March 6, 2025 • 45 mins
Bitcoin is difficult to change. How do we reach consensus to change it? Nitesh walks us through the first half of the Bitcoin Consensus Analysis Project paper, providing an in-depth analysis of Bitcoin’s consensus mechanism and the complexities surrounding protocol upgrades. He discusses the challenges of implementing changes in a decentralized network, the difference between soft forks and hard forks, and various activation methods like Flag Day, BIP 34, BIP 9, and BIP 8. Nitesh also outlines the different stakeholders in the Bitcoin ecosystem—including economic nodes, investors, media influencers, miners, protocol developers, users, and application developers—and their respective incentives and influence on the network.
Show Notes: https://atlbitlab.com/podcast/nitesh-b-how-does-bitcoin-consensus-work-part-1
00:00 Introduction to Bitcoin Soft Forks
00:35 Event Recording and Sponsors
02:09 Meet the Speaker: Nitesh
02:52 Understanding Bitcoin Consensus
05:38 Consensus Rules in Bitcoin
08:51 Soft Forks vs Hard Forks
14:25 Activating a Soft Fork
20:25 Voting Systems in Bitcoin: BIP 34 and BIP 9
21:44 Introducing BIP 8: Community-Driven Upgrades
23:08 User Activated Soft Forks (UASF) and User Resisted Soft Forks (URSF)
24:27 Human Factors in Bitcoin Changes
25:31 Stakeholders in Bitcoin: Economic Nodes and Investors
33:09 Influence of Media and Miners on Bitcoin
36:17 Role of Protocol Developers
41:34 Users and Application Developers
42:58 Conclusion and Next Steps
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Nitesh (00:00):
Everybody who wants a soft fork or does not want a soft fork.
obviously has incentives behind it, right?
Because for someone, Bitcoinis freedom money for someone,
bitcoin is number go up.
For someone Bitcoin is they don'twant to use the fiat system and they
just want to like transact only inBitcoin, live on Bitcoin standard.
(00:20):
For someone they're investor.
They follow government rules.
They only buy ETFs.
It, it is just, just differentthings for different sets of people.
Stephen DeLorme (00:35):
This podcast episode is an event recording.
If you're listening to the audioversion, you might be missing some
context from the speaker's visuals.
You can find the videoversion at atlbitlab.
com.
That's A T L B I T L A B dot com.
There might also be audiencequestions or other background
chatter that's not audible.
Look, event recordings are neverperfect, but we're sharing it here
(00:58):
because we think you're going tofind something valuable in it.
Let's talk a little bit about our sponsorsfirst, and then we'll get onto the show.
This episode is sponsored by ATL BitLab.
ATL BitLab is Atlanta'sfreedom tech hacker space.
We have co working desks,conference rooms, event space,
maker tools, and tons of coffee.
(01:18):
There is a very activecommunity here in the lab.
Every Wednesday night isBitcoin night here in Atlanta.
We also have meetups for cybersecurity,artificial intelligence, decentralized
identity, product design, and more.
We offer day passes and nomad passesfor people who need to use the lab only
occasionally, as well as membershipsfor people who plan to use the lab
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(01:39):
One of the best things abouthaving a BitLab membership isn't
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Surrounding yourself with thecommunity helps you learn faster
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Your creativity becomes amplifiedwhen you work in this space.
That's what I think at least.
If you're interested in becominga member or supporting the space,
please visit us at atlbitlab.
com.
(01:59):
That's A T L B I T L A B dot com.
All right, on to our show.
Nitesh (02:09):
Hey everyone, I'm Nitesh.
I'm a software engineer.
I work on Bitcoin stuff every day.
I work here at the lab.
Um, so today we're gonna talk about,uh, this long article that was
written by a bunch of smart people.
Uh, some names you might befamiliar with, some probably not.
(02:33):
But essentially, um, the, the reason whythis article was written was Over the
past, yes, probably more than two, threeyears now, uh, there's a lot of, um,
controversy about upgrades in Bitcoin.
So, if, if you, if you're familiarwith Bitcoin, and you run the Bitcoin
(02:58):
software, it is, like, it's not anopen secret that, you know, Bitcoin
is really, really hard to change.
Like, if you want to add a new feature,or pull a new feature out of Bitcoin,
It takes a long time, like, andbecause Bitcoin is a decentralized
network, there's a bunch of peoplewho have voice on and opinions on
(03:22):
what happens inside of Bitcoin.
So, um, these people could be,you know, influencers, they could
be large businessmen, investors,people who own exchanges.
Us here are sitting in thisroom could be anyone, right?
So the idea behind this, this articleor paper is, is that how do all
(03:46):
these sets of people come togetherin order to come to consensus so that
we can like push Bitcoin forward interms of making change to Bitcoin?
Um, but I'm not really gonnalike go through this article.
I have made slides because Obviously,nobody's gonna read all that.
(04:07):
Um, so, analyzing Bitcoin consensus.
The risks of protocol upgrades.
So, like I said, this bunch of people whocame together, wrote this article, because
they believe that it, there is a lot ofcontroversy about how, you know, how, you
know, you make changes to Bitcoin, youpropose, and then people will hate you,
(04:29):
sometimes you even get death threats.
Because you propose a certain changeand try to push for that change.
And it's, it's happened to quite, quitesome debts who basically stopped working
on Bitcoin because they proposed tochange, they pushed it too hard, the
community did not understand or hatedit or whatever, or probably it's bad.
Um, and you know, people get mad.
(04:51):
So, all right, um, what arewe gonna talk about today?
So some basic overview.
We're gonna talk about what consensus is.
We're gonna talk about what soft,soft forks and hard forks is.
And then we're gonna talk about howwe can activate a fork in Bitcoin,
basically activate a change in Bitcoin.
And then we are gonna talk about stateof mind, which basically means what
(05:12):
your state of mind is in terms of likewhere you stand what for supporting
versus not supporting a new change.
And then we are gonna talk aboutstakeholders who are basically.
Categories of people who, who are indifferent sectors of the Bitcoin industry.
Like I said, they could be businessmen,or people in this room, or media
(05:34):
influencers, podcasters, anyone, or devs.
Right.
Okay.
So what are cons?
What is consensus and what isconsensus rules in Bitcoin?
So at the bare minimum, like mostof us know that, you know, there
are only 21 million Bitcoin.
That is a consensus rule, right?
Everybody agrees that, youknow, there are only 21 million
(05:56):
Bitcoin and there'll ever exist.
And, you know, a block's mineapproximately every 10 minutes
and the size of the block is fourmegabytes and things like that.
But where is all this stuff written?
So, this link, if you go, thispile of garbage, which is called
C++, Um, which nobody likes.
(06:18):
Yeah, I can see.
Alright, So, this is where you, theconsensus tools of Bitcoin are written in.
Now, it's not written inEnglish, it's written in C++.
the reason Bitcoin does not have a spec,when I asked a few core devs why is all
(06:40):
this not written in English and onlywritten in C++, they told me English can
be misinterpreted, but code cannot be.
So that's why it is writtenin C++ and not in English.
Um, at least that's theanswer they gave me.
Anyway, so, for example,um, where is this?
so max block size, for example, ifyou know the maximum block size on
(07:03):
Bitcoin is four megabytes, that meansyou can only cram four megabytes
worth of transactions in, in a block.
Um, and then the coinbase maturity,so every time you mine a block,
my new Bitcoin will created, andthe coinbase transaction which
generates new Bitcoin cannot bespent for up to a hundred blocks.
Now that is a consensus rule.
So these kind of consensus rulesare written inside of maybe
(07:27):
you want this one or this one?
Oh, there you go.
Uh, yeah.
This says once one Bitcoin isa hundred million Satoshis.
That's a consensus So The maximumnumber of Satoshis that can ever exist.
So 21 million Bitcoin into100 million satoshis, right?
So this, all this stuff is written.
(07:49):
In C++ in this GitHub repo calledBitcoin, This is what, when somebody
says you're running Bitcoin software,this is essentially what you're running
in your, in your computer at home, in aRaspberry Pi or a MacBook or whatever.
Right?
So, essentially, these are a setof rules that everybody has agreed
(08:09):
that will, Everybody has agreedsaying this will be Bitcoin.
That is essentially what consensusrules are and what consensus means.
All right.
So, some of the most, you know,popular consensus rules is, for
example, a block validation.
It includes how the block shouldbe, what the size of the block
is, um, you know, the proof ofwork that goes into the block.
(08:33):
And for example, for example,transaction validations, you know,
how our transactions should bestructured, what inputs are, what
outputs are, and things like that.
And including chain selection, we, youknow, when I, I'll, we'll get to the
technical details uh, of all of this.
First, okay, before we go into theactual topic of software versus hard
(08:56):
works, We first have to understandin the world of software, what
are braking changes and what arebackwards compatible changes, right?
What a breaking change basically means is,if you make a change, that means people,
you make a change and push new code.
That means people who upgrade toyour new code have to go fix their
(09:18):
old code to start supporting yournew piece of code that you pushed.
What's what Backwards compatible meansyou push a new feature, but people can
just upgrade and not, not worry aboutTheir existing software just runs fine.
They don't have to worry about anything.
right.
I can give you like areally, really basic example.
right.
(09:38):
So this is.
Really, a really simple piece of code.
It says, add numbers, right?
Let's say the entire world doesnot know how to add two numbers.
Everybody uses my code, right?
Everybody uses Nitesh'scode to add two numbers.
right?
Simple.
It says, there's a function, ittakes in a number A, it takes
in number B, returns a number.
(10:00):
If either A or B is undefined,I'll say Fuck something wrong.
If it's not, then I'll return A plusB. And I'll print it out, right?
That's all it is.
Now, if I run this, I'll saysum of numbers is nine, right?
Great.
But, one morning, I wake upand say, Hey, I don't want to
support two numbers anymore.
I wanna start supportingadding fee numbers.
(10:21):
Right?
So what I do?
I go,
C,
number, and, uh,
All right
Now, now my code onlysupport adding three numbers.
So everybody who was using my codein the past, Now has to go fix
(10:45):
their code of adding numbers, right?
This is a breaking change.
Now if I run this, I'll say,Fuck, something went wrong, right?
Now, this, this, like Isaid, is a breaking change.
But how do I make thisbackwards compatible?
I go and say C equals zero.
All right, problem solve.
(11:05):
And now I run it.
Now the code works again.
Right?
But this is backwards compatible.
So I push.
I'm still supporting adding three numbers.
I could like Say five plus four, commat three, and then he'll say nine.
but if I remove three, it'll still work.
Right?
So this essentially is whatis backwards compatible versus
(11:29):
what is a breaking change.
This is like a very stupid simpleexample, but you get the idea, right?
The same thing applies in Bitcoin, right?
What's, when somebody says what a softfork was as a hard work is, a soft fork
is when you push new code to Bitcoin, Andthen somebody upgrades, or then, or the
part of the network upgrades, that meansyou don't have to worry about anything.
(11:52):
Everything that was runningpreviously will just run fine,
as long as there are no bugs.
What a hard fork is, you push a newsoftware update, and then a part of
the network upgrades, it'll behavedifferently for them, and the other
half of the network that didn't upgrade,it'll behave differently for them,
because the code is different andit's not backwards compatible, right?
That's what this tablebasically says, right?
(12:15):
soft forks.
they're backwards compatible.
it's optional to upgrade.
You don't upgrade, is fine.
Hard for and upgrade is required inBitcoin terms because if the network,
the whole network does not upgrade, we'llhave something called a chain split.
Where half the network will say, thisis Bitcoin, and the other half will say,
(12:36):
I don't know, Ethereum is Bitcoin, orBitcoin Cash is Bitcoin, or some other
fork of Bitcoin is Bitcoin, which it
okay, soft forks.
it tightens existingrules, or adds new rules.
Hard forks, it changes orrelaxes existing rules.
What?
(12:56):
Like, relaxing a rule.
Instead of 21 million, we hadmagically have 42 million bitcoin.
Right?
That's relaxing.
Tighten.
Um, instead of a four megabyte block size,we have a two megabyte block size, Right?
Um, this is a graph historically onhow long it takes by version of Bitcoin
code, The, the C++ code that I showedyou takes to upgrade from one version
(13:21):
to the other in terms of weeks, right?
Initially, when Bitcoin first started,like way back when version 0.10,
it only used to take less than 50weeks to upgrade, but in general,
if you see, it's trending upwards.
The time it takes for peopleto upgrade their nodes.
That means, back then, usually onlysoftware engineer used to run No,
(13:44):
Like mostly, people who are technical.
Now a lot of people run nodes.
Now, a lot of people just plugin their notes and forget it.
Sometimes it's running fortwo years straight and they
probably never looked at it.
So the time it takes forsomeone to upgrade their nodes
is getting longer and longer.
So, it's really risky.
to make breaking changes becausepeople in general don't upgrade
(14:06):
their software very frequently.
So the last time Bitcoin hada breaking change this is a
hard work, was in 2011 or 2010.
right?
It was really long time ago.
Since then, we have not brokenanything in terms of consensus.
Alright?
we're talking about soft forks.
How do we act?
(14:26):
activate a software, right?
This primarily is three ways to do it.
The first one is called flag day.
It's like the oldest wayto activate a software.
It's super simple.
You make a flag saying on this blockheight, a software gets activated.
It gets activated ordoes not get activated.
(14:46):
That's it.
It's like super simple.
Um, so basically all nodes, you know,start upgrading minors, you know, start.
Signaling There's, there's notreally a signaling mechanism.
So on that certain day, um, basicallyall nodes just transition from the
old version to the new version.
(15:07):
That's basically it.
The problem with flag day is.
Um, there is no flexibilityin terms of operating.
So, for example, something goeswrong, you cannot like roll back.
Like, for example, if slowly thenetwork slash starts adopting, and
then somebody notices an issue,you can stop and then just go back
(15:30):
and say, we're not doing this.
But the problem with flag dayupgrades, for example, is on that day,
everybody upgrades, and then you'rescrewed if something goes wrong.
right?
Audience (15:38):
So the principle is, you download the upgrade ahead of time, but
there's a certain date where it goes live.
Nitesh (15:45):
It's, It goes live, that's it.
You you set a block heightand it just goes live.
Enough people, if enough nodesupgrade and enough blocks are
following the new version, it'sjust live on the new version.
right?
Next, web 34.
This is a slightly, um, Iwouldn't say complex, but it's an
(16:08):
improved mechanism over Flag Day.
The way this is done is,Inside a Bitcoin block,
Let me open mempool.space.
All right, does this show
block,
does this show a block header?
(16:29):
Uh, sorry, Mind block.
this show details of a block?
Show like the, the version number?
Alright.
This is the version numberof the block, right?
Uh, shows hex, but imagineit's 1, 2, 3, whatever.
doesn't matter.
So what BIP 34 does is.
(16:50):
All miners who start runningthe new piece of software
We'll bump this version number.
Let's say it was version one.
they'll bump it to version two saying weare supporting this new software proposal.
I don't know.
It could be, that's, it could be hard for,for example, or software, But essentially,
they will just bump the version numberfrom one to two or two to three,
(17:13):
whatever, and say, After that, okay, soonce they bump the version number, you
track the, you track up to a thousandblocks and at least 75 of the nodes.
Should, um, sorry.
At least 75% of the last 1000blocks should be signaling
(17:35):
this new version number.
If it, if that does not happen,then the activation fails and you're
back to where you would, if it doeshappen, then you sign, then you wait
another thousand blocks and then.
At least 95 of the thousandblocks, which means 950 blocks,
should signal the new version.
(17:57):
And then it is successfully activated.
So the first 75%, you can bumpthe version, and then it's still
like old blocks and new blocksare accepted by the network.
The next thousand blocks, the 950blocks, or whenever the first nine 50 es.
After that, the old version is nolonger supported by by the network.
(18:18):
The blocks get rejected.
Right?
So, this is how BIP 34 works.
It works pretty well.
The only downside to BIP 34is, um, you cannot signal
multiple soft forks if you want.
Like, for example, you are tryingto activate three different
soft forks at the same time.
(18:40):
And then, but most of the minors onlywant to activate, like, one of them.
They don't like the other two.
Right?
You can either signal all ofthem, or, like, none of them.
Like, you can't, like, specificallypoint, saying, I'm signaling for this one.
So when you bump the version number,it means you are basically saying, I'm
signaling for whatever piece of codethat you're running at that point.
(19:02):
of time, It works pretty well,but that was, and at least from my
understanding, that was the only downside.
The upgraded version to that is BIP nine.
What BIP nine does is, instead of like,this, instead of like bumping the whole
number, they bump like bits of the number,like partial parts of the number, So you
(19:26):
bump, let's say this becomes zero one,and that means It signals one software.
And this zero tube signals something else.
zero, three signals something else.
They bump, like, version bits of it.
and then there's no 75 in this.
This is simply the 95 rule, where overa period of 2016 blocks, If 95 of the
(19:48):
hatcher is signaling towards something,that means that thing gets activated.
The most recent one that wedid like this was taper, right?
this is just thedifferences is explaining.
This is like be 34, like you justbump version 1, 2, 3, and four, right?
This, these, these were like the differentsoftwares that we activated with BIP 34.
(20:09):
Um, and then this is the nine,and then it's ab B, like you,
like I said, you bump the versionbits and not the whole version.
All right, Any questions so far?
I know this is getting technical.
Audience (20:25):
So It's basically a voting system in some respect?
Nitesh (20:30):
It is a voting Okay, so the problem with BIP 34 and BIP 9 is, regular
humans don't really have a vote in it.
The miners basically decide what happens.
Because they're the ones whoare signaling and then producing
the blocks and then publishing.
And because all this is backwardscompatible, all the nodes on the
network will either start acceptingthe block saying, oh, this is a new
(20:54):
block, or the nodes will not just notunderstand the new version and say,
oh, this is cool, and let's say, okay.
If it was breaking, if it was a hardfork, the nodes will not understand it.
Because it's backwards compatible,all no will say, okay, cool.
Right?
So the problem with The these twobes is, The miners almost have full
control for software to get activated.
(21:15):
Like, tomorrow morning, miners couldlike, decide and activate a software
from Bitcoin if they wanted to.
They generally don't do it becausethey'll get a lot of shit up, shit
for it, but they could if they want.
And that is why
Audience (21:26):
What was the last hard fork?
Nitesh (21:28):
Sorry?
Audience (21:29):
What was the last hard fork?
Nitesh (21:30):
The last hard fork?
Yeah.
Uh, I think we activated OP_NOP.
And that
Audience (21:38):
Required everyone to shift.
Nitesh (21:41):
Yeah, but back then there was like 10 people running a node.
So, because miners have so much power,uh, I think Luke, Luke's probably
Luke Dash Junior came up with BIP 8.
BIP 8 is for the communityas a together to activate a
software or reject the software.
Um, what BIP 8 does is, um, along withyour node software, You run another piece
(22:08):
of software on the side that talk to your
accepts or rejects blocks, right?
So if you want to activate a new software,and then the min and you just wanna
do it as a network, the miners, youknow, are still not signaling, but then
they still produce the block template.
And then they obviously mine theblock and then send it out, right?
(22:31):
But the more nodes start rejectingthe it's bad for the miners
because the network will split.
So they will also start upgradingand then start showing support.
That's basically the concept of BIP 8,where the Where, again, it's basically
you set a height and then this, at, atthis height, we say it basically activates
(22:53):
and then a bunch of people upgrade.
But the only difference is the, the,the, um, the process of upgrades
starts with users stuff, miners, right?
Because they start upgradingtheir nodes and start, start
rejecting blocks by miners.
It also works the oppositeway, which is, um, which is,
(23:13):
it's called UASF and U-R-S-F.
UASF is user activated soft fork,and URSF is user resisted soft fork.
URSF is, if the miners try to, youknow, start activating a software,
all bunch of users can run this sideapplication that looks for that block
that version bit or whatever the minersput in for signaling and you can start
(23:35):
rejecting blocks and that's bad forthe network You don't to rejected
because when you broadcast a transactionor you know, when a new block gets
mined, you want all the nodes to like.
have the new block because that'show you sync to the blockchain.
That's just how it
Audience (23:50):
(inaudible)
Nitesh (23:58):
Right.
Um, but I suppose if there's like50 people reject, like half of the
network rejecting blocks, it's,would it, maybe it'll create a
change, but I'm not very sure.
Would it?
That's fair.
Yeah.
But I guess the blockpropagation will stop.
(24:19):
A lot of nodes might not, mightnot, you know, start listening
for blocks and stuff like that.
Okay.
Now, the technical stuff is done.
Now, this is all the non-technical stuff.
This is related to thehuman beings, right?
All the stuff that we spokebefore is about changing Bitcoin.
(24:39):
But, as human beings, where do westand in terms of changing, right?
As the, the, the paper Categorizesinto six state of minds.
You, you are passionate for thechange, you're supportive of it,
you're apathetic or undecided, you'reunaware of what is going on, you're not
(25:01):
supportive, but you don't really careeither, you're just not supportive.
And six is you, you don't like itand you actually spend resources
and power to fight against it.
Right?
These people usually, accordingto the authors of this paper,
fall in these six categories.
And the two that are highlightedin read are where most people are.
(25:21):
They are.
Either undecided or they have no clue,right, um, about what the change is.
all the people who are in bitcoinare categorized into these six
sections of people, economic nodes,which are basically large exchanges,
(25:44):
coinbase, finance, all these things,investors, your Michael Sailors,
Media influencers, your podcasters,miners, are your miners, mining pools,
protocol devs, who work, actuallywork on the Bitcoin Core software,
users and application devs is us.
Simple.
(26:04):
First economic nodes.
Um,
so before we get into this, these sixset of people, everybody who wants a
soft fork or does not want a soft fork.
obviously has incentives behind it, right?
Because for someone, Bitcoinis freedom money for someone.
(26:25):
Bitcoin is number go up for someone.
Uh, Bitcoin is they don't want to use thefiat system and they just want to like.
Transact only in Bitcoin, liveon Bitcoin standard for someone.
they're investor.
They follow government rules.
They only buy ETFs.
It, it is just, just differentthings for different sets of people.
Right?
(26:45):
So for these people, um,you don't know who they are.
Brian Armstrong and Cz Binance,um, for them, um, they're,
they have obviously have power.
They can define what a fork is in thesense that because most of the Bitcoin
activity run happens on these exchanges,what the ticker symbol they decide is,
(27:09):
could be what Bitcoin could be, right?
And it's, it's just because mostof the volume happens on exchanges.
Like no, 90 don't, like 90% ofpeople don't trade peer-to-peer,
or they don't go to an OTC desk.
They go to one of these largeexchanges to buy and sub.
Um, they also run these massive nodes.
(27:29):
For example, they, theydon't like a software, they
start rejecting those blocks.
That could be a problem, um,for example, they don't like a
fork and then a fork happens.
They they have all the user's funds andthey don't like that fork, they can start
dumping all those coins on the marketand they don't even have to tell you.
Um, and their incentives are, they wantmore trading to happen on their platforms.
(27:55):
And, you know, they have to complywith regulation and stuff like that.
Investors.
Sure.
Yeah, I mean, if, if you don't want a forkto succeed, they could say, Oh, this fork
is Bitcoin and this fork is not Bitcoin.
So our, our coins are this fork and notthat fork or something like they could,
they, they, They could exert enough powerin terms of what their nodes can do.
(28:21):
But the, I think the most importantpart of this is they can set that
they, you know, they can sell the forksthat they don't like, they can dump.
So
um, next Investors, they,well, again, if you don't know,
this guy is Michael Saylor.
He talks a lot on TV.
Um, this guy is Larry Fink.
(28:43):
He's the CEO of BlackRock,who steals all our lands.
Uh, our lands, land,like farmlands and land.
They just buy a lot of.
Yeah, they they buy a lot of real estate.
Um,
(29:04):
well buying a lot of them.
Um, anyway,
What powers do they have?
They have influence on price.
If Michael Seller buys a lot ofBitcoin, everybody gets excited
and say, Hey, And then everybodybuys Bitcoin and the price goes up.
same thing happened when BlackRocksaid, We are starting an et
tf Bunch of capital poured in,
(29:25):
Bitcoin price went up.
Audience (29:29):
Make the distinction between, say, BlackRock,
BlackRock also
that they could sell.
They could, yeah.
How
Nitesh (29:48):
Um, I think the way they, so, okay, so for
Brock, they are not a custodian.
Their coins are sitting on Coinbase.
Coinbase is cus custodian their funds, sothey're like different sectors of people.
They're relying on Coinbase, so they'renot the ones who are making decisions.
They nodes are not, though, theydon't even wanna know, probably their
(30:10):
nodes are not making any calls onwhat this fork is or that fork is.
They could influence Coinbase to do it,
Audience (30:18):
so this is the value of like holding your own coins, is that it
gives them the less, influence, right?
Sure.
Yeah.
Nitesh (30:26):
Um, I guess mo at least the investor side, they have more influence
on the price of Bitcoin versus whatactually happens with forks and at least.
My understanding of it.
Um, so anyway, um, again, thepowers, these guys, obviously
(30:47):
they can influence the pricebecause they have a lot of money.
Um, so they can, like, forexample, they can say, oh,
this software is good because.
Like 10 years from now the futuresmarket say it's this software could
like make the Bitcoin price go higherWe can pump the price higher because
this fork or something gives somefeature that helps the price go up.
(31:10):
or Something like that Um, They couldalso fund core devs, the Bitcoin protocol
devs, to like, you know, say You know,let's build this or let's build that uh,
Because they have the money to do it andwhy do they do it the the biggest thing
is number go up For example MicroStrategyis a publicly traded company They
(31:34):
have a lot of Bitcoin if the price ofBitcoin goes up their stock price goes
up their, Their shareholders are happy.
Their CEO is happy.
So um, Their incentives is number go upthey would ideally like to stick to the
store the concept of store of value ofBitcoin because It helps the price go up.
And then obviously, their verycompliant with the, with the government.
(32:02):
Um, so this little chart basically shows,um, how somebody can react when react
to a fork in the sense that, like, forexample, somebody who self custodys their
Bitcoin, for example, if I Like don'tlike a fork and I want to sell my coins
(32:22):
or whatever I can act very quickly, right?
I can immediately move my coinsand then do whatever I want with it
as you go down the list it getsharder and harder for somebody else
to move their coins Um, because youknow For example, a publicly traded
company needs approvals from boardof directors and their meeting only
(32:45):
happens at 9:00 AM on a Monday, right?
They have to wait.
They can't like just, you know,just magically move coins.
And then the same thing with large ETFs.
ETFs only trade Monday to Friday,what, 9:00 AM to 5:00 PM or nine
30 to 5:00 PM or whatever, right?
So it's, it gets harder and harder forsomebody's ability to act when a software
(33:06):
happens or it's gonna happen or something.
Media influencers.
Um, all right.
this guy, his name is Adam Back.
he's the CEO of blockchain.
Peter McCormack, big Podcaster,Preston Pysh big Podcaster.
Uh, not saying they're bad andgood, but just put some photos.
Um, again, the, the power thatmedia influencers have is If you
(33:31):
remember that slide where the stateof mind, where, you know, there's
two sectors of people who are eitherundecided or just unaware, right?
These sets of people have theability to change the mind of
especially those segments, right?
Because.
That is where you consumeyour Bitcoin content from.
(33:53):
You watch the news, you listen topodcasts, and then based on what they say
or what, you know, if, if Adam back likesa proposal and then you really like the
guy, you just tend to like the proposal.
That's just how we work, right?
Um, So then, you know, they, their,their powers could be, they can like
(34:15):
change They can change your narrative.
They can distort like a support, like,for example, because he has so much pull,
he, he can say, Oh, um, you know, we don'tlike this software, but Blockstream built
this better version of the same thing.
So we should probablysupport this thing, right?
He could totally do that.
And then he could, they can even censorpositions of other stakeholders, like.
(34:37):
For example, you know, they don'tlike a software, they, you know,
hypothetically, let's say Twitterdoes not like a software, they could
like censor information about thatsoftware, for example, Um, but on the
flip side, they can be great educators.
Um, Incentives, obviously, theygenerate more engagement, they get
(34:57):
more following, they make more money.
Uh, They also ideally wantto make, maintain more
credibility in the community.
Um, All these people, especially thesetwo, Um, they'll have sponsors for their
podcasts and all that stuff, right?
So they try and act in the best interestof the people who are paying them money.
(35:19):
Miners.
Um, these are the people who aremining these blocks, who are,
who have massive data centers ofmachines that spend a bunch of
energy to mine Bitcoin blocks, right?
That's how Bitcoin is secure.
(35:40):
Um, these people have theirown incentives, right?
They wanna make as much money aspossible from this block reward.
Like I told before.
Whenever in a new block getsmined, this goes to the, this
goes to the miners, right?
This is the new Bitcoin that'screated, along with transaction
fee that goes to the miners.
They want to get as muchof this as possible.
(36:01):
Um, and, um, they obviously want thenetwork to be as stable as possible.
Because if something goeswrong, they're screwed.
Protocol devs, these guys are the oneswho write these awesome C++ code, right?
(36:23):
Um, his name is Luke, and she's Gloria.
Um, they maintain theBitcoin core software.
Uh, they can propose andimplement new changes.
Um, this one's interesting to mebecause what we believe as Bitcoin
(36:44):
is mostly this one repo that you seehere, 99 of Bitcoin that software is
running out there is just this, right?
So people who work on this havea very high influence on what
happens in the network, right?
At least they have a lot of say.
I mean, People are willing to listento people who are like working on this.
(37:07):
Um, so because there is only one client,they also have the power to veto, right?
Saying, oh, we don'tlike this work server.
we're not even gonna bother working on it.
And because there's no other client,if we don't work on it, you're screwed
because nobody else is gonna work on it.
Nobody's even if you work on it,nobody's gonna run your software.
So they kind of have this power, right?
(37:29):
Um, the incentives are, you know,they want to improve Bitcoin.
they'll obviously wanna maintain theirreputation, um, you know, but they could
also be incentivized by sponsorships.
Now, a lot of pro, like some ofthese people have jobs, but some
of them, um, you know, they're justsponsored by various companies.
(37:50):
could be ETFs, largehigh net worth people.
So they could also be influencedby the people who are paying them.
Audience (37:59):
Oh, sorry.
Nitesh (37:59):
Yeah, go ahead.
and, we'll,
Audience (38:04):
(inaudlble)
Nitesh (38:08):
You basically have to contribute long enough.
to.
and then, uh, there's like a processwhere they, you know, eventually bump
you up to being a code maintainerwhere you actually have access
to push into the code directly.
Right now, maybe they're likefour or five, I don't know how
(38:30):
many are like, actively working,
Right?
(38:58):
Yeah.
You said seven?
Audience (39:00):
Yeah, there's maintainers,
Nitesh (39:01):
Seven maintainers?
Okay, cool.
Audience (39:03):
Alright.
Nitesh (39:04):
Oh, Jordan, sorry.
(Jordan) (39:11):
Sponsorships, (inaudlble)
Nitesh (39:17):
think they're they're not that much of a problem.
Uh, for I can give you an example.
For example, worked on an implementationof Bitcoin's fork and added bit
300 for, um, who's the bit 300 guy?
Uh, Paul Starz.
right?
So, he paid Luke to work onimplementing drive change.
(39:38):
And he, I mean, he, to be fair, he wasvery transparent, transparent about it.
But, he got paid, right?
He was in, got paid to do it.
So you can like pay someone to like pusha soft fork or build one and then, you
know, actively push towards, you know,
push, you know, push your influenceon the community saying, Hey,
(40:00):
I'm a code, code maintainer.
This soft fork is awesome Maybe'cause they have so much pull.
More people tend to listento them and things like that.
Audience (40:07):
Because I think that's a lot of people are confused And how like
these people don't work for companies per
Nitesh (40:15):
some do some don't
Audience (40:16):
but even when they do If they're largely granted then they're
getting financial reimbursementfor the work that they're
on project
Nitesh (40:33):
right
Audience (40:34):
like open sats.
Right.
Nitesh (40:37):
Uh, Okay, so for grants, like the, the, I think grants, are,
I'm, I'm not, I, I could be wrong, butin my opinion, grants, because they're
just given so that these people areactively maintaining Bitcoin core and
not per se of like pushing the software.
So it's just like, you know, you're doing.
(40:57):
Community work, so getsome, pay, get paid for it.
But, I think when it comes to pushingsoftware, the the money we're talking
about is much larger and stuff.
Uh, so who they are is public knowledge,but they could be, inno, like anonymous.
Like, you can see the contributors on, on,on Bitcoin and then you can li literally,
(41:22):
some people have pictures, you knowwho they are, they can be conferences.
Some people are anonymous, theydon't show their faces, really.
So, it's public who they are, butthey, you know, not necessarily
public where they live.
Next one is us.
Uh,
Um, So users and application desks,like all us in this room, right?
(41:44):
Um, what powers do we have?
We yell on Twitter andeverywhere else, right?
And then, what can, what else can we do?
We threaten to exit and mass sell Bitcoin.
To your point, like, maybe most, alot of people have, uh, you know,
more Bitcoin in south custodyversus, like, the custodians have.
And then if, I don't know, all ofus, like, get together and say,
(42:06):
hey, we don't like this fork,We all sell, we'll mass exit.
Maybe the price will go down to zeroand, I don't know, Bitcoin will die.
So, I
this is The power that we have, right?
Um, obviously, uh, for somereason, the paper, like, combines,
like, users and applicationdevs together, but that's fine.
(42:27):
But the application devs could haveslightly more influence in the sense
that they're working on some application.
Like a wallet or something thatimproves, you know, makes faster
Bitcoin transactions or whatever.
And a certain software can help them.
And then, you know, they're alsoreally influential in the community.
So they can, you know, push a certainsoftware and things like that.
(42:50):
But in general, this is whatusers and application devs can do.
Alright,
and the next part is whenStephen's gonna talk about it.
How do all these people like, reachconsensus to activate a software?
So, you gotta wait for that for March 5th.
That's it.
Stephen DeLorme (43:14):
Hey, thanks for listening.
I hope you enjoyed this episode.
If you want to learn more aboutanything that we discussed, you can
look for links in the show notesthat should be in your podcast
player, or you can go to atlbitlab.
com slash podcast on a final note.
If you found this information usefuland you want to help support us, you
can always send us a tip in Bitcoin.
(43:36):
Your support really helps us that wecan keep bringing you content like this.
All right.
Catch you later.
Everybody who wants a soft fork or does not want a soft fork.
obviously has incentives behind it, right?
Because for someone, Bitcoinis freedom money for someone,
bitcoin is number go up.
For someone Bitcoin is they don'twant to use the fiat system and they
just want to like transact only inBitcoin, live on Bitcoin standard.
(00:20):
For someone they're investor.
They follow government rules.
They only buy ETFs.
It, it is just, just differentthings for different sets of people.
Stephen DeLorme (00:35):
This podcast episode is an event recording.
If you're listening to the audioversion, you might be missing some
context from the speaker's visuals.
You can find the videoversion at atlbitlab.
com.
That's A T L B I T L A B dot com.
There might also be audiencequestions or other background
chatter that's not audible.
Look, event recordings are neverperfect, but we're sharing it here
(00:58):
because we think you're going tofind something valuable in it.
Let's talk a little bit about our sponsorsfirst, and then we'll get onto the show.
This episode is sponsored by ATL BitLab.
ATL BitLab is Atlanta'sfreedom tech hacker space.
We have co working desks,conference rooms, event space,
maker tools, and tons of coffee.
(01:18):
There is a very activecommunity here in the lab.
Every Wednesday night isBitcoin night here in Atlanta.
We also have meetups for cybersecurity,artificial intelligence, decentralized
identity, product design, and more.
We offer day passes and nomad passesfor people who need to use the lab only
occasionally, as well as membershipsfor people who plan to use the lab
more regularly, such as myself.
(01:39):
One of the best things abouthaving a BitLab membership isn't
the amenities, it's the people.
Surrounding yourself with thecommunity helps you learn faster
and helps you build better.
Your creativity becomes amplifiedwhen you work in this space.
That's what I think at least.
If you're interested in becominga member or supporting the space,
please visit us at atlbitlab.
com.
(01:59):
That's A T L B I T L A B dot com.
All right, on to our show.
Nitesh (02:09):
Hey everyone, I'm Nitesh.
I'm a software engineer.
I work on Bitcoin stuff every day.
I work here at the lab.
Um, so today we're gonna talk about,uh, this long article that was
written by a bunch of smart people.
Uh, some names you might befamiliar with, some probably not.
(02:33):
But essentially, um, the, the reason whythis article was written was Over the
past, yes, probably more than two, threeyears now, uh, there's a lot of, um,
controversy about upgrades in Bitcoin.
So, if, if you, if you're familiarwith Bitcoin, and you run the Bitcoin
(02:58):
software, it is, like, it's not anopen secret that, you know, Bitcoin
is really, really hard to change.
Like, if you want to add a new feature,or pull a new feature out of Bitcoin,
It takes a long time, like, andbecause Bitcoin is a decentralized
network, there's a bunch of peoplewho have voice on and opinions on
(03:22):
what happens inside of Bitcoin.
So, um, these people could be,you know, influencers, they could
be large businessmen, investors,people who own exchanges.
Us here are sitting in thisroom could be anyone, right?
So the idea behind this, this articleor paper is, is that how do all
(03:46):
these sets of people come togetherin order to come to consensus so that
we can like push Bitcoin forward interms of making change to Bitcoin?
Um, but I'm not really gonnalike go through this article.
I have made slides because Obviously,nobody's gonna read all that.
(04:07):
Um, so, analyzing Bitcoin consensus.
The risks of protocol upgrades.
So, like I said, this bunch of people whocame together, wrote this article, because
they believe that it, there is a lot ofcontroversy about how, you know, how, you
know, you make changes to Bitcoin, youpropose, and then people will hate you,
(04:29):
sometimes you even get death threats.
Because you propose a certain changeand try to push for that change.
And it's, it's happened to quite, quitesome debts who basically stopped working
on Bitcoin because they proposed tochange, they pushed it too hard, the
community did not understand or hatedit or whatever, or probably it's bad.
Um, and you know, people get mad.
(04:51):
So, all right, um, what arewe gonna talk about today?
So some basic overview.
We're gonna talk about what consensus is.
We're gonna talk about what soft,soft forks and hard forks is.
And then we're gonna talk about howwe can activate a fork in Bitcoin,
basically activate a change in Bitcoin.
And then we are gonna talk about stateof mind, which basically means what
(05:12):
your state of mind is in terms of likewhere you stand what for supporting
versus not supporting a new change.
And then we are gonna talk aboutstakeholders who are basically.
Categories of people who, who are indifferent sectors of the Bitcoin industry.
Like I said, they could be businessmen,or people in this room, or media
(05:34):
influencers, podcasters, anyone, or devs.
Right.
Okay.
So what are cons?
What is consensus and what isconsensus rules in Bitcoin?
So at the bare minimum, like mostof us know that, you know, there
are only 21 million Bitcoin.
That is a consensus rule, right?
Everybody agrees that, youknow, there are only 21 million
(05:56):
Bitcoin and there'll ever exist.
And, you know, a block's mineapproximately every 10 minutes
and the size of the block is fourmegabytes and things like that.
But where is all this stuff written?
So, this link, if you go, thispile of garbage, which is called
C++, Um, which nobody likes.
(06:18):
Yeah, I can see.
Alright, So, this is where you, theconsensus tools of Bitcoin are written in.
Now, it's not written inEnglish, it's written in C++.
the reason Bitcoin does not have a spec,when I asked a few core devs why is all
(06:40):
this not written in English and onlywritten in C++, they told me English can
be misinterpreted, but code cannot be.
So that's why it is writtenin C++ and not in English.
Um, at least that's theanswer they gave me.
Anyway, so, for example,um, where is this?
so max block size, for example, ifyou know the maximum block size on
(07:03):
Bitcoin is four megabytes, that meansyou can only cram four megabytes
worth of transactions in, in a block.
Um, and then the coinbase maturity,so every time you mine a block,
my new Bitcoin will created, andthe coinbase transaction which
generates new Bitcoin cannot bespent for up to a hundred blocks.
Now that is a consensus rule.
So these kind of consensus rulesare written inside of maybe
(07:27):
you want this one or this one?
Oh, there you go.
Uh, yeah.
This says once one Bitcoin isa hundred million Satoshis.
That's a consensus So The maximumnumber of Satoshis that can ever exist.
So 21 million Bitcoin into100 million satoshis, right?
So this, all this stuff is written.
(07:49):
In C++ in this GitHub repo calledBitcoin, This is what, when somebody
says you're running Bitcoin software,this is essentially what you're running
in your, in your computer at home, in aRaspberry Pi or a MacBook or whatever.
Right?
So, essentially, these are a setof rules that everybody has agreed
(08:09):
that will, Everybody has agreedsaying this will be Bitcoin.
That is essentially what consensusrules are and what consensus means.
All right.
So, some of the most, you know,popular consensus rules is, for
example, a block validation.
It includes how the block shouldbe, what the size of the block
is, um, you know, the proof ofwork that goes into the block.
(08:33):
And for example, for example,transaction validations, you know,
how our transactions should bestructured, what inputs are, what
outputs are, and things like that.
And including chain selection, we, youknow, when I, I'll, we'll get to the
technical details uh, of all of this.
First, okay, before we go into theactual topic of software versus hard
(08:56):
works, We first have to understandin the world of software, what
are braking changes and what arebackwards compatible changes, right?
What a breaking change basically means is,if you make a change, that means people,
you make a change and push new code.
That means people who upgrade toyour new code have to go fix their
(09:18):
old code to start supporting yournew piece of code that you pushed.
What's what Backwards compatible meansyou push a new feature, but people can
just upgrade and not, not worry aboutTheir existing software just runs fine.
They don't have to worry about anything.
right.
I can give you like areally, really basic example.
right.
(09:38):
So this is.
Really, a really simple piece of code.
It says, add numbers, right?
Let's say the entire world doesnot know how to add two numbers.
Everybody uses my code, right?
Everybody uses Nitesh'scode to add two numbers.
right?
Simple.
It says, there's a function, ittakes in a number A, it takes
in number B, returns a number.
(10:00):
If either A or B is undefined,I'll say Fuck something wrong.
If it's not, then I'll return A plusB. And I'll print it out, right?
That's all it is.
Now, if I run this, I'll saysum of numbers is nine, right?
Great.
But, one morning, I wake upand say, Hey, I don't want to
support two numbers anymore.
I wanna start supportingadding fee numbers.
(10:21):
Right?
So what I do?
I go,
C,
number, and, uh,
All right
Now, now my code onlysupport adding three numbers.
So everybody who was using my codein the past, Now has to go fix
(10:45):
their code of adding numbers, right?
This is a breaking change.
Now if I run this, I'll say,Fuck, something went wrong, right?
Now, this, this, like Isaid, is a breaking change.
But how do I make thisbackwards compatible?
I go and say C equals zero.
All right, problem solve.
(11:05):
And now I run it.
Now the code works again.
Right?
But this is backwards compatible.
So I push.
I'm still supporting adding three numbers.
I could like Say five plus four, commat three, and then he'll say nine.
but if I remove three, it'll still work.
Right?
So this essentially is whatis backwards compatible versus
(11:29):
what is a breaking change.
This is like a very stupid simpleexample, but you get the idea, right?
The same thing applies in Bitcoin, right?
What's, when somebody says what a softfork was as a hard work is, a soft fork
is when you push new code to Bitcoin, Andthen somebody upgrades, or then, or the
part of the network upgrades, that meansyou don't have to worry about anything.
(11:52):
Everything that was runningpreviously will just run fine,
as long as there are no bugs.
What a hard fork is, you push a newsoftware update, and then a part of
the network upgrades, it'll behavedifferently for them, and the other
half of the network that didn't upgrade,it'll behave differently for them,
because the code is different andit's not backwards compatible, right?
That's what this tablebasically says, right?
(12:15):
soft forks.
they're backwards compatible.
it's optional to upgrade.
You don't upgrade, is fine.
Hard for and upgrade is required inBitcoin terms because if the network,
the whole network does not upgrade, we'llhave something called a chain split.
Where half the network will say, thisis Bitcoin, and the other half will say,
(12:36):
I don't know, Ethereum is Bitcoin, orBitcoin Cash is Bitcoin, or some other
fork of Bitcoin is Bitcoin, which it
okay, soft forks.
it tightens existingrules, or adds new rules.
Hard forks, it changes orrelaxes existing rules.
What?
(12:56):
Like, relaxing a rule.
Instead of 21 million, we hadmagically have 42 million bitcoin.
Right?
That's relaxing.
Tighten.
Um, instead of a four megabyte block size,we have a two megabyte block size, Right?
Um, this is a graph historically onhow long it takes by version of Bitcoin
code, The, the C++ code that I showedyou takes to upgrade from one version
(13:21):
to the other in terms of weeks, right?
Initially, when Bitcoin first started,like way back when version 0.10,
it only used to take less than 50weeks to upgrade, but in general,
if you see, it's trending upwards.
The time it takes for peopleto upgrade their nodes.
That means, back then, usually onlysoftware engineer used to run No,
(13:44):
Like mostly, people who are technical.
Now a lot of people run nodes.
Now, a lot of people just plugin their notes and forget it.
Sometimes it's running fortwo years straight and they
probably never looked at it.
So the time it takes forsomeone to upgrade their nodes
is getting longer and longer.
So, it's really risky.
to make breaking changes becausepeople in general don't upgrade
(14:06):
their software very frequently.
So the last time Bitcoin hada breaking change this is a
hard work, was in 2011 or 2010.
right?
It was really long time ago.
Since then, we have not brokenanything in terms of consensus.
Alright?
we're talking about soft forks.
How do we act?
(14:26):
activate a software, right?
This primarily is three ways to do it.
The first one is called flag day.
It's like the oldest wayto activate a software.
It's super simple.
You make a flag saying on this blockheight, a software gets activated.
It gets activated ordoes not get activated.
(14:46):
That's it.
It's like super simple.
Um, so basically all nodes, you know,start upgrading minors, you know, start.
Signaling There's, there's notreally a signaling mechanism.
So on that certain day, um, basicallyall nodes just transition from the
old version to the new version.
(15:07):
That's basically it.
The problem with flag day is.
Um, there is no flexibilityin terms of operating.
So, for example, something goeswrong, you cannot like roll back.
Like, for example, if slowly thenetwork slash starts adopting, and
then somebody notices an issue,you can stop and then just go back
(15:30):
and say, we're not doing this.
But the problem with flag dayupgrades, for example, is on that day,
everybody upgrades, and then you'rescrewed if something goes wrong.
right?
Audience (15:38):
So the principle is, you download the upgrade ahead of time, but
there's a certain date where it goes live.
Nitesh (15:45):
It's, It goes live, that's it.
You you set a block heightand it just goes live.
Enough people, if enough nodesupgrade and enough blocks are
following the new version, it'sjust live on the new version.
right?
Next, web 34.
This is a slightly, um, Iwouldn't say complex, but it's an
(16:08):
improved mechanism over Flag Day.
The way this is done is,Inside a Bitcoin block,
Let me open mempool.space.
All right, does this show
block,
does this show a block header?
(16:29):
Uh, sorry, Mind block.
this show details of a block?
Show like the, the version number?
Alright.
This is the version numberof the block, right?
Uh, shows hex, but imagineit's 1, 2, 3, whatever.
doesn't matter.
So what BIP 34 does is.
(16:50):
All miners who start runningthe new piece of software
We'll bump this version number.
Let's say it was version one.
they'll bump it to version two saying weare supporting this new software proposal.
I don't know.
It could be, that's, it could be hard for,for example, or software, But essentially,
they will just bump the version numberfrom one to two or two to three,
(17:13):
whatever, and say, After that, okay, soonce they bump the version number, you
track the, you track up to a thousandblocks and at least 75 of the nodes.
Should, um, sorry.
At least 75% of the last 1000blocks should be signaling
(17:35):
this new version number.
If it, if that does not happen,then the activation fails and you're
back to where you would, if it doeshappen, then you sign, then you wait
another thousand blocks and then.
At least 95 of the thousandblocks, which means 950 blocks,
should signal the new version.
(17:57):
And then it is successfully activated.
So the first 75%, you can bumpthe version, and then it's still
like old blocks and new blocksare accepted by the network.
The next thousand blocks, the 950blocks, or whenever the first nine 50 es.
After that, the old version is nolonger supported by by the network.
(18:18):
The blocks get rejected.
Right?
So, this is how BIP 34 works.
It works pretty well.
The only downside to BIP 34is, um, you cannot signal
multiple soft forks if you want.
Like, for example, you are tryingto activate three different
soft forks at the same time.
(18:40):
And then, but most of the minors onlywant to activate, like, one of them.
They don't like the other two.
Right?
You can either signal all ofthem, or, like, none of them.
Like, you can't, like, specificallypoint, saying, I'm signaling for this one.
So when you bump the version number,it means you are basically saying, I'm
signaling for whatever piece of codethat you're running at that point.
(19:02):
of time, It works pretty well,but that was, and at least from my
understanding, that was the only downside.
The upgraded version to that is BIP nine.
What BIP nine does is, instead of like,this, instead of like bumping the whole
number, they bump like bits of the number,like partial parts of the number, So you
(19:26):
bump, let's say this becomes zero one,and that means It signals one software.
And this zero tube signals something else.
zero, three signals something else.
They bump, like, version bits of it.
and then there's no 75 in this.
This is simply the 95 rule, where overa period of 2016 blocks, If 95 of the
(19:48):
hatcher is signaling towards something,that means that thing gets activated.
The most recent one that wedid like this was taper, right?
this is just thedifferences is explaining.
This is like be 34, like you justbump version 1, 2, 3, and four, right?
This, these, these were like the differentsoftwares that we activated with BIP 34.
(20:09):
Um, and then this is the nine,and then it's ab B, like you,
like I said, you bump the versionbits and not the whole version.
All right, Any questions so far?
I know this is getting technical.
Audience (20:25):
So It's basically a voting system in some respect?
Nitesh (20:30):
It is a voting Okay, so the problem with BIP 34 and BIP 9 is, regular
humans don't really have a vote in it.
The miners basically decide what happens.
Because they're the ones whoare signaling and then producing
the blocks and then publishing.
And because all this is backwardscompatible, all the nodes on the
network will either start acceptingthe block saying, oh, this is a new
(20:54):
block, or the nodes will not just notunderstand the new version and say,
oh, this is cool, and let's say, okay.
If it was breaking, if it was a hardfork, the nodes will not understand it.
Because it's backwards compatible,all no will say, okay, cool.
Right?
So the problem with The these twobes is, The miners almost have full
control for software to get activated.
(21:15):
Like, tomorrow morning, miners couldlike, decide and activate a software
from Bitcoin if they wanted to.
They generally don't do it becausethey'll get a lot of shit up, shit
for it, but they could if they want.
And that is why
Audience (21:26):
What was the last hard fork?
Nitesh (21:28):
Sorry?
Audience (21:29):
What was the last hard fork?
Nitesh (21:30):
The last hard fork?
Yeah.
Uh, I think we activated OP_NOP.
And that
Audience (21:38):
Required everyone to shift.
Nitesh (21:41):
Yeah, but back then there was like 10 people running a node.
So, because miners have so much power,uh, I think Luke, Luke's probably
Luke Dash Junior came up with BIP 8.
BIP 8 is for the communityas a together to activate a
software or reject the software.
Um, what BIP 8 does is, um, along withyour node software, You run another piece
(22:08):
of software on the side that talk to your
accepts or rejects blocks, right?
So if you want to activate a new software,and then the min and you just wanna
do it as a network, the miners, youknow, are still not signaling, but then
they still produce the block template.
And then they obviously mine theblock and then send it out, right?
(22:31):
But the more nodes start rejectingthe it's bad for the miners
because the network will split.
So they will also start upgradingand then start showing support.
That's basically the concept of BIP 8,where the Where, again, it's basically
you set a height and then this, at, atthis height, we say it basically activates
(22:53):
and then a bunch of people upgrade.
But the only difference is the, the,the, um, the process of upgrades
starts with users stuff, miners, right?
Because they start upgradingtheir nodes and start, start
rejecting blocks by miners.
It also works the oppositeway, which is, um, which is,
(23:13):
it's called UASF and U-R-S-F.
UASF is user activated soft fork,and URSF is user resisted soft fork.
URSF is, if the miners try to, youknow, start activating a software,
all bunch of users can run this sideapplication that looks for that block
that version bit or whatever the minersput in for signaling and you can start
(23:35):
rejecting blocks and that's bad forthe network You don't to rejected
because when you broadcast a transactionor you know, when a new block gets
mined, you want all the nodes to like.
have the new block because that'show you sync to the blockchain.
That's just how it
Audience (23:50):
(inaudible)
Nitesh (23:58):
Right.
Um, but I suppose if there's like50 people reject, like half of the
network rejecting blocks, it's,would it, maybe it'll create a
change, but I'm not very sure.
Would it?
That's fair.
Yeah.
But I guess the blockpropagation will stop.
(24:19):
A lot of nodes might not, mightnot, you know, start listening
for blocks and stuff like that.
Okay.
Now, the technical stuff is done.
Now, this is all the non-technical stuff.
This is related to thehuman beings, right?
All the stuff that we spokebefore is about changing Bitcoin.
(24:39):
But, as human beings, where do westand in terms of changing, right?
As the, the, the paper Categorizesinto six state of minds.
You, you are passionate for thechange, you're supportive of it,
you're apathetic or undecided, you'reunaware of what is going on, you're not
(25:01):
supportive, but you don't really careeither, you're just not supportive.
And six is you, you don't like itand you actually spend resources
and power to fight against it.
Right?
These people usually, accordingto the authors of this paper,
fall in these six categories.
And the two that are highlightedin read are where most people are.
(25:21):
They are.
Either undecided or they have no clue,right, um, about what the change is.
all the people who are in bitcoinare categorized into these six
sections of people, economic nodes,which are basically large exchanges,
(25:44):
coinbase, finance, all these things,investors, your Michael Sailors,
Media influencers, your podcasters,miners, are your miners, mining pools,
protocol devs, who work, actuallywork on the Bitcoin Core software,
users and application devs is us.
Simple.
(26:04):
First economic nodes.
Um,
so before we get into this, these sixset of people, everybody who wants a
soft fork or does not want a soft fork.
obviously has incentives behind it, right?
Because for someone, Bitcoinis freedom money for someone.
(26:25):
Bitcoin is number go up for someone.
Uh, Bitcoin is they don't want to use thefiat system and they just want to like.
Transact only in Bitcoin, liveon Bitcoin standard for someone.
they're investor.
They follow government rules.
They only buy ETFs.
It, it is just, just differentthings for different sets of people.
Right?
(26:45):
So for these people, um,you don't know who they are.
Brian Armstrong and Cz Binance,um, for them, um, they're,
they have obviously have power.
They can define what a fork is in thesense that because most of the Bitcoin
activity run happens on these exchanges,what the ticker symbol they decide is,
(27:09):
could be what Bitcoin could be, right?
And it's, it's just because mostof the volume happens on exchanges.
Like no, 90 don't, like 90% ofpeople don't trade peer-to-peer,
or they don't go to an OTC desk.
They go to one of these largeexchanges to buy and sub.
Um, they also run these massive nodes.
(27:29):
For example, they, theydon't like a software, they
start rejecting those blocks.
That could be a problem, um,for example, they don't like a
fork and then a fork happens.
They they have all the user's funds andthey don't like that fork, they can start
dumping all those coins on the marketand they don't even have to tell you.
Um, and their incentives are, they wantmore trading to happen on their platforms.
(27:55):
And, you know, they have to complywith regulation and stuff like that.
Investors.
Sure.
Yeah, I mean, if, if you don't want a forkto succeed, they could say, Oh, this fork
is Bitcoin and this fork is not Bitcoin.
So our, our coins are this fork and notthat fork or something like they could,
they, they, They could exert enough powerin terms of what their nodes can do.
(28:21):
But the, I think the most importantpart of this is they can set that
they, you know, they can sell the forksthat they don't like, they can dump.
So
um, next Investors, they,well, again, if you don't know,
this guy is Michael Saylor.
He talks a lot on TV.
Um, this guy is Larry Fink.
(28:43):
He's the CEO of BlackRock,who steals all our lands.
Uh, our lands, land,like farmlands and land.
They just buy a lot of.
Yeah, they they buy a lot of real estate.
Um,
(29:04):
well buying a lot of them.
Um, anyway,
What powers do they have?
They have influence on price.
If Michael Seller buys a lot ofBitcoin, everybody gets excited
and say, Hey, And then everybodybuys Bitcoin and the price goes up.
same thing happened when BlackRocksaid, We are starting an et
tf Bunch of capital poured in,
(29:25):
Bitcoin price went up.
Audience (29:29):
Make the distinction between, say, BlackRock,
BlackRock also
that they could sell.
They could, yeah.
How
Nitesh (29:48):
Um, I think the way they, so, okay, so for
Brock, they are not a custodian.
Their coins are sitting on Coinbase.
Coinbase is cus custodian their funds, sothey're like different sectors of people.
They're relying on Coinbase, so they'renot the ones who are making decisions.
They nodes are not, though, theydon't even wanna know, probably their
(30:10):
nodes are not making any calls onwhat this fork is or that fork is.
They could influence Coinbase to do it,
Audience (30:18):
so this is the value of like holding your own coins, is that it
gives them the less, influence, right?
Sure.
Yeah.
Nitesh (30:26):
Um, I guess mo at least the investor side, they have more influence
on the price of Bitcoin versus whatactually happens with forks and at least.
My understanding of it.
Um, so anyway, um, again, thepowers, these guys, obviously
(30:47):
they can influence the pricebecause they have a lot of money.
Um, so they can, like, forexample, they can say, oh,
this software is good because.
Like 10 years from now the futuresmarket say it's this software could
like make the Bitcoin price go higherWe can pump the price higher because
this fork or something gives somefeature that helps the price go up.
(31:10):
or Something like that Um, They couldalso fund core devs, the Bitcoin protocol
devs, to like, you know, say You know,let's build this or let's build that uh,
Because they have the money to do it andwhy do they do it the the biggest thing
is number go up For example MicroStrategyis a publicly traded company They
(31:34):
have a lot of Bitcoin if the price ofBitcoin goes up their stock price goes
up their, Their shareholders are happy.
Their CEO is happy.
So um, Their incentives is number go upthey would ideally like to stick to the
store the concept of store of value ofBitcoin because It helps the price go up.
And then obviously, their verycompliant with the, with the government.
(32:02):
Um, so this little chart basically shows,um, how somebody can react when react
to a fork in the sense that, like, forexample, somebody who self custodys their
Bitcoin, for example, if I Like don'tlike a fork and I want to sell my coins
(32:22):
or whatever I can act very quickly, right?
I can immediately move my coinsand then do whatever I want with it
as you go down the list it getsharder and harder for somebody else
to move their coins Um, because youknow For example, a publicly traded
company needs approvals from boardof directors and their meeting only
(32:45):
happens at 9:00 AM on a Monday, right?
They have to wait.
They can't like just, you know,just magically move coins.
And then the same thing with large ETFs.
ETFs only trade Monday to Friday,what, 9:00 AM to 5:00 PM or nine
30 to 5:00 PM or whatever, right?
So it's, it gets harder and harder forsomebody's ability to act when a software
(33:06):
happens or it's gonna happen or something.
Media influencers.
Um, all right.
this guy, his name is Adam Back.
he's the CEO of blockchain.
Peter McCormack, big Podcaster,Preston Pysh big Podcaster.
Uh, not saying they're bad andgood, but just put some photos.
Um, again, the, the power thatmedia influencers have is If you
(33:31):
remember that slide where the stateof mind, where, you know, there's
two sectors of people who are eitherundecided or just unaware, right?
These sets of people have theability to change the mind of
especially those segments, right?
Because.
That is where you consumeyour Bitcoin content from.
(33:53):
You watch the news, you listen topodcasts, and then based on what they say
or what, you know, if, if Adam back likesa proposal and then you really like the
guy, you just tend to like the proposal.
That's just how we work, right?
Um, So then, you know, they, their,their powers could be, they can like
(34:15):
change They can change your narrative.
They can distort like a support, like,for example, because he has so much pull,
he, he can say, Oh, um, you know, we don'tlike this software, but Blockstream built
this better version of the same thing.
So we should probablysupport this thing, right?
He could totally do that.
And then he could, they can even censorpositions of other stakeholders, like.
(34:37):
For example, you know, they don'tlike a software, they, you know,
hypothetically, let's say Twitterdoes not like a software, they could
like censor information about thatsoftware, for example, Um, but on the
flip side, they can be great educators.
Um, Incentives, obviously, theygenerate more engagement, they get
(34:57):
more following, they make more money.
Uh, They also ideally wantto make, maintain more
credibility in the community.
Um, All these people, especially thesetwo, Um, they'll have sponsors for their
podcasts and all that stuff, right?
So they try and act in the best interestof the people who are paying them money.
(35:19):
Miners.
Um, these are the people who aremining these blocks, who are,
who have massive data centers ofmachines that spend a bunch of
energy to mine Bitcoin blocks, right?
That's how Bitcoin is secure.
(35:40):
Um, these people have theirown incentives, right?
They wanna make as much money aspossible from this block reward.
Like I told before.
Whenever in a new block getsmined, this goes to the, this
goes to the miners, right?
This is the new Bitcoin that'screated, along with transaction
fee that goes to the miners.
They want to get as muchof this as possible.
(36:01):
Um, and, um, they obviously want thenetwork to be as stable as possible.
Because if something goeswrong, they're screwed.
Protocol devs, these guys are the oneswho write these awesome C++ code, right?
(36:23):
Um, his name is Luke, and she's Gloria.
Um, they maintain theBitcoin core software.
Uh, they can propose andimplement new changes.
Um, this one's interesting to mebecause what we believe as Bitcoin
(36:44):
is mostly this one repo that you seehere, 99 of Bitcoin that software is
running out there is just this, right?
So people who work on this havea very high influence on what
happens in the network, right?
At least they have a lot of say.
I mean, People are willing to listento people who are like working on this.
(37:07):
Um, so because there is only one client,they also have the power to veto, right?
Saying, oh, we don'tlike this work server.
we're not even gonna bother working on it.
And because there's no other client,if we don't work on it, you're screwed
because nobody else is gonna work on it.
Nobody's even if you work on it,nobody's gonna run your software.
So they kind of have this power, right?
(37:29):
Um, the incentives are, you know,they want to improve Bitcoin.
they'll obviously wanna maintain theirreputation, um, you know, but they could
also be incentivized by sponsorships.
Now, a lot of pro, like some ofthese people have jobs, but some
of them, um, you know, they're justsponsored by various companies.
(37:50):
could be ETFs, largehigh net worth people.
So they could also be influencedby the people who are paying them.
Audience (37:59):
Oh, sorry.
Nitesh (37:59):
Yeah, go ahead.
and, we'll,
Audience (38:04):
(inaudlble)
Nitesh (38:08):
You basically have to contribute long enough.
to.
and then, uh, there's like a processwhere they, you know, eventually bump
you up to being a code maintainerwhere you actually have access
to push into the code directly.
Right now, maybe they're likefour or five, I don't know how
(38:30):
many are like, actively working,
Right?
(38:58):
Yeah.
You said seven?
Audience (39:00):
Yeah, there's maintainers,
Nitesh (39:01):
Seven maintainers?
Okay, cool.
Audience (39:03):
Alright.
Nitesh (39:04):
Oh, Jordan, sorry.
(Jordan) (39:11):
Sponsorships, (inaudlble)
Nitesh (39:17):
think they're they're not that much of a problem.
Uh, for I can give you an example.
For example, worked on an implementationof Bitcoin's fork and added bit
300 for, um, who's the bit 300 guy?
Uh, Paul Starz.
right?
So, he paid Luke to work onimplementing drive change.
(39:38):
And he, I mean, he, to be fair, he wasvery transparent, transparent about it.
But, he got paid, right?
He was in, got paid to do it.
So you can like pay someone to like pusha soft fork or build one and then, you
know, actively push towards, you know,
push, you know, push your influenceon the community saying, Hey,
(40:00):
I'm a code, code maintainer.
This soft fork is awesome Maybe'cause they have so much pull.
More people tend to listento them and things like that.
Audience (40:07):
Because I think that's a lot of people are confused And how like
these people don't work for companies per
Nitesh (40:15):
some do some don't
Audience (40:16):
but even when they do If they're largely granted then they're
getting financial reimbursementfor the work that they're
on project
Nitesh (40:33):
right
Audience (40:34):
like open sats.
Right.
Nitesh (40:37):
Uh, Okay, so for grants, like the, the, I think grants, are,
I'm, I'm not, I, I could be wrong, butin my opinion, grants, because they're
just given so that these people areactively maintaining Bitcoin core and
not per se of like pushing the software.
So it's just like, you know, you're doing.
(40:57):
Community work, so getsome, pay, get paid for it.
But, I think when it comes to pushingsoftware, the the money we're talking
about is much larger and stuff.
Uh, so who they are is public knowledge,but they could be, inno, like anonymous.
Like, you can see the contributors on, on,on Bitcoin and then you can li literally,
(41:22):
some people have pictures, you knowwho they are, they can be conferences.
Some people are anonymous, theydon't show their faces, really.
So, it's public who they are, butthey, you know, not necessarily
public where they live.
Next one is us.
Uh,
Um, So users and application desks,like all us in this room, right?
(41:44):
Um, what powers do we have?
We yell on Twitter andeverywhere else, right?
And then, what can, what else can we do?
We threaten to exit and mass sell Bitcoin.
To your point, like, maybe most, alot of people have, uh, you know,
more Bitcoin in south custodyversus, like, the custodians have.
And then if, I don't know, all ofus, like, get together and say,
(42:06):
hey, we don't like this fork,We all sell, we'll mass exit.
Maybe the price will go down to zeroand, I don't know, Bitcoin will die.
So, I
this is The power that we have, right?
Um, obviously, uh, for somereason, the paper, like, combines,
like, users and applicationdevs together, but that's fine.
(42:27):
But the application devs could haveslightly more influence in the sense
that they're working on some application.
Like a wallet or something thatimproves, you know, makes faster
Bitcoin transactions or whatever.
And a certain software can help them.
And then, you know, they're alsoreally influential in the community.
So they can, you know, push a certainsoftware and things like that.
(42:50):
But in general, this is whatusers and application devs can do.
Alright,
and the next part is whenStephen's gonna talk about it.
How do all these people like, reachconsensus to activate a software?
So, you gotta wait for that for March 5th.
That's it.
Stephen DeLorme (43:14):
Hey, thanks for listening.
I hope you enjoyed this episode.
If you want to learn more aboutanything that we discussed, you can
look for links in the show notesthat should be in your podcast
player, or you can go to atlbitlab.
com slash podcast on a final note.
If you found this information usefuland you want to help support us, you
can always send us a tip in Bitcoin.
(43:36):
Your support really helps us that wecan keep bringing you content like this.
All right.
Catch you later.
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