Marty Bent Discusses The Secrets Of Bitcoin On Pomp’s Off The Chain Podcast
Marty Bent and Anthony “Pomp” Pompliano teamed up to discuss “the secrets of bitcoin” on a recent episode of Pomp’s Off The Chain podcast.
During the podcast, the pair discussed everything from crypto mining to price predictions.
The podcast featured unique insight into topics like why hashrate is more important than people give it credit for. The pair also discussed the financialization of bitcoin, including how Wall Street is becoming increasingly involved in the crypto space.
You can check out Pomp’s Off The Chain podcast, where episodes are available as free downloads. A new episode is released approximately twice a week, with the first episode debuting on August 27, 2018.
The “Secrets of Bitcoin” podcast was released on September 5, 2018. Marty Bent is the Editor in Chief at Marty’s Bent, an online newsletter about bitcoin. He’s also the host of another bitcoin podcast called Tales from the Crypt. If you don’t want to listen to the hour-long podcast, then you can read Pomp’s transcript of the podcaston Medium.
What kind of secrets did the pair discuss about bitcoin? What did they uncover? Here are some of the highlights of the conversation:
How Mining Secures The Bitcoin Network – And Why Energy Consumption Isn’t A Big Deal
Bitcoin critics will tell you that bitcoin’s network uses more energy than most countries in the world. That’s true. At last count, bitcoin was ranked at around #50 on the list of energy consuming countries.
While some criticize bitcoin’s energy consumption, others insist that it’s necessary in order to secure the network.
Marty Bent brings up a good point: much of the electricity consumption of the bitcoin network comes from renewable energy – like hydroelectricity. Other energy comes from sources that would have otherwise gone to waste – like excess natural gas being blown off from wells in Texas:
“…people just assume that it’s all dirty energy and that it’s wasteful. So, what people don’t understand is that a lot of Bitcoin operations, especially here in the West and even in China, China uses a lot of coal, sure, but they use a lot of hydroelectric energy as well, and one thing we are finding here in the U.S. is some miners going to the West Texas, going to oilfields, and basically siphoning the excess natural gas that is being led into the atmosphere at these oil distilleries, and basically that would be wasted energy if these Bitcoin miners didn’t show up and instead of sending that either methane or natural gas …”
Bent adds that “it’s not wasteful at all. It’s actually very efficient” because of this system. Miners compete for the most efficient sources of energy, and the most efficient sources of energy are typically renewable resources or energy that would have otherwise been wasted.
Bent brings up another interesting point: we use energy to uphold the US Dollar as the reserve currency of the world. It’s unclear how much energy we use on a daily basis, just like it’s unclear how much energy the bitcoin network uses every day (all bitcoin energy consumption statistics are estimates – not facts).
Pomp states that,
“The US Dollar, I think I’m getting this right, is more than 10 times on an energy consumption basis than what it takes to run the bitcoin network, and so, is that good or bad? I don’t think we know yet.”
It’s unclear how much energy we use to support the US Dollar. Obviously, there are a lot of factors that go into that – from the cost of running banks to the cost of securing gold reserves to the price of holding foreign currency reserves.
Bitcoin’s Energy Consumption Leads To Decentralization, And Decentralization Leads To Value
Next, the two discuss how bitcoin’s energy consumption helps secure the network by encouraging decentralization. Even with mining pools collecting enormous amounts of hashrate, the individual miners within those pools have the power to leave at any time. This creates a decentralized ecosystem, and that decentralization leads to value. In other words, bitcoin’s energy expenditure is one reason it has value.
Here’s how Pomp explains it on the bitcoin secrets podcast:
“It is the largest computer in the world, right? And if you actually take the hash rate that you’re throwing at it, it has the most computing power in the world, and so when you look at this, it’s heavily, heavily decentralized. Now, are there these concerns around some centralized components of it? Mining pools and certain people have larger mining farms and things like that, of course, but I think when you look across the entire ecosystem, it is by far the most decentralized. It is by far the most secure, and ultimately that’s going to translate to value.”
The pair also discuss how last year’s BTC/BCH hard fork showed that mining pools have less power than they think.
“I think that type of [miner vs. user] mentality carried over into the fork wars of last year where Jihan and crew tried to exert their power. They thought miners had more power than they did and things like the user activated soft fork and now SegWit2x sort of proved that hey, actually users have a lot of the control in this network, and you sort of have to have that checks and balance.”
“Where Are The First 33,000 Blocks” Of XRP?
After discussing bitcoin’s PoW system and decentralization, Pomp and Marty move onto discussing altcoins like XRP, the digital currency created by Ripple. Ripple claims XRP is decentralized and has limited connection to the company. Nevertheless, there’s some controversy over how Ripple and XRP are connected, including the early days of the XRP network.
Marty addresses this point on the latest podcast:
“But where are the first 33,000 blocks? That’s what I know. Once you can answer that XRP troll army, I’ll give Ripple a semblance of legitimacy. And I don’t think that’s going to happen.”
The other altcoin they discuss is Stellar, which is another payment-based cryptocurrency with a controversial pre-mine. The XRP network is entirely pre-mined, and there’s some controversy over Stellar’s Lumens digital tokens:
Does Stripe Own $6 Billion Worth Of Stellar Lumens (XLM)?
“So yeah, pre-mine all coins, doesn’t Stripe have $6 billion worth of Stellar Lumens?”
Marty later adds that he thinks “they were granted them as equity in something.”
It’s hard to verify that claim online. Stripe published a blog post back in July 2014 discussing their relationship with Stellar. Here’s the part of that blog post where Stripe reveals they have a significant amount of Stellar Lumens:
“A couple of months ago, Stripe contributed $3M to help get the project going. In return, we received 2% of the stellars.”
Meanwhile, the Stellar.org “funding” page reveals the following:
“In 2014, SDF received a loan of $3,000,000 from Stripe which was subsequently repaid with 2B lumens.”
Based on the official information from Stellar and Stripe, Stripe was granted 2 billion Stellar Lumens (XLM). Based on current prices, that’s significantly less than the $6 billion mentioned in the latest podcast, although it’s still a significant amount of money (2 billions XLM is worth $500 million). It’s unclear if Stripe has increased or decreased its holdings since being granted 2 billion XLM in 2014.
Who Is Satoshi Nakamoto?
“I think Satoshi could move his coins and spend them,” says Marty Bent at 51:32 of the podcast.
“Long time down the road….Do we ever want to know who Satoshi is?”
Next, Pomp asks Bent who he thinks Satoshi is.
“I don’t know…I have no idea,” answers Bent.
“This is probably, I think is Satoshi were to- I’m not saying this is going to happen, I’m saying if Satoshi were to come back under certain circumstances I think it would be okay. I don’t think he ever will. He, she, it, they ever will. I don’t think it would be the end of bitcoin. There’s a lot of people who say that.”
Why could the discovery of Satoshi’s identity be the end of bitcoin?
Well, the two bring up the fact that at least part of bitcoin’s value comes from the myth of Satoshi Nakamoto. The mysterious figure lends some of the mystery to bitcoin. If we take off Satoshi’s mask and it’s just some nerdy computer programmer from Silicon Valley or Australia or Florida, wouldn’t that cheapen some of bitcoin’s value?
Is Satoshi’s Stash Of Bitcoins A “Quantum Computer Alarm System”?
Next, the two discuss a point I haven’t seen mentioned very frequently: could Satoshi’s legendary stash of bitcoins be part of a quantum computer alarm system?
Marty claims that Satoshi’s stash is somewhere between 800,000 and 1.5 million bitcoins. That seems to be the general estimate for Satoshi’s stash, although few people seem to believe that he owns as many as 1.5 million bitcoins: most claim the amount if closer to 1 million or 1.2 million.
Satoshi, of course, hasn’t touched his bitcoin aside from a few test transactions back in 2009.
Why hasn’t he moved his bitcoins? Why wouldn’t Satoshi touch his bitcoins to prove his identity? If someone like Craig Wright or whoever is really Satoshi Nakamoto, wouldn’t he move a few of those bitcoins to prove his connection?
That’s where the two bring up the idea that Satoshi’s stash could be a “quantum computer alarm system”:
“So some people think that Satoshi’s stash is a quantum computer alarm system because the way that his coins are secured and the type of contract, there’s two types of ways to do it, I believe. There’s pay to pub key and there’s pay to pub key hash. And the pay to pub key hash is what most people use today. They’re not using … It’s like the most secure way, not the most secure but it’s more secure than pay to pub key because it ads a hash onto your public key I believe. Which makes it harder to figure out your private key. Satoshis are pay to pub key, no hash.”
In layman’s terms, Satoshi’s stash of 1 million bitcoins is secured with a unique hash. It would take a special kind of computing power to crack the code to Satoshi’s stash, and the only feasible way of getting that computing power is to use a quantum computer.
There’s A 10% Chance That Bitcoin Will Become The Reserve Currency Of The World
The podcast ends with the two discussing one final secret of bitcoin: when will bitcoin become the global reserve currency of the world?
In November 2017, a guest on Marty’s podcast gave it a 5% chance. Now, on this latest podcast, recorded in August 2018, Bent says that he’ll “bump that up to a 10% chance.”
“[The chance of bitcoin becoming a global reserve currency] gets higher everyday. Longer it survives the more probable it will survive into the future.”
As for the price of bitcoin, Pomp famously went on Bloomberg in December of 2017 and claimed bitcoin could hit $50,000. Pomp now claims he no longer makes price predictions.