen DeLorme: yeah,

AUDIENCE: because I think we could add like. ETF. Mm-hmm. And, and now even potentially Sovereign Wealth Fund kind of actors into that second column here, that might create more momentum for a potential change that may be counter

Stephen DeLorme: Sure.

AUDIENCE: To what developers would be wanting.

Stephen DeLorme: I think let's just keep going because I think it'll all become clear as we keep going. Uh, I think what the authors of this paper are actually saying is that like it already does happen that way. Like, uh, already what they're trying to say here is [00:27:00] economic nodes already do exert influence, um, in media.

Influencers do exert influence, users do exert influence. All these groups do exert influence. And so that's actually the point of this process is that all of these stakeholders do have power and they do have influence, but it's the way the, the areas in which they can wield them are limited. So I think that these are valid questions and great points and I think that, um.

You, you, you know, I think someone who's smart enough to work on Bitcoin core protocol design. I, I, I don't wanna put words in anybody's mouth, but I think it's kind of like, I, I think that, uh, that the discussion around the protocol, you kind of have to be able to carry your weight, uh, like intellectually to be able to have really, really serious, meaningful conversations about the protocol.

And it, it might be, yeah, I mean, it's kind of like you have to put in the proof of work to show, you can have a discussion about the protocol. Um, but having said that, whether economic nodes, all these stakeholders, [00:28:00] they all have power. And so that's kind of like what this whole paper is talking about.

Let's move on. 'cause that, that's basically what we're talking about is like, you know, every, everyone's smart in thinking ahead here. This, this is basically what this paper is about. So let's, let's look at this stakeholder powers during a consensus change. This next section of the paper is talking about how stakeholders have varying degrees of power during the course of a consensus change.

And so this graph here, I think lays it out pretty well. You have, uh, different, like the, the, uh, amount of power you have in a given stakeholder class. They say changes over the course of, um, a consensus change. And so I'm not sure if everybody can see the, the color super well. Uh, actually I think, uh, because I have night mode on, on this monitor, I can actually see it, uh, the color's better over here.

So we've got blue line for economic nodes, red line for investors, or I'm sorry, that's a orange. Orange line for investors, green for media [00:29:00] influencers, red for miners. Uh, that is a purple for protocol developers and a black for users. Uh, the purple and the black kind of blend together, but we will roll with it.

So let's say you're gonna make it, you want to, uh, you know, some kind of new feature or some kind of change to the protocol. We'll start at the beginning. We'll roughly say this is protocol ideation. So at this point, investors have the least amount of power. Miners have a little bit of power. Um, then they say that, what is it?

The green, the media influencers have a lot of power and the protocol devs have a lot of power, and the users are kind of in the middle. And so the idea here is that the protocol at the protocol stage, this is where the, the, the protocol devs are at their most powerful because this is during the protocol ideation.

They're, they're, uh, coming up with ideas, whether it's being discussed in GitHub threads, mailing lists, posts, chat rooms, conferences, wherever it is, this is where the ideas are flowing freely. [00:30:00] Um, and a lot of, uh, you know, powerful conversations happening, um, and maybe codes being written, but it's all, you know, experimental kind of stuff, right?

It's not like actual deployable code. Then at this, this time, it, it, it sounds, it's a little counterintuitive seeming at first, but the media influencers, they say actually have a lot of power at this time because this is the point in time when. You know, no one, you know, no one is running this code in production, right?

It's just ideas that developers are talking about and maybe experimenting with on their own laptops. So, of course, podcasters, um, you know, invite them on to talk about their stuff. You know, you've probably watched episodes of like Stefan Lara or Peter McCormack, where they're interviewing some developer and they're talking about some, oh, you know, this OP code's gonna fix everything, right?

Um. That's kind of what that is, is at this time, the media influencers actually have the ability to take ideas that are being discussed on mailing lists and at conferences, and really, really [00:31:00] elevate these ideas and raise awareness, um, in, in people's minds. They also have the ability to bury these ideas or to not talk about them or to talk shit about these ideas, right?

That, that, that these are all on the table, but that's the power that the media influencers have. So they're like the most powerful ones here. Then you get into the idea of the bit being implemented. Implemented is that's, that's where they're writing code for it, they're testing it, all of this kind of stuff.

Um. And then you get over here where it says, merged into core signaling threshold starts. So in this example scenario, we're going to, you know, um, let's say it's SegWit, um, or taproot or something like that. We're gonna actually merge the code into Bitcoin core. Um, and there's going to be a miner signaling mechanism in place, uh, you know, by whatever means, and it happens.

Okay? So at this point, look, the protocol devs and the media influencers actually their power starts to decline. It doesn't go all the way down, but it goes down the middle at this point. [00:32:00] Uh, this is where the miners start to gain more power, because I just said we're talking about a miner signaling mechanism.

So as soon as it's merged into core and that code can be download, that Bitcoin version can be downloaded and the miners can start running it, their power goes way up. They can actually start signaling or not signaling it depends on how they wanna wield their power. Um, also the, uh, the investors, uh, you know, um, uh, go up during this time that they say, um, uh, I wanna double check that in a minute.

I think that was just because the idea that, um, if a, you know, there's the possibility of a, you know, contentious fork, um, investors can kind of, uh, you know, signal, um, what they want to do. Um, the economic nodes are starting to gain, uh, power at this point as well too. And so this is where you start getting into the ideas of like, you know, futures markets and things like that.

And when the signaling threshold. Um, you know, hits [00:33:00] and, you know, it, it, it's actually, uh, you know, the, the, the, the consensus change is actually going to happen because the miners have, um, hit that signaling threshold. The, the economic nodes are at their most powerful. So at this point in time, you know, uh, you know, from the signaling all the way through, it actually hitting, they can do things like launch futures markets.

Like, okay, you know what, if there is a, a chain split or a new coin, well, we can start a futures market for that. Um, or investors could be like, oh man, I don't like these changes to Bitcoin. I'm gonna sell my Bitcoin and, you know, buy some shit Bitcoin instead. Like they, they could do that. And you know, again, wh whether you think Bitcoin price action, you know, is affected by this sort of thing or not, I don't know that's up for discussion, but it's like the investors have all these ways of signaling their preferences.

Based on, um, you know, which exchanges they use, whether they buy their Bitcoin or sell it, whether they, you know, sell off futures on other [00:34:00] coins, things like that. Um, then you have the, this like thing where like the majority of clients, um, uh, start to adopt it. So again, the power shifts a little bit. Um, you know, again, the miners, they, they're still, they still have the ability to kind of choose.

Um, they, they don't have the, the signaling power. They can however, choose if they want to keep mining under the new, um, you know, consensus changes or if they wanna switch back to the old ones. Um, you know, the protocol devs, they, they, their power starts to go down. It doesn't plummet all the way because, uh, you know, the, the, the, the protocol devs and the media influencers, they can, uh, start to shape public discourse.

Like certainly if someone is a very experienced protocol dev, their opinion. Might carry a little bit more weight, um, hopefully carries a lot more weight if they know what they're talking about. Um, you know, the, the media influencers, um, you know, still have big fan followings and all that. Um, [00:35:00] but yeah, uh, the users are, are kind of in the middle here.

They, they don't, they never really get to the, the upper echelons of power here. Um, but, uh, you know, what's, what's kind of interesting though is that the investors, the investors get a, a, you know, the most amount of power at the top. And I'd say a lot of us, you know, a lot of people fall into the category, both users and investors.

This is where investors have a ton of power, because again, if there is a, uh, a chain split or something like that, in the case of like Bitcoin and Bitcoin cash, well, you can sell your Bitcoin cash. For Bitcoin. So you're creating like a, if you sold sell your Bitcoin cash, um, you know, you're, you're hurting the price of Bitcoin cash and then you're also creating more like demand pressure inside of, on the Bitcoin side of things.

So, um, you know, the investors end up wielding, uh, you know, a, a ton of power there. And at this point, I think they show the, the economic node power going down. It's because [00:36:00] once, once, you know, the majority of clients have adopted it, it's really in the hands of the investors at that point for the market to kind of decide, um, if it likes this change or not.

Um, so yeah, they all have powers. It just, it kind of depends. That's what the authors of the paper are saying. Um, any questions, thoughts about, about, about all of that kind of stuff?

AUDIENCE: I guess, uh, just a thought I had about, you know, the economic notes and the investors. Greg, I. So, I mean, I guess that's more of a reason for people to hold their own keys, right?

Because they can vote with their money. Their money being Bitcoin.

Stephen DeLorme: Yeah.

AUDIENCE: They believe to be Bitcoin. Right. So I mean, just looking at it, it, you know, when you think investors nowadays, people think the ETF right? But almost all of 'em, except for one, doesn't even prove they have the keys.

Stephen DeLorme: Yeah.

AUDIENCE: They just say that they, they don't prove it.

Stephen DeLorme: Yeah. And they do argue, uh, earlier in the paper that yes, if you do have self custody, it enables you as an investor to move quicker. Right? I think ultimately it matters how much Bitcoin [00:37:00] you have. Um, because like the more Bitcoin you have, the more kind of, like, if you think of it as a vote. Um, it's kind of like the more Bitcoin you have, the more votes you have.

You know, if you, if if, if, if, if I don't like something and I sell half a Bitcoin cash, that's not as much of a, um, a profound statement as if somebody sells 10 Bitcoin cash for Bitcoin. But certainly, um, if I have self custody, I can move quicker. And so with enough people with self custody Yeah, you, you, you have the ability to move quicker as an investor.

AUDIENCE: Yeah.

'cause I mean there's what, 19.85 million already mine.

Stephen DeLorme: Yeah.

AUDIENCE: And there's supposedly only a couple million on the exchanges, right?

Stephen DeLorme: Yeah.

AUDIENCE: So while they may be looked at as the economic nodes today, the reality is those who hold the keys are the real economic actors in the protocol.

Stephen DeLorme: Yeah.

AUDIENCE: So I think that's just kind of a chart tick.

Stephen DeLorme: Mm-hmm.

AUDIENCE: Advocate for self custody, in my opinion.

Stephen DeLorme: Mm-hmm. Yeah. So did I, oh, sorry, go ahead.

AUDIENCE: I don't know if, uh, this fits into what we were just talking about, but was it ibit that changed their, [00:38:00] their thing such that they can allow for in kind redemption. There was a recent change to one of the ETFs.

Stephen DeLorme: What do you mean when you say in kind redemption?

AUDIENCE: So in kind redemption, everything that was approved last year. Oh yeah. Had, if you, um, if you had like a bunch of it Then there's an option and there's limits and, and you have to be a certain type of investor and stuff. But there was an option you could, you could sell for cash. Well it's just like selling it.

Right. But for a lot of these ETFs they have what they call inkind redemption. So if it's like a gold ETF, then you can take your ETF shares and convert them to gold and they will have to give you the gold. One of the ETFs, I think it was Ibit recently changed such that if you're a big holder of that ETF, you could actually.

Say, give me the Bitcoin that represents this block of of ET TF share. And there would have to be a mechanism which [00:39:00] basically they would've to transfer a certain amount from their holdings into your possession. Again, certain qualifications and stuff, but it kind of, instead of a trust me bro sort of model that the ETFs are under, it's like I could kind of make a run on the ETF.

Like you would make a run on the bank if enough of the major investors wanted to pull out actual Bitcoin, they could show that.

Stephen DeLorme: Mm-hmm.

AUDIENCE: The F actually had it. It's kind of like looking is the golden, the

Stephen DeLorme: Yeah.

AUDIENCE: Knox kind of like thing.

Stephen DeLorme: Yeah. That's cool.

AUDIENCE: So my question in this context is like, does that mean that their economic power is potentially elevated?

If you can move the market or if you can pull, like, I guess, I guess it's really equates the amount of Bitcoin, but equates to the voting power. So in that case, it's kind of slightly elevated based on that, the nature of that ETO, uh, [00:40:00] that's thoughts.

Stephen DeLorme: Yeah, I'm not sure. Uh, I mean, maybe just by having a lot of Bitcoin, uh, I don't know.

so

AUDIENCE: I guess the question that I, that comes is like, could a big hedge fund like rock BlackRock, like. Yeah. Do something in the market that substantively changes any of this consensus.

They could, they somehow exert power in a way.

Stephen DeLorme: Yeah.

AUDIENCE: That is inordinate.

Like

Stephen DeLorme: if they're an investor in Bitcoin, they can do it according to this paper. Again, that's, that's the thing is that the investors have power.

So I'm gonna move us on here, uh, because we got, uh, we got some more, more shit to get through. Um, one point I just wanna highlight here. The fact that the relative powers of the stakeholders fluctuate throughout the consensus change process suggests that stakeholders should have a countercyclical behavior with respect to their state of mind.

That was a maybe a, I don't know, very engineery way of putting it. Um, but [00:41:00] the plain English way of, of saying it is, um, like you don't, like when you need to exercise your power. When, when the time comes, when you are as a stakeholder, you are at your most powerful. You don't want to be stuck in the middle at three or four.

You don't want to be unaware or apathetic of a change when you're the most powerful. So obviously as a protocol dev, you don't want to be. Um, you know, apathetic at the beginning of this process. Um, similarly as an economic node, you don't want to be apathetic or unaware going into this critical part of the change.

You want to follow this and know what it is so that when the time comes where your stakeholder group is the most powerful, you're prepared to act.

so yeah, I mean, again, this is just, this section here is just talking about consensus and Bitcoin. How do you measure it? How do you actually figure out where everybody's at? Um, that's kind of, I think [00:42:00] maybe what you might be, might be getting to, uh, there with your comment is that, um, how do you actually, you know, before you start implementing it, determine how people feel and it's messy.

This is the social layer of Bitcoin. It's not, um, it, there's not an easy way of doing it when it comes to exchanges, economic nodes, you can see their press releases and stuff like that. You can't really see what client, uh, uh, version they're running. But you can see their press release. You can look at their product development announcements.

With investors, you can see how they're feeling by the price of Bitcoin. You can see how competing forks of Bitcoin are doing. Um. You can see, press, press releases from like major investment firms and ETFs and things like that. See what their views are, see how they're investing their money. Um, you know, uh, you know, engagement and views.

That's kind of like how you see, uh, the media influencers, uh, take on it. What, what topics are they choosing to promote and engage with? Um, of [00:43:00] course they say, you know, it's sometimes difficult. You know, you, you know, particularly like with like Twitter, API, if you really wanna scale the Twitter API, um, or if you want to, uh, you know, you know, peruse the Twitter API at scale, I think you gotta play, pay a decent chunk of change.

But, um, assuming you have, uh, have the, the money to pay, you could in theory survey social media for social sentiment. Um, miner signaling, obviously that's the version, bits and the metadata on the blocks you can see press, uh, press releases from major pools. Um, of course. A miner could lie, they could actually, um, you know, do a version bit signal without actually updating to a particular client version.

So there's not always a way of knowing. Oh, with Protocol devs, this is obviously the, the largest one they can write and implement about. Uh, they, they can write about stuff, they can implement code, um, they can advocate for proposals, you know, do press releases, social media posts, talk at conferences, write code, write tests, um, Bitcoin [00:44:00] Inquisition, it's like a CNET for testing new op codes.

You can see what people are merging into Inquisition, what people are actually using on Bitcoin, Inquisit Inquisition. Um, but, you know, you know, again, as I say, developer's influence is often indirect. Um, it, it just kind of depends on if their proposals get accepted, uh, you know, accepted or rejected. And it's also, you know, subject, you know, the, uh, a proposal might be, um, a very strictly defined, um.

Uh, you know, piece of code within the, the, the mind of the protocol engineer, but it's kind of gonna be interpreted by the community and the way that, you know, people want to interpret it. And it's not always, uh, you know, maybe it's accurate, maybe it's not, but it is gonna be interpreted in a different way.

And then users and application devs, um, you know, again, press releases, product developments, all that. Again, application devs and users are in the same bucket. Um, but again, it's hard. Um, they also say, you know, like you can actually measure how people feel about stuff by [00:45:00] the absence of press releases or the absence of, you know, you know, commentary online.

If you see a company or an individual not talking about something, um, maybe that's a signal that they're not into it, or maybe they are into it and, uh, their company is working on something with this new. A consensus change and they can't talk about, 'cause it's considered a, a, a trade secret. So, um, you know, they, they suggest that, um, maybe, um, as a stakeholder, whatever kind of stakeholder you are, if you see, uh, another stakeholder who's kind of being silent on an issue, maybe you wanna kind of talk to them, have a one-on-one chat, just kind of, you know, uh, gauge the temperature, how they feel about a certain proposal.

That way you can figure out what state of mind they're in. Um, and, and, and all of that. But measuring actual, like social layer, human consensus is messy. And it's, it's, it's not something that we can do accurately. They do suggest some [00:46:00] ideas for, um, how we maybe could improve this process. Um, you know, if we had more transparency from economic nodes, that's basically like exchanges telling you what version of bitcoin core they're running and like publishing it very publicly and openly.

Um, you could have, uh, prediction markets for, uh, Bitcoin protocol changes. So, um, you know, you got poly market. It's a super fascinating, uh, you know, it's, it's a, it's a. You know, alt coin protocol sort of thing. So, you know, I don't love that. But the, the product itself is fascinating 'cause you can see people bidding on all kinds of stuff, like from, you know, who's gonna win the election to, who's gonna win the Super Bowl to like, you know, is this celebrity gonna say this word in the next 12 months on tv?

Um, and, uh, maybe you, uh, could make some kind of Bitcoin based, uh, prediction market, um, for certain protocol changes. Um, prediction markets, um, with enough scale and enough market liquidity seem to do a good job of predicting things. Um, but you know, that's maybe [00:47:00] dinner conversation. Um, maybe there's an implementation of an anonymous cryptographic at a station mechanism.

So it could allow stakeholders like a, you know, a large Bitcoin holder or a frequent transactor to, um, you know, sign a message saying they agree with a change without, uh, revealing their identity. Um, that's a little kind. Hand wavy and woo woo to me, uh, that's some real, you know, moon math cryptographic black magic.

I'm not entirely sure how that, that that would, um, work, but I mean, if you just kind of squint at the idea, it sounds kind of cool. Um, and then aggregation websites that summarize support, um, or lack of support for different protocols. So like, you know, for anyone that's been following my user experience work over the couple of years, I've launched websites like bitcoin qr.dev, and, uh, I've helped with the Bolt twelve.org redesign and also win taproot.org.

These are simple websites that show like, well, which company and Wallet supports? Taproot addresses which company and wallet supports. [00:48:00] Uh, bolt 12, which supports, uh, BIP 21, you know, uh, QR codes with lightning parameters embedded. These are like simple application layer things. What if you took that idea but you scaled it to something much bigger industry-wide and made it for protocol changes instead of for like the little dinky application there stuff I do.

Um. So, yeah. Um, we're gonna get into some like, uh, you know, you know, interesting weird territory here and, um, I, I, I kind of don't wanna take questions on that previous one 'cause I wanna make sure we get into the, like, the really crazy, weird chain split stuff that I think everyone will find fascinating.

Now, when I was reading this, I was initially a little bit conflicted with the order in which they laid out the information in this paper and I thought about rearranging it for everybody and putting chain splits at the beginning. But then after getting through it, I realized I don't really know the best way to organize this content.

It's Bitcoin. [00:49:00] It's a lot to wrap your head around. Um, so at this part of the people, they start talking about how, like, okay, most of the consensus changes, or really all of 'em so far have been in Bitcoin core in the future. Maybe that's not the case. Maybe people start making. Uh, Bitcoin written in other programming languages.

And, um, it was, you know, and, and maybe these, uh, uh, new Bitcoin clients actually, um, actually, you know, uh, gain adoption or maybe people actually wanna run these clients. Um, so they call these alternative consensus clients, um, and, you know, they, they highlight, it's a major departure. It could involve risks, but it, it is an option.

Um, so, you know, there could be different, um, you know, motivations for that sort of thing. Um. You know, you know, economic nodes, maybe they has something to do with more trading or more fees. Um, with the media influencers, maybe it's, you know, just a, a chance to be in the spotlight. You know, [00:50:00] potential to gain attention and credibility, be seen as promoting innovation, all of this kind of stuff.

Um, you know, maybe miners want to get more transaction fees out of the whole deal. Um, maybe protocol devs want to add new features, all this kind of stuff. But if you get to a point to where we can't do that in Bitcoin core, then people, you know, could start pursuing these alternative consensus clients.

So they lay out this kind of nice little flow chart here. It's like your upgrade pass for Bitcoin are right now we're here. You get your upgrade merged into Bitcoin core, and it basically is gonna happen probably like historical network upgrades, like Segway and Taproot. It could instead be upgrade, could be merged into an alternative client.

And if it doesn't reach miner, uh, hash rate threshold, then you know, the alternative client fails to activate the upgrade. And, you know, people probably, excuse me, probably stop using it. Um, it could be that it actually reaches a miner hash rate, you know, threshold. [00:51:00] Um, and if there is low or medium economic node adoption, meaning if exchanges the economic node actors, uh, fail to adopt the alternative, uh, consensus client, or they don't, you know, not enough of 'em do, then you're gonna have a chain split, which we're gonna get to.

If a high economic node adoption happens, then you could have a world with alternative consensus clients. And maybe that's the future. But what could happen though is that, that other path, that chain split risk. So what is a chain split? So a chain split's the scenario where the blockchain forks into two chains and you basically have two coins and you know, this has happened.

Um. You know, a a a couple times in like Bitcoin and blockchain history? Um, I wanna say some, I, I might be wrong in this, but I, I want to say it happened in the very, very early days of Bitcoin when there was like, hardly anybody working on it. Um, you know, this must like 2010 or something, 2011, and the protocol devs [00:52:00] very quickly, like hashed it out and got it fixed, right?

So there was a chain split in the early days in Bitcoin, I believe. Um, it happened in Ethereum, I think in like, uh, 2021, um, due to a bug between like, uh, uh, between two different, um, implementations of Ethereum. Um, it also happened, uh, you know, with us, with, uh, Bitcoin and Bitcoin cash, you know, we ended up with two different coins.

So there was Ethereum, the chain split in a 2016 after the DAO hack. Um, you know, basically, uh, these hackers stole a bunch of money from a smart contract. I'm kind of paraphrasing. And, um, you know, some people in the Ethereum community wanted to roll that back and take the money back from the attackers, give it back to, uh, the rightful owners.

And, you know, some people didn't. And so it forked into Ethereum and Ethereum Classic. Um, some people did not upgrade to the Ethereum client that, um, uh, rolled back those transactions. And so you ended up with a chain split. Um, so whenever there's a significant disagreement like this [00:53:00] over protocol consensus rules, this is gonna create, um, uh, a chain split.

AUDIENCE: Just a quick note of the recent, uh, $1.5 billion Ethereum heist, uh, with that occurred, I don't think there's any rolling it back, but there was discussion. It seemed about doing a rollback.

Stephen DeLorme: Oh boy.

AUDIENCE: Applications might be. Uh, I, I think now we've gone way too far to like even consider it, but there was, it seemed like a window of time when the Ethereum community was considering rolling it back, which would've probably tanked their whole project, in my opinion, but

Stephen DeLorme: Wow.

AUDIENCE: That's like, uh, it, these things do happen and these, these issues come up.

Stephen DeLorme: Yeah. That's wild times. And that, that would've been crazy if there had been another split. but for anyone, so for anyone who's not kind of, uh, away, you know, has never been in Bitcoin for a chain split, you know, for those of us who are here during the Bitcoin cash fork, [00:54:00] you end up with money on both chains.

That's the weird thing about it, and that's, that, that's the kind of hard thing to think about, but it's because the blockchain has diverged. It's like you have this ledger with all these pages in the ledger that you're stacking up, and then suddenly it forks. And it's like both chains are the same up until a point, but then it forks off over here and over here, and you, you, they, they then have different histories after that point in time.

Um, this is, you know, it's like imagine, you know, uh, uh, I don't know. Imagine the time travel movie where someone, you know, fails to, uh, you know, uh, goes back in time and prevents their friend from getting killed, and then you end up with two timelines. One where their friend is alive and one where their friend is dead.

Same basic idea. Um, you know, conceptually, scientifically science fiction, metaphorically speaking. You end up with coins on both chains. So this is where the economic nodes, uh, you know, come in, in into play. It's this like market warfare of like, which coin do people wanna hold? Are you [00:55:00] apathetic? Are you in the middle?

Are you, state of mind, three and four, and you're just gonna hold onto coins on both chains and see what happens? Are you for the chain and you're gonna sell the original chain and hold onto the split? Or are you against the change and you're gonna, you know, uh, you know, sell the old and buy the new? Like, what are you gonna do?

Um, but you know, the, the, the economic nodes. So investors have a, a role to play in that, and the economic nodes have a role to play in that because they can assign ticker symbols and they can, you know, choose which kinds of markets they wanna honor and all that kind of stuff. Um, so you also have the idea of hash rate allocation.

So miners have a role to play during a chain split. Um, miners can decide which chain, uh, that they want to, uh, direct their hash power at. Um, and if a bunch of, you know, miners move to one chain, the other chain could be 51% attacked. Like right now, we, you know, we talk about, you know, what, what if Bitcoin could be 51% attacked?

What if all the [00:56:00] largest pools were one, one player? Well, imagine if all the hash power in Bitcoin or like a whole bunch of it suddenly started mining something else. Well, then I. You would have, you could probably have a 51% attack. Um, you also have this idea of replay attacks, which is an interesting one.

You might remember this from the block size wars. Replay attacks are basically like, let's say I have, um, uh, a transaction on Bitcoin and I broadcast a transaction to send somebody some Bitcoin. But somewhere along the way this, um, you know, uh, Bitcoin transaction I broadcasted makes its way over to a Bitcoin cash node.

And, uh, my Bitcoin cash, uh, accidentally gets spent as well, or vice versa, right? So you have this situation where you only intended to spend your coins on one chain, but you know, it accidentally got spent on both chains. Um, so these are replay attacks and I believe with, uh, I believe there were replay attacks, um, replay, attack, uh, mechanisms, like [00:57:00] prevention mechanisms put in place, um, uh, uh, before segment was activated.

But, uh, I might need to be corrected on that. so you know, the long-term viability, it's like the success of each change depends on its ability to garner sufficient economic activity.

You need people using the chain for economic activity. You need developer support. You need, you need miner participation. Um, there's also like this debate kind of, that can happen in a chain split. Like which one is the real Bitcoin? And I think at this point, you know, we all feel like, hey, Bitcoin's the real Bitcoin.

It's the one called BTC, it's Bitcoin core, right? And um, but this is like a ideological difference. If you, you're on the other side of that, maybe you think the other one's, you know, Bitcoin. Um, so yeah, chain splits are, uh, uh, pretty, um, you know, uh, pretty, uh, scary situation.

Um, oh yeah, this is what I really wanted to get into is like all these, these things right here. Okay. So there's this idea that after a consensus chain [00:58:00] change comes into effect, um, like let's say the miner signal for it and, you know, the consensus change updates, miners could still change their tune, right?

So like, let's say you have these blue blocks, which are the newly proposed rules. These are like, call these the soft fork blocks. These are like the blocks that have some new Bitcoin feature that was just activated. So this consensus changes activated where mining blue blocks that contain all of our new rules, and then somebody broadcasts a legacy transaction that's like, you know, um, not viable under the new tightened rule set, but they broadcast it, but it has a ton of fees associated with it.

It's like, yeah, it, you're a miner and you see this transaction come in and it's like, okay, these aren't the new rules. These are the old rules. But there's a ton of fees here. I kind of want to include these transactions in a block, even though it breaks, it's the old rules and not the new rules called a bribe.

Called a bribe. Banjo [00:59:00] says, yeah, this is, that's exactly what can happen. So in this scenario right here, the pool mines it.

So you have a new rule block and new rule block, and then miners start, you know, mining these legacy rule blocks. Um, and, uh, they, they, they get into this idea of a bounty. So the idea is, let's see, a consensus change, uh, has just been confirmed and like, you know, the last block or whatever.

And as users, we're all gung-ho and it's like, yeah, they just, you know, you know, activated some like really cool new op code that like allows me to secure my Bitcoin in some novel and interesting way. So I'm gonna send it to like, you know, this particular address and lock my coins up in this newly activated op code.

Okay. What you've just done there is you've created a bounty on your coins. You have created a bounty, um, that incentivizes malicious miners to change the rules and use the old client,

Stephen D's video recording: uh, because let's say I'm like, [01:00:00] yeah, you know, let's say I'm like super rich and I've got like 10 Bitcoin or something.

Like, I love this new op code. I'm gonna send, I'm gonna lock up 10 Bitcoin with this new op code. Well now I've just created a 10 Bitcoin incentive for the miners to change the rules on me. So, you know, I. I, I newly proposed rules transaction. I, I put my, my, my Bitcoin in this new op code, it gets mined in a block.

I put another, uh, you know, one in there. It gets mined in a block. Something is weird about the font, uh, color on this. I don't know why it's like showing up so light, but it says newly proposed rules. Block Bounty, 200 Bitcoin. I've sent 200 Bitcoin to an address locked up in a novel new op code that was just activated.

So then somebody, uh, sees this and they're like, well, under the old rule set, uh, you know, my, if I use an older Bitcoin client, it doesn't recognize the new, the newly tightened rule you're using. So I could actually spend that transaction. And [01:01:00] then a pool sees it, a mining pool sees it, and they mine it.

This creates a chain split, and so there's one, uh, there's one block over here, uh, that, that still has my Bitcoin in it. It still has my 200 Bitcoin in it. And then in the legacy rules, fork miners are mining blocks that have basically stolen by Bitcoin. So there's a chain split there. And you know, I mean, it's, it's an interesting thing.

Then it's like, well, which chain wins? And obviously my Bitcoin is on, you know, I want the blue chain to win because it has my 200 Bitcoin locked up in this novel new op code. But what if the orange chain wins? What? Sorry?

AUDIENCE: Only one miner's gonna get that 200 Bitcoin, right? So why would all the other miners on top?

Stephen D's video recording: Well, well think about it like this. So what if, um, what if I. Um, what if there, what if? And instead of just thinking about it as me, uh, locking up my, say, 200 Bitcoin in this, uh, uh, [01:02:00] you know, new op code, let's say a lot of people do it. So let's say all around the world, a bunch of people start, you know, locking up their Bitcoin in this new op code.

So a bunch of people create transactions spending the coins from the new op code, and they pay a huge transaction fee to the miners because you're stealing somebody's Bitcoin, right? So it's like, it was a hundred Bitcoin. As a miner, I could just pay you 10 Bitcoin and you'd probably be good with it, right?

Like, that would probably be enough for you. And let's say I broadcasted a ton of these transactions, a lot of miners would probably wanna scoop up that money, right? So, but I, I mean, it just depends on how much, if there's enough of these bounty transactions being claimed, maybe enough evil miners start mining these blocks to where.

You know, to gain the transaction fees to where they don't wanna roll it back.

AUDIENCE: So it's almost like the bounty has to reach like a critical mass to incentivize miners to cause a change [01:03:00] split.

Stephen D's video recording: I think that's a good way of putting it. That, yeah, I, I, I, that would be the way I would imagine it is that the bounty would need to hit a critical mass to incentivize enough miners to want to split.

Yeah.

AUDIENCE: So the inference here is do not use a new feature for some period of time after it starts.

Stephen D's video recording: I think that is a correct inference to not use a new feature for a little bit of time. Like maybe I. If a, if a new consensus change comes into effect, maybe don't send out of an abundance of caution. Perhaps don't send your coins to any kind of, uh, address or script that, um, you know, utilizes some novel new feature until the network is kind of stabilized and we're certain that there's not a chain split and, and, and all of that.

Um, so yeah. Um, I, so I think that's about it. Um, that, you know, we, we've kind of beaten the bounty thing to death. Um, and I, I think I'm gonna go ahead and [01:04:00] just bring us to a conclusion here. Um, yeah, that's probably it. There's a lot of stuff we could talk about here. Um, oh, I think this might be a good place to just kind of wrap it up right here.

So this is kind of the, the final questions that the, the author has put forth. I'm gonna, I. It's not super long list. I'm not gonna like read every line in this. I'm just gonna cover the key bullet points. Um, so assessing whether a proposed change is achieved consensus can be challenging due to bitcoin's decentralized nature.

Consensus is not formalized through votes, but it's instead gauged by the absence of strong sustained opposition and the overall sentiment of the community. So you can look to several indicators and resources. So I say one mailing list discussions two. GitHub activity three, the BIP process. We talk about those a lot at bit devs.

People writing these documents with suggestive improvements. Uh, technical conferences, workshops, podcasts, uh, miner signaling, node adoption, economic node statements. In other words, press releases from exchanges, tweets from [01:05:00] exchanges, things like that. Um, community sentiment. This is a little squishier and soft, but how do people talk about it at your local bit?

Devs meetup. How do, um, you know, uh, you know, people talk about it on Twitter, just this kind of, what's the vibe when talking about something? Technical analysis and reviews, like looking for people that have really reviewed the code for new changes. What do they say about it? Um, have people run this on Testnet and cnet, and if so, are people using it on Testnet and cnet?

And is it working? Is it working as expected? Are there bugs? That sort of stuff. Um, market sentiment, you know, derivatives, futures, the price of Bitcoin itself. Um, and then user activation. This is the extreme case of people actually using UASF clients. So these are all things that, whatever kind of stakeholder you are, and I think a lot of us in the room, we probably fall into multiple stakeholder categories here.

Um, and only you can know which of those categories you fall into. Um, but you know, we, we all, I think [01:06:00] belong to a, a different subsets of different stakeholder categories. That's, that according to all those paper that's, that's, uh, from what they've analyzed, that's how this process works. So now you know your powers, you know, when you're the most powerful, you, your, your, your role is to go out into the world now and be involved in these discussions and figure out how to, uh, best exercise your power, um, so that you get the Bitcoin that you want.

So that's, that's it. That's tonight's conversation.

Stephen DeLorme: Hey, thanks for listening. I hope you enjoyed this episode. If you want to learn more about anything that we discussed, you can look for links in the show notes that should be in your podcast player, or you can go to atlbitlab. com slash podcast on a final note. If you found this information useful and you want to help support us, you can always send us a tip in Bitcoin.

Your support really helps us that we can keep [01:07:00] bringing you content like this. All right. Catch you later.