Allen Piscitello, Blockstream’s Director of Product Management whose main professional focus has been on the Liquid Network, has agreed to answer to a few of Vlad Costea’s questions. This interview is part of Crypto Insider’s celebration of Bitcoin’s tenth anniversary, as Satoshi Nakamoto has famously published the Bitcoin Whitepaper on October 31st 2008.
Conceptually, it’s fascinating to observe how far Bitcoin has come: we’ve reached the point where sidechains and second layer solutions are realistic and functional implementations, so Satoshi’s vision of having a scalable competition for banks while retaining accessibility and decentralization is closer to us than ever. However, Blockstream has managed to become a divisive entity in the Bitcoin community, as some members have questioned its legitimacy and its intentions. On one hand, it’s the most upfront, vocal, and involved company in the development of every project which seeks to build layers on top of Bitcoin without compromising the decentralization of the network. On the other and, it seems to be centralizing the talent, the brains, and the resources under a common institutional umbrella, and this type of arrangement is bound to attract criticism.
For the purpose of describing Blockstream’s latest releases and the overall involvement in projects such as the Lightning Network and Bitcoin Core, Allen Piscitello has agreed to speak to Vlad Costea and answer to both uncomfortable and PR-friendly questions about the products. As a bonus, the video attached and the transcript also contain a brief dialogue about Magical Crypto Friends, the show which is sometimes deemed as “Blockstream propaganda”.
There’s no better way to celebrate this unique anniversary than to get an insight on the future of Bitcoin — and whether you like it or not, the company founded by the likes of Adam Back, Gregory Maxwell, Mark Friedenbach, Pieter Wuille, Jonathan Wilkins, Erik Svenson, and Jorge Timon is the pioneering entity which takes Satoshi Nakamoto’s invention to unprecedented highs.
Vlad: Hello and welcome to the Crypto Insider interview! I’m Vlad and today I will be interviewing Allen Piscitello who works for Blockstream, and I’m going to allow him to introduce himself and distinguish between whether or not he speaks on his behalf, or he mentions whatever the statement or the views of the company are. And please, you may speak right now.
Allen Piscitello: Alright, yes. My name is Allen Piscitello, the Director of Product Management of Blockstream. That’s what my job is, to help define products that we build at Blockstream. My focus has mostly been on Liquid, which we just released in the last couple of weeks, we have quite a few different exchanges, financial institutions, brokers, traders on this platform to have faster and more private Bitcoin transactions along with other assets. I’ve been at Blockstream for just over a year, I’ve been in the Bitcoin space for nearly seven years as well. So I’ve been following Blockstream since the very beginning and have only recently joined. So thanks for having me on, Vlad!
Vlad: Oh, this is a privilege! It’s the first time when I speak with somebody from Blockstream. And there is some sort of mystification of Blockstream going on online. If you read many threads on Reddit, they’re going to mention “Oh these people are not very transparent. They don’t want to speak. They’re concealing themselves from the public eye!”. And I even watched a video, which I think was on the Monero threads, and it was at some conference where Adam Back was also attending. And Fluffy Pony just went there to the reporter and gave and interview while Adam Back had to be persuaded, and he was a little more reluctant to speak to the reporters. Is it just because he’s shy, or do you think he has something to conceal from the reporters, as they might ask malevolent questions?
Allen Piscitello: I think it depends on the situation, I know Adam’s definitely one of the more shy people out there. I remember one of my first exposures to Adam, actually, was in 2013 when there was a big deal that they had him on a podcast. And he was very, I think, quiet. He didn’t say very much about things and that’s changed a lot over the years: he’s been speaking at a lot of conferences and he’s been fairly influential in the space. But you know, I think that his comfort zone is in building cryptographic systems and coming up with great ideas rather than being the PR frontman. So I think that might be part of what was going on, I think there’s also a little bit of concern because there are a lot of not-so-fair journalists who do have an agenda. You know, some random stranger comes up, it might not be clear if it’s someone looking to get a “Gotcha!” moment or someone looking to have an honest interview. So I think that might be part of it as well. But I wasn’t there, I can’t speak exactly for what it is, I can only speculate on what it is based on how I know Adam.
Adam’s always been someone who’s been very open within the company, and very active in the community. Adam was in the Core Slack for many years talking to people and very open and transparent to everything he’s told me back then, before I was at Blockstream. I think he just needs to be in his comfort zone.
Vlad: Okay, but why do you think there’s so much criticism about him? Because after all, he’s an OG cypherpunk, he’s the one who invented the Proof of Work consensus system, and a lot of people seem to question whether or not he’s qualified. And when I say “a lot of people”, they might be from r/BTC and they might be associated with Roger Ver or Jihan. But why do they hate him personally?
Allen Piscitello: I think that you need a target. You know, the biggest way to align a group of people who maybe would not be aligned politically is to find the common enemy. So Blockstream became this target mainly because there were so many influential people in the space that, on their own, joined together and formed this company. And then it made an easy target for a lot of people. And a lot of these people were, you know, engineering and technical folks who just want to write great code and that’s their focus. They’re not interested in PR, playing games, and politics. And they became an easy target and, you know, I think Adam wasn’t a target for a while. Adam had been involved in a couple of things in the past with the Hong Kong Agreement, but I think Greg Maxwell took the brunt of it for a long time and I think that was very unfair. He just wanted to write code and I think he’s off doing things doing on Bitcoin now that the target is gone. So they need a new target, and the clear target is someone who is the biggest figurehead in the company. He’s the one that they can point their sights at and fire away. Adam, I think, was pretty good about not taking it personally and not letting it bother him, I think a lot of people are just out there because they need an enemy to fight, otherwise they wouldn’t be able to stay aligned and they wouldn’t be able to have a way to keep from infighting.
Vlad: Now let’s move away from all the gossip and all the rumors. Let’s talk something more concrete, like the launch of Liquid.
Allen Piscitello: Absolutely, yes. Do you have something specific there Vlad, or should I fire away?
Vlad: Yes, personally I wrote an article about it and I’ve actually asked Samson to review it and tell me if I got anything wrong. Because in the FAQ section there weren’t many technical mentions, they tried to put it in layman terms and maybe explain so that anyone can understand, but there are some concerns which I personally had with the idea of having geographical diversity, in the sense that you have to have as many exchanges from as many countries and as many continents as possible, so that you avoid a concentration of power in one area. And this is healthy for the democratic consensus decision-making between the participants of the side-chain.
But let’s imagine that you have… actually you have a concentration of exchanges because China and the United States have many more exchanges than most countries. But in the future if you have an American exchange which wants to join, do you think that there will be a queue waiting in line for another Chinese exchange to be interested in joining so that they can balance the consensus?
Allen Piscitello: Yes, so we do have a requirement of the network to make sure that the risk is distributed both politically and geographically. We don’t want a natural disaster to take out enough of the network to take it down. This would likely happen in a single place and we don’t want any political events to take down the network. As you know, there are certain countries that have been harder on exchanges than others, and so we want to make sure that it’s balanced. And we can balance this by having two different levels of membership in the network: we have the functionary members who are running the servers and the network, and then we have what’s called participants. So if we ever get to a point where there’s too many in one region, I actually worked out it… we actually had just naturally that spread, it wasn’t even intentional to go like recruit certain regions or anything like that. But if we ever got to that point, we’d be able to add people as participants in that region without having to have a functionary there. But I think in the future, it worked out pretty naturally in this time and we didn’t want to have any more than four in any particular country or region, and we actually never had more than three. So we actually have a buffer in that, and that worked out pretty well.
In the future, as the federation expands, all these members who are participants would like to have them be functionaries in the future and you know, as they do that, the federation will grow and that number that can go in a single region also goes up. So because the number is actually… I don’t know, more than one third of the network in a single region, that means that we are pretty unlikely to have that much concentration in any particular region. You mentioned China and the US: it’s actually interesting, as China I think only has one exchange there, and in the US it’s actually not exchanges that we have; we have some financial institutions and other parties that are being the functionaries in the US. So it’s a pretty natural mix that we had just from talking to people.
Vlad: I remember when it was launched, that some people were outraged by the idea and they did not understand that it’s a second layer. So if it fails, it’s not going to affect the main chain in any way, and also I guess there was enthusiasm prior to the release. I mean, people have known about Liquid about 3 years or something?
Allen Piscitello: I think that’s probably right, I think we’ve announced it three years ago.
Vlad: And then at the launch, there was just this wave of criticism going around on Twitter, on Bitcoin Talk. And do you think this was just part of the opposition trying to attack your idea?
Allen Piscitello: I don’t think it was just the opposition trying to attack the idea. I just think there were some people trying to understand the model and maybe didn’t think about it before this point. So we announced the sidechains whitepaper when the company was founded, we’ve announced Liquid pretty early and we also did the strong federation’s whitepaper fairly early as well. So this whole idea of the federated sidechain has been around for a while. But it’s been in very academic papers, and probably didn’t make its way very deep on Reddit or Twitter. A lot of people just saw side chains and realized you just thought about the original merged mining idea.
That’s still something we’re interested in and we wanna pursue. The state of mining has been very centralized and it really harms the security of that model, so we wanted to also look at other models that might be viable in the near term and the federated model actually is required for the Liquid use case. And even if we had merged mining, it wouldn’t actually be able to solve Liquid as well. The Liquid use case as well, and the reason for this is we want to have… and one of the problems that people have with moving money between exchanges is you want to have a fast settlement time and you want it reliably.
So, in that case, in the case of mining, you’re always going to have variance that there might not be a block for a long time. And that’s just the nature of mining. And so the federated model was the only way to guarantee that that was in there. The other part is that people were using the yardstick of comparing Liquid with Bitcoin. As you mentioned, Liquid is the second layer, it’s independent, it’s people doing things on their own, it doesn’t affect the main chain in any way.
A big part is that we are very passionate about making sure that Liquid stays decentralized and trustless at the base layer. Because you can still build other decentralized layers on top, like Lightning, and you can build more centralized systems on top as well, like Liquid. And that’s different use cases, different trade-offs, different benefits, and people can choose to use on or the other without affecting the underlying currency. So yeah, the yardstick was really comparing Liquid to Bitcoin, when reality is that the use case that Liquid is replacing or enhancing is the case where it’s completely centralized today. So the use case you have if you’re trading on an exchange, in order to actually be able to trade reliably, you need to just leave a lot of funds on these exchanges.
And we know going back to the days of Mt. Gox and every year it seems like this happens: if you leave money on an exchange, bad things can happen. And when you’re trusting a single party, there can be insiders that take your funds, there can be bugs that make your funds get lost, there can be hacker that attack it. And so the idea is that you’re moving from a single custodian when you’re holding funds with Liquid, to a group of the functionaries where it would be much harder to attack all of these different entities all around the world, all with their own data centers, all with their servers that we don’t even know where they’re at. So it’s a very challenging problem for someone who’s trying to attack the network. This is why the yardstick for Liquid is: if your alternative is leaving money on a single exchange, Liquid is definitely going to be an improvement for you because now you’re trusting a federation of exchanges.
If your yardstick before was “I’m holding my Bitcoin on my own, I don’t trust anyone, I don’t anyone to mess with them, I don’t want to ever worry”, then you shouldn’t be putting your coins in Liquid. It’s a different model, has different features, has different benefits, and then as soon as you’re done using Liquid you can always move your coins back to the Bitcoin network and take advantage of all the properties you have of Bitcoin.
Vlad: You’ve mentioned the Lightning Network and I know that Blockstream is always involved in developing the Lightning Network. But how different or how do you explain the difference between Lightning and Liquid?
Allen Piscitello: Yes, so this comes up a lot, there’s a lot of confusion with the difference between Liquid and Lightning. There’s differently some overlap, both will allow you to send you payments much faster than you would otherwise do. With Lightning you don’t even have to wait 2 mite settlement, you’re getting your payment very quickly. Lightning is using a more reactive security model, so if someone tried to steal your funds, you have a time when you can go and reclaim all the funds in the channel so that’s a different security model. It’s not necessarily that one’s better than the other. But the big thing is that Lightning is very much geared towards micropayments and that’s just the nature of the network. The Lightning itself, you need to have channels with available funds along routes in the network. Really what that means in reality is you’re gonna have a lot of channels open that you maybe aren’t able to utilize for every single payment. For most micro transactions from small payments, any kind of retail use case that’s usually fine if you have a hundred dollars tied up on five different channels and you have to pay $5 for coffee. No problem, you’ll be able to find the channel that does that.
Now if you’re a large trader and you’re looking to move 1000 Bitcoin and you’re gonna want to move it between one exchange an another, you’re going to need to have enough capacity of all these different channels to move all those funds to any of different exchanges you want. So the channel capacity and routing issue becomes a little bit more amplified in this case. So that’s a use case where Lightning isn’t necessarily as well suited. And then the other part too is that Liquid has another feature that Lightning doesn’t have at all, and that’s issued assets. So Liquid has the ability to issue any arbitrary assets on the platform. They can represent anything from fiat tokens, crypto lions, or any other asset type that you want. And that’s not at the Bitcoin base layer. But if we look for Liquid to scale in the future to even much larger numbers than we have today, we’re actually looking to build Lightning on top of Liquid. So that’s actually an investment that’s useful for Bitcoin and also will be useful for Liquid. The ability is that you can even pay any asset using Lightning as well.
Now that’s something that will take some time, we’re gonna get it perfect on Bitcoin before we’re certain that we get to Liquid. But it’s something that is going to be very beneficial for using Liquid in the future for more use cases.
Vlad: This doesn’t have to be an official statement, it can be your opinion. But which coins do you think will join Liquid in the near future? Because so far it’s only available for Bitcoin, right?
Allen Piscitello: We actually looked at this: can we have an official consensus-based peg for other coins? And people are wanting to have every coin under the sun on Liquid. And really, there are a couple requirements for getting a coin that would even be worth considering to have as a consensus-based peg. The requirements would have to be that there’s a history of being able to leave the hands off, the chain has to be secure, it’s unlikely that any kind of Proof of Work rollbacks would occur if any kind of hard fork where there’s manual intervention require… that’s gonna make it very unlikely to be able to be supported on Liquid. So, you know, the list of coins that started dwindling down – we’ve always seen attacks on a lot of the coins or we know that they’re possible when there’s not very much Proof of Work behind them, and that’s something that could jeopardize the entire system if there was a problem with one of the coins.
And it required manual intervention, so we really didn’t feel great about a lot of the other coins out there. Even some of the bigger ones have a history of splits or hard forks, or arbitrary fast decisions where certain developers go to the chat rooms and say “please stop trading”. We can’t do that with Liquid, but this is something that’s sitting off in a secure data center and everyone’s not gonna be able to react that fast. So that one knocked down the list pretty small. And we thought maybe we could do one or two, but at that point it was only covering a small percentage of the use case people would have had. So we’re really going to focus on another way to do it, which is having an unofficial peg where the consensus of the system is not affected by it, but other parties could represent either good individually or as a federation where they hold an underlying asset like Litecoin or Ethereum. And they hold this asset either single-signature or multi-signature and they issue tokens on Liquid representing those assets. And if someone wanted to redeem those tokens for those underlying assets, they would go to the issuer and do it. It is very similar to Liquid today, the issuers of Liquid Bitcoin, it’s just the federation, this is just a different federation and if the issuer itself in this case failed to live up to their promises, it wouldn’t take down the Liquid Network. So it’s a little bit of buyer beware of trying to find a federation that’s doing this, but people are already trusting custodians with their coins when they’re trading anyway, so I don’t think it’s that much of a stretch to do that even in the case where there’s a single issuer.
But we’d like to build a federation, if there’s interest from the members to build a smaller federation, to do an unofficial peg for other assets. So they will be coming. You asked when they will be coming, we actually created some assets on Liquid on launch just for fun, they’re not actually representing anything real. But those are there. The assets I would expect probably would be there first and early, and would probably relate to fiat tokens. That’s something we will be pursuing very strongly, Liquid allows for single transaction atomic swaps which could be really nice for trustless exchange model. So you could have a single transaction that swaps one of the USD coins with Bitcoin. And that happens in the single transaction trustlessly, so this is something that a lot of our members are interested in and it’s a matter of bringing some of the existing ones on board, or maybe that there will be some new players in the space that see the opportunity in Liquid.
Vlad: So that was a very long explanation in which you said that there will probably never be an Ethereum federation on Liquid because it has a history of hard forks and it’s unpredictable in its nature of governance. But it’s likely that Litecoin will have one just because it wasn’t ever meddled with?
Allen Piscitello: I don’t know if I would say never ever meddled with, but we could potentially do it, but it’s a lot of work just to support one coins to do that. Our users, our customers, they want dozens of coins to do this. So I think even with something like Litecoin we would recommend having the same infrastructure of a federation of trusted custodian holds, a portion of Litecoin and issues Liquid Litecoin and deals that do peg themselves. And if the exchanges that are already are dealing with Litecoin today are already holding Litecoin for traders, then I think it would be a natural fit and we’ll see some interest from our members in this use case. So it’s just a matter of getting it off the ground and facilitating it.
Vlad: Okay. What about the development of Bitcoin Core, the client? To which extent is Blockstream involved, and does it support the new talented coders who want to get in and program?
Allen Piscitello: Yes, from the Bitcoin Core side we have Peter Wuille who is full-time Bitcoin. He builds things that he wants on it, he can basically pursue in research areas whatever he wants. So that’s what Peter does. Peter’s doing a lot of interesting research, but there is some overlap between that and Liquid. So one of the things that we would really like to see in Liquid is Schnorr signatures.
Schnorr signatures allow you to have a more efficient way of signing especially multi-signature transactions. So Liquid has a federation which has a large number of members and has a large number of signatures, so Schnorr would be very useful. It would also help us get even larger federations than are possible today.
There’s some overlap, Peter (Wuille) is doing a lot of other interesting projects as well, and then just because Liquid is based on Elements (Elements is our open-source blockchain project). And Elements is actually a hard fork of Bitcoin, so there is a lot of commonality there. So we have things that are useful for us in Bitcoin, that are also useful for us in Liquid and Elements. So if we are developing them, we always try to push everything we can down to the base layer of Bitcoin so that other people do this.
We have a lot of developers that do have commits to Bitcoin Core, so Greg Sanders is our tech lead of Liquid. He’s contributed to Bitcoin Core in the past. We’ve had Jonas Nick who’s also contributed a lot, he’s on our research team. Andrew Poelstra is also on our research team doing a lot of interesting cryptographic work. So all these people, they will contribute to Bitcoin. Basically, it’s just things that they’re already working on, and it’s useful for Bitcoin too and we want to share that. Or people just like to hack on Bitcoin in their free time and we have a lot of people who are interested in the space.
But we have one full-time developer with a lot of people kind of incidentally touching it. It’s a pretty small number right now compared to a lot of the companies out there. I think Chaincode Labs has three developers, maybe four at this point. And we have the MIT Media Lab which has a few people working on it. Lots of other companies have stepped up to the plate and started contributing to Bitcoin Core, so we’re really excited. Blockstream has gotten this reputation of being the source of Bitcoin developers, but really we’re actually smaller right now compared to the other players who have stepped up to the plate.
Vlad: I think that’s a big conception, as people usually point out to Bitcoin Core as having a monopoly and they say that there aren’t any alternative clients which are worthy of being used. And Bitcoin Cash usually takes pride in having two teams which develop two different projects, but also I think I read that there’s a risk of having an accidental hard fork because of the differences between the two software implementations. So how would you describe this situation: is it better to have one client on which many teams work, or would it be a good idea to diversify the offer and allow teams to work on their individual clients?
Allen Piscitello: Yeah, I think we can go back to Satoshi back in 2010. He said, and I might misquote him, that having a second client would be a nuisance to the network. Getting things right with consensus is extremely hard. We’ve seen history of even with the same clients just in different architectures or in different scenarios, disagree about consensus. And it happened on the same piece of software, the same code, and the same machine. If you have a small bug, you could have a situation where they disagree about if a block is valid or not. So you start adding in new clients and new… not necessarily new teams, but new clients. With new software, you always have a possibility that there is one subtle bug in one of the clients or the other, and they may disagree.
And I think Peter Todd wrote a really good article about this. I think some of the teams have said “Well, it’s really good that, if there’s a problem, if someone might stop and if I continue on… and it’s like “no no no, you want to shut everything down when there’s a consensus mismatch”. You want to stop the transactions, you want to make sure that no one is losing money because someone losing money is much worse than nothing happening. The absolute worst case of something happening is we figure out what’s wrong, we fix it, we move on. Whereas, if it starts splitting and goes for hours or days, then you have a big mess to clean up. So he talked a lot about redundant systems and fire alarms and being able to detect problems and shut down, turn on the sprinklers. If you think there’s a fire, you’re going to turn on the sprinklers even if it’s gonna fry your servers because you don’t want to burn the building down. So I think that’s the philosophy there. I think, with the alternate teams, that’s really a symptom. This is my personal opinion, not anything official Blockstream.
A lot of that is a symptom of people who just can’t play nicely with others, a lot of these teams for other projects like BCH, they basically came from people who didn’t really get along well with others on the Bitcoin Core team. And when you have people, and I’m not going to name anyone specific, who even go back to older projects than Bitcoin and they have had this history. It’s not terribly surprising, they don’t get along and they end up not getting along even on their new projects and form three or four teams.
I think the real strength of Bitcoin Core is that there are hundreds of contributors, there are people that are welcome in there even when they’re brand new. They are welcome, they start contributing, I think for example Kalle Alm is not new anymore, but he was a very strong contributor right away and started adding value to Bitcoin Core. He begame a top contributor very quickly and so that’s something where, if you have the skills and you cooperate with others and your can listen to feedback, you can take the criticism, and you have the patience for it, I think you can do a lot. And that’s something that I think Bitcoin Core has done really well.
The people who have contributed have worked well together and I think that the strength is that everyone is working altogether and you are not doing everything three times. I think that’s made for a lot more innovation and more eyes and reviews to check things. If you have more reviewers, you are more likely to find problems and that’s probably the right way to go. There are other clients and you know some of them are academic projects, some of them are designed to balance this out. But I think it’s a risk for the network that it would split, and if there’s a split, even if there’s something that we say is a bug in Bitcoin Core, really the code speaks for itself. This code is the spec, and if there is a problem there, chances are the other clients are going to have to pick that up.
And example is in multi-signature transactions in Bitcoin: there’s an extra push operation, which means that you have to just put an extra piece of garbage on your script to make it work. And that’s kind of a bug, I think everyone would agree that that’s a silly bug, it probably shouldn’t be there, but that’s how it is and everyone has to implement that. Everyone has to implement the same bug for it to be compatible, and it’s how it’s going to go. And when you have corner cases or advanced features, it’s always possible to miss something and cause a chain split. And if you’re not watching both chains, potentially someone could go off and not realize that there’s another chain going on that you have no idea about.
Vlad: I think I’ve also read a few hours ago a tweet by Jameson Lopp, who praise the 0.14 implementation of Bitcoin Core and even said that his node was syncing up 5% faster than previously. And he predicted that Schnorr signatures and all the improvements that the team is bringing up to the client is going to get so much more fast, and the blocks in the blockchain are not going to be as bloated anymore because the data gets compressed to greater results.
Allen Piscitello: Yea, there’s just non-stopping innovation and I follow the space for a long time. And the funny thing is that in the last year working full-time at Blockstream, rather than just having Bitcoin being a hobby, it’s been harder to keep up with innovation and just follow it myself than ever before. And even though I can spend my entire day in this space, so it’s really amazing what the team has been working on. They’re doing all kinds of different things to enhance efficiency and privacy, fungibility, and they’re very focused on making this work. So I’ve been really impressed with the development quality of the team.
Vlad: What is your prediction for Bitcoin? Do you think it will become a mainstream mean of payments, or do you think it will be more like a store of value even when you have Lightning and Liquid?
Allen Piscitello: Yeah, I think that’s an interesting question. I don’t think any of us really know. I’ve been in the space a long time, I would have never guessed we are where we are here today and just the mainstream level of adoption. One of the members of Liquid is the Six Digital exchange, which is a stock exchange in Switzerland. Earlier this year, we released a cryptocurrency data feed product with the ICE (Intercontinental Exchange), who is the owner of the New York Stock Exchange, so we were literally in the boardroom and on the floor of stock exchange talking about cryptocurrencies. I never would have thought we would have been here today, so I know I’m gonna look silly making predictions about where Bitcoin is going.
I think the most important aspect of Bitcoin, and this is my personal opinions, is that the biggest competitor of Bitcoin is the bank: you know, the reserve banks of the world that are issuing their own currencies. And I think this was something Satoshi was getting at: if you want to have something that’s money, you need to have it where it’s only ruled by mathematics and not by ruled by the whims of politicians, or by cartels that are making these decisions. And that’s something that Bitcoin does well. If it does anything at all that’s useful, I think that’s the most important thing it could do.
But I think I’m very optimistic that as it becomes the store of value, as people start running to it and all over the United States it’s a little bit more stable here than a lot of other countries, but currency instability exists frequently in other parts of the world. We’re seeing it in Venezuela, Zimbabwe, and Argentina a few times, we’ve seen it in Mexico. These things happen all the time, and there’s a lot of reason that they do that. But something like Bitcoin is not susceptible to that. So I think that as people start running to it and moving towards it, and I’m very optimistic about the tech that we have with other layers or solutions and how we continue to innovate, and build a better system of top of it.
So some of it may resemble things like Lightning Network, some of it may start resembling things that are very similar to financial institutions today. But that’s okay, what you’ll have is greater choice and greater accessibility of anyone who wants to join the network. And competing these other companies will have the power to do so without needing to ask for permission from anyone. And I think that’s a big difference between the system we have today and Bitcoin. I’m very optimistic, 10 years out, 20 years out, I have no idea where we’re going to be. I’m just looking to see – I think Bitcoin is either going to get incredibly large and dominate a lot of the money of the world, people will be building systems on top of it, or it will be nothing. I think that’s really the two extremes and I think I’m willing to take the bet of my personal investments in Bitcoin that there’s a decent enough chance that it would be quite large.
We’re seeing a lot of adoption from places that I never would have expected it from, I think we saw the big news about Fidelity recently getting involved in this space, we’ve seen a more start-up type financial companies like Square and Robin Hood getting involved in cryptocurrencies. There’s cryptocurrency data feed on the New York Stock Exchange… these conversations are coming up and institutional investors are looking to see the asset class.
I think that scares a lot of people because they’re afraid the old guards come in and take control, but I’m confident enough in the underlying technology that they can’t do anything to stop it. They can try, but there’s too much decentralization, there’s too much power. But we have to keep asserting that ourselves, the users of Bitcoin need to be strong and I think we got a little bit of a test to the immune system last year with a couple of different attacks on Bitcoin that went very well, and I think that proves that outside parties will have a difficult time influencing or changing Bitcoin. But that’s only as strong as its users that are able to resist that.
Vlad: Do you think that part of the spirit of lost? In the sense that right now you can look at the average user on Twitter who complains about another ETF being rejected. And when Bitcoin first came out, it was completely against financial institutions. It was this anarchist way of saying “I’m not going to use your money, I want to construct my own system in which I transact value”. And do you think that was lost in the community?
Allen Piscitello: Yea, I think the community might have missed the mark a little bit on that one. I think that if you look at the adoption waves of Bitcoin, I think you had the early adoption waves. A lot of people who are on the cypherpunks mailing lists, they saw it. But I think the person who got it the most early on was Hal Finney. And Hal Finney even identified we have this base layer that’s completely secure, completely decentralized, and out of anyone’s control, and maybe someday there are things like Bitcoin banks that are built on top of it. But now you have your choice of who they are, and they can’t actually change the money supply or influence that. Or if you don’t like your bank, it’s very easy to go off the bank and have a system where you have your own type of payments. So I don’t think they’re incompatible with each other and I think that a lot of people who came in later, you had a lot of the loyally anarchist crowd and libertarians who came in. There’s an overlap of that than just people who are anti-authority or anti-corporation that came in as well. I don’t think they’re incompatible, I think the most important thing is that none of those companies, none of those banks, none of those businesses have any influence over the protocol or your money. And in that case, if you don’t like what they’re doing, don’t use them. Stay on what you do or use the level of competition will be much higher where you don’t have to ask permission of a banking cartel to join a payment network. You make your own bank in a regulated-friendly country and people are free to use that service if they want or no service.
Now I think what Hal missed and I can’t blame him on this one, is the level of technology that we’ve been to build on top, that could have even made that level unnecessary. So things like Lightning Network, that’s something that really… I think it might have been Satoshi or even Mike Hearn that just had the idea aiming the channels pretty early. That was kind of a thought, but the idea of Lightning Network which takes it even further, is that you don’t necessarily need those things if you don’t want them.
So I think that people might have not realized that freedom doesn’t necessarily mean banning these things from existing or keeping them from existing, it means that they can exist or you can use things that don’t require this level of regulation or compliance, and they exist on their own. So I think that’s the part that was missed by a lot of the community there. Again, if an ETF happens, that’s… if people want to participate in that, they’re free to do so. I know a lot of people who don’t feel comfortable being their own bank, and if they feel comfortable with a custodian, then that’s their choice. If someone wants to be their own bank and wants to HODL their money and have no one able to stop them from using it, they have that power still. So these things existing don’t take that away, they’re just added to it. So I think that’s the concern. The main thing I would warn the community about is being aware of it and making sure these entities come in and they don’t have control and they don’t have the ability to change things. So to do that, we need to make sure everyone who wants to can run a node, we want to make sure that everyone’s able to validate the transactions if they want to. So they’re not reliant on any third party if they don’t have to. But that doesn’t mean they can’t choose to, and I think that’s what freedom is about.
Vlad: Do you think we should maybe establish a custom which says that if you own more than, say 0.1 BTC, then you should be running your own node for security?
Allen Piscitello: Yes, but I don’t think owning BTC is necessarily the drawback there. So the real thing you care about with a node is when you’re receiving a payment. Cause once I have that Bitcoin and I’ve received it as a payment, whatever is going on with the blockchain actually doesn’t really matter. So right now let’s just say, for example, someone bought 10 BTC and they validated, it’s all valid, they received the transaction, it’s all finalized, it’s got 1000 blocks on top of it. Whether they run a node or not doesn’t matter, because they’re not validating any payments. When they are receiving their payments in the future, maybe they buy more, and they should definitely be running a node to validate that.
So I think this distinction of whether you have it or not: it’s more about whether you are receiving payments or who you’re receiving payments from. So, if my best friend sent me some Bitcoin and I see it on my phone and I have a full node at home, I’m gonna trust that he paid me because he’s my friend and he’s probably not gonna rip me off. And maybe when I get home, I’ll check it out later. So I think there’s a lot of black and white thinking in this space of, you know, “run a node or it doesn’t matter!”. And I think it’s very situational, so are you receiving payments? Are you receiving payments from people you don’t trust at all and maybe have no recourse from? You obviously want to run a full node in that case.
When I’m spending, I’m making a payment, and if someone is happy to think that they got paid and that they’re on their way, so I think receiving is the idea. I think Eric wrote up some really good article about this as well.
Vlad: Now let’s wrap this up by speaking of Magical Crypto Friends, which is a show that sometimes gets labelled as “the Blockstream propaganda” on Twitter. Do you think it’s educational if people watch it? Or do you think it’s maybe to negative, in the sense that they spend too much time slamming other projects and not being constructive enough?
Allen Piscitello: It’s a mix, right? So there’s a lot of drama in this space, and like it or not, that’s what people are drawn to: drama and disagreements. That’s going to be common for a long. If there’s days when there’s no drama, it’s kind of scary and it makes you ask if people are actually paying attention anymore. So it’s gonna be a show that’s, I would say, it borders between serious topics and fun and games. And I think it’s… Samson’s on there, he’s famous for his Twitter activity, that’s how I knew him before Blockstream, and he can say things that are provocative. That’s always gonna be part of the show.
I think it’s needed calling out a lot of things in this space that are just either scams or just lies, or bad things. And I thing calling that out is important. So a lot of people say it’s maybe not constructive, but keeping people away from scams or problems or bad situations is actually very healthy. And staying away from attacks, being able to fedent against attacks on Bitcoin is something that is needed, and it seems like your immune system attacking a virus inside of your body. That seems very negative and destructive, but really it’s needed to survive.
So I think that that part is necessary, it is a fun show. I don’t think they take themselves really seriously, they’ve got a cartoon opening that’s pretty ridiculous, and that’s just who they, that’s just who the gang is. I think the whole show started out as just kind of a joke from Whale Panda saying they should make a show, and they did and Samson took it to the next level with the cartoon at the beginning. I think that’s just a way to kick back a little on that, so it’s definitely… I don’t think they expected to last as long as it’s done, at least that’s my impression of that.
Vlad: I mostly agree. I started watching about a year ago, when the SegWit2X hard fork was about to happen. And I guess that’s where they drew their inspiration from, because the intro used to be so much longer and included a scene in which they save Bitcoin from the evil New York Agreement. And it gets very dark and story, as they try to approach these mosters which are trying to destroy Bitcoin. In a way it was funny, but I guess as the situation got more relaxed and the development for Lightning and Liquid started to become much more concrete and closer to meet the deadlines, I guess it got softer.
At first it was all about calling out Bitcoin Cash and saying “Oh, it’s Bcash” and it was all about calling out scams. I guess it was the right time for scams to happen, because it was that phenomenal bull run and that bubble which we all saw grown and burst. But right now I think they should focus much more on the technology just so the average Twitter person can understand how Liquid works, because I noticed that in the last show they name-dropped it like a dozen times.
Allen Piscitello: I hear you saying you’d like to see more focus on technology and updates. And I’m not sure that’s the right avenue for it. So if you look at who’s on that show, we have a very good mix of people. You have Riccardo who is a developer, Charlie who is a developer, Whale Panda whose claim to fame is trading, and you have Samson who is quite famous on Twitter and on the marketing side of things. To do that type of approach you’d want to have some type of guests on there who are very knowledgeable about the technology. I think with who you have on there, you’re going to end with kind of a little bit more, slightly below the surface, but not a deep dive on there. I think the show needs to stay at that high level of broad audience of basically who’s on the show without guests. And I think they have had guests there a few times, but those were the people who are really going to get into the weeds.
Even I get in the weeds a little bit more on Liquid than Samson and I think I still need to learn a lot compared to our engineers that are on there. I think it’s a different show, I think it’s meant to be fun, I think you were dead-on saying that the bull market was a big part of the drama. Drama always seems to correspond to the price of Bitcoin, I think they’re very closely related. I think it’s probably the price that causes the drama, but we’ve always seen the bull market crash and the things kind of stabilize and even price is boring at this point, it’s been around the same price for weeks on end.
So people are busy building things, and that harms the drama side of things. And that’s not a bad thing for Bitcoin, but it’s a probably bad thing for the ratings of the show. There’s not as much interesting things to talk about in terms of drama. So I think maybe skiing some technical guess would be useful. Now let’s see if any of them are fitting in a cartoon show, I think that’s the big question.
Vlad: Okay. I don’t think I have anything else to ask you, but if there is any last comment that you would like to make for Crypto Insider or tell us how we can follow you on Twitter and how we can write to you or something just in case we have questions about Blockstream.
Allen Piscitello: I like to stay off the grid for the most part, but it’s been a little bit more since that. So yeah, the best way to reach me is to e-mail email@example.com, and everyone interested in Liquid can get a hold of me. I answer that a lot. But besides that, I’m pretty low-key and off-the-grid. So thanks for having me on Vlad, I appreciate it!
Vlad: Thank you, bye!
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