Let's Talk BitcoinEpisode 94

“Privacy and the Arts”

Participants: Adam B. Levine (ABL) – HostStephanie Murphy (SM) – Co-hostKritov Atlas (KA) – author, “Anonymous Bitcoin Book”Ross Mintzer (RM) – Musician (https://www.facebook.com/rossmintzerband)Peter Todd (PT) - Chief Scientist of the Mastercoin foundation

ABL: Today is March 22nd, 2014. This is episode 94. This program is intended for informational and educational purposes only. Cryptocurrency is a new field of study. Consult your local futurist, lawyer, dog trainer, interior decorator, beautician and colorist before making any decisions whatsoever for yourself.

Welcome to the Let's Talk Bitcoin, a twice-weekly show about the ideas, people, and projects building the digital economy and the future of money. My name is Adam B. Levine, and today, we're looking at the privacy of Bitcoin in its various applications.

First, Stephanie Murphy sat down with Kritov Atlas, author of the recent “Anonymous Bitcoin Book.” (teaser quote – KA: When you use Bitcoin privately, you're helping out the people you do business with, as well.) They talk privacy, security, and some of the myths and legends of each in the world of Bitcoin.

At the end of January I caught up with musician Ross Mintzer to talk cryptocurrency for the fans, give him my explanation of this musician-coin concept that takes the LTBcoin model and applies it to individual ensign musicians, and the difference between Doge and Bitcoin. (teaser quote – RM: It just made me feel good. I like to see the interactions of the people on the subreddit. I like what people were talking about and I wanted to be a part of it.)

Finally, I'm joined by Peter Todd, chief scientist of the Mastercoin Foundation to talk stealth addresses for you and me. (teaser quote – PT: It makes it easier for you to do the right thing with regard to privacy. Your Bitcoin address, whatever you do with it, is publicly visible. You are linking information about your transactions. You are essentially saying “alright, I did this transaction and I did this transaction. Potentially, I did a whole bunch of 'em.”) Not to be missed.

Quick shout-out to the CoinScrum London-based Meetup group. They're putting on a big Bitcoin debate event on April 5th and are looking for both attendees and speakers. Visit Letstalkbitcoin.com/op for more details.

Enjoy the show.

SM: This is Stephanie Murphy from Let's Talk Bitcoin and we are here at the Let's Talk Bitcoin Lunch Meetup at the Firewill Cafe in the Lost Pines Hotel. I'm here with Kritov Atlas. Hi, Kritov.

KA: Hi. Good to be here.

SM: Kritov is a friend of mine and he came to the Meetup, and I'm really glad to see him, but he also has a really important and cool project that he's working on that I really wanted to share with the audience because this is something that we talk about a lot in the Bitcoin world. Where's the future of Bitcoin going? Are we going to a future where everything is tracked and we're going to be coin-validated and scrutinized, and all of our finances are going to be out there in the open for stalker ex-husbands and creepy governments to look at? -Or, are we going to retain control over our financial privacy, and are we going to actually have the power to do what I think Bitcoin intended, which is empower[ing] people over their own finances. Kritov has written a book called the “Anonymous Bitcoin Book,” is that right?

KA: That's right, yeah.

SM: Tell me a little about the book and why you decided to write it.

KA: What inspired me to write the book was – I was seeing a lot of folk lore about Bitcoin and its anonymity and the level of privacy you would get with Bitcoin. IF you look at news articles or look at forum posts, you'll see a lot of people saying “Bitcoin is anonymous currency” and stuff like that – and especially when it comes to things like Silk Road – if you wanted to mis-characterize Bitcoin, the first thing they'll trot out is that it's an anonymous currency being used by criminals to buy drugs and stuff like that. Really, the design of Bitcoin is pretty open. I think something that people would find surprising is that, in many way, Bitcoin has less financial privacy than the legacy banking system they're coming out of. If you get a paycheck in the mail from your boss, you don't expect that he's going to be tracking what you're spending your money on: what kind of groceries you're buying, what you're buying at CVS – but something like that could potentially happen with Bitcoin, depending on how people follow best practices for privacy and so forth. Since it's a nascent technology, people have always had a difficulty with privacy and technology, and they tend to do whatever comes easiest. If you don't make privacy easy, then they won't use things in the most private way. Bitcoin doesn't make it that easy to use it in a private way. There's a spectrum of privacy you can have with Bitcoin, and on the extreme end you can have a very high level of anonymity, but right now the default and the way people are using Bitcoin is that – they're not getting a whole lot of financial privacy out of that. I wanted to write a book for people where, if they decide they – I wanted to first educate them about what the state of privacy is right now, what it's going to look like, what your privacy's going to look like if you continue to use Bitcoin in the way that most people are using it, and then I wanted to give them a very straight-forward, leaving-nothing-up-to-the-imagination approach to how to use Bitcoin in a very anonymous kind of fashion, and get a lot of financial privacy out of the currency.

SM: -And you have a background in computer security, right?

KA: Yeah, that's right. I've been a computer security researcher and consultant for a number of years, and I recently just quit my job to focus full-time on writing about Bitcoin and privacy.

SM: Right, so can you give me an example of perhaps how a typical Bitcoin user might use Bitcoin and it could be totally traceable, and they might not even know about it?

KA: Sure. I gave a talk at the conference the other day, and I sort of gave this hypothetical scenario where there's two people. One of them sends a tip to the other in Bitcoin, and I was describing how this would look on the blockchain. The blockchain is this public ledger of all the Bitcoin transactions. We don't have anything like that for cash – there's no ledger of cash transactions, which is part of the reason why cash can be so anonymous. -So, the way that these transactions show up on the blockchain – often, we learn of peoples' identity. Addresses kind of get associated with one another, and particularly if there's something like where they don't have enough bitcoin in one of their Bitcoin addresses to send the total they want to send to the other person, they have to pool together from multiple accounts. A lot of time, their Bitcoin client will do this automatically for them.

SM: -So, for instance, if you have blog or Twitter account, or something, people could say “okay, well we know Kritov owns this address, and on the blockchain, there are outputs from that address that are going to other change addresses, so those must also belong to him, too,” right?

KA: Yeah, exactly - change addresses or addresses being pooled together in order to get up to a total you want to send... so basically, what's happening on the blockchain is there's this incredible graft of people's Bitcoin addresses, and they don't see this happening. It's something that's going on behind the scenes and it's an incredible data-mining tool for whoever wants to mine it, whether it's corporations or governments, or just creepy-snoopy people who want to find out what you're doing. You're not able to see the full effect of your finances, but if you deal with something like cash or writing checks or whatever, you know exactly who it's going to, who's going to be able to see the check that you're handing, or who's standing around to watch your cash transaction, but the weird thing about Bitcoin is it's like cash, but the entire world's standing around to see the cash transaction. I think it's really important – I consider it kind of a financial self-defense technique, to learn how to use the currency privately and retain some privacy when you're doing your finances.

SM: What about the argument that everyone will trot out: if you have nothing to hide, what are you worried about?

KA: That's a very old and common argument. There is this guy named Daniel J. Solove who wrote a paper a while ago called “I've Got Nothing to Hide and Other Misunderstandings of Privacy.” Great paper. Basically, what he's saying there is even if you don't have something to hide, people in all tax jurisdictions and all legal jurisdictions still have some kind of legal risk that they're going to blamed – for something they didn't actually do. They have real problems in court systems all over the world, and with law enforcement and so forth – justice systems. Even if that doesn't happen

to you, it happens to people all the time. -So when you say “I don't have anything to hide, so I don't care about surveillance or censorship or whatever,” you're throwing a bunch of other people under the bus. Fundamentally, it's an act of antipathy toward your fellow human being to throw that out as the standard - that if people are not doing anything bad, they should not be worried about these types of things. It has real-world consequences for lots of people, very terrible consequences. I think that financial privacy is something we should invest in as a society. I think it's really important, whether you want to have a free anarchic society or if you want to have a healthy, democratic society – in both cases, financial privacy is a very, very important thing.

SM: You said something in your other talk the other day, that there was a law professor who threw out a statistic saying every adult over the age of 18 could be, if they wanted to, indicted for some kind of federal crime in the US?

KA: Yes. Here's another statistic: in 2013, there were 40,000 new federal laws that were passed o nthe books, and we don't actually know how many federal laws there are. There have been a number of legal organizations that try to count it, because it's kind of important to know what the laws were, and they weren't able to. They tried for a long time and gave up. If you don't know how many laws are out there, you can't stop yourself from breaking them. What this law professor is basically saying is there're so many laws on the books – some of them are mutually contradictory – that people are breaking laws all the time that they're completely unaware of, and yet the standard we have in our society is “ignorance of the law is no excuse.” Meanwhile, there's no one who knows all the laws, right? That's kind of a dangerous combination of principles to go by. It means that really anyone can get nabbed if they have the misfortune of getting on the wrong side of someone.

SM: -Or what's to stop something that's not currently illegal from becoming illegal in the future and the enforcement being applied retroactively when there's this nice historical record in the blochcain?

KA: Yeah, that happens all the time. It happened to MtGox, for instance. Their financial troubles – they had incompetence at their leadership level, but their financial troubles started when they had five million dollars seized from the US government for filling out some paperwork in the incorrect way and doing it in a way that was pretty much fine at the time when they filled out the paperwork, but then there was some rule that was changed after the fact, or some “clarification” that was given about these very nebulous rules after the fact, and they weren't able to receive the news of this change, go back, and look at their paperwork and make the change, and they lost five million dollars as a result, which really got the ball rolling on the collapse of MtGox. I think this is something that's important to all Bitcoin users because in a lot of places in the world, governments are not going to look upon Bitcoin very favorably. In some places, there are going to be bans or restrictions – there are going to be criminal charges that are related to Bitcoin, so you don't want to be one of the people that has the misfortune of putting your finances out there on the blockchain and finding out, later on, some legislator decided that what you happened to do, which was recorded on the blockchain a few years ago, was, in fact, illegal, and now you can be prosecuted for it, so this is why I think it's kind of financial self-defense – not only having privacy

from people that you're doing business with, and just kind of snoopy, creepy people or corporations, but also keeping yourself safe from the legal aspect of things as well.

SM: Right. It's not just yourself, right? It is possible to associate – to incriminate – other people with your Bitcoin activity on the blockchain, is that right?

KA: Yeah, absolutely. After the talk, I had a developer come to me. He's working on some accounting software for Bitcoin, for tax purposes and whatnot, and he was really concerned. He listened to the talk and he's been following this stuff for a while, and he doesn't want to create a tool where someone can come for his records and use that information to go after the customers of his customer's. That obviously makes his product less attractive to the customers and, just from a moral standpoint, he doesn't want to be partly responsible for someone being incriminated for something that they don't deserve to be incriminated for. It's a real concern. If you care about your fellow human being, you don't want to be participating in a system where they're – where they come under some kind of misfortune, and so when you use Bitcoin privately, you're helping out the people that you do business with, as well.

SM: Okay. People have heard this and they're thinking “well, how do I use Bitcoin privately?” Obviously, there's a whole book you've written on this, but give us some quick tips on how people can get greater privacy with their Bitcoin use.

KA: It depends on who you think might be trying to look into your Bitcoin activities. I like to use this term for people who might be looking at the blockchain: I call them investigators because it's a morally-agnostic term: it could be someone that's a thief who's looking for targets or it could be someone who's trying to recover bitcoins for someone who they were stolen from, so we don't really know who's going to be looking at this stuff, but depending on who that person is that's investigating you, you'd have different techniques. What I recommend for people is that you take the worst-case scenario investigator into investigation, and if you have that covered, then everyone else who could possibly look into your finances will also be covered in that situation. In the worst-case investigator – would be something like someone working for the mob who's trying to track down targets for theft – something like that. They have millions of dollars of resources, they're able to hack into ISPs and get logs from customers' Internet traffic and stuff like that, so I think there're probably two important categories of tools. One is the ability to cover your tracks on side-channels: information about your bitcoin transactions. For instance, if someone is to log all the Internet traffic out there – something like the NSA's PRISM program, or something along those lines – you need to have some tool to hide the geographic origin of your Internet traffic, so something like Tor or I2P.

SM: Does a VPN work for that, or no?

KA: A VPN is good, but all it does is basically force your investigator to do some extra work in order to get access to the logs, so it just means that they'd have to hack into your VPN or otherwise obtain logs from that VPN in order to get access to your data as opposed to just being able to get it directly from your ISP or whatever – so it just adds one step. I'd much rather people use

something like Tor, where there's no “Tor person” to go to to get access to those logs – it's distributed all over the world, so it's a decentralized solution to privacy.

SM: I've heard that if you log on to Tor, then log into Facebook with Tor, it might be pretty easy to track your identity on Tor. Is that right?

KA: Sure. Tor is kind of a primitive tool. All it does is hide your geographic origins of your Internet traffic, but there's still lots of ways to correlate Internet activity with your person. This is something I talk about in the book, but you kind of have to manage your identities on the Internet. If you have, for instance, a LocalBitcoins.com account that you always log into through Tor – well, if you're using a whole bunch of different Bitcoin addresses with that account and someone is able to get access to the LocalBitcoins.com logs, now they're able to identify a connection between that LocalBitcoins identity and all of the addresses that are associated with that identity. There's kind of this identity management you have to do in addition to using these tools. I'd like to see these tools get better so they can do this kind of identity management for people, or make it very obvious how that's working out, but we're not quite there, yet. I think the best thing we have is something like a Tails linux, where at least it's configuring Tor for you, because if you just try to install Tor on your Windows machine, or your Mac machine, or whatever, it's kind of complicated. The computers these days work in very complicated ways, so even if you're doing all your web browsing through Tor, there's all these weird messages that are being sent out, like DNS queries and so forth. If you're using it all in one package like Tails linux, then it kind of does all that stuff for you, but you still have to do your own identity management.

SM: What about mixing?

KA: Mixing is very important. It's a way of dealing with the openness of the blockchain. Mixing is – I kind of think of it like shuffling cards. You want to make sure you get a mixer that is doing a good job of shuffling the cards. If you've ever played cards with some friends... you have some friends that are very good at shuffling – they bridge the cards and they look like Vegas dealers – and then you have some friends who don't know what the heck they're doing... they kind of cut the deck once and they take a card and they stick it in the middle. They deal it out and you're like, “dude, I got the same hand except for this one card. You're terrible at this.” When it comes to your financial privacy, you definitely want to have the friend who's like the Vegas dealer and not the kind of cutting-the-deck kind of person. Not only do you have to use bitcoin mixers, but you also have to know which ones to use and how to use them. It's something that I talk about in-depth in the book and something I plan on definitely covering a lot more, covering reviews of mixers and talking about which kinds of mixing technologies are superior.

pause segment –

Ad?: This is Kris Joseph, bringing you news on NXT, the first true second-generation currency for March 22nd, 2014. NXT has not been very friendly to traditional miners because it does not use the same proof-of-work system that many other altcoins do. This week, two new mining pools have appeared that address this: hashrate.org and p00l.org. Both have created pools that mine the

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unpause segment –KA: The Bitcoin mixer is a tool you can use to kind of hide the path of your bitcoins on the blockchain.

SM: This is tracking the specific bitcoins, not the Bitcoin addresses?

KA: You'll have bitcoins that are at a particular address and you can keep sending them to new addresses. The problem with just sending them to new and new addresses is that it's pretty easy to follow these paths along the lines. Mixers can use a variety of techniques to mess up this path, basically. The way that the original mixers basically worked was – they were centralized mixers that had a wallet service, so you'd send them some bitcoins, and then they'd send you some other bitcoins back, and they'd basically do some off-blockchain where they say “okay, Johnny sent me some bitcoins from this address. I'm going to send him bitcoins from another address that has no relation to it on the blockchain and I'm going to do my own database to keep track of this account. I'll charge him a little fee to do this.” This may or may not be totally effective, but it's a way of giving you a little bit more privacy than just using Bitcoin on a normal basis. Mixing is absolutely still changing rapidly as a technology. The next generation of mixers is going to be peer-to-peer, decentralized mixing. We have that going on at blockchain.info where their shared-coin service, which is based on CoinJoin...

SM: Do you have to opt in to that, or is it an opt-out thing?

KA: You have to opt in. They have a “send” screen, and you have to say “I want to do a shared coin send,” as opposed to a regular send. It does cost a small amount – they charge you a little fee, just for transaction fees, basically. You want to have multiple rounds of this, so basically you'll be doing up to ten transactions in order to just do the one send as opposed to just a normal send, and you'll be doing it with other blockchain.info customers who are using the shared coin service.

SM: Okay, so if the only people who opt-in to shared coin are people who are concerned about their privacy because they do have something to hide, is that a problem?

KA: That is a problem, because we know from other areas that have privacy technology that when people need to opt-in in order to use it, most people absolutely will not use it. It's a little bit of extra work, the graphical interface is for this privacy technology tends to be kind of clunky and awkward because there's not enough customers to incentivize them to design this really clean, easy-to-use interface for us. You get really low participation and the problem with that is Bitcoin privacy fundamentally comes down to anonymity. You need to be able to do anonymous

transactions. You need to be able to own bitcoins anonymously. Anonymity is all about participation. The more people who participate in an anonymity system, the more anonymity everyone has, so low participation also means weaker privacy for the people who are actually opting into this system.

SM: Okay, so opting into privacy-enhancing features is actually a form of activism, to take Bitcoin as a whole to a more private and secure space, right?

KA: Yeah, absolutely. Somewhere to the Tor networks... Tor is all about people using each others' Internet connections as an ephemeral or temporary identity, and the more people who use Tor, the stronger anonymity is for all Tor users. Some people are using Tor for really important things like blogging in a dictatorial regime, and whistleblowing, and all that kind of stuff, so it's really important they have good privacy. People, for a long time, have been practicing activism by participating in the Tor network, running a Tor node, using Tor, and so forth, to help out these kinds of activists. I think the same thing applies to Bitcoin privacy. You could help out these activists and just people in general who deserves financial privacy. Everybody deserves financial privacy, I think. When you participate in these systems, you're helping out your fellow human, as well. It's definitely a form of empathy and freedom activism to participate in privacy systems with regards to cryptocurrencies.

SM: Okay, and what are some other ways people can help push Bitcoin forward toward a more privacy-preserving status?

KA: I think the best thing we can do in Bitcoin – the way that we've had the most success and pushing for its success – successful technology – is by voting with your wallet. If you have the choice between a bunch of different wallet services, pick the wallet that has the best privacy features. Right now, I think Blockchain.info is a very strong competitor with their shared coin service which they're providing for no fee – they don't receive any fees on that, right now. They used to and then they were like, “we hate coin validation. We want to make it easier for people to have private transactions,” so they took the very brave and noble step of removing their fees for that service. -So you want to pick a service like that, or Darkwallet, or whatever it is that has the best features. You can also let people know you want to have these features – email to developers... when you introduce your friends to Bitcoin, you can let them know, “hey, there are these privacy concerns. You can use a service like blockchain.info because they have these privacy features,” so these are all ways of propagating the meme that Bitcoin privacy is important.

SM: Cool. Just to sum up briefly – for somebody who's totally new to this and wants to do as much as possible to preserve their privacy, would you say you recommend this blockchain.info wallet with the shared coin service? - And give a few other tips and just let people know what they can do for a call to action...

KA: Yeah. Shared coin is excellent. Just Google around and search CoinJoin, coin validation... stuff like that. Get a little informed on what the state of these topics are. You can, of course, read my book where I cover these extensively as well. You see things like Tor.... Tor is actually.... if you're

gonna use shared coin, all you really need to do is download – in order to combine that with Tor – you can download the Tor Browser Bundle, and that makes it pretty simple. I cover that in the book, but people can figure that out on their own, of course. -So yeah, just using these kinds of technologies and trying them out. I think they're pretty easy to use once you figure out what they are and get accustomed to them.

SM: -But you just have to take that first step to opt in...

KA: Yeah, absolutely.

SM: Your website is anonymousbitcoinbook.com where you have a lot of helpful blog posts about cold storage, political issues, and all kinds of other things, so people can go there - anonymoubitcoin.com - and order your book. It's now available, right?

KA: Yeah, that's correct. There's the book, a premium package that gives you even more information. You can also follow me on Twitter at @anonymouscoin. I'm definitely going to be covering this stuff extensively in the future, so more blog posts. I'm on the Bitcoin Group regularly, which is another show that I recommend people check out, with Andreas and some other great folk.

SM: Alright. Thanks so much, Kritov. This was great.

KA: Thanks for having me.

End segment –

ABL: Today on Let's Talk Bitcoin, we're joined by Ross Mintzer of Rossmintzerband.com. Ross, you're a musician and have been working with cryptocurrencies for a while. I really thank you for joining us today to share your experience with Bitcoin.

RM: Thank you, Adam. It's great to be here.

ABL: How long have you been making music and how long have you been interested in cryptocurrency, and where did those things overlap?

RM: I've been making music my whole life. I'm 26, now. I started playing the saxophone as an eight-year-old, so it's been quite a while. Now, I sing mostly and produce music. I heard about cryptocurrency fairly recently, actually... maybe only about a few months ago, and it really resonated with what I was doing. I'd been doing a lot of social media advertising to connect with people with my music around the world. I've always been thinking about – how should a musician be fairly compensated for his work? When I started to learn about digital currency and the different options out there, it's like a light bulb went off – like, this is the missing link to monetizing in a fair way, the work the work and the music that I'm making and creating.

ABL: When you discovered that, what was your next step? What was your first attempt at using this to do that?

RM: First, it was to investigate and to try to understand Bitcoin and the other alt-currencies, and what kind of possibilities are out there. The first step is simply - I just put my Bitcoin address, my Dogecoin address to start accepting donations on my website. That was my first thing – it's pretty easy, too.

ABL: Interesting. You accept Bitcoin and you accept Dogecoin. Those were the two cryptocurrencies that you went to?

RM: That's where I met [Maut?]! It could change. It really could. Litecoin too, maybe. I'm still learning a lot.

ABL: Let me ask – what was the thing – usually, when we talk to someone and they accept more than one cryptocurrency, it's Bitcoin and Litecoin because those have been kind of the gold and silver analogy that people like to use. Is there anything in particular with Dogecoin? Was it just the time – it was getting big and fun to be involved with? Help me out here.

RM: It was just the community. I was in a certain place in my life and – Idunno, it just kind of hit me. It just made me feel good. I like seeing the interactions of people on the subreddit. I like what people were talking about and I wanted to be a part of it.

ABL: You wanted to support it, basically, is what it sounds like.

RM: I just wanted to a part of it. -laughing- Yeah. There was the first Dogecoin party we had, last week in New York City, I think, and I let them use my sound system. That was at the NYC Bitcoin Center. It was cool.

ABL: How's that going? Do you notice any difference between the Bitcoin side of things and the Dogecoin side of things as far as a Bitcoin artist looking for remuneration?

RM: At this point, I think it's too soon to really tell. I'm curious to see – it's like a lot of people I've connected with so far, unfortunately, haven't even heard of a digital currency, or know very little about it and they're not using it, yet. I believe, once everybody knows – more people understand what it is, and the potential, and what it's capable of doing, then I'll be able to see some results, more, because right now, if I'm not really targeting this niche group of digital currency users, then it's hard to tell, right now.

ABL: Let's talk about that right now. I think you're going with a tipping model, right? You're using a tipping model?

RM: Right. Right now, it's just a tipping model. Absolutely.

ABL: Okay. I don't think that that's an end-game for you. You're not actually against selling your music. This is just a first step? -Or are you producing your music, giving it away for free so you get the maximum distribution and then just asking people to give value for the value that they get? -Which is very similar to what we've done with Let's Talk Bitcoin and our listeners...

RM: Exactly.

ABL: What is it you hope to achieve with this? Are you just looking for feedback, like “hey, I got a bunch of tips. That means people like what I'm doing.” -Or are you actually looking to – would you like to live off of these funds? How would you like to see this develop, and are tips the ideal vehicle for this, or do you think this is kind of a stop-gap? This might be kind of a large question. -chuckles-

RM: It might be a larger question, like – I think that's more of like “how is the content creator treated in society? How do we look at the artist in the...?” I think, with the digital currency tipping box for social media – for Twitter, they're making one for Facebook – that's such a big deal, because I've connected with so many people from social media... now that this is capable, where someone aroudn the world can support me in a small way, instantly from their virtual wallet to mine, that even is a big deal. There's this coin called FlorinCoin – one of the developers actually spends a lot of time at the NYC Bitcoin Centers. It was Joseph Fiscella, and he had an idea with the protocol of the FlorinCoin where you can send a message when you send somebody money, so you can also send, say, your email with your money, and he has this idea called the FlorinExchange. -So basically, as a musician, people have sometimes sent me their email, and I've sent them my music for free, but now, the idea that they can send me some money AND their email in one deal, and then I get the money and I send my song to them, and there's no third party platform... like, there's no bank or iTunes, or any other group that gets their hands on that, and that to me seems like a really big deal. That would be so cool, if there were something like that.

ABL: -So, somebody wants to order something from you, so it's like they take a bunch of coins and then wrap a message around it and throw it at you. You don't know necessarily who threw it at you, but you've got the message so you know where to send the thing in return.

RM: Yeah! It's really cool. It's like the virtual... like if you came up to me and bought a CD from me for $5 and I gave this CD to you in person. It's really person-to-person, virtually. That's really cool.

ABL: That's really interesting. We're actually going to turn this around now, Ross, because I think I have some ideas that I'd like you to ask me questions about, but really quickly... I want to tell you really quickly, another thing you might want to check out for your music, is a site like CoinLock, actually, which is kind of like a virtual vending machine where you set up a contract once. You'll upload a song, put the price that you want, the address that the payment should go to, and you can distribute that website that has all that information for it, and whenever somebody buys that from you, it sends you, I believe it's 98% of the amount. The site keeps 2% and that person gets to download one copy in their browser without having an account or logging in at all. (RM: Wow!)

It's really cool. There are all these really interesting, automated tools. What you're saying is great, but it's very manual. You have to send out a copy for each one of these. -So you could do both... anyway, I just wanted to share that with you....

RM: Is that called CoinLock?

ABL: Yeah, it's called Coinlock.com.

RM: I'm gonna check that out.

ABL: Recently, I talked about LTBcoin, which is a coin that we're creating for the Let's Talk Bitcoin network which we're going to accept exclusively for advertising and there're a couple of other value-adds that you'll be able to do with it that you won't be able to do – or it'll be much cheaper to do with LTBcoin compared to bitcoin or dollars. One of the other really interesting use cases for this is artists who are new and unsigned can essentially use this same model and create a coin that they guarantee they will accept for their music moving forward and they'll accept for certain things moving forward. For a high amount of your coin, you might have lunch with them or something like that. In the beginning, when you create these, you're going to create them for nothing because the value you imbue in them comes from the fact that people like your music or like whatever it is you're doing and have an interest in supporting and buying it, and think it'll become more important in the future. (RM: Woooow!) Exactly. Because all of these currencies are deflationary currencies, where all of the money supply is created at once – and then it's just an issue of distributing it over a period of time based on whatever makes sense for with that particular coin, you can create stakeholders. -So if you sell early CDs for example, you could include a couple of your coins with each CD that goes out and make all of those people stakeholders. If you wanted to raise money, you could sell some of those coins in an auction sort-of environment, or sell them to people who really like to support you, because again, they're not just throwing money at you, you're actually giving them something valuable back in return. Of course, if you fail, they probably wouldn't be worth anything, but they weren't worth anything to begin with. If you succeed, you have all of these people who were vested in your success and gain along with you. It's very interesting.

RM: That is a really cool idea, Adam, and thank you for sharing that with me. I see it, and – gosh, yeah, that's really cool. I hope somebody does that. I could see somebody potentially doing that in the future... how far are you along are you with your LTBcoin?

ABL: I originally thought I was going to have to create a new altcoin, but what I discovered is, actually, all the things I want to do, I can do with user-created assets on one of these other platforms like Mastercoin or CounterParty, or, eventually, Ethereum and Bitshares, and things like that. -And NXT also, I believe, just rolled out their asset exchange, so all of this stuff was impossible like three weeks ago, and now there are multiple platforms you can do it on right now. So, yeah – no, absolutely.

RM: Wow.

ABL: Did I blow your mind?

RM: Yeah, you did, a little. It's just cool and interesting what you can do with these digital currencies. It really is interesting. I'm curious... would I do that? I guess – the stuff you just said is a little over my head. Even if I was trying – like, let's pretend I really don't know that much at all... is there like a site I can go to that I can... that I can like put my Ross Mintzer coin and press “create” – is that possible, yet?

ABL: There is! There is. There's a site called CoinGen that will let you do that, but the problem there, Ross... if you create an altcoin, you're basically starting from the ground up, and you can fork anything out there because the cryptocurrency ecosystem is open-source, so any work that has been done in the open-source, you can take from the current iteration of it and create your own copy and start building from there. It's very easy to bootstrap in from that side, but what you need to do is mine. You need to actually have people who are supporting and providing security to the network, and essentially powering the transactional engine, whereas with RossMintzercoin, maybe you won't have that in the beginning, so it creates a situation where in the very beginning of the coin, it's dangerous because someone can take it over and kind of have their way with it. With these “metacoins,” what they're essentially doing is – they're altcoins that're built on top of Bitcoin, or they're just altcoins themselves that have the ability to create other coins on top of them through a simple user interface that takes somewhere between one and ten minutes. It'd be literally like filling out the name, putting in the amount that you want to create, and then if there're any specific rules that're going into the contract, you include that... so it becomes less about the technical hurdles and more about what the rules are for your currency, right? What are the things that're add value to your currency, and what are the rules under which they will be sold or distributed to other people. We've gotten way off course here, clearly, but I thought... it's hard to do right now, because nobody's done it, yet, but somebody's going to do it. Somebody's going to be first, and it's gonna happen in like the next month.

RM: Sure. Joseph's idea with the FlorinExchange was like... there'd be many different artists selling their music, so I guess – yeah, if it wasn't just my band, but like a record label, and they all used one coin and maybe that would help that issue of somebody taking it over at the beginning, kind of getting it out of the nascent stage of the coin until a more mature coin, so it's safer to use.

ABL: I think we're going to see all kinds of things... all kinds of things, and a lot of them aren't probably going to work, but some of them will.

RM: Yeah. It's great. If you don't fail, you're never going to achieve anything, so I think with all this stuff, we need to just go ahead and make mistakes because that's how we move ahead with all things; technology, and music, too. You can't be afraid to make mistakes in music if you want to get better.

ABL: We're playing out with one of your songs, here.

RM: So cool...

ABL: So... Rossmintzerband.com – any final comments here?

RM: -laughing- No. Thanks so much for having me. It's an honor to be on this show, and this show is great, so thanks, Adam.

ABL: Thanks to you, too. We'll see you next time. [PR note: the music's pretty decent]

End segment –

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Start segment –

ABL: Today, we're joined by Peter Todd, a core Bitcoin developer and chief scientist of the Mastercoin Foundation. Peter, thank you for joining me today on Let's Talk Bitcoin.

PT: Hey, you're welcome.

ABL: I listed two of your projects, but you're actually pretty prolific. I recently saw you're going to be auditing the CounterParty protocol. Are there any other projects you want to name-drop that you think people should know about?

PT: I think what's interesting about what Mastercoin's done with my role as chief scientist – we see it as – decentralized finance is so small as a field that we shouldn't be thinking in terms of being in competition with each other as much as being in competition with centralized finance, so even though I work as chief scientist at Mastercoin, as you said, I'm also auditing CounterParty, and I'm also helping out with ColoredCoin's work as well.

ABL: I think that's the ethos, frankly, to be moving forward, now. There's so much room for collaboration, so much stuff that needs to be built, and we're all kind of rowing in the same

direction anyway – so since it's all open source, this is the way that makes a lot of sense to do, so I'm glad to see you guys taking this ethos, and that's been true pretty much with all my talks with Mastercoin folks. The reason why we're having this conversation today isn't actually about Mastercoin, it's about stealth addresses, which are something that you, sir, were talking about a couple of months ago. Let's pretend I haven't done any research and I'm just some schmo of a podcaster... what's a stealth address and why is it relevant to me?

PT: I think what it really comes down to is it makes it easier for you to do the right thing with regard to privacy, because a Bitcoin address is something that – whatever you do with it, it's publicly visible, so what it comes down to is that if you use a Bitcoin address twice, you are linking information about your transactions. You are essentially saying “alright, I did this transaction and I did this transaction. Potentially, I did a whole bunch of 'em.” That's information that you don't necessarily want other people to know. A great example is – alright, you get paid by your company every month. Do you want every single paycheck to end up on the same address so it's kind of obvious how much you're getting paid, how often it is and so on? You're much better off if that information isn't public, and to make that possible, you have to figure out how you receive payment from someone twice with the same address. All a stealth address is is just a bit of cryptography math so that you can essentially give someone else this piece of data that lets them then construct addresses that can pay you, and even though they're not linked publicly, your wallet can still recover the funds from them and still spend them.

ABL: So these are like... something like hierarchical deterministic client-side wallets, where the sender generates it? Explain this to me more.

PT: You brought up HD wallets, and HD wallets are potentially another way of doing this kind of thing in that, with an HD wallet, you could potentially give someone else what's sort of called the root, and then from that root pubkey, they can then also derive addresses, and then you can set up your wallet software to look for addresses that could've been derived from that root. The problem with it is it's kind of inflexible, because the only thing you can kind of do is say you have address #1, address #2 – if your wallet doesn't happen to be looking at the right address, or maybe the address get out of match or something, or you really want to give this to two people because it's more convenient, it's just a lot of overhead and complexity to it from a user's point of view. Fundamentally, yes, you're right – it's a way of giving someone a piece of information from which they can derive multiple addresses to pay you, so from that respect – yeah, they're very similar.

ABL: This is helpful to me, then, because Let's Talk Bitcoin as a podcast, we'd put out this piece of information about us, and then people would be able to use this to derive addresses that they could send money to us. We wouldn't generate the address – they generate the address and it routes it to us, right?

PT: Yeah, and this is a key problem with HD wallets. Let's suppose you wanted a donation address, but you didn't want to be public who has donated to you and how much. If you just publish an HD wallet address, the problem is that both sides of the sending of the funds or the receiving of the

funds essentially have to regenerate the same address. If we have the root and then we generate address #1, on your side, you must also generate address #1 and look for it in the blockchain. If it's a donation address, which index do you use? If I'm going to donate money to you, my client has to somehow find an index that hasn't already been used, and then not have that search space of indexes be too big – otherwise, your wallet software is then having to search for thousands of possible addresses, so you get this very hard-to-achieve trade-off that – practice adds lots of overhead and isn't really practical in a lot of cases.

ABL: So what's the use of these things?

PT: I think for an HD wallet route... for the use-case of you giving an address to someone to pay you, it does probably work in cases where there's a one-to-one relationship. I could, say, give my employer an HD wallet root, and because they know which addresses of that chain they've used, it's easy for them to use a new one each time with a bit of bookkeeping.

ABL: So this is more like setting up a direct-deposit relationship with your employer than it is being able to just give an address to all your friends and have it so they can anonymously pay you, because they aren't all keeping track of who all's sending payment to you at what point, right?

PT: Yeah, that's not a bad description. I think, on the technical level, that description kind of misses a lot of stuff, but in terms of what the user experiences, that's quite correct.

ABL: Well, I'll believe I'm missing stuff on the technical level – that's definitely true. I have a lot of things that I'm working on, and I have a lot of these problems. Setting up a way for people to donate to us – like, we're creating an application for smartphones right now that's going to have tipping stuff, and it'd be great. We have, on the one side, I view this as solving another end of another problem I have... we're basically setting up a system called BitSplit, that's an idea of Kyle from CoinTalk, where you can essentially have an address route then, out to multiple addresses, where one person could get 10%, one person could get 15%, one person could get 50%... it's totally arbitrary. This is like the other side of that. If you attach this to the front of it, you have a way for it to be totally private and still go through all of this distribution automatically. Could you do it?

PT: For instance, for your application there, you want to be able to publish an address and take funds you receive and split it up. As you know, by creating that singular address, you have the problem that if it gets reused, you lose some privacy there. With a stealth address, what that would enable from your point of view is that your site would be publishing stealth addresses instead of normal Bitcoin addresses, so when I say, made a donation that's supposed to be split across, say, 10 parties, that donation would be not visible to anyone else on the blockchain, or at least, I should say, it wouldn't be linkable to anyone else, and I've essentially generated new addresses by the Stealth method, pay you, your wallet software would see the money, and then the next guy that comes along pays to an address, see the money, and it all works out. I guess the important thing is, right now, the main alternative is you have an interaction. Let's suppose your website had a button that you click and it'd pop up a new address every single time a user wanted

to donate. That's all well and good, but by popping up a new address, you have an interaction between you and them that you can't get rid of, and that's really what stealth addresses try to avoid, so you don't have to have that overhead.

ABL: Okay. As a normal user, if I wanted to implement something like this, what would that look like? Is this something that's still in a theoretical stage? Is it something where there're are APIs out there and I can point a developer to it?

PT: It's not to a point where there're tested APIs and tested implementations. It's at a stage where people are writing code to implement it and testing it out, and making sure that things work as expected. I, personally, am writing what I'm calling the Stealth Address Reference Implementation, and then I'm doing that in conjunction with DarkWallet/libbitcoin guys who are also doing an implementation. Our goal, there, is that with two implementations, we can make sure that they do interoperate in natural specifications that will get written, is cracked, and is something people like co-authors can take and implement stealth addresses from that.

ABL: Sounds great. Before I let you go on this one – while I've got you here – you were brought to the Mastercoin Foundation to address some of the complaints about the protocol and some of the incongruities in it. Can you address any of that? Can you talk about any of the work that you've done to change the protocol and what the complaints were, and how the complaints were addressed? This could be an entirely different interview, too... just throwing this out there because I'm legitimately very curious.

PT: I guess the big thing I'm going to say up-front first – nobody in the decentralized finance state knows actually what will or will not work. This is a field that did not exist maybe even a year ago.

ABL: Yeah, absolutely.

PT: It is very, very [intermental?]. I think what specifically has happened with Mastercoin is I think there's actually been a fair number of smaller changes, things like making sure that they understand their options, for instance, to make sure Mastercoin transactions are blocked, making sure that they understand the issues surrounding consensus surrounding Mastercoin. I think a big and very important one is I came up with what seems like a reasonable way to upgrade these systems so that if you need to change Mastercoin to add new features or change how it works, we believe we now know how to upgrade it and have an upgrade process set up to operate smoothly. I think, more long-term then, there's – and I'd say this is the other half of what I'm working on – I'm kind of working on Bitcoin itself, making sure Bitcoin can scale, making sure that the Bitcoin protocol itself works in a variety of ways, stays decentralized and so on. Fundamentally, that's because Mastercoin depends on it, as do all these other decentralized finance things, with one exception of Ethereum.

ABL: I believe NXT also doesn't rely on it, but it's not using a blockchain-like structure.

PT: I wouldn't necessarily call NXT decentralized.

ABL: Really? That's interesting.

PT: Yeah, well unfortunately, their proof-of-stake algorithm for consensus inter-depends on developer checkpoints, so if the developers' proof-of-stake algorithm doesn't work...

ABL: Hmm... interesting. Peter, we're going to have to do a longer interview at another time.

PT: Yeah, you're into very big topics there.

ABL: Yeah, it's very true. It's a very big topic and it's such an interesting time right now, because I think you view yourself kind of like how I view myself, which is as a free agent in this space.

PT: Yes.

ABL: There's so much stuff going on, you really can't pick a team. It's just about looking at all the innovation and trying to learn from everything, and then at the end of this, we wind up incorporating all the best elements into the same things because it's all open-source anyway, right?

PT: That's absolutely true. If anything, I think that's kind of one of the interesting things about stealth addresses – simply that on a technical level, it really is kind of simple, so it's nice, then, to have a project I can reasonably see getting implemented in a relatively short period of time versus other stuff where the whole scope of what decentralized finance is gonna do is just so complex, and there're so many different moving parts that sometimes it's kind of hard to wrap your head around.

ABL: Peter Todd, chief scientist of the Mastercoin Foundation. Thank you.

PT: Hey, you're welcome. Thank you.

ABL: Thank you for listening to episode 94 of Let's Talk Bitcoin. Visit us at letstalkbitcoin.com for more content, subscribe to all our feeds, tip our shows, and, of course, try out the other shows on the LTB network like Paul Boyer's award-winning Mad Money Machine and Ethan's Live Bitcoin Report every Wednesday at 7pm Pacific Time, Dr. Stephanie Murphy and Bryan Sovereign on the Sex & Science Hour, and of course the boys in Nashville serving up Bitcoins & Gravy. Content for today's episode was provided by Stephanie Murphy, Kristov Atlas, Ross Mintzer, Peter Todd and Adam B. Levine. This episode was produced and edited by Adam B. Levine, with additional editing by Denise Levine. Music for this episode was provided by Jared Rubens, Ross Mintzer and General Fuzz. Any questions or comments? Email adam@letstalkbitcoin.com