Charlie Lee on the Future of Litecoin
Litecoin creator Charlie Lee is definitely one of the most influential, charismatic, and respected voices in the world of cryptocurrencies. He has been around for a long time, he’s seen many projects get born just to crash and burn during the various market cycles, but through it all LTC has thrived and has maintained relevance as digital silver which helps king Bitcoin scale and improve.
Given these circumstances, to which we also add the fact that he’s been the most accurate
crypto prophet of 2018, it was a true privilege to get to interview Charlie Lee himself. However, the talks didn’t really revolve around making speculations about the price: instead, we spoke about the new technologies that were brought and are about to get brought into Litecoin, and we tried to envision a future for the 7 year-old digital silver. From SegWit and the Lightning Network to the prospect of adding Confidential Transactions and Schnorr signatures to increase fungibility, it was a really productive discussion that should reveal why Litecoin is still around after all these years: it’s all about a mix of conservatism and the boldness to embrace new technologies that get tested before they get implemented into Bitcoin.
Despite the disappointing price movement, 2018 has been an incredible year for Litecoin in technological terms, as it spearheaded the mainstream adoption of the Lightning Network and it announced it would take some bold steps towards mainstream adoption and fungibility. Therefore, in the context of the whole bear market (which Charlie Lee accurately predicted), one can observe that they technology is thriving, is more capable than ever to provide an alternative for sound money, and gets adopted by an increasing number of merchants on a daily basis (which is also the merit of people like Jon Moore).
– Hello and welcome to a special edition of the Crypto Insider interviews. I am Vlad and today my guest it none other than Charlie Lee, the inventor of Litecoin.
– Hey Vlad, it is nice to be here.
– Hi Charlie. I never thought that I would say this by the end of the year, but I am so happy that I get to talk to you and there is so much to talk about, there is a lot going on with Litecoin, there is a lot going on with the crypto space in general, and there are a lot of improvements being proposed to Bitcoin and Lightning and I guess we have quite a lot to cover.
– Sure, yeah.
– But first of all, I was thinking that you usually don’t get to talk about yourself and your background. I know that you went to… was it Stanford?
– M.I.T. You went to M.I.T, you graduated and then you got employed at Google?
– Yeah, I came out to the Silicon Valley in 2000, basically at the peak of the dot-com
bubble. I worked for a couple startups and then ended up at Google.
– How would you compare the hype and the environment? You saw the dot-com bubble, now you are seeing what goes on with the cryptocurrencies and the whole Blockchain industry. How are they similar and what are the main differences that you observe?
– The similarities are obviously, there is a bubble in the crash, right? Just like with the internet, it was hyped up, and then there was a crash, but there’s real value in the internet, just like Bitcoin, cryptocurrencies, there is definitely real value. So, with Bitcoin, I have actually seen like 2, 3 bubbles and crashes, so it is kind of just pretty kind of standard fair, what we are seeing today, so I guess I am just used to it.
– Okay. But what about the enthusiasm which surrounds these technologies? We’ve seen the first years and we’ve seen how much people speculated, and how they attribute some kind of value, or some kind of utility to these inventions. But did you observe any other differences?
– Differences with the dot-com bubble?
– It’s not exactly the same obviously. What exactly is your question?
– I am trying to get a comparative perspective between all the hype and the environment which surrounded the internet in it’s early days and how everyone wanted to be on the web and have a website, and right now when everybody in 2017 wanted to do an ICO, to get on the Blockchain, and even I think the first half of 2018, the vibe was still positive that the Blockchain was going to revolutionize the entire world and change everything, and I know that IBM is experimenting with a private Blockchain. Maybe you’d have a different insight. In 2000, I was 8 years old, so there is no way I can remember that.
– Yeah, unfortunately not really, because I actually came out here pretty much at the start of the crash, so I wasn’t really into it during the bubble, so I didn’t really pay much attention to the bubble part of it, because I was still in school, so I wasn’t investing in stocks, or buying these stocks, watching it go up and then watching it crash, so…
– So, how was it like to get a job at Google? Right now, it’s a very big deal, but back in the day it wasn’t anything special, it was just an ambitious project, trying to create the best search engine out there.
– Yeah, I didn’t get into Google that early, like I was in Google in 2007. So, back then it was already a public company, it was already big. At that time, it acquired YouTube, I was working on YouTube mobile for the first 2 years at Google. And it was a pretty cool experience, working for a very successful company. Basically, anything Google launches, you get millions of users right away. So, you get to work on cool stuff, for a company that you know is not going anywhere, that’s very successful, so it was definitely a very good experience.
– Would you find any similarities between the working environment that you had in Google and the one that you found at Coinbase when you became an engineer?
– It is very different, Coinbase, when I joined, I was in second year, it’s like two founders; Olaf and Craig, another engineer and I. So, it was very early, back then, there’s no guarantee that Coinbase would become anything or would become big, or even if Bitcoin would do well. So, at Google, there is no risk in losing a job… there is no risk if the company going out of business. But at coin base, it’s a startup right, so it is definitely very different, I enjoyed it, it was definitely very exciting times. Nowadays, coin base has gotten quite big, I think 500 employees or more. So, it is getting there to a point where it is very different company than when I joined.
– And you actually left Coinbase at the peak, when it was starting to become this big deal and everyone wanted to get listed on Xoinbase and it was regarded like the holy grail of cryptocurrencies, because it’s so easy to acquire cryptocurrencies on Coinbase.
– Yeah, I mean, it’s still regarded pretty highly today, it’s the place to get into crypto. And I think coinbase has done an amazing job in introducing new people to cryptocurrencies.
– Okay. So, how did you get into Bitcoin?
– I found out about Bitcoin in 2011, I read an article about Silk Road, and really got interested in the currency that the marketplace was using, a currency that is decentralized and since resistant, and that really caught my attention.
– Did that appeal to any previous… maybe economic opinions that you had? Or would you describe yourself out as someone who sympathizes with the cypherpunks or has libertarian ideas?
– I never really got into the cypher punks ideas, recently I definitely learned a lot more about it. I think what grabbed me was my experience with gold and I had always been interested in gold and how it was a better form of money than Fiat currency, and just watching government print Fiat currencies and devalue everyone’s money, was just frustrating. When I saw Bitcoin, I saw a way where not even the government had control over the monetary policy, and I think that’s very powerful. And I think, also because I understood the cryptography behind it, and since I was a software engineer, I could look at the code and see how it functions and see how it really works and why it works, so I kind of understood it right after that, because of my software engineering background and my interest in code and sound money really drew me into the Bitcoin.
– But it didn’t take you very long until you forked the Bitcoin Genesis Block and created Litecoin. I know that this year marks the 7th anniversary of Litecoin.
– Yeah, it was about 6 months in, but it wasn’t that long, but actually at that time, it felt like a long time. Like when I first heard about Bitcoin, basically I went all in and read everything about Bitcoin. The interesting thing back then is you can actually spend all your time in reading up on Bitcoin, the Bitcoin forum, there wasn’t Reddit or Twitter back then. So, pretty much all the information about Bitcoin, everybody talking about Bitcoin was in one location, and you can pretty much read up everything going on around the Bitcoin space, you can follow basically everything. There is Ponzi schemes, there is
mining, there’s other stuff going on back then. I pretty much dabbled into everything, right… mining, all these different stuff going on, and obviously I created my own Altcoin, so it was pretty cool.
– So, for the people that you were looking up to at the time, like posting all the time on forums, Bitcoin Talk, and maybe expressing some revolutionary ideas that influenced you?
– There’s definitely a lot of anonymous users. Back then, Gavin was leading the Bitcoin project… I met him, and I would say it was the first Bitcoin conference in New York, in 2011. I think then we were about 50 people that showed up, and it was like almost all of the Bitcoin community showing up at the conference, so it was pretty cool. He was working on multi-sig transactions, and I kind of helped him a little bit on that. It was pretty cool to be so early in this space.
– So, when you envisioned Litecoin, was it always the support coin for Bitcoin? The one which maybe aids it in development? Or did you actually think of competing in the very first years?
– No, I have always thought that Bitcoin would be like the main coin, like the king, so when I created Litecoin, it was more for fun, it caught me by surprise also. Initially, someone wanted some coding help, to create a coin code called ‘fair breaks’ which is a fork of tenant breaks to make it more fair. So, I helped him with the coding part, I offered to help, because I understood the code and I was comfortable with it. And then, that project kind of failed, and then I decided that, I just wanted to do something better than all the other coins out there, make a coin that is truly fair, that is simple, follow Bitcoin’s kind of path, but just have more plentiful coins and faster, and just go with the silvertip coins, gold, kind of idea. And I just went ahead and did it. Didn’t think too much of it, didn’t think it was going to become anything huge.
– But if you take a look on coin market cap, and you choose the historic view, and I am going to do that right now, you will realize that, at the time, there were like 10 coins, and Litecoin was the second, and that happened on the first day clay market cap launched.
– Yeah, but before that, I actually when Litecoin was first announced, there were a lot of haters back then also, they were like, why do we need another coin?
– How is that different from the Bitcoin Maximalist from now?
– It is pretty similar, but actually most people didn’t think Litecoin would succeed, like there were actually a lot of other coins there, like X-coin, i-coin, kind of bricks who were doing relatively well and people didn’t see a need for another coin. But I think because of the way I launched Litecoin and just trying to make it the most fair as possible, all these other coins had pre-mines and other stuff that were very kind of shady and beneficial to the creators, the creators did some shady stuff, so I think the fairness of Litecoin really helped it bubble to the top.
– I am looking at the first snap shot of Coin Market Cap from April 2013, Litecoin was the second biggest coin at the time, it was valued at $4.33. Right now, we don’t hear about Peer coin, Name coin, Terra coin, Dev coin and Nova coin, and to me, this is impressive, you stood the test of time, though I don’t think you got involved 100% until last year, into Litecoin. So, what do you think is the reason for this staying power and success?
– I think, one thing, it is fair, so people don’t like to support coins that are unfair. The other is, I think the silver to Bitcoin’s gold, kind of marketing term really s kind of a self-fulfilling prophecy, it’s easy to understand, it helps people get in, gives them reasons why Litecoin is valuable, and I think just the fact that Litecoin has been around, the network has been very stable, it hasn’t had any downtime, hasn’t been attacked, it’s protected by its own ASIC mining machine, so miners… it is the lack of no consensus now, there is no reason for miners to attack Litecoin and kill the coin that is making them money, just like Bitcoin, it’s well protected by the right incentives. And today, it is on all the major exchanges, so it has really high liquidity, you can easily get it. So, a lot of things work for Litecoin, and for me, in 2013, I joined Coinbase, so I was working on primarily Bitcoin for about 4 years, and last year or 2 years ago, I decided that I’d like to start focusing my time on Litecoin, so last year I quit coinbase, I am dedicated to spending all of my time on Litecoin now.
– That’s great. So, when did this idea that Litecoin is digital silver, just like Bitcoin is digital gold come around? Where did it come from?
– I thought of it the day I thought of Litecoin, so I have seen like society use gold and silver as money, and I saw a potential need for a silver to Bitcoin’s gold, because I saw Bitcoin as digital gold. So, the idea for Litecoin to be silver is that, it would have cheaper fees, so if you are sending lots of money, you would use Bitcoin because you can afford the fees, the being a percentage of the amount you are sending is relatively small, if you are sending a large amount. If you are buying coffee, on-chain transaction for Bitcoin, it may be quite expensive relative to the amount you are paying. So, I see a need for an alternative coin that would work alongside Bitcoin, to fulfil the transaction needs of everyone.
– In the previous answer, you mentioned that people don’t usually like coins that are unfair and have a pre-mine, if you take a look right now, you have Ethereum which had a huge pre-mine and it’s one of the most successful projects out there, you have XRP which has over 70% of the supply which is being held by the creators. And you also have Bitcoin cash in both of its versions, which actually forked off at a certain block, and people got their coins for free, if they held Bitcoin before, so they cannot claim that they have the same amount of proof of work behind a project, they just took on from there.
– Yeah, so I think some of these coins do provide value, so people see value in Etherium. Not so sure about XRP, but I mean people do see value of a coin working closely with banks, so that’s why they would buy or use XRP. As most people know, I am not very fond of Bitcoin Cash, I think it is not very secure, because it has like 5% of Bitcoin’s hash rate, so any small Bitcoin pull could attack it, or people could get enough hash rate to attack. That’s why like a threat from Craig Wright is so effective at scaring everyone with Bitcoin Cash, because it is possible, even if Craig Wright never planned on executing the attack, never even had the resources to execute the attack, just because by saying it, everyone freaks out, then it caused the Bitcoin ABC developers to add checkpoints and to add stuff that really hurts the decentralization of the coin, just because they are afraid of this kind of attack. So, things like that really hurt the sound money properties of Bitcoin cash, and that’s why I don’t think it’s going to do well in the future.
– If we had this interview a few days ago, we could actually speak about the Flappening being in place, but this morning we had a big pump in Bitcoin Cash, it went over 50% up…
– It’s pretty incredible, Bitcoin Cash went up more than 100% of value in the past 2 days, that’s quite impressive. Yeah, I predicted the Flappening would happen this year, and the reason why I predicted that is, I think the long term value of Bitcoin Cash is less than the long term value of Litecoin, because it’s not sound money, so what I am looking towards is just… I think Bitcoin and Litecoin, the idea is to become sound money, and a new form of money that we’ve never seen before, where it’s censorship resistant, nobody controls it and it holds value, because it has good properties of money, so it’s a very good property of money. And that’s kind of what I am working towards for Litecoin also. And for Bitcoin Cash, it’s totally not comparable, in my opinion.
– Yeah, I guess I agree with that statement… When you made the prediction, it was not obvious at all, because Bitcoin cash had all the marketing, had some developers, had people like Jihan, I am not sure if financial but also political support of Gavin Andresen. And it seemed like a big deal at the time, they were talking about overtaking Bitcoin all the time, and when you made the prediction, it was bold, but people who were reading about the Flapenning happening last week, they were like, “oh it was so obvious, the prediction that actually made sense and it was only a matter of time until it happened”.
– Things made sense in hindsight. Just like my tweet about Litecoin price could potentially drop to $20, don’t invest unless you can withstand this volatility, I mean in hindsight, it was like “oh, wow, that’s obvious”, like you shouldn’t be investing last year if you can’t extend this. But at the time when I made that tweet, people were thinking I was crazy. I think I remember, a few of the responses were like… but it is different now in 2017, we have features, we have all these people that are interested, all these people knowing about Bitcoin and are Litecoin, it’s different, it’s not going to drop 80%, 90% anymore, but crypto does what crypto does I guess, which is… I think it would decrease all the time, but you just have to be careful, because this market is very volatile.
– Okay, I have 2 questions right now, one is related to something you implied, and I am not sure if it was on purpose, where you referenced the tweet by John McAfee, who said last year that those who believed that Bitcoin would drop in price are actually not acquainted, and have no idea about the economics of the Blockchain which are different from everything else, which turned out to be such a bad thing to say in the long term.
– And I think there’s quite a few people who are very bullish on Bitcoin, I mean, I am very bullish on Bitcoin also, I think the future of Bitcoin and Litecoin is… I am very bullish on that. But in terms of short term, no one knows. To say Bitcoin price would reach a million dollars, that’s a really bold statement, I mean he gave a timeframe of a few years, that’s pretty bullish. Will it eventually reach a million dollars? Who knows? I think if the US dollars goes into inflation or even hyper-inflation, of course it is going to reach a million dollars, but that’s like a long time away, if it ever happens. So, my point is, a lot of people were really excited, bullish about Bitcoin, but no one really knows what the price would be, like last year when it hit like $20,000 or almost, nobody predicted that, unless you are just pulling numbers out of the air. A lot of people who are smart in this space thought, like hitting $5,000 is like amazing already, it was 5 times the previous high. So, it goes from 500 to 200, the lowest… Going from 200 to 5,000 is 25 times increase. And that’s incredible, so when it hit $20,000, it was like, wow! How high can it really go, like people were thinking it was going to go $200,000, but then obviously in the hindsight, it was a bubble and now, we’ve crashed.
– But a lot of people right now claim that you are the best positional trader in the business, because you predicted the $20, which was very accurate. How did you come up with $20 out of all the values, why was it not $100?
– I just put it out there. In my tweet, I mentioned that the price of Litecoin has previously dropped 90% from it’s high, so this is how volatile the market is. At the time of the tweet, Litecoin just hit $200, so I said, if you can’t withstand it dropping back down to $20, which is 90% drop, then don’t get it, because I also had it later on that, as we get in… like people who can’t withstand this volatility are the ones that are buying at $200, and selling at $20, they are the ones that are losing money.
In the long run, we see ups and downs, if you buy high and sell low, you are losing money, but if you can actually withstand the volatility, if you buy because thinking that the future is going to be good, but in the short term, anything can happen, and you just hurdle it, when it drops, you hold on to it, and knowing that the fundamentals haven’t changed, so there is no reason for this drop, it’s going to come back, it is just a matter of time. So, if you have that mentality, then you can make money in the end. But obviously, there is a risk, there is a risk that Bitcoin and Litecoin can go to zero, it’s a very experimental new thing, so don’t invest money that you can’t afford to lose, and you can potentially 10X your money, or you can go to zero. So, definitely be very careful, that’s kind of the mindset that I had and I was trying to convey that.
– Now it makes a lot of sense, but at the time, you wrote the tweet when Litecoin was $200, and it went all the way up to $350 before it dropped, and it fluctuated at some point so we could still see some hope in January and February, but after that it just crashed, on and on…
– Yeah, it is basically that everything followed Bitcoin pretty much, the Alts definitely crashed a lot than Bitcoin, but the pattern is very similar, Bitcoin crashing like $6,000 and then went back to I think $11,000 or $12,000. And now, it’s at $3,000 and today, it’s at $4,000. It’s just very volatile.
– And I know that in 2019, there is a halving of the mining rewards for Litecoin, and usually in this business where there is mining and rewards, years which contain a reduction of the rewards usually mean that the price would go up to meeting the sustainability of the mining. So, do you think that Litecoin is going to have a great 2019?
– It’s hard to predict the price, like the last block halving for Litecoin didn’t really affect the price. I don’t really believe that halving has any effect on the price, I think it should be already priced in, people already know the schedule of the creation of Litecoin and Bitcoin, Litecoin follows Bitcoin, every 4 years… So, that should agree with pricing, I think it could lead to self-fulfilling prophecy which people think that’s going to help price, so they buy, which if everyone does that, then how would the price go up? So, that could happen, there is a small potential where miners could be not selling, when the halving happens, so if the miners believe in the coin and they are mining the coins, are potentially at loss, after the halving, they will still mine and not sell and that would remove some selling pressure on the market, which helps the price, so that could help the price a little bit. Other than that, I don’t think it has a huge effect on the price.
– Okay. So, on a daily basis, when you get out of bed, what is the one aspect of Litecoin which makes you feel most excited and makes you say “I want to work on this, I want to make this happen”?
– It goes back to sound money properties, it’s trying to create something that is good money, something that is decentralized, decentralization is a means to an end, the end would be censorship resistance. You have money that no one can stop, which a lot of people don’t actually think too much about it, because they are used to this current system we have. That’s also why I like the drug market places use Bitcoin and Litecoin because it’s censorship and money, it’s your money, you should be able to do whatever you want without anyone else telling you, you can’t. And that’s part of the idea I am looking towards, creating something that people can use. Like having control of your own money, and that’s what excites me about Bitcoin and Litecoin.
– On January 3rd, there was this initiative to move your funds away from exchanges and just into your own personal wallets. Do you think that is a good idea to do it all on the same day?
– I am on the fence for that, I think it’s good… You are talking about the proof of reserve, I think we call it the Satoshi run, basically kind of a bank run for everyone to withdraw their coins off of
exchange, to prove that exchange actually has your coin. And also to get people used to the idea of, they can control your own money, and securing your own coins yourself. I kind of like that, I like to keep exchanges on their toes, so that they don’t get too relaxed and start to be relaxed with security and lose people’s money. I also like the idea of people being educated or educate themselves on how to secure their own coins, and how to basically be your own bank. Because if you don’t, then the money is under someone else’s control and it’s not really your money, so you lose that benefit.
What I don’t like about this initiative is that, it could potentially cause people to make a mistake and lose money. So, a lot of people who keep money on exchanges are those that aren’t very technical and don’t know how to secure their coins, right? So, they probably have a lot of malwares on their windows machine, so if they actually move coins from coinbase to their own personal computer that has already a lot of malware, potentially someone could steal those coins, that would suck for those people trying to do something good, and end up losing all their coins.
– Yeah, but don’t you issue with scalability and the idea that the blocks get filled very quickly? And you’ll have big fees once again, one with SegWit?
– Yeah, but if it is just a one-day thing, I think it would be fine. I think a lot of people are going to do it, you are not going to see any material effect, I think it is more about education, just making this a thing so people will actually say what is this, and look into it, and learn about how putting onto their own coins is better than keeping them on exchange. And I think, for education, it is good… I keep some coins on exchanges, everyone does if they are
trading right, so people who are trading are not going to move their coins out of exchange, because they want to keep their hoarders up. So, I honestly don’t think there will be a lot of moving coins off exchanges, even if the campaign is not to be successful.
– Do you believe that Coinbase will ever allow the users to be custodians of their own keys?
– They have had, I don’t know if they still have it, multi-stake wallets, we were using the custodian down keys. I think the target audience for Coinbase are just everyone, just want to make it easy for people to buy, sell and use cryptocurrencies, and owning their own key is just not so easy, so coin base does everything, they try to make it easy for people, so that’s not their goal, to have people own their own keys, so I am not sure if they are going to go there, but they did invest in a decentralized exchange, so they are exploring that, we will see where that goes.
– I mean, the issue is not just with Coinbase, you also have Binance, which in 2017 used to be the place where you buy all the shit coins and try to make big gains, and I think which other big player doesn’t have custodian keys? I think Robin hood has the same issue, but that’s not available in Europe, in Europe we have eToro, which is similar to Robin hood. And also, I think Abra doesn’t have a future to own your own keys.
– It doesn’t?
– Doesn’t, as far as I know.
– I think it’s always a tradeoff between security and usability, something that is really secure and is just not as easy to use, and something that is easy to use is hard to secure, I think it’s something we constantly have to fight against, this trade-off and try to improve both usability and security.
– There was recently an issue which some people have pointed out, that Coinbase owns about 25% of all the Litecoin supply. Did you know that? I think the news came out today or yesterday.
– When I was working at Coinbase, they owned like 5% of all Bitcoins, 8% of Ethereum, so 25% is a lot, in terms of percentage, but in terms of the amount of money, I think it is one-tenth of how much Bitcoin they own. So, 25% is like 400 million dollars’ worth of Litecoin, a lot of money.
But they own like 4 billion dollars’ worth of Bitcoin. Coinbase is a big player, that’s why I convinced Coinbase to support Litecoin, because I know that a lot of people would use Coinbase to buy Litecoins, because it’s one of the first companies in the U.S to release and support Litecoin. And it turned out to be true, so a lot of people bought their Litecoin off Coinbase.
I am not concerned about decentralization, because initially when this news came out, before we found out it was coinbase, we saw someone move 25% of all Litecoin, over 3 days, people’s concern, is this a large way… or could they potentially get freaked out and sell these coins, and cause the price crash.
But after finding out it was coinbase, it was actually good, coin base represents hundreds of thousands of users so it is actually decentralized, the problem is that they are keeping all their coins on coinbase, which I think Coinbase has great security, but still a single point of failure. If anything does happen, that’s a lot of coins for a hacker to steal, and I think overtime, we just need to educate more people to be their own bank, and not leave their coins on exchanges, but I am not especially worried about this, today.
– So, you trust so much in the security that Coinbase and other exchanges which do not allow users to be custodians, have of their keys?
– I want to say, I worked at Coinbase, so I know… I helped build it, make sure it is secure and does well. So, I definitely trust Coinbase, I don’t know about exchanges, exchanges get hacked all the time, I definitely don’t recommend people leaving money on exchanges or even Coinbase.
If they have the ability to secure it themselves, I would recommend people secure it themselves. But the reality is Coinbase does a better job at securing coins than the average person.
So, it is kind of like, leaving money in the bank or leaving money under your mattress, leaving cash, people don’t leave cash under their mattress, and I don’t recommend people leaving cash under their mattress because someone will break into the house and steal all your money, whereas if someone breaks into a bank and steals the bank’s money, there is insurance, and you will get your money back, so there’s no worry. So, it is similar to this, if you are not technical enough, or if you don’t know enough to secure your coins yourself, it’s better to leave it on Coinbase than to keep it on your computer which has malwares and you don’t do backups properly, so there’s various ways that you can lose coins that way.
– I don’t think people like Jimmy Song or Jameson Lopp or Giacomo Zucco would agree with that, I have spoken to them in different interviews, but this is a different and interesting perspective.
– Yeah, I think ideally, people should have control of their own coins, you can’t expect everyone to be able to do that. I think it will improve over time, as more hardware manufacturers make hardware wallets, like the HTC phone, the HTC Exodus which we will have built in, secure crypto wallets so it is easy to use and still secure, it is important for that to happen, for people to just build out things and make it very easy for people to secure their own coins, before that would happen. We saw that Ledger for example sold like a million units, that’s pretty amazing, having a million hardware wallets out there that are being used by people, seems we are moving towards that direction where people are securing their own coins, so that’s good.
– I think I am confused in terms of making the difference between Ledger and Trezor, I look at them and I see they have similar functionality and I think Ledger has slightly more coins which it supports. But, do you have any kind of recommendation in regards to which one is the better product?
– They are very similar, they are different, depending on the quantity you have, I would say you can go either way, I have used both. I think, initially Trezor had a better UI and Ledger recently launched their Ledger life app which is really easy to use also, so depending on… I would say either one would be fine.
– Okay, they are also priced the same, so at the end of the day it is just a matter of choosing. Well, let’s get back to Litecoin, and talk about the improvements. Do you think Litecoin would be on the Blockstream satellite to have its Blockchain synchronized for all eternity and space?
– Sorry, so I think that Litecoin would be on the Blockchain satellite?
– I actually talked to Blockstream a bit about that, they are kind of focused on Bitcoin which you can expect. I think eventually we will go that route, I think Blockchain’s satellite is pretty cool, it’s not that useful for most people, it’s a cool concept, it plays off of the censorship resistant part where, even if your internet is being censored, you can get and sync to the Bitcoin blockchain, I think that would be useful for the future. But, it’s not something I am concerned about, I am concerned more about adoption by people, more so than being censorship resistant from the government, I would say.
– Okay, so what about the Liquid network? I know that they planned to add many more coins, and there is a Blockstream product which supposedly or maybe practically helps exchanges make cheaper transactions which are also confidential. And do you see Litecoin as being one of the next assets being added?
– It doesn’t work that way, Liquid… you can create
tokens or assets on top of Liquid network. So, Litecoin is separate from that, you can’t really add Litecoin to Liquid that way. Like liquidation of Bitcoin, so you can potentially create a Liquid Lite network that is exactly like Litecoin, but that’s not the same.
– Okay. So, do you see that happening?
– That Blockstream would work on Liquid for Litecoin? I doubt anytime soon.
– But they support separate team of developers creating the token under Liquid side chain for Litecoin?
– You could create a token on Liquid that is backed by Litecoin… anyone could do that. So, if you want to create a token on liquid, that is backed by Litecoin that you hold, then you do that and people can actually send Litecoin to you and you send them the token where you can do it in an atomic way, where you can sort of move Litecoin unto liquid, if that is usable. Anyone can do that, with permission from Blockstream.
– Or from Litecoin…
– Yeah. I got a message from an exchange, asking me, if it was okay to add Litecoin. They were asking if they want to make a deal, or something to that effect, so I think they wanted to see if we would pay them to use Litecoin on their exchange. So, I just replied, go ahead and list Litecoin, you don’t need permission from me.
– That’s how it works. But I guess it gets confusing with the existence of the Litecoin Foundation, and it gives people the impression that they actually have somebody to speak to when they have any dealings with Litecoin.
– Kind of, it is definitely an issue, because Litecoin is a decentralized currency. So the Litecoin Foundation could disappear tomorrow and Litecoin would still exist and work fine. Even if no development happens on Litecoin, it will still work, miners will still mine it, they will still make money from mining, it would still be secure. As long as there’s no new big bugs that are found, there won’t be any issue with Litecoin.
So, a lot of people are complaining about Litecoin not having a lot development, we piggyback off Bitcoin development a lot, we depend on Bitcoin developers and we do stuff, but we don’t really need that much development ourselves.
And similar for Litecoin Foundation, people complain about Litecoin Foundation not having a lot of money, and that’s kind of bad, like someone once complained that the Litecoin Foundation treasury is really low.
But we didn’t print money out of thin air, we didn’t give ourselves a lot of money so of course we don’t have money, unlike all these ICO coins which have hundreds of millions of dollars in their treasury, that they can spend on stuff, it’s not the same, Bitcoin doesn’t have Bitcoin Foundation that has a treasury of billions of dollars working on Bitcoin.
And the same for Litecoin, so Litecoin Foundation is made up of a bunch of people, mostly volunteers, because people who are excited about Litecoins, but the foundation don’t have the resources to pay, to have a huge team, and we are just working on Litecoin development, and just spread the adoption of Litecoin and that’s the goal of the Foundation. But companies don’t need to work with the Foundation to actually support Litecoin.
– Now, I know that your brother is a board member of the Bitcoin Foundation. Do you guys get along? I know that he supported Bitcoin Cash at some point.
– We get along, but we have different ideas about things, like he supported SegWit 2X, I was pretty against S2X. He thinks Bitcoin Cash is just like Bitcoin, I definitely don’t agree. So, we definitely disagree on many things, but it’s fine.
– So, which one of you got into Bitcoin first?
– I did. I introduced Bobby to Bitcoin, actually back in 2011, but he didn’t really get in in 2011, he kind of understood it, but he had concerns about it. Then, I think in 2013, he really got into Bitcoin with BTC China, BTCC.
– That’s a big market I guess, or it used to be before the government got involved too much. Let’s get back to Litecoin and talk about the state of Lightning, and I even saw that there’s a question on Twitter about somebody asking if there is any way to check the amount of Lightning nodes being deployed for Litecoin?
– There is the site 1ml.com, principle of Bitcoin and Litecoin, so you can check there. Lightning network is live for Litecoin, but not a lot of people are using it, it’s still fairly new. It’s still new technology, it’s still not easy to deploy Lightning nodes and play with Lightning, that would improve overtime, the Lightning developers are working hard on improving Lightning.
– I heard during the last Magical Crypto Friends episode, that you had a Casa node, right next to your desk, I was curious if it has functionality for Litecoin?
– Yeah, Casa mentioned in one of their tweets, that they are working on Litecoin support, but currently the Casa node only supports Bitcoin, but it wouldn’t be hard for them to support Litecoin, I think it’s more about the UI of it, and also about, would they support it together? Bitcoin, Litecoin together, potentially allow for atomic swaps and things like that, I think that’s the direction they are going towards. But nothing announced by them yet.
– That would be really cool, and I guess I would order one and put it on my desk, knowing that I can actually exchange between two coins, without resorting to a practical, centralized exchanges, or decentralized ones. And also, you get to store and synchronize two Blockchains at the same time, which is impressive. I am not sure if the current storage, I think it is 1 terabyte, or 500 gigabytes, I am not sure if it can take on to long time, both Bitcoin and Litecoin, so I think they should be thinking of a way to scale with storage.
– Yeah. And a lot of people don’t understand why block size is such an issue, why don’t we just increase the block size to 32 terabyte or 1 terabyte, it is because it is resource intensive, it is like if no one can run a node, then he decentralization is dead, then it becomes centralized to people who actually can run nodes, then if you can’t run a node, listen to those that can, about what is a valid transaction, what is not a valid transaction. And the fact that you can still run a full Bitcoin and a full Litecoin node on a Raspberry Pi device is awesome.
Anyone can build or buy this device for hundreds of dollars, you can buy it for three hundred, and it just works, it has the Bitcoin full node and as Lightning, and you can use LN transactions, or you can do on-chain transactions with a device like that, it’s pretty cool. And that’s why it flew off the shelves, it is not cheap, but it’s cool, you can build it for like a hundred dollars, but people are willing to pay three hundred, because it’s easy, and it’s all set up and it just works.
– Yeah, but usually, we don’t think too much about the amounts of nodes that we have and that’s a big issue if we want decentralization which is as you said, a means to achieving censorship resistance. I guess I don’t run a node all the time just because I need the storage on my SSD drive, and I have been told that if I run an SSD, it’s a bad idea to have too many re-writes to it, because it would burn very quickly. And I have actually burnt an SSD back in June, I think, when I was trying to run a Lightning node…
– Yeah, but it was still under warranty. They gave me a new one.
– Yeah, I think you don’t need to run your own node, for most people, they are fine trusting another node, but most use Coinbase, put their coins at Coinbase… of course those people don’t need to run their own node, but the idea that what’s powerful is that you can, if you want to.
So, it’s like, with the current financial system, you can’t get away from banks, you have to use them, you just can’t do that. But with Bitcoin and Litecoin, you can be your own bank, or you can run your own node.
So, running your own node means that you can’t be tricked by anyone about what is or is not a valid transaction. If someone said they sent you a thousand dollars… if someone sends you 10 Litecoins, if you run your own node, you can know for sure that you actually got those satellite coins, if you don’t… you have to trust like a block explorer or another node, to tell you.
Of course, it’s far-fetched where those explorers and nodes collude against you, they tell you that you have coins, but you didn’t… It has happened before, like Blockchain info. at one point it has shown an invalid transaction as valid, it was just a mistake into a code, and it might be like a double spend, they showed the one that had actually didn’t confirm as the confirmed transaction, you thought that you had a confirmed transaction, then afterwards, it got taken away because it’s not actually confirmed.
So, that has happened, also the promise that they will make decisions for you in terms of hard forks and things, if your coin is on coinbase, after the Bitcoin cash out, you only had Bch, you don’t have BSP coins, it eventually would give you BSP coins, but they may decide not to, and it is not only in your control.
– But do you think you can still run a Bitcoin Cash now if they have 64 megabytes blocks?
– It would be very hard; it would be much harder. You can still do it, but just like Ethereum it is really hard for anyone to run Ethereum node, it will be the same for Bitcoin Cash, it’s trade-offs, if you want Bitcoin Cash, supporters want to put a whole social network on the Blockchain, they want to put all the tweets or whatever on the Blockchain, they want everything on the Blockchain, that’s fine, but it is not going to be decentralized. It’s like, I am not working towards a better PayPal, I want something that is really different.
– Yeah, that’s also what Tim May said in his last interview before passing, now he is very critical of cryptocurrencies becoming too centralized, in terms of being held by exchangers which only allow you to withdraw certain amounts a day. And also you have certain regions where you are not allowed to run a node and you have to compromise, or you are not allowed to mine, or you just have cryptocurrencies which are very centralized in their nature and their very core when they were created.
– Yeah. I am not that interested in those cryptocurrencies, but there is room for everyone, some people don’t care about decentralization, that’s why coins like Ripple are so popular, people think that working with the banks and just being kind of like the PayPal 2.0 is useful, that’s fine. I don’t care about coin like Ripple, when it is centralized, a company owns a huge amount of it, and they are using it to kind of… It’s just different, it’s not the same, it is from a different angle, but there’s room for everyone, I think.
– And that’s why I had my mind blown when I read, I think it was a post by Luke Dash, the Bitcoin Core developer, and he said that we actually need smaller blocks in Bitcoin, and in a time when you find people who still complain that SegWit2X was a good idea, that having 2 megabyte blocks would have been better, you have somebody who is a Bitcoin Core developer, and he says, you know, I think 600 kilobytes would be enough. And his considerations are mainly because it would be quicker to synchronize the Blockchain.
– Yeah, I don’t totally agree with him, but I see where he is coming from, he wants people to be able to quickly sync the Blockchain for things to work well, and then move the scaling to second layer solutions. So, there is a trade-off, I think if Lightning really becomes used, it could work, I think it would be hard to convince everyone that we should decrease the block size today, but he keeps pushing for that, I am not sure why he does, he is an interesting person. We have different people who have different opinions, and that’s fine.
– That’s why this space is so interesting, we have all these people coming up with different propositions. Right now, Bitcoin Satoshi’s vision, or BCH SV, or whatever you want to call it, pretends to be the government and enterprise friendly version of Bitcoin.
– Yeah, I mean BSV is… Craig Wright, I just don’t understand, he is talking about patents… I think one of his last tweets was like, in a few years, a billion people would be using my technology, I am like…
– Yeah, I don’t know all that because he blocked me.
– He blocked like everyone, I think his Twitter feed is private, but there is like a bot that follows him, that retweets what he tweets, it’s kind of a joke. Just today, I saw someone reply and say, I thought this was like a comedy account, they didn’t realize it was actually his feed, his reality is just so ridiculous, it just seems like a parody account.
– There is no way of knowing on Twitter, you have all these cartoonish accounts which actually speak more truth than people who reveal their own identities.
– That’s definitely true.
– But a lot of people get attracted to Tiffany Hayden, and they believe that she is brilliant, and when she said that XRP will flip Bitcoin at some point or be valued at some crazy amount, like a thousand dollars, and there are not even enough money in the world to have that value for XRP.
– The value for XRP today is already quite ridiculous. I didn’t expect this…
– But it was even more ridiculous when it got to 3 dollars.
– That’s true.
– I actually lost a lot of money shorting XRP, last December, I saw it went up to 50 cents and I said to myself “there is no way it can go up, because it was 20 cents all year long, and this was already too much”, and I shorted it, and I lost money.
– Trading in cryptocurrency is definitely not for the average person, pretty risky to short on anything. Even if you don’t think a coin has value, it can do crazy stuff.
– Right. Let’s get back to Litecoin, and talk about Confidential Transactions which you mentioned on magical crypto a few episodes ago, and do you want it to be an opt-in feature, just like Zcash, and it would happen through a soft fork.
– Yeah. So, I mentioned previously, fungibility and privacy, they go hand-in-hand, they are one of the only properties of some money that we don’t have with Bitcoin and Litecoin. The example is like, if you are spending coins to buy coffee, if you send coins that you just recently purchased off an exchange, let’s say you purchase 100 Litecoins off exchange, you send it to buy coffee, the person knows or could see that you actually have 100 Litecoins, I think financial privacy is important.
Even if you are not doing anything illegal, it is important to have financial privacy, and with Litecoin today, you have to really think about which coins to spend… I don’t know how you use Litecoin and Bitcoins, but the way I use it is like, I have all my input and I know which one, where coins came from. And you kind of don’t want to mix the inputs and outputs, you just have to make sure that you preserve some privacy. And that’s kind of really annoying, it’s not a good user experience if you have to deal with that. So, having something like confidential transaction will get us closer to good privacy and good fungibility, and that is something that I am currently thinking about exploring for Litecoin.
– I see a lot of people who are confused about what does it mean, and they think that this would slow down the adoption, just because they think it’s absolute privacy, like in Monero. But a confidential transaction actually means that a third party cannot see the amount which you send and the amount that you have in your wallet, right?
– Yeah. So, basically the amount could be hidden, with confidential transaction. The network still enforces that the amount being sent equals the amount received, so no coin is created from a transaction, even though you can’t tell how much is in the input or output, you still know the cryptographically that some of the input equal some of the output, so nothing is created.
But the idea is, let’s say you bought 100 Litecoins from an exchange, you tried it in a confidential transaction, so no one can see that it is actually 100, so when I send that 100 to buy coffee, obviously, the recipient would know that they got the coins, but they can’t see what the change is, and what the sent amount is. So, I could be sending you a thousand and be getting a change of 999 or I could be sending you two and getting a change of 1, and you just don’t know, and that is the privacy that you get from using confidential transactions.
– Yeah, because right now, the issue is that, it’s unnatural, when you go to the supermarket and you give the cashier a $20 bill, she doesn’t know how much money you have in your wallet, I think that’s what Riccardo’s Spagni said in Magical Crypto, that’s where I got example from. That shouldn’t happen in cryptocurrencies, nobody should know how much money you have in your wallet, unless you purposely disclose, or you give out your public key so people can check on a block explorer.
– Yeah, and there’s two things about privacy. One is the amount, the other is the routing. With Monero, the use of ring transaction, ring signatures with transactions. So, you sign like 6 different inputs, so you don’t know which one the money actually comes from, so that hides the route of how the money is flowing, transaction behind the amount. So, for Litecoin, I think Lightning Network is going to be pretty good for hiding the route, would be good for privacy to a certain degree, so I think adding confidential transaction will help with Litecoin privacy and fungibility.
– And that would be very good news if you ask me. But I know it is a very controversial and divisive issue, because some people are used to Litecoin being similar to Bitcoin, and unless Bitcoin also implements the feature, it is going to be weird for a lot of people.
– Yes, we’ll see, it’s definitely controversial. There’s also a concern about regulatory concern. How would exchanges feel towards Litecoin with confidential transactions? I think with the recent addition of Z-Cash to Coinbase and also Gemini, it shows that it can work well with exchanges, because it is opt-in and exchanges can ask for the view key, so they can see what’s going on, it’s just that the amount is hidden, if you use opt-in confidential transaction. So, I think everybody should be fine, I think it is good, I do think we need to improve fungibility for Bitcoin and Litecoin, and this is a good start.
– I guess a lot of people don’t know how to use confidential transactions in Zcash, they think that the transactions are private by default. But actually they have to obfuscate the transaction by paying extra. So, I guess there is a number of transactions which are being made back and forth, so there is no way to track back. Did I describe it well?
– It’s very different, Zcash uses zero knowledge proofs to do the transactions, so you actually hide everything, the transaction amount and also the route. So, with Litecoin, with confidential transaction, it’s quite a bit different technology, I think Zcash technology is definitely better for privacy, it is also unproven, it also uses a lot more resources… I don’t know what the current numbers is with their latest release, that’s why it’s also more expensive and also take more time, like computer resources, to actually create these zn-snarks transactions and to actually process them. So, it’s definitely an interesting development on the network.
– I know that the Zcash confidential transactions are expensive, Litecoin provides a cheaper alternative.
– It will be cheaper, but still confidential transaction with even bullet proofs today is still about 3 times increase in size of the transaction, in terms of the size of the transaction. So, you would expect about 3 times increase in fees you pay, because your fees are based off of the transaction size. So, you can imagine it been 3 times more expensive than a regular transaction. But, Litecoin doesn’t have a space constraint, do they? Today it has 4 times the block size of Bitcoin, I am not concerned about the transaction, the space usage of complex transaction.
– I wanted to ask you this before, but I think I forgot. You are the first to accept SegWit, and prove to the world that it actually works through Litecoin, and how is Segway adoption going down with Litecoin? I know that Bitcoin has some issues with stubborn exchangers and people who just don’t want to adopt SegWit is it better with Litecoin?
– First, Litecoin wasn’t the first coin to activate SegWit, I believe there were other coins that activated SegWit before Litecoin, but it was the first major coin that activated it, that had a lot of value. In terms of SegWit adoption I honestly don’t track SegWit, because it is not that important to me, if people need to use SegWit, they will use it, if you need to use Lightning, you will need SegWit, you will need transaction malleability, so you have to use SegWit.
For exchangers, if you don’t care about paying more fees, so SegWit transactions would be cheaper, if you don’t care about paying more fees and most don’t, they don’t even support SegWit transactions, they can store in their regular transactions, pay a little bit more fees. Litecoin is not constrained, doesn’t have block size issues right now, so I am not concerned about people not using SegWit, I think it is designed to incentivize people to use Segway if they want to pay less fees. So, the incentives would work, there is no reason for me to be concerned about how much of the network is using SegWit today.
– I think I have read that there was this consensus between Litecoin miners to reduce the fees by 10 times, did that actually happen?
– So, it is not really by Litecoin miners, it is kind of just the recommended fees for the network, so it is like the minimum fee. So, this is something that the developers and I have come together to talk about, and we decided to reduce the fees by 10 times.
So, this will happen within the next release… and as everyone update to 0.17, they will be paying less fees.
Fees is not an issue today, it is still very low with Litecoin, I think it is the trade-offs, if you make the fees too low, then you will get a lot of spam, it becomes really cheap for someone to spend the Blockchain, creating transactions that aren’t really moving any value, really useful, creating random transactions that just shuffle money around, and then build the Blockchain, so it makes that attack cheap, and that’s not good. So, it’s kind of a trade-off with how cheap we want it to be.
– So, how do you feel about Schnorr signatures?
– I think it is good, it is definitely coming to Bitcoin, and by that it will also come to Litecoin. I think Bitcoin developers are working on very cool stuff, like with signatures and scribblers scripts, lots of amazing stuff coming out in Bitcoin. And all that is thanks to SegWit, now that we have SegWit, all these can be added as soft forks, we will follow all the drama, hopefully we’ll follow all the drama, like strict improvements on Bitcoin scaling… in security, and adding smart contract stuff to Bitcoin and Litecoin.
– Do you think that in the long term, Bitcoin and Litecoin will actually provide all the functionalities of Ethereum?
– It’s hard to say, I don’t think Bitcoin or Litecoin will ever be Turing complete, so you can’t do everything. It’s a different focus, so I think with Bitcoin and Litecoin, the focus is just to be a form of money, the important thing is value transfer, transfer of value, and that’s the key, programmable transfer of value. So, that’s why adding more of codes and scripts and it gets easy to do programming, to do smarter contracts which Bitcoin or Litecoin is important, but you don’t have to do like everything.
Whereas, you don’t have to be the world whole computer, I think having a world computer on the Blockchain is crazy, because it doesn’t scale, having everyone, all the nodes running, every single computation doesn’t make any sense. I have said it many times, if Google and Amazon created a smart contract that is centralized, that works like a thousand times more efficient than Ethereum, and people will use it, crypto kitties doesn’t need decentralization of Ethereum, most apps do.
– Yeah, there are just cool proofs of concepts, they can just show how it works, they are just interfaces to help people get acquainted to the new technologies, just like, I think in Windows, they had a game Solitaire which was maybe the best way to learn how to use the mouse.
– Yeah. Minesweeper…
– Yeah. It took like 15 years to finish my first game of Minesweeper… I also want to ask you about the Litecoin community, or how they call themselves the Litecoin Fam. What I noticed, and I even wrote an article about it, is that unlike a lot of communities, they don’t just tweet, they don’t just spend their time at their desk, and type about what they think their vision is of Litecoin, they just go out there and they talk to actual sellers and retailers, and they convince people to accept both Bitcoin and Litecoin, and I guess that’s the advantage that being on the side of Bitcoin allows you to also introduce Litecoin as a cheaper alternative. But I appreciate this grassroots approach and the energy you have, John Kim and John Moore, who are very active all the time, it is very hard to keep up with them.
– Yeah, I think it’s amazing. I definitely am very thankful of everyone who is basically volunteering their time to help push for adoption. I think it’s key for Litecoin. Basically, Litecoin is currently a very speculative currency, that’s why a lot of people keep their coin on exchanges than coinbase, because they are being traded back and forth, and that’s good for liquidity, but we need to move towards more utility, more people are actually spending the coin, having more merchants accepted, having more places to spend your coins, I think that’s what will take us to the next level, so to speak. I am definitely pushing for adoption wherever I can, and I am very excited to see others are also.
– Yeah, I guess your philosophy is different from that of people who think it is just a store of value and a way for people to keep their wealth in a way that cannot be taken away by their government.
– It is definitely that too. I see both… if it is just a store of value, gold is a great store of value, but it is hard to actually use it, that’s why our government mint it like gold coins, because it makes it easy to use. But just being only a store of value will only get you half-way there, you still have to be able to use it, to be able to spend it.
And that’s why I am actually excited about lightning network, I think that’s the other part of it, that will make it easy to spend, for merchants to accept Bitcoin and Litecoin, and for people to spend it. And also, it helps Bitcoin scale, you can actually use it without building the Blockchain, so you can do micro transactions, you can send tiny amounts of Bitcoin or Litecoin, and it would only settle on chain, so it doesn’t have to take up a transaction block space.
– Right. And also, I think the approach which you understood very well in 2017 was that it doesn’t matter, it is not just about the speculative aspect, I think that a lot of projects which were launched had extra features and they had maybe fundamentally good ideas, but their approach was not to have as many users as possible, but to be listed on as many exchanges and allow the people who invested to increase their investments and it was all about speculations when they could just showcase the technology in a more practical way.
– Yeah, it is unfortunate, that’s why the exchanges were able to charge listing fees. Because all these ICOs and coins, they wanted to be listed so people can trade it, and actually pump the price up, that’s what they cared about. And unfortunately, like with so many coins out there, it’s hard to rise up above everyone and for people to notice you. So, that’s why all these white papers, all these marketing stuff, claiming this is the next big thing, all these scams and stuff, it is just kind of unfortunate, but it is what it is…
– I think the part which makes them scams is not technological necessarily, it is just the part which has pre-mines and the marketing and the way they approach the market from day one, the way they launched. Maybe the ideas can be used, to be implemented in Bitcoin for soft forks at some point, if they are that good.
– Yeah, unfortunately, that won’t make them any money, that’s why they launch it as an ICO, make a lot of money and then market it.
– So, I don’t think I have any more questions for now. I am happy that we spoke and this was incredible.
– Yeah, thanks for doing what you do. I think it helps a lot too.