podcast: https://stephanlivera.com/episode/314/

Stephan Livera:

Dustin, welcome to the show.

Dustin Trammell:

Hey! Nice to be on.

Stephan Livera:

So Dustin, I’ve seen some of your work and obviously this recent discussion I think spurred some of the conversation. I thought it would be great to get you on and have a chat with you and hear a little bit about your story and where you came from and how you found all this Bitcoin stuff. And how you were there so early as well. I’d love to get into some of that. Can tell us a little bit about what were you interested in before you came across Bitcoin?

Dustin Trammell:

Yeah, sure. I’d be happy to. So my career has mostly been in information security, computer security. I started that career doing defense, building out secure networks for banks, financial institutions—lots of firewalls, VPNs, that kind of thing. After about seven or eight years, I switched into offensive roles, spent about another seven or eight years doing original research around software vulnerabilities, writing exploits, doing that kind of work. And after all of this, I decided to stop working for other people and start my own firm doing consulting around all of these areas that I had been interested in. I never had really done a lot with cryptography, specifically, other than just armchair quarterbacking a bit and hobbyist-type stuff. I’ve used PGP for a very, very long time. I’ve always found it fascinating, but other than employing it practically for things like VPNs, I hadn’t done a lot with it. But because of that, I was on the cypherpunks cryptography industry mailing lists for a number of years. So I was paying pretty close attention when the original Bitcoin white paper was published, being fairly libertarian-minded and enjoying things like alternative currencies. I was following the Liberty Dollar at the time and alternative economic models, things like that. [Bitcoin] caught my attention immediately, being cryptography security stuff that I was already interested in and working in the field all mashed up with libertarian economic principles—Austrian economic principles. So I found it fascinating, immediately downloaded and read through the white paper and was eagerly awaiting the software when it was released a few months later in January. So that’s how I initially came across Bitcoin and why I was paying attention at the time. I pretty much downloaded the software immediately, just did a cursory review of the code at the time, but began running it pretty quickly after it was posted to the mailing list. So that’s how I came across it and got started running the software.

Stephan Livera:

Yeah, fantastic. So I mean you really were right there at the start. I think you just had that interest in it and you were already primed to understand this thing, because you had a bit of a technological understanding and you were also interested in the economic free market aspects of Bitcoin.

Dustin Trammell:

That’s absolutely right.

Stephan Livera:

So you came across—in 2008, there was that initial post on the mailing list, and the white paper, and then you were getting ready basically because in January 2009 is when the actual network launched for the first time. And so can you tell us a little bit about what it was like then being one of the early people who were running Bitcoin?

Dustin Trammell:

Sure. When I first ran the software back then it was all just one piece of software. You had the wallet, the miner, the full node, everything just contained in one piece of software. So I started that up and one of the reasons why I think I may have been the second node on the network was because when I started it, the behavior of the software back then was that if it was the first time it started, it would bootstrap to a known IP address and try to get a peer list and then connect to up to eight peers. And after eight it just stopped unless it loses its connection, then it reconnects to another one and tries to maintain a pretty static list of eight connections to the network. So when it first started up, it connected to one other node and that was it. It just sat there with one connection for about four to six hours, and then it started making other connections and other nodes began to come online. So I think I may have been the second node on the network, but that’s entirely speculative based on the behavior that I saw in the software at the time. I started playing around with it, noticed a few bugs, reported those through e-mail to Satoshi. He responded, we went back and forth in some conversation around bugs and some things I wasn’t understanding about the software—what certain things meant, how it was operating—and that kind of thing. There really wasn’t much of a community around it, other than a handful of cryptographers on the mailing list that also responded and had questions. It got a decent amount of response on the mailing list, but I wouldn’t say it was an overwhelming response. It was a handful of people that were interested and started providing feedback. So I wouldn’t necessarily call it a community at the time. It was a handful of software engineers and cryptographers, basically just trying to figure it out. Some who had read the white paper, some who hadn’t that just saw the software being released and it began growing from there.

Stephan Livera:

Yeah that’s fascinating. This is like really the early days. This would have been pre-Silk Road, any of that stuff. It really would have been basically cryptography and privacy activists and libertarians that would have fit the profile. Those are the kinds of people who you were interacting with in those days in terms of e-mails back and forth or talking about bugs or talking about what the software did. And there wasn’t even any commerce being done. It was just kind of like—perhaps it might’ve seemed at that time more like an intellectual curiosity as opposed to something really practical at that early stage, right?

Dustin Trammell:

Yeah, that’s exactly right. Because the coins that were being generated weren’t worth anything, no one had exchanged them for any commerce, buying or selling goods. Nothing like that had happened. I personally had been running some of the SETI@home and other distributed computing projects at the time and thought, Oh, Hey, here’s another interesting one. This one makes digital currency. It’s not looking for alien life. I had SETI@home clients running on a handful of computers and thought, Sure, I’ll rededicate a couple of computers over to this one, play around with it, start generating some coins. I didn’t realize that you had—in the software—to specifically turn on mining. It was disabled by default. So I didn’t actually start mining until four or five days later. And I posted the signature on Twitter showing the first block that I had mined, which was a few days later after the network had launched. But yeah, I also wouldn’t say I necessarily was interacting with a lot of people around it. I was communicating directly with Satoshi and a lot of those conversations I believe were private with Satoshi. I didn’t know many of the other cryptographers at the time. Like I said, I didn’t do a lot of work in that area so I didn’t have a lot of pre-existing relationships with the other people on the mailing list other than a handful of on-list, e-mail interactions prior to that with other subject matter. So I wasn’t really interacting too much with other people around Bitcoin, just Satoshi themselves.

Stephan Livera:

I see. So in the same way that for people who ran SETI at home, they might’ve clicked and downloaded the client, run it on their computer, but not necessarily be interacting with the community because they might’ve just been a bit more of a casual observer at that point. And there wasn’t this whole scene around Bitcoin and movement around Bitcoin as there is today with investors and books and articles and podcasts and all of these things.

Dustin Trammell:

Oh yeah. What it’s grown to is massive. And none of that existed at the time.

Stephan Livera:

I see. Yeah. In terms of interactions with Satoshi, I mean you touched on this earlier, but it sounds like—and actually I had a quick look through your blog post saying I’m not Satoshi—and you actually included a link to a zip file with your e-mail correspondence with Satoshi. So I had a quick look as research for this. Could you tell us a little bit about that? As I saw it, it was mostly technical questions about how Bitcoin worked or little things that you had noticed.

Dustin Trammell:

Yeah that’s a pretty good characterization. Like I said, when I first ran the software, there were a handful of features and things that I didn’t understand. I was looking for clarification so that I made sure I knew what was going on with the software. The rest of it was basically just me reporting bugs—something didn’t work right—I reported that so that it could get fixed, as you do with open source software. You look at the code, you play around with it, and you try to help improve it where you can. Even back then, I don’t think a lot of people were even sending Bitcoin to and from anyone else. I was running it on multiple computers, so I began consolidating into a single wallet from these disparate computers that I was running it on. But I wasn’t sending to anybody else, I was just sending it to myself for consolidation. Obviously, Hal Finney got the first transaction recorded directly with Satoshi and then some number of days later, Satoshi also sent me some coins basically as a thank you for submitting bugs. The e-mail archive that you mentioned online is pretty much a complete history of my interactions with Satoshi. Again, they were all pretty benign, so I felt it was fairly harmless to publish those at the time that I did. I was doing that very specifically in response to a situation that could have gotten me in pretty hot water with law enforcement. A couple of security researchers had done a bunch of research around Bitcoin and some of the addresses and transactions—this was a number of years later when the news broke that Bitcoin was being used for the Silk Road and it was the native currency for the dark web on the Silk Road—they had done some research that basically they were alluding to a specific Bitcoin address that supposedly, they thought, funded the creation of the Silk Road or funded some early silk road development or transactions or something. It’s been a number of years, I actually forget the details. But this address that they were speculating about was very publicly my address. They didn’t Google the address. They didn’t try to figure out, Okay, is this a known address? They were just going entirely off of blockchain data from what I could understand and were speculating. Back before exchanges existed—Mt. Gox, Trade Hill, some of these early ones—before any of those existed, the only way that you could exchange Bitcoin for dollars or other currency or goods was to find another human somehow and either do it electronically or meet up with them in person, things like the local bitcoins.com site were created to help you find other people. But on IRC (internet relay chat) on Freenode, there was a channel called Bitcoin-OTC, I think it was called. And they had a bot that allowed you to register with the bot, give it a Bitcoin address that you could prove was yours by signing a thing using the private key of the address, and then begin building a reputation around that address and that identity for doing electronic trades over the Internet. So people were using PayPal, people are using wire transfers, and there was a lot of scamming going on at the time. Someone would send a wire, get the Bitcoin in exchange for it, and then they would go and reverse the wire. Or any number of things they could do to scam you. So this reputation system was very important, but it required that you tied a Bitcoin address to your identity in that system, which I did. I was exchanging some Bitcoin at the time looking for other people. And so I did that: the address that I tied to my account on Bitcoin-OTC on Freenode was this address that they were speculating about in the research. And so law enforcement, doing any more in-depth digging than they did, would very easily come across that tie to my identity, and it was my hacker handle, Druid. It was tied to that identity, but I don’t hide that—you can very easily associate that with my real identity. And they’re off to the races. So at the time, in order to protect myself, I felt that I needed to make a public statement, which is the blog post that you referenced and point out that, No, I am not Satoshi. No, I didn’t fund the Silk Road with this address. It was actually a Mt. Gox deposit address that they were talking about. And the source address was my public one. So pretty easy to figure out, but the researchers didn’t do any of that cursory investigation around the address to determine that before publishing a paper speculating that it was related to Silk Road.

Stephan Livera:

Unfortunate. So nowadays there’s much more chain surveillance companies, Chainalysis and the like, and others who are doing that in a more let’s call it white hat capacity, people like Ergo—who for listeners I’ve done an episode with Ergo if you’re interested. But I suppose in this case, those security researchers had just done what you referred to as that person’s flow analysis to try to basically use these heuristics, right? So it’s very interesting what you’re saying as well that in those earlier days, people would actually dox a specific address that they controlled because it was a reputation system. It was like a web of trust. There’s this idea that you have a private key for this address and by signing a message—obviously you understand this but just for listeners—you can sign this message by revealing that you control the private key without actually revealing the private key. Then everybody else can now fundamentally prove that yes, Dustin or this guy, whoever it is, actually controls that private key. So it’s really interesting to hear that explanation. And I know in those days, Bitcoin-OTC was a very infamous early trade destination or venue for people. So in those days, this is also pre even being called Bitcoin Core, right? So it would have been just code put on a SourceForge—

Dustin Trammell:

It was just Bitcoin. There were no altcoins, there were no forks. It was just Bitcoin. That is the only one.

Stephan Livera:

Yeah. And in terms of communication, it would have been mailing lists. And this would have been even pre-BitcoinTalk, right? Before the forum. It would have just been e-mail mailing lists. Was there IRC in those days?

Dustin Trammell:

That’s right. Yeah. There was some channels on IRC that were related to Bitcoin. I don’t know if there was an official one on IRC. The official communications channel started off as a mailing list. It was originally posted to the cypherpunks list. Satoshi created a Bitcoin-list that a lot of the development talk moved over to. So it wasn’t directly on the cypherpunks cryptography list. After that, they set up the forums with the web interface and a lot of the community discussion moved there. But I believe a lot of the development stuff was still on the e-mail list, which I believe was hosted by SourceForge. So this was pre-Git. You had SourceForge, and I believe SVN was the predominant source control tech at the time. Eventually things moved over to Git, and that’s where it’s maintained now. But the mailing list, Bitcoin-list, I believe was just hosted on SourceForge with the code repository, and that’s where development and development discussion was happening.

Stephan Livera:

Very interesting. Are there any other notable interactions with early Bitcoin people that you had from those days?

Dustin Trammell:

Not really. For me, I played around with it initially, I mined a bunch of blocks, I reported some bugs. I left the miners running for a while, but eventually moved on to other things. The coin wasn’t worth anything at the time. It was just an interesting technology experiment. It was obviously growing and more nodes were joining the network, mining capacity was going up, but I honestly just got—I’m fairly ADHD—and I got distracted and went on to other things and essentially forgot about Bitcoin until the news about the Silk Road broke. At that point in time, all of this other development community had developed around it. The coins were worth like $7-$9 by that point. And I was blissfully ignorant of that entire period of time up until the news about the Silk Road using Bitcoin hit and I was like, Oh yeah, I remember Bitcoin. I did some stuff. Maybe I still have that wallet? I went and looked and—of course, I’m a data pack rat so I did, [and] re-engaged with the tech and the community at that point. Fortunately for me—because I was not paying attention—I may have sold half of my coins at $1 or $5 or some super early price. I did sell moderate amounts around that period of time. I was like, Oh, this stuff’s worth $9 now, let’s take some profit. Back then, I essentially just saw it as an interesting technology project. Sure, it might be used as Internet money. I understood the tech really well. I did not understand the economics and the fundamentals of what money is. I credit my Bitcoin rabbit hole journey there in large part to Robert Breedlove. His content is amazing and it really helped me understand a lot more around economics and finance and what money is. Now that I understand why Bitcoin is the best money ever discovered or created by humans, it’s all very, very obvious why I should have held every single satoshi I ever had. But—we live and we learn. In the early days then I also gave a ton of it away. I love alternative currencies and coinage, I’m a coin collector. So when the Casacius coins came out, I bought tons of those things and I gave them away at hacker cons, I gave them away at industry conferences, I even gave him away at Renaissance festivals. One of my favorite interactions at a Renaissance festival was this guy dressed as a leprechaun. I was like, Oh, he’s gonna love this little gold shiny coin with a hologram foil on the back. And I give it to him and of course it’s a Renaissance festival so they like to play up the, “We don’t know what technology is?” thing. So he’s looking at this coin all skeptical and he bites on it [to] see if it’s real gold—it was hilarious. But that was a 1 BTC coin. At the time they were worth like $7, maybe $8. I felt it was cheap marketing to help raise awareness of Bitcoin, you know? They were only five bucks a pop—who cares, right? I bought tons of those things and gave them away.

Stephan Livera:

So for people who aren’t familiar with the Casacius coin, can you just explain what that is?

Dustin Trammell:

Absolutely. So a random guy on the Internet decides to start minting physical Bitcoins, and they’re basically a brass token like a Chuck E Cheese or arcade token with a little depression on the back, small circle depression, that a paper wafer can sit in. On the paper wafer is a private key to a Bitcoin address. I don’t think you can fit the entire address or entire key on it, but there’s a reduced-size version of a key that will fit on the paper. It was printed on the paper, put on the back of the coin and then covered with a tamper-resistant foil seal. So that way you could see if it had been messed with to get the private key out of it. And then the address that was represented by that private key under the foil was loaded with whatever the face-value denomination was. At the time he was minting 1 Bitcoin denominations. Later he added 5s. There’s a 25 one that was also solid gold or silver. I think he had both options, I forget. There’s a 1,000 Bitcoin bar, like gold bar or silver bar. And then later once the value of Bitcoin started going up, he started making 0.5 Bitcoin 0.1 Bitcoin, et cetera, coins. Eventually he stopped making these. I think he started getting some regulatory pressure about “minting money”—go figure—but it was a fun project at the time. And I, being a coin collector, loved these things. I bought tons of them, gave tons of them away to just help raise awareness about Bitcoin. Get people into using Bitcoin. A lot of them, people just immediately ripped the foil off of and put it in an electronic wallet. But a lot of people kept the actual coins intact and a number of these still exist. There’s a tracking account on Twitter that tells you every time someone redeems one of these coins, which of course lets you know that all of the remaining coins just got that much more valuable as collector’s items. That was Casacius coins. There’s a number of other physical coin producers now that have come and gone and/or still exist. But it’s an interesting little sub-culture of Bitcoin—all of these physical representations. There was another one at the time called Bitbills, which was like a plastic credit card looking thing. It worked the same way, it had a private key inside under the laminate and under the foil. But yeah, I bought a number of those, gave those away. Those came in 1, 5, 10, and 20 BTC denominations. At the time they weren’t worth all that much money. So it was “cheap.”

Stephan Livera:

And I mean, it’s funny just to think about right, because I mean even a 10 BTC coin, now that’s 600-grand at today’s prices, right? So it’s insane to think about it like that. But of course the understanding at that time and the understanding today is so different. And obviously the big story everyone talks about is the 10,000 Bitcoin pizza. Or two pizzas.

Dustin Trammell:

It was 20,000 for two. So yeah, 10,000 per pizza.

Stephan Livera:

Right. Whatever it was, I mean, it’s just insane the amount of money, right? And so it’s like the shift in understanding—because in those days it sounds to me like it was a frivolous thing. Like people would be like, Oh, you want some Bitcoin? Here you go. Here’s a faucet. And now it’s all about HODLing, right? Or at least when you do spend, you’re very intentional about that decision because you know it’s going to be worth so much more—or at least most of us—we believe it’s going to be worth so, so much more in the years to come. So as you said, over time, even for you that understanding shifted. Where would you say the community started to understand that idea?

Dustin Trammell:

Probably five, six, maybe seven years ago. Content creators like Robert Breedlove, Preston Pysh, yourself, really started educating the Bitcoin community around the financial aspects of it. And for a lot of people—especially here in America—a lot of people are not financially literate. They don’t understand fiat currency and what it is, how it works. They don’t understand inflation, what it does to the economy. And so I believe that a lot of the education being done, especially the last few years, it’s really ramped up. We have some extremely high quality content in the Bitcoin community around finance now. None of that existed back then. It was just kind of a fun Internet tech money—to the point that faucets existed back then—it was just a piece of code on the website and it would just give you Bitcoin. You go to it, it would give you some set amount of Bitcoin, and it would have a donation address that people could fund it with and people did. So if you wanted to get into Bitcoin and didn’t really know how or where to get any, you just go find a faucet and it would send you half a coin, a coin, whatever. But now: yeah, we understand the importance of Bitcoin and how incredibly valuable it is and how undervalued it is right now even at—you know we saw an all-time high yesterday, $68,000 something. It’s still undervalued. Massively undervalued.

Stephan Livera:

So what are your hopes then for a sound money future?

Dustin Trammell:

One of the things I love about Bitcoin is its distributed nature. You can’t stop it. It exists now. It’s going to continue to exist. And because there’s no way to really shut it down, it’s going to out-compete everything else. There’s really nothing anyone can do about that. Humans act in self-interest—they’re going to gravitate to Bitcoin as they understand it. I don’t think you can stop that. So my hope is that that continues, which there’s a high probability that it will, and we get away from fiat currencies and the enslavement that they have wrought on the human race. Like I said, a lot of people don’t understand fiat currency. They don’t understand what it’s doing to them, what it’s doing to their savings. You literally cannot save in fiat currency these days. Your value is getting eroded away by inflation at a much higher rate than any interest you might be collecting on a savings account or on a bond. You literally can’t save in fiat. The only options are Bitcoin and maybe precious metals, gold and silver. They’re holding their own okay, but Bitcoin is not only proving itself to be an excellent store of value, but also an appreciating store of value. So my hope is that humanity wakes up to this a lot faster than it is. It’s still happening very rapidly, but the sooner we get there, the better.

Stephan Livera:

Yeah. And in the community there is the infamous time traveler post. That was maybe 2013. It was an infamous Reddit post. We joke, and I end my podcast with this idea of, I’m going to see you in the citadels, right? And so I wonder what your thoughts are on that idea of citadels. Do you think we’re going to see that sort of thing, or do you have a different vision of how it might play out?

Dustin Trammell:

I think we will start to see some of that with the very early adopters, people that managed to HODL a ton of Bitcoin. You’ll definitely see it from those types in the physical world. You know, going and buying a private island, securing it, being fairly sovereign themselves on that. But even for some of the people getting into Bitcoin now, that physical sovereignty might not be very achievable, but digital and personal sovereignty absolutely is. Bitcoin is a technology that enables that. It’s incredibly hard to confiscate unless you give up your keys. It’s incredibly hard to counterfeit. No one can debase your financial sovereignty. Now that we have that as a species—as humanity—it has kind of altered the way that humanity was evolving. We were evolving with fiat currency and central banking towards a more enslaved, less free global community. But Bitcoin has completely altered that. As we continue to evolve in this new direction, I believe that people will begin to understand what self-sovereignty, individualism and all of these things—the benefits that those things really provide.

Stephan Livera:

Yeah. And so in many ways, it’s that people haven’t really even thought deeply about financial sovereignty. And Bitcoin is forcing that into their minds as part of the conversation. And for many people, it is like a mind virus. Once they’re captured and once you’re inside, you don’t really leave. I mean, once you’ve been here for long enough.

Dustin Trammell:

Yeah you just go farther and farther down that rabbit hole.

Stephan Livera:

That’s been my experience, anyway. And I wonder as well, you were commenting earlier on the difference between investing in Bitcoin versus saving in Bitcoin. Could you explain?

Dustin Trammell:

Right. So investing in Bitcoin essentially assumes that at some point, you’re going to get back out of Bitcoin—you’re going to take profit, you’re going to redeem your Bitcoin for some other currency, some other asset. That’s investing. Saving in Bitcoin is what the HODLers are doing. They’re trying to accumulate as much Bitcoin as they can and just HODL it. Later they may borrow against it as an asset, but they’re not giving it up. They’re using it as savings. Like I mentioned earlier, you can’t really save in fiat currency. The inflation rate is far-outpacing any interest you might be getting from a savings account, from a bond, money market fund, whatever the case may be. A quarter of the dollars in circulation were printed in 2020. That’s a 25% monetary inflation rate. If you’re not getting 25% on your investment or on your savings account, you are losing value. It’s that simple. So you have to find something else to save in. And again, monetary metals are decent—Bitcoin is far superior.

Stephan Livera:

Of course. And so that also does play into the decision around if you choose to invest in Bitcoin companies as well. So I guess that’s also always going to be on our minds when we’re thinking, Well, how much HODLing am I going to do? And how much am I going to be investing into [companies], even if it is a Bitcoin company? So I’m curious how you think about that idea?

Dustin Trammell:

That’s an interesting question because one of the mistakes that I made early on after rediscovering Bitcoin and getting back into it was I listened to a lot of people telling me I needed to diversify. You know, I had all this sudden money in Bitcoin. It’s risky to keep all of your eggs in one basket. You need to liquidate some, move it around, et cetera. So I bought some real estate. I diversified a bit into that. And I also began investing in venture capital and startup companies. The interesting thing about investing in Bitcoin companies specifically is that you’re helping build this environment, this ecosystem around the asset class, which improves adoption, improves the functionality of the Bitcoin network. Now we’ve gone from the Bitcoin Core protocol being a base layer of money—it’s beginning to be used for primarily settlement transactions and things like that. High-value transactions into layered money. We now have the Lightning Network as a layer 2 payment system built directly on top of the layer 1 Bitcoin protocol. And we have the Liquid sidechain also built on top of Bitcoin. So as we begin to build on this layered money approach and build this ecosystem around Bitcoin, it improves adoption, it improves the value of Bitcoin and what it’s providing as a monetary network to humanity—which grows the value of Bitcoin. It just makes it more and more valuable over time. So when you’re investing in Bitcoin companies specifically you’re investing in the future of Bitcoin and the value of the Bitcoin that you are continuing to HODL into appreciation. So that’s how I think about investing in Bitcoin companies specifically, and why I’m continuing to do that instead of just HODLing all of my Bitcoin as much as I can. At this point though, I am doing things like taking loans on the Bitcoin as an asset, and then investing the capital received as a loan, because the appreciation is outpacing the interest I’m paying on that credit. So yeah, there’s a number of different ways you can do it, but that’s one of the ways I began working with investing in venture capital and Bitcoin companies specifically.

Stephan Livera:

Yeah. That’s [inaudible] and reminds me very much of Pierre Rochard’s speculative attack thesis. It’s leveraging this idea that by taking out debt and basically putting up Bitcoin as collateral and using the fiat to fund investment or into other aspects of it, that’s maybe another way to consider this. So that way you’re at least giving up less sats in the process of investing. And now some people use that to essentially lever up on Bitcoin. They borrow debt to get some fiat and then use that fiat to buy more Bitcoin—you can also do it in this sense. Some people even do that also to mine Bitcoin. So they might stake Bitcoin as collateral and get some fiat and then use that to buy Bitcoin mining equipment as another example to stack sats and secure the network at the same time. I’m curious as well then: what kinds of things are you keen to see in the ecosystem? Like, are you looking at Lightning development or Bitcoin mining or core protocol things, or other things? What are you interested in from a Bitcoin environment and ecosystem point of view?

Dustin Trammell:

Any and all of it. If it’s a Bitcoin-native company, it’s using Bitcoin natively, not even necessarily building Bitcoin infrastructure or protocols—interested in that—obviously anything having to do with Lightning is exploding right now. We’ve even begun to see a layer 3 on top of Lightning like Impervious AI that allows you to do all kinds of interesting things through the Lightning Network as its underlying layer 2 protocol, which then of course settles on Bitcoin layer 1. So we’re really starting to see this multi-layered approach, not only to the money and the asset itself, but to the ecosystem being built around the Bitcoin asset class. And it’s fascinating. So looking for all of those kinds of things: anything to do with Lightning, other sidechains. Liquid is interesting. They’re starting to build things like NFTs on Liquid, which is then of course natively on Bitcoin. It’s its own blockchain separately, but the currency token use is wrapped Bitcoin. So it’s building directly on top of the Bitcoin asset.

Stephan Livera:

I see. Yeah. And one interesting idea related to that is this idea that obviously in the early days—and you can attest to this—Bitcoin was more centralized in the early days, right? It was Satoshi and you, and Hal, and a few others. And over time that network has distributed out. And now, arguably, there are tens of thousands of Bitcoin nodes around the world. There’s probably close to 20,000 Lightning nodes in the world, and that’s just the ongoing nodes. There’s lots of people who are running it on a phone wallet or a phone app that’s maybe just not an always-on Lightning node, but it is a Lightning node in that sense. But one idea I recall is this idea that this is a way to actually bootstrap a new decentralized system, because there’s actually an incentive for people to run a Bitcoin or a Lightning—or a combined Bitcoin and Lightning—node. And so there are all kinds of opportunities that might come on top of that. And I think that’s where potentially companies like the Impervious AI idea is coming from as well.

Dustin Trammell:

That’s right. As, as we begin to continue running into problems socially, like censorship, you’re starting to see lots of these large social media providers essentially censoring their content. Because Bitcoin has proven—and before Bitcoin, things like BitTorrent have proven that the decentralized model can prevent those types of attacks—you’re going to see more and more things being built in a decentralized way. And by providing both a tiered money approach and a tiered technology stack approach to building these types of things, you’re going to see all kinds of interesting distributed systems built on top of these ones that we already have, like the Lightning Network using Impervious AI. You can send messages, you can establish out-of-band communications by doing the negotiation and control protocol set up within the Lightning Network. And then for example establishing a VPN—you can do the negotiation through Lightning with Impervious and then have your VPN tunnels set up out-of-band. You’re going to start seeing all kinds of things like that being built specifically to get around a lot of the censorship—not only social censorship, free speech that kind of thing with social networks—but also financial censorship. One of the early days things that happened was with WikiLeaks. PayPal and other providers that they use to get donations, essentially blacklisted them. And Bitcoin was a way for them to get around that censorship. So as society continues to encounter these problems with encroachments upon liberty, you’re going to be seeing these more and more distributed systems being built to solve those attacks.

Stephan Livera:

And just keying into that concept there around setting up an out-of-band method for communication, could you just elaborate a little bit there? As I understand, one example could be that you establish, out-of-band, a way to encrypt your communications. So as an example, maybe you and I—in the background, the software is doing all this—but really what’s going on is there’s some kind of Diffie Hellman key exchange going on. And then later now we can transact or communicate in an encrypted way where you and I have exchanged our public keys. Is that right?

Dustin Trammell:

That is exactly right.

Stephan Livera:

So then it can potentially allow people to encrypt their communications in a way that maybe it’s not as feasible or as easy to do that. Although I suppose, how would that compare with VPNs that we use today? Let’s say if somebody is using Mullvad or ExpressVPN or something, some other current VPN technology—how would that distinguish?

Dustin Trammell:

So the way those work is: almost all of the packets being sent back and forth to do the communication setup takes the same route as the actual tunnel will over the IP network. So it gets routed from your LAN up to your router, across your ISP, to the other ISP, back down to the other end point. If that’s being blocked somehow, maybe some protocols are allowed through, some are not, and the negotiation protocols are blocked, you can negotiate through the Lightning Network and then set up your tunnel, which may not be blocked, through the normal route. So it allows you to get around some types of censorship when particular protocols are blocked and others are not. Or particular ports. Sometimes you can mask your traffic, make it look like a different protocol, but if you can just route your negotiation traffic through the Lightening Network, you don’t have to worry about that.

Stephan Livera:

Yeah. Interesting. And with privacy, I think it’s an interesting aspect because there’s so many different ways you can fall down or so many different ways that there could be a fingerprint left behind that could then be the string for someone to draw on to try to figure out what’s going on. And one thing I’ve heard of with privacy—and this comes into even coin surveillance and chain surveillance—is like a timing analysis. And so that can make it less convenient for people. As an example, if you’re doing all the transactions at a certain time or a certain same time of the day, there’s a fingerprint there. And so then the way to get around that is to maybe space out your timings or to randomize the timings, or have some kind of noise protocol. But the point I’m trying to make there is that in some cases that will make it less convenient for people. So do you see that as like, these kinds of privacy and censorship resistant technologies will be used by less people because less people are willing to pay that convenience cost?

Dustin Trammell:

Yeah, it’s a difficult problem because privacy is hard. Information leaks, things like you mentioned with the timing, like we’ve even seen people try to figure out who Satoshi is based on when they were posting to the mailing list, when they were committing code to the repository. Oh, it looks like this fits in a European time zone, assuming that they were working during the day. Information like that naturally leaks. And it’s very difficult to maintain privacy without taking a lot of that into consideration. And most people just don’t. They don’t think in that mindset. I’ve been working in security for 20-25 years. And even sometimes I don’t think about some of these cases. Very early on with Bitcoin, it was an interesting tech toy basically. I didn’t think that I needed to necessarily keep my address private that I was using for trading on the Bitcoin-OTC channel. And later in life that basically led to doxing almost entirely my transaction history on-chain. So privacy is difficult. And the easier we can abstract some of that away from the user and make it easier for them, I believe the more adoption that we’ll get. But most people are not going to pay that cost. A lot of people just don’t care about their privacy. We have an entire new generation of young people that have grown up with things like TikTok and Instagram and their entire lives are online. They don’t think too much about, Okay, what should I keep private? What should I have public? It’s just not part of their mindset, it seems. So as technologists, the more of this that we can build into the technology and abstract away from the user and make it easy for them, the more adoption that we’ll see.

Stephan Livera:

Yeah. And it’s interesting, you mentioned things like TikToK and Instagram, and even now if you look at some of the surveys of what do kids want to be, they want to be a YouTube star or an influencer. So it’s going the other way. They want to be more famous. They don’t want to be more private. They want to be more famous and more out there. So it’s an interesting way. But in fairness, that could also be a cultural impact of fiat money. And let’s say a return to sound money might also change some of that incentive there and it might change some of the technology that we use. The other point that’s also important to consider is it’s not necessarily being private versus every possible thing or every possible entity. It might be just, as people would say, privacy is the ability to select, to selectively disclose to the world. And so if you transact or you speak and communicate in ways that are maybe not private versus every single possible entity, but if you’re at least private against most, then maybe that’s at least an improvement on today and the current state of things with messaging and finance. So also wanted to get your thoughts. You are working on some puzzles. So what’s the deal here?

Dustin Trammell:

Yeah, so with my background in computer security, throughout my career, I’ve gone to a lot of information security and hacker conventions. One of the biggest ones of the year being Defcon in Las Vegas. And puzzles and crypto challenges and things like that are a huge part of that culture to the point that now at Defcon we usually have electronic badges that do some interesting stuff. There’s almost always a puzzle built into the badge. There’s multiple puzzles and access challenges built around parties and events. So, you know: make your way through the challenge you get to the end and you solve it, you get access to the party—that kind of thing. So I’ve been both involved in creating these and solving these for probably a couple of decades now. And I just enjoy making them. I’m a hobbyist game developer, game designer. I like designing board games, card games, crypto puzzles, things like that. And so attending Bitcoin 2021 earlier this year, I got there the night before the convention and I couldn’t sleep. So I was thinking, Okay, what can I do? I’ll create a puzzle for the conference attendees and see if anybody jumps on it and tries to solve it. I created a basic little simple one. It had like maybe seven or eight steps to get to the end and just threw it out there on Twitter to see if anybody found it interesting. I had a small number of players, but they were very enthusiastic about trying to figure out the puzzle. And so I think that creating a larger, more involved puzzle for next year might be fun. I’ve started working on that a bit. I’ve reached out to the convention to see if they want to help support in any way. And we’re trying to put something fun together for that. But yeah, it’s just something I do as a hobby. I’ve been doing it for a long time. And if you’re going to Bitcoin 2022 next year you can look forward to that.

Stephan Livera:

Yeah, I’m definitely keen to, and I’m sure many listeners will be interested to attend, also. Have you got any tips or tricks for people when they’re trying to play these crypto puzzle games?

Dustin Trammell:

It depends on what type of challenges they are. We’re going to try and create something for next year that pretty much anyone can play, and will scale up in difficulty as you progress. So you can play the first part—you can play all the way to the end. It might get somewhat technical at the end with some challenges that might be around chainalysis—go find a specific block, specific transaction, tell us what the values are, those types of things. One of the things that I like to do with these types of puzzles and challenges is educate. So it’s trying to get you to either demonstrate that you know a particular skill or learn how to do that skill and then demonstrate that you’ve learned it. So there may be some challenges around chainalysis. We’ve got at the conference, a number of different areas that are interesting, and we’ll probably be involved in some of the challenges. There’s the art gallery, there’s the, the e-sports and gaming area. So we may build some challenges around doing things in those areas specifically. And of course there might be some social challenges. You know, go find a particular celebrity and they give you the password. I can give you a password. And if people find you at the con, you can give them the password and they pass that challenge. So we can build puzzles around literally anything. We’re going to try to build some that are very approachable and some that ramp up in difficulty and end up being a little more challenging for the more technical—the developers, the artists—you know, niche subject matter.

Stephan Livera:

Awesome. Well I’m looking forward to that. I think that’ll be really fun. I’m already really looking forward to Bitcoin 2022. We’ll see how things go there. So I think it’s probably a good spot to wrap up here, Dustin. But before we finish up, have you got any closing thoughts that you want people to think about, and of course, where can people find you online if they want to follow your work?

Dustin Trammell:

Yeah, absolutely. I’m pretty much everywhere under the name Druidian on Twitter, Instagram. LinkedIn I’m just my regular name, Dustin.D.Trammel. As far as parting thoughts: Bitcoin is inevitable. The real question is just how fast do we get there? I’m a big proponent of getting there faster. This is one of the reasons, again, that I’m investing in Bitcoin and Bitcoin-native companies. The faster we can get there, the better for humanity.

Stephan Livera:

Fantastic. Well, thank you, Dustin. I’ve really enjoyed chatting with you.

Dustin Trammell:

Yeah. It was great, having me on. Thank you so much.