Eric Voskuil is the Most Rational Bitcoiner

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“There are unique aspects about Bitcoin. The fact that the cost of using it rises when other people are using it, is unique to everything in the world, and people don’t look hard enough at that and the consequences of that.”
— Eric Voskuil

Location: Los Angeles
Date: Friday, 26th September
Project: Libbitcoin
Role: Lead Developer

Bitcoin is the best performing asset of the last ten years. It has the potential to disrupt entire states, overturn traditional financial institutions and change the way corporations do business.

With so much potential and with the stakes so high, it's easy to see why discussions around Bitcoin's ideology can become so heated. 

Hyperbitcoinisation is touted as the end game by many Bitcoiners. In this scenario, Bitcoin would displace all fiat currencies to become the world's most dominant money and reserve currency. But not everyone shares this vision. Some believe that the economic game theory isn't strong enough for Bitcoin to ever reach hyperbitcoinisation and that in reality, if it were achieved, governments wouldn't relinquish power so easily.

In this interview, I am joined by Eric Voskuil, who John Carvahlo described as Bitcoin’s most rational thinker. After starting his career as a software developer, he took a 10-year hiatus flying fighter jets in the U.S Navy before returning to software engineering and Bitcoin. We discuss libertarianism and anarchy versus minarchy, fractional vs full reserve banking and remaining a rational Bitcoiner.

TIMESTAMPS

00:05:11: Introductions 
00:06:20: Discussing motorbikes, planning trips and accidents Eric has had
00:15:14: Exploring different areas of South-East Asia that Eric has travelled to
00:19:04: Delving into Eric’s background and his experiences flying for the US Navy
00:27:07: Eric’s early involvements with the software and technology industry
00:32:41: Discussing Eric’s early interest in libertarianism and his alignment to anarchism
00:36:11: Touching on morality in libertarianism and the connection with the non-aggression principle
00:38:15: Discussing statism and various healthcare options around the world
00:42:33: Touching on whether we could see a successful society based around collectivism in the future
00:44:34: Exploring recent increasing laws regulations and whether this is a long-term trend
00:52:42: Could Bitcoin disrupt the modern-day economy and what implications would have this?
00:56:39: Discussing if hyperbitcoinization is unrealistic and if it’s dangerous for Bitcoin to get too big
01:00:14: Delving into the instinctive, defensive nature of the Bitcoin community 
01:04:50: Discussing Eric’s unpopular theorems in the space, including economic theory
01:08:40: Eric’s thoughts on interest accounts and other financial products in Bitcoin
01:11:59: Discussing what a realistic future could look like, with Bitcoin and fiat alongside each other
01:17:51: Delving into Eric’s potential future conference and Peter’s new podcast, Defiance
01:21:29: Exploring Lightning and why you would want to use the base chain over Lightning in the future
01:29:12: Final comments and how to stay in touch 

 

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TRANSCRIPTION

Peter McCormack: Welcome Eric, finally!

Eric Voskuil: Thanks!

Peter McCormack: We talked about this in London, was that about a year ago? I can't remember. Do you remember meeting in London? You were at that event?

Eric Voskuil: Oh I didn't really stay, I just came in the hallway and probably talked to you for a few minutes.

Peter McCormack: Not memorable then! But good to have you on. Have you been biking around the country?

Eric Voskuil: Yeah I bike a lot. I keep a bike in Los Angeles and I took a trip out with a friend to Palm Springs and lo and behold, there was a Bitcoin conference out there. So ran into some people, and now I'm back here and great to be here.

Peter McCormack: Good life!

Eric Voskuil: Well yeah, I do a lot of biking around the world though, so that's what I was doing out in London. I did a two week trip around Europe, 10 countries I did Mongolia, India, Thailand going to do Cambodia in February.

Peter McCormack: How do you find going on the other side of the road in the UK?

Eric Voskuil: It's not much of an issue. I actually forget sometimes when in the US which side I'm on, turning a corner and go into the wrong lane, because I'm just so used to doing both. So the first time I did it, it was kind of a scary thing going to the mountains in Australia, coming around corners, cars coming right at you, but yeah, you get used to it.

Peter McCormack: Have you been to Cambodia before?

Eric Voskuil: Yeah, a couple of times.

Peter McCormack: I've just been there about four weeks ago, first time.

Eric Voskuil: Angkor Wat? Yeah that's great stuff.

Peter McCormack: Yeah, it's not what I expected actually.

Eric Voskuil: What did you expect?

Peter McCormack: I don't know. I tell you what I expected, so my experience of Asia is Thailand. I've been to Thailand three times and I've also been to Hong Kong, but with Cambodia I was going for the temples, but I stayed in Siem Reap and then what happened was I ended up on the first night, I was with my kids, and we ended up going down that street where all the partying is.

I was like, this feels a bit weird, but this was like, I don't know, just like a backpacker destination. Then we did the temples, which I thought were great, but you could do a three day tour or one day tour. We did the one day tour and I think after like three temples, we're like, "okay!"

Eric Voskuil: Yeah, you could probably do it all in three temples, Angkor Thom, Angkor Wat and then I forget the one with the plants...

Peter McCormack: With the trees? The Tomb Raider one?

Eric Voskuil: Yeah, that was really cool!

Peter McCormack: That was cool. Yeah, Angkor Wat was amazing, we did the sunrise, but it was overcast. We didn't get a proper…

Eric Voskuil: You can take a little boat tour on one of the, I don't know what they call it, moats around and you can go out to the Island and watch the sunset out there. That was nice.

Peter McCormack: I didn't know that, but we were going to go from there down to Phnom Penh and then head down to Ho Chi Minh. Then somebody said, 'just don't go to Phnom Penh, not with your kids, it's grim." So we went across to Hanoi in Vietnam, did Ha Long Bay and then worked our way down Ninh Bình, Hoi An. Have you been to Vietnam?

Eric Voskuil: Yeah a couple of times. I just did a bike trip. I picked up a bike in Saigon, drove it to Hanoi in February and I was there once before. Hanoi is one of my favorite places. Saigon is, I don't know, just a little bit to industrial feeling, but Hanoi has this old French colonial feel and old Asian feel to it in parts. So yeah, I'm going to try to get a conference there in March.

Peter McCormack: It's funny because I had it the other way. I didn't love Hanoi, but I loved Ho Chi Minh. But again, that might come down to being with my kids and the different things you can do. But our favorite place was Hoi An Yan, have you been there?

Eric Voskuil: Yeah, when I did that trip, it's the only place I stopped for two nights. There was a nice hotel on the river in the middle of the town and stayed there for the coolers. Last time I was there they did the lights festival, you know when they floated the candles down the river and that was pretty cool. It's a nice place at night.

Peter McCormack: I tell you what was also interesting in Cambodia was the dual currency, the dollar and the riel, which is the local currency. We found that everyone wanted the dollar and I think that was a way of charging Westerners more, because you'd pay $3 for a coffee and not think anything of it. Then you'd go somewhere else and it would be like 20 cents!

Eric Voskuil: Yeah dual pricing is pretty common in different parts of the world.

Peter McCormack: That was my first experience of it. But you've probably travelled more than me.

Eric Voskuil: I don't know, 80 countries.

Peter McCormack: Ah, so somebody said to me, this was about 10 years ago and they said you should do more countries than your age.

Eric Voskuil: I'm close!

Peter McCormack: Another 5, 6 to go! They said that's a good target and it keeps you going to new places. I am 1 off, so I've done 39 but I'm 40. But I've done I think 7 new this year.

Eric Voskuil: That's a pretty good rate, you'll pass me at that rate because I probably did 65 in the last 15 years. My son got really into travel and he started planning trips. We did a sail from Tonga to Fiji with a friend who was circumnavigating solo and that was when he was 10 and he got really into it. So we went everywhere, but now he's in college and so I'm just traveling on my own mostly and it's getting harder and harder to get into new countries, because I keep going back to the same ones! Just came back from Tel Aviv, Riga and Frankfurt.

Peter McCormack: Is that because you like them more?

Eric Voskuil: There just happens to be stuff to do, you know like conferences and meetups. So I try to find places where I haven't been, try to find a meetup group and go and talk. When I did Vietnam last, I went to the Saigon meetup group and I've used that in a number of places, just to have something to do and know some people.

Peter McCormack: It's good to keep traveling though! I've enjoyed it.

Eric Voskuil: I'm trying to get to them all, but you won't get there at 1 per age years, so you got to get like 3!

Peter McCormack: Yeah and some of them you're going to have to be a bit more careful on, riding your bike around North Korea might be difficult.

Eric Voskuil: I think North Korea would be probably easy, not safe but yeah. I don't know about renting and stuff like that, that can be a fricking hassle. But some places you just have to buy one, sell it when you're done, buy one off somebody on the street.

Peter McCormack: Big empty roads in North Korea though.

Eric Voskuil: Yeah, we have roads. Mongolia was the toughest I've done by far and I don't think I'll find a tougher place. There's probably harder places to ride where you can't get anywhere, but as far as actually getting somewhere and being as hard as possible, that's probably it.

Peter McCormack: Is that because it's dirt roads?

Eric Voskuil: It's because there aren't any roads! There's Ulaanbaatar, which is the city with about a million people and there's a couple of other small regional capitals that have pavement. But outside the towns, there's just trails. They look like animal trails, mostly bike trails and they just spin off in all directions. There's no signs, there's no bridges, lots of rivers, so a lot of water crossings, things like that.

So yeah, up North it's all volcanic rock and mud and swamp and in the middle, it's kind of wet and mountainy terrain. Then down South it's all sand, but it's not like a big dune like you see in the movies, you know Mongolian desert. That actually only exists in one valley and it's just a big pile of sand and then people like to photograph it. So it's not what it really looks like, it's more like Arizona.

Peter McCormack: Have you ever come off your bike?

Eric Voskuil: I did once there and that was the only time I really would say I had. At a slow speed I wiped out when I was in college, back in like 1986, but never had a real wipeout. But going up a hill in Mongolia, it was just a nice sunny going up a hill and it just kept getting steeper and steeper and then towards the top it turned to crushed stone and then I just couldn't get any more traction because I didn't have enough speed and flipped over backwards and slid down.

Peter McCormack: Shit! All okay?

Eric Voskuil: Yeah, sprained ankle, burnt hand. But I put my hand on the engine when I got up and I was like, "oh fuck, this is getting worse!" Then the weirdest thing happened, I was sitting there with the bike and it was a pretty heavy bike for Mongolia, a DR650 and it was upside down, gas pouring out of the tank coming down the hill and my buddy behind me and there was no way he could stop it standing up. So he just laid his down sideways and then this family comes by wearing helmets, riding horses really slowly just walking by us and we were in the middle of nowhere.

There was nobody for, I don't know, 20/30 miles from where we were. They just came trotting by and I think they were German and there's a Mongolian guy behind them and it was the weirdest thing to see people wearing proper riding helmets and everything in Mongolia. I got chastised, because they thought I was going to start my bike and scare the horses and here I am, just had this major wreck and that's all they care about. I was like, you're definitely not Mongolian.

Peter McCormack: So do you just plan a route and just go off? Do you plan about safety? The areas you shouldn't be going to that might be dangerous, are you just, "I don't give a fuck."

Eric Voskuil: For that trip, there was a lot of planning because my son did it as a birthday present. The plan was to be in the Gobi desert with a sat phone on my 50th birthday and that's where I was. He planned every bit of the route, got the phone, emergency plan, tickets, the places to stay, all that.

That one day we deviated from his route, which was a big mistake and we had to backtrack the whole way. But normally I just go flip up Google Maps, get a ride and book the hotels as I go, unless it's someplace... Europe I usually book ahead of time, but anywhere in Asia, just do it as I go.

Peter McCormack: Any hairy situations?

Eric Voskuil: Hairy situations. Not really, I found traveling generally to be pretty safe everywhere. People are pretty good. Situations where you're stuck, the bikes are broken or you can't get through somewhere, that's most difficult and that's where you usually meet people and have interesting experiences. I had a lot of that in Mongolia, people helping us and us helping local people as well. So it's fun and it's rewarding. It's why it's nice to not plan everything so much and not go to places like Europe so much because it's just too easy.

Peter McCormack: When you're in Thailand, have you been to Chiang Mai?

Eric Voskuil: Yeah I did.

Peter McCormack: Did you ride up to Pai?

Eric Voskuil: Yeah, we call that "the burnout city", it's where all the burnouts hang out! Too many Americans and Europeans?

Peter McCormack: So Chiang Mai was weird. When I first got there, I thought it was just like a crap little Bangkok and then we went into the center and there's like a blues bar or jazz bar, I can't remember which it was upstairs in that center piece. We hung out there and that was cool.

Then by the time we had to leave Chiang Mai, we had three days there, I kind of got the feel for what it was and as you say, like a burnout place, that kind of makes sense. But we hired a car, so again, just me and the kids, we hired a car and did the route up to Pai and that's probably my favorite ever drive, I've ever done.

Eric Voskuil: Yeah, so when I was referring to the burnout town, that was Pai. We started and didn't spend much time in Chiang Mai, we came up from Bangkok on a short flight and then rented the bikes and left the same day. Might've spent one night, but we did a circuit about 10 days on the road. We lost one day, so I missed one town cause one of the Triumphs broke down, surprise! But the riding was amazing, I tell people that it's the best riding anywhere I've seen in the world.

Peter McCormack: It's just so beautiful!

Eric Voskuil: But the roads are so well maintained and the terrain is just perfect for riding, the mountains up there by Chiang Mai. So you go on like a big circle to the East through the mountains and Pai was different than every place we went. It's just so many Westerners hanging out there, like it's Key West or something!

Peter McCormack: Well, so the way I describe it to people, it's like a surf village without a beach. You suddenly get there, it's all hippy, you can get a really good pizza, you can go to a bar and play pool. We had New Year there and it was phenomenal, it's my favorite place in Thailand.

Eric Voskuil: It's very quaint and very bohemian, but it's not very Thailand and we actually didn't like it for that. We liked just being in a small town where we're the only strangers in town and you easily find the party and we could just get on the bikes at night and ride around slowly until we find a party. That was a lot of fun!

Peter McCormack: Well when you've got two kids and you get to a place where they can get a pizza rather than having chicken and rice again, they were like, "this is the best place we've been!" Did you carry on beyond there? Because we went onto a place called Mae Surin and then we went down to Mae Hong Son and came back.

Eric Voskuil: Yeah we did all that. I'm very poor at memory.

Peter McCormack: Yeah, by the Burma border.

Eric Voskuil: Yep, we went right up there. What was that other town...

Peter McCormack: But that's like the opposite, so you leave Pai with all the Westerners, you get to Mae Hong Son and I think we saw two Westerners in the whole town.

Eric Voskuil: Yeah, that was typical of most of the towns we went to.

Peter McCormack: We went to this one place for dinner up that way and we had, I mean two courses each, I had the best bottle of wine on the menu and I think it was like $6.

Eric Voskuil: I don't like most food from South-East Asia and that whole area, but I love Thai food. So the food, the people, the terrain, the roads, and we could get real bikes! We got Triumph Bonneville T100s which is the same bike my friend keeps in his house here in Malibu and the same one I ride out of London.

When I did the Saigon to Hanoi thing, I found the biggest bike I could find, which was a Vietnamese copy of a Honda 125 and my Vespa has more power than that thing had! Four hours on the road with that, I was pretty much done. I've done 12 hour days, no problem on a big bike, but that was just brutal.

Peter McCormack: So the Bonneville was the reason I took my bike test. I'd seen a Bonneville and I was like, "wow, what a fucking cool bike that is!" But like I said, I failed. Maybe I should do it again. Anyway, man! So I was on a call this morning with John Carvalho, we had to catch up on something and I said, "oh I'm interviewing Eric afterwards" and he said that you are the most rational Bitcoiner there is.

Eric Voskuil: Am I a Bitcoiner?

Peter McCormack: You tell me! Do you know what, I don't even know the backstory.

Eric Voskuil: I was just wondering about what that term actually specifically means, but yeah, I try to be rational.

Peter McCormack: Well I've seen you speak at a couple of events, Riga last year actually, you did a couple of panels as well.

Eric Voskuil: I do a couple every year.

Peter McCormack: I think you were on one with Eric Lombrozo last year, I remember that. But what's the backstory? What was pre-Bitcoin?

Eric Voskuil: Where do you want me to start! I started programming in probably in 1981/82, I loved it. So I decided to go get a computer science degree. I went to Rensselaer Polytech, New York. After about two years of that I took an internship with IBM, it was really boring. I still have the same motorcycle I took to college and that's what I like doing. Just riding my motorcycle around up in the Catskills and playing softball on the weekends with the other interns.

So I decided I had to do something a little bit more physical and I was at a bookstore and somebody pointed out "Hunt for Red October". I bought that and read it and decided I was going to go join the Navy. So I went to the recruiter, they said, "no, you could be a sub guy, but you should go talk to the pilot guy." So that's how I got into aviation.

I did two years more college, finished up, went into the Navy and did 10 years, became a pilot, flew off a ship and did two cruises in the Med, Adriatic, did the Bosnian War twice, went back, went to Top Gun and became a tactics instructor and then I decided to get out! So I did everything I wanted to do when I get out!

Peter McCormack: You would have fancied a sub?

Eric Voskuil: I would have done. I actually did two weeks on a sub when I was in RTC over the summer from Hawaii to San Diego and it's interesting. I get qualified on all the ships systems, learn how to drive it.

Peter McCormack: Who's sub were you on?

Eric Voskuil: US taxpayers! No, it's was USS Guardfish-612. I think it's probably gone now.

Peter McCormack: Have you watched the film that's just come out about the Kursk, you know the Russian sub that sunk? They lost the whole crew.

Eric Voskuil: Oh, that was actually more recently, right? They lost some during the cold war and they never advertised it, so I don't know.

Peter McCormack: Yeah this was a recent one and there were survivors, because they heard them banging on the hull and the Russians did not want to accept the help of the British who were there. But the film was really interesting, it's worth watching.

Eric Voskuil: Yeah, I just remember some news clips and stuff, I didn't get the full story. The US lost two nukes, the Thresher and the Scorpion. They used to say, "if you pull that lever at the wrong time, it'll be Thresher and Scorpion port and starboard!" In other words, we'll be down there with them.

Peter McCormack: So you went to the Navy, but you did aircraft?

Eric Voskuil: I flew F18s off the boat.

Peter McCormack: Fuck!

Eric Voskuil: USS Enterprise was my last cruise, so I can say I...

Peter McCormack: You're actual Top Gun?

Eric Voskuil: Actual Star Trek because I served on the Enterprise and before that the Saratoga.

Peter McCormack: What are they like to fly? I mean, it must be an insane experience?

Eric Voskuil: Yeah, in many ways it's work, right?

Peter McCormack: Yeah, this is work, but I enjoy this compared to previous jobs I've had! My first job I used to hammer handles on umbrellas. I had to hammer all day, every day handles on umbrellas for eight hours and I used to turn it into a game to see how many I could do in an hour. It was the worst, but it was a job.

Eric Voskuil: Is that a regular show quote, "all day, every day"?

Peter McCormack: Maybe! But this isn't a job and whilst flying an F18 is a job, come on, it's got to be a lot of fun as well?

Eric Voskuil: Yeah, certain parts of it are great and certain parts of it are just crap and some parts are just work. It is cool when you get that sunny day and you're out there fighting one on one or doing a big tactical mission, all the efforts put towards... It's kind of like if you imagine... I know some astronauts, and these guys, 10 years training to fly a mission, so there's a lot of work there that's not so great, but then you have that mission and that's awesome. But while you're doing it, you're just totally consumed in the work.

But there's moments where you have time to reflect and it's fun. I suppose, you'd look at the earth and say, "that's cool!" That's kind of what Navy flying is like, there's an awful lot of training and preparation work and things that aren't very exciting or interesting and hard. Then there's flying, which is great, but then there's also the mission and all that stuff. Then there's sometimes when you just get to enjoy it.

Peter McCormack: I think it's every job though. I mean, even this afterwards, I've got to do the boring bits, the admin, the engineering, the marketing.

Eric Voskuil: Exactly, people forget about that when they romanticize like, "oh he's just playing around having fun!" But it was great, I enjoyed it and when I got out I just told myself I wouldn't have any regrets, because I left after 10 years at the height of my career. I could have stayed in, but I decided I wanted to do other things and that was really what got me out, I wanted to run a software company actually.

Peter McCormack: Did you have any real engagements?

Eric Voskuil: No, I carried live ordinance over Bosnia but never delivered. We were actually between the two hot periods where the US delivered weapons there. But while I was out there, there were people that got shot at and shot down, just a couple. So there was real stuff going on. There was a lot of stuff going on, on the ground, but the air was pretty quiet most of the time.

Peter McCormack: So you were stationed in the Baltics during...

Eric Voskuil: So we were in the Adriatic, between Italy and former Yugoslavia and it's a very small place for a carrier to operate. They get in a geographical region we call "the box". So we were just stuck out there in "the box" for months, periodically pulling into Trieste for some liberty and back in the box.

It was also usually crap weather out there, so when it was crap weather, the Air Force wasn't flying from Vincenzo or wherever they flew from, so we would pick up all the crap weather missions, go out in the clouds, see nothing but clouds the whole time and come back sometimes.

Then every once in a while like I said, you get a beautiful day or get to do something interesting. I chased a helicopter through Croatia that was carrying troops against the no fly zone, but at night, infrared pictures, it was pretty cool. Actually my first mission was in Bosnia.

Peter McCormack: Nice. I went to Yugoslavia when it was Yugoslavia 35 years ago when I was 5.

Eric Voskuil: Are you really old?

Peter McCormack: Well 40, just hit it! I've got time to catch your countries up. But yeah, so we had this Yugoslavian family who came to live next to us where we were in England in Bedford. We got to know them, my mum helped them out a lot and then they invited us out to Yugoslavia. So we drove from England to Yugoslavia across Europe, it took two days.

My mom and dad, three kids in the back, no iPads, no phones, we had the most amazing time. We spent I think two days in Belgrade and then we went down to the coast and I think it was, what is now Croatia, we had a week there and then we went back.

Eric Voskuil: To like Split or?

Peter McCormack: I can't remember, but maybe Dubrovnik.

Eric Voskuil: On the coast, those are the best places. My favorite was Dubrovnik, but Split is really cool too.

Peter McCormack: Well I had this weird experience. So I was only 5, we went to this little park and there was a seesaw and I went to sit on it and there was a stick on it. So I went to pick it up and it ran up my arm and it really freaked the shit out of me. But after the war, we never heard from them again because he actually had to fight in the war, the father and then we never heard from the family again. We've tried to find them, but never got hold of them, which kind of sucks. All right, so after that, back to software?

Eric Voskuil: Yeah, so left the Navy to start a software company. I'd always been writing code, did a lot of things here and there for the Navy. So I took this piece of shareware that I had been given away on the internet in 97/98 and I started a company. I left the Navy with I think $7,000 in the bank, put that all in the company and my partner and I was a friend from college, moved up to the Boston area and just started working.

So raised a little friends and family money, raised some institutional money, 2000 hit and we burned through all of that, laid everybody off. I think bottom was negative 60k in working capital and we had withheld our own salaries for about two years, but we kept it going and then just kept writing code and eventually in 2006, we sold most of the company to Microsoft, that's why I live in Seattle. I've been there for about 13 years. I left them after 2 years, went back to the other part of the company that we didn't sell them and grew that for a short period of time until we merged with another company and then eventually sold that to Veritas capital.

It's still out there, it's called Beyond Trust and just keeps accumulating stuff! But I got completely out of that a few years back. So then I did a third one and that one folded up. The day that that was done, I just happened to have had a copy of the Forbes magazine Silk Road article. I read it and I went right to the Bitcoin white paper Reddit and have been working on Bitcoin ever since. I had enough background, not just from computer science and long-term personal studying economics, but I also was interested in DigiCash back in the 90s. I actually contacted them because one of the patent holders has the same name as me.

Peter McCormack: Is that David Chaum?

Eric Voskuil: Yeah, David Chaum's company. So they were in Amsterdam and I sent him, this was early email days, I sent him off an email and never got a response, but I was curious that there was a guy on one of the patents named Eric Voskuil. It turns out I met David Chaum about a month or so ago for the first time at a barbecue in Berlin and I told him the story and he said, "oh I wonder what that guy is doing, he was our college hire and he was brand new." I looked him up and he's making video games for somebody out here in California.

Peter McCormack: Voskuil is not a common name!

Eric Voskuil: We're probably related. There's a lot of Voskuils in the town that we came from. I went there too actually. I was just out at Breaking Bitcoin and I did Bitcoin Wednesdays and so in between, there was like four days, so I took the Triumph, it'd come out of London and I did 10 countries in Europe, so I took the Triumph out to Winterswijk, which is on the German border and just parked it in the center of town and looked around for a few minutes and then left. But also went to another town called Holten, which is even smaller, just a pub and a gas station.

Peter McCormack: What else do you need?

Eric Voskuil: Yeah and this is where, so Derk Voskuil and Hendrika Landerweerd came from these two towns in 1847 or something and came to the US and met on the trip and got married. So I wanted to see these two towns. So I went to talk to the bartender for a while and some crusty old guy that was talking about the war and was interested in my flying.

I asked the bartender if he knew any Landerweerds and he said, "oh I went to school with all kinds of Landerweerds!" So he tried to get one to come to the bar, some long lost cousin, but a thunderstorm came and I had to go. But that was nice to be able to just go out there and see the roots, to see where I came from.

Peter McCormack: I need to get myself to Seattle. I've gradually ticked off various states and cities. This is like my 70th trip to the US, but Seattle I'm really drawn to, but I love the music.

Eric Voskuil: Go in the summer!

Peter McCormack: Well, to be honest, from what everyone tells me, it's just like British weather.

Eric Voskuil: Except for the summer. The summer is like Los Angeles weather. You have to water your lawn, it rains maybe once a week and it's sunny, beautiful, warm and dry. So yeah, the rest of the year is like London.

Peter McCormack: But all the music I grew up on is from Seattle. I've actually got a tattoo, this one. Do you know of a band called Alice in Chains?

Eric Voskuil: Yeah sure!

Peter McCormack: So that's the singer from Alice in Chains, who are like my favorite band as a kid.

Eric Voskuil: Seattle was big in the 90s here for music, I don't know what it's doing now.

Peter McCormack: Well, I romanticize about that whole era, Pearl jam, Soundgarden.

Eric Voskuil: For me, I'm in Seattle, I get to see the old bands that are coming through now, so I saw Devo, X, I saw Fear last year, these are just awesome for me to go to see most of the original band. So yeah, that's not quite my generation. I listen to it, but at least Seattle can draw those guys.

Peter McCormack: I also want to go to the Boeing factory because I watched an incredible documentary about the construction of the 747 and how they had to move the different parts around the city and I've been told that the tour is pretty cool. Have you done it?

Eric Voskuil: Do they make the 747 in Seattle?

Peter McCormack: I thought they did.

Eric Voskuil: They have factories in several cities nearby. I don't know what they make where. The cool thing to see in Seattle is also the museum they have at Boeing field. That's a good museum.

Peter McCormack: Yeah I've been told that too. I don't like flying, but I'm definitely a plane nerd. My dad was an aircraft engineer. So what happened was he joined the Air Force because his brother did and when he got accepted and they turn up, you have to go and pick the course you're going to do. It's in alphabetical order and the first one was aircraft engineering, so he just selected that and then ended up being an engineer for 30/40 years. So he's got me a real interest in planes and the Boeing factory sounds like a good place to go.

Eric Voskuil: Yeah, that's a good one to start at.

Peter McCormack: So on the Bitcoin side of things, you said you read the white paper, you had an interest in economics. Do you have the interest in the whole libertarian side of things?

Eric Voskuil: Yeah I do. So something happened in '91 and it kind of, I actually got a Poly Psy Minor, which doesn't mean anything, but I was as confused as most college grads. But I started getting interested and started reading and had a friend, a landlord actually gave me a copy of "The Law" by Bastiat and I read that. Just little things like that started to contribute to my libertarianism and within a year I decided that I was a libertarian.

I joined the party and even went to a convention. I wouldn't say I was very active, but definitely kept studying and reading and that kind of drove me into economics. So I was a card carrying member of the libertarian party for 25 years, even did a little campaigning for Ron Paul at one point.

After that, the last major work of economics I read was Rothbard's "Man, Economy and State". I'd always been kind of on the edge, but after that I just decided I was an anarchist, I wasn't a libertarian. So yeah, that was my political economic evolution.

Peter McCormack: Yeah, I've been diving down the libertarian side of things recently. So two shows ago, I had Erik Voorhees on. I was in Denver and we did a show where he was explaining to me libertarianism and I was trying to, I suppose putting the questions to him regarding the things I didn't understand about how it practically works, like how a free market really works, how you have no state and that was very useful. Then I was just up in Wyoming and did a show with Trace Mayer, Caitlin Long and Tyler Lindholm.

So Tyler is a representative and he was explaining that he's a libertarian conservative, which says to me that he's a libertarian really, but the conservative side allows him to practically have a voice within the market when they're working on regulations. I'm struggling to understand why libertarianism hasn't really grown to become like... So for example, we don't really have a libertarian party in the UK of any note.

I know in the US there's a bigger movement, but there's not a significant challenge to the left or the right at the moment, yet everything I read or understand about, certainly with, I would say the non-anarchist libertarians, the more practical, let's reduce gun...

Eric Voskuil: Well that's the distinction, it's minarchism versus anarchism, no statism. It's tough philosophically to justify minarchism, as if it's bad, why do you want any of it? It becomes what people consider more of a practical issue...

Peter McCormack: What I'm implying with minarchism is that it avoids having a Wild West.

Eric Voskuil: Yeah and this is something I always point out to people, they immediately jump to trying to envision a world without a state and to me, anarchism is a personal philosophy. I don't participate to the extent that I'm able, just like I wouldn't participate in any other crime unless somehow I was forced to or something. You just don't voluntarily be evil and it doesn't mean I'm trying to tear down anything or force anybody to believe anything, I just don't participate.

Peter McCormack: But there's a separation there between breaking the law and morality, because some laws, so my discovery of Bitcoin was when my mother was sick with cancer, we wanted to get her some cannabis oil to treat her, that is deemed illegal in our country, but when your mum's dying, you don't give a fuck.

So I bought some Bitcoin, bought some on the dark web, there I broke the law, but it's morality. My mother is dying, I don't care. "Do evil" is kind of like bringing harm on others and I think you can separate the two.

Eric Voskuil: So when you talk about morality, you have to have a principle against which to judge what's moral and what's immoral and for me personally, that's the non-aggression principle and that's the sole principle of anarchism.

Peter McCormack: If there's no victim.

Eric Voskuil: Yeah, if there's no theft, essentially is what it comes down to, theft is really the only crime. Even if you're killing somebody or maiming them or stealing their stuff, it's all fraud, it all comes down to theft. So aggression, is this taking from others involuntarily. It's not non-violence, it's theft. So if you look at a law that itself is based on collecting taxes to enforce the law, there's a theft right there. It's not voluntary, so it's aggression.

So some laws mirror what we call common law, which is basically precedent set around defining aggression in a practical sense, so you can punish it or deal with it and that's what we call natural law, which kind of flows into common law. But then you get statutory law, which is just anything you want, enforce it on other people and so that to me becomes the immoral act and not wanting to participate in that, is just consistency.

Peter McCormack: So I'm guessing you don't vote?

Eric Voskuil: About 10 years since I voted.

Peter McCormack: Because this is a question I put out to some libertarians, I said, "do you vote?" Because the statist insult was commonly used, "you're a statist." I understand the shame that comes from that, I get it. But then I was like, "okay, so if I vote, am I a statist?" I guess you are, but then do you want to have a voice? I'm getting to the point where I think I possibly won't vote, but then say if somebody robbed your house, would you phone the police? You perhaps want the help, but then you become part of the system, are you a statist then? There's choices there to be made.

Eric Voskuil: Yeah, where you're first to pay for the system and therefore you're going to pay twice. I do this, I send the kids to private school and pay for other kids to go to public school and going to pay again to go to private school. I could hire my own private investigator or I could use the cops that I already paid for.

You're constantly put in that situation, do you take the so-called benefits that are there, that you've paid for? But you're being forced to pay for it and if you're asking a cop to come over and investigate something, it's not the same as voting to send a cop over your neighbor's house to take their stuff so you can put up a new school.

Peter McCormack: Very true.

Eric Voskuil: I wouldn't do that myself and I wouldn't ask anybody else to do it.

Peter McCormack: I have the same in the UK. I pay for the NHS and I also have private healthcare, which by the way in the UK is not expensive and the difference in treatment levels between the NHS and private healthcare is unbelievable, I pay like £100 a month. My son had an injury this past year from football.

He's immediately seen by a doctor, he's straight to a specialist, he's having his MRI scans and I'll be honest, I think the private doctors are probably, God I might get attacked for this, but generally better because they're getting better paid. So it's like the natural market. But whilst I understand all libertarian points of view, I still prefer the structure of healthcare in the UK, than say the US. But then I'm conflicted because I'm like, "well, it's a system I'm forced to pay for, it's coercion.

Eric Voskuil: Well there's no example of a free market system you can compare it to. I mean, the closest I've seen is Singapore. I took two trips to Singapore last year to get diagnostic procedures done for my son because the wait was so long in the US.

Peter McCormack: Even though it's private? All US healthcare is private?

Eric Voskuil: There's nothing private about the US healthcare system. The majority of the costs in the US healthcare system both in time and money are state driven and the more and more laws you put on it, the more expensive and the more time you wait. So they were shocked because they hadn't seen that as much. They see it from a lot of other countries, where the systems are even worse. But like, "you're from the US and you're coming here? We don't usually see that".

We had a life and death situation where something could kill you in a month and we had to wait three months to find out if he's got that issue. He's fully aware of this, but no choice. We got to a point, where it might be Addison's disease, which is deadly in three months. So we got on the plane and it's actually cheaper. I self-insure, so we get on a plane, fly down there, get a hotel room, get everything done in one day, a whole battery of tests and everything came back and it was still cheaper than what we would've paid in the US.

Peter McCormack: That's quite incredible.

Eric Voskuil: So yeah, highly recommend it. It's very easy. Medical tourism in Singapore is encouraged.

Peter McCormack: Well like I say about the UK, if you go private it's not added. Like I say, it's not that expensive, £100 to be seen straight away. We have full coverage as well, including cancer care, which again is really important because there are waiting lists. But on my plan, like I say, £100 a month, you're instantly seen and you're see the next day.

I consider it an insurance, a £100 month insurance for me and my children to be instantly seen and that's worth having. I guess though, I think there is kind of like a strong relationship between the private care and the NHS because the government realizes it's taking the pressure off. What about people who are into collectivism, they want to work together as a group.

How do you see that society would work, like respecting those who want to be fully individual, fully self-sovereign and also there are groups of people who want to collectively work together. Can you see a society working like that?

Eric Voskuil: Well yeah, that's how society works. Look at us, we're doing this for this collective group of Bitcoin people that do what we want and nobody's making us do it.

Peter McCormack: Well, we've got a wide of wrapper that wraps everything we do, which is the state.

Eric Voskuil: Sure, but if you ask, can people join voluntarily, collectively, and do stuff, that's what a company is, right? A group people get together, pool their capital and share the interest or dividends proportionately, the gains. That's voluntary, that's cooperation and there's a lot of other forms of cooperation, but that's extremely common. Then there's individuals who just want to do their thing on their own and that doesn't take the state, but the state exists and sometimes you can't avoid it.

But I compare it to organized crime, like in Italy at certain times, maybe even today, the Sicilian Mob was the state in the South and Mussolini tried to push them out and couldn't quite do it. So he just kind of authorized it and it was like the transition from crime to state without really any change. It's just a really interesting way to look at it. Would you go and vote for the next mob boss?

You might consider that immoral, but you'd go and vote for the next guy who is going to take your stuff and your neighbor's stuff so he can make what he wants. I don't see much of a distinction, if any. The distinction is that people accept it as, at best, a necessary evil, but typically a good. Whereas they wouldn't say that about an organization that wasn't sanctioned. Then Mussolini steps in, sanctions them and yeah, now it's good! So not a distinction for me.

Peter McCormack: See, when I was up in Wyoming, it was very interesting to see actually in work, groups of people working together to try and reduce government. I mean that was the take I took from my conversation with Erik Voorhees is, whilst he's a radical libertarian, he's an anarchist, he wants no state. He understands that there's no practical one step from where we are to that, he said the goal really is just less government, "let's just take 1% of the budget away each year."

But I've seen that happen, I saw it up in Wyoming. Tyler Lindholm was talking to me about how they're trying to remove regulations. I can't remember it was him or somebody else, but there was like an association for barbers, you had to be regulated to be a barber and he's like, "this is nonsense!" But they also did it with, there was like regulations around certain foods and the production of food and one of his big things is to remove the regulation around food as well.

But I'm seeing it in action, most people support it, practically it makes sense, yet we seem to live in a society that we have increasing regulation, increasing laws and increasing rules. Why do you think this is happening? Why aren't we making any progress?

Eric Voskuil: I don't know, in the short term it's hard to see progress, but if you look at the long arc of history, there's a lot of progress. So I don't tend to worry about the short-term I kind of focus on myself and do what I think is morally justifiable and enjoyable and not participate. If more people did that, then you'd have less of this stuff.

Peter McCormack: So political apathy would be a good thing?

Eric Voskuil: Yeah, I think if people focused on making things and trading things, which is what they're all trying to do, and so they're not stealing things from other people, then we progress. I mean that's what does happen. These big onerous, political structures grow and grow until you get something like North Korea or other communist countries and what happens is they consume a large portion of the pre-existing capital and then fail.

Then what happens is the black market takes over or gradually takes over during this period and now people are actually operating in a more free market, because even the state has to ignore it or there wouldn't be anything. So you see this in a lot of the post-communist countries, dictatorship oppressive regions where there's this onerous state, I'm trying not to name any because I go to these places!

I haven't gone to North Korea, so I can call that one out, but people largely ignore it and it's really fascinating. You end up with it tending to be smaller scale I think, but a lot of really truly independent businesses doing their own thing.

Peter McCormack: Well it's happening in North Korea. So I just watched a documentary about it and there is a free black market in North Korea outside of Pyongyang and that was a result of the famine, because after the famine, I can't remember what it was, say 2 million people died, I don't know the numbers. But without the black market, which essentially is a free market, more people would've died. But this black market arose and people were able to trade, so Pyongyang's essentially turned a blind eye to it because they had to.

Eric Voskuil: They'd be dying too, they live off of it too! This has happened in all the communist countries. We ended up with a thriving black market, so that kind of gets ignored and I think that's really interesting. It just becomes necessary. The market always functions, it just gets taxed and if you tax it too much, it just doesn't exist anymore and now nobody has any stuff. So you have to kind of reach the maximum level of tax that the market can sustain.

But as people get wealthier and wealthier on the whole over centuries, they tend to want to do more things independently and that's what happened during the industrial revolution, dramatic change. Those type of changes keep happening.

Poverty around the world is largely eliminated and that's been something that has happened in the last 10/20 years where we kind of crossed that line. Now you only see famine when it's state imposed. It used to be a naturally occurring event, it would happen periodically and crops destroyed, large scale famine, it just doesn't happen anymore.

Peter McCormack: It's like Yemen with the war.

Eric Voskuil: The Irish potato famine was even state imposed or the Ukrainian mass murder, that was an imposed famine or China during those dark years, there was state imposed famine and that still does happen. But the natural famines that would occur have largely been wiped out.

Peter McCormack: Ukraine, I think I might have read about that recently. Is that where they, they killed all the farmers and gave the land to the people?

Eric Voskuil: Well there was the collectivization of the farms, which was resisted, and then there was, I'm not very good at the finer details of it, but Stalin basically imposed a famine by stealing all the food and that was catastrophic, millions of people were killed. The same thing happened in China as well.

Peter McCormack: So do you subscribe to the opportunity with Bitcoin in that, if we create a circular economy with Bitcoin, over time, gradually the tax receipts for the government will fall, as they can't print more Bitcoin themselves and they're going to have to rethink their deployment of capital and ultimately they're going to have to reduce the size of government or take it away from military. Do you subscribe to the fact that Bitcoin can do this?

Eric Voskuil: Possibly in a roundabout way. Bitcoin existed to save people tax, right? If you remove all the various forms of taxation on money, you could do what Bitcoin does without all the costs of Bitcoin. But you can't, so Bitcoin exists so that people can do it when it's not allowed. They can send money across borders, they can hold money that's not subject to seigniorage. But that doesn't mean that the state won't tax and the first and most obvious act, if it becomes significant enough for it to be a tax drain on the state is for state just to say it's money laundering, it's illegal and if you do it, you're going to jail.

If you mine it, if you accept it etc. So any white market business will just simply not do it or there'll be black market, there'll be illegal. So that's very easy and I think a lot of Bitcoiners just tend to bury their head in the sand about that one. That's why I call Bitcoin a "black market money", it's designed to operate when it's not allowed. It's very easy to disallow it and there's all kinds of arguments of why that can't happen, which I think are all nonsense. It becomes so popular they won't be able to resist it?

Well the obvious observation is that only the popular things get banned. The most popular things in the world are the things that are always subject to controls, because they tend to generate the highest tax revenue. So, for example, banning the ability to restrict access to medications and pharmaceuticals is the basis of the drug war. If you remove those restrictions, now there's no drug war, but now you're not extracting any control over the medical system, which is about medicine.

So yeah, those arguments don't really hold any water to me. If it's a political solution, popularity, then it's the status quo, that's what we have, we could vote for good money and we don't. So Bitcoin is a way for people, if they don't agree with what everybody else wants and votes for, they can get some relief to do some things they want to do.

But in that case, if it takes enough tax revenue away and the state is not unable to suppress it, to say a 51% attack, because that's costing too much in tax money, then the tax will just be pushed elsewhere and hopefully at that point more visible. More visible tax tends to lead to higher resistance to tax. Money taxes are very, very opaque, people don't see they're paying it.

Peter McCormack: Well when I was with Paul Phua yesterday, he made a very interesting point that that reminded me of. He also said that one of the worst things about the democratic process in the US, is that the votes by politicians are public. He said they should all be anonymous, because then they would be voting with what they really believe is best, rather than...

Eric Voskuil: I'm not sure what they really believe is best, is any better than what they believe everybody wants.

Peter McCormack: Well yeah, but he said it's not always what they believe what people want. Sometimes it's based on their lobbying dollars.

Eric Voskuil: Sure, but anything they vote for is being done with tax behind it. The state doesn't act without tax. They can't even poll the vote without the tax to do it. So unless you eliminate all of the tax that the state collects, you still have the same problem. It's just a different choice, choose to spend on this versus that.

Well, it's still involuntary. So if you draw the line of good and bad, as involuntary action, then it doesn't matter what they're voting for, the fact that they're voting to tell you what to do, whether some people think it's better or not is irrelevant.

Peter McCormack: So do you think it's dangerous for Bitcoin for it to get too big and actually hyperbitcoinization is actually unrealistic because it's a threat to the state. So it actually is better existing as a parallel monetary system to give an alternative choice.

Eric Voskuil: As long as it's allowed, Bitcoin will continue to operate in the white market and some people will believe that it will be able to do that perpetually, because it's doing that now. That may be true, you can't prove that the state is going to care enough to actually do something or value it highly enough. But presumably, if they do want to preserve the tax revenue coming from money, that would be the first step, is to just say you can't do it. The next step, once it continues to thrive in the black market, the easiest next step is to impose a 51% attack on it from one place on the earth.

What people don't understand about this is they assume that the total hash rate is what makes the difference and it's not. It's profitable to mine and it's more profitable to be the biggest miner. So you can achieve 50% with less than 50% of the hash rate, because you can put it all in one place, in one big mine and nobody else can because it's not legal. Even if they could, if you can do that, you're still making a profit, it's been done. Nobody cares and it's no reason to care if there's a 50% miner, as long as they're not censoring.

So yeah, it all continues to work. When they start censoring, then you have a problem, as the state or the censor can now demand identity for every transaction that gets confirmed, just like they do with the existing financial system and therefore they have full transparency into everything and can demand inflation if they want.

With those two changes, it's the perfect state money. So that would be the attempt and the resistance would come from people who don't want to obey and they're called "black market'. So this is not a moral judgment, for me this is the line between what's allowed and what's not allowed relative to some permitting authority.

Peter McCormack: But I think I know what the defense would be from some Bitcoiners and I'm pretty sure I've heard you talk about this and you don't agree with it, but they will say, "but Eric, game theory!"

Eric Voskuil: Yeah it's bait man!

Peter McCormack: You don't agree with the game theory?

Eric Voskuil: No, I never say that. I say I've yet to see any case where a game theoretic model has been applied to Bitcoin where it actually is relevant. Somebody proposed that the prisoner's dilemma game applied to states like the bricks getting together and using Bitcoin because eventually they have to, because the game theory basically makes it economically rational for them all to band together and do this. I ran the game theory model, took all the assumptions that were proposed and put them in the model and ran it.

The model doesn't apply. It only applies under certain conditions and it doesn't apply. I wrote it up, put it out there, haven't seen any material critiques of it and that's why I write things up and put them out, to get some peer review. I wouldn't consider myself an expert in game theory or anything really, but I have enough understanding to go out and make the model and I've yet to see anybody who talks about game theory in Bitcoin actually do that and just whip it out, like it's some magic solution, game theory.

So I'm not saying that it doesn't apply, I'm saying I have yet to see any actual application of that theory to demonstrate the forces at work that people assume.

Peter McCormack: So I know we're not meant to say "community", but within the Bitcoin community, do you think people are too often defensive when people raise issues to be discussed? Like one thing I still have not heard a very solid defense for, is what happens when the subsidy ends. The answer for Bitcoin security is that there'll be enough in fees, but what happens if there isn't?

The kind of answers I tend to hear is like, "well we don't have to worry about that now. We don't have to think about that now, you're concern trolling", but doesn't it make sense to even just discuss it and just to think about what are the potential scenarios, so you're prepared ahead of time?

Eric Voskuil: Well it's really this just one scenario. If fees aren't high enough to provide enough..

Peter McCormack: That was an example though, I'm saying generally speaking, do you find that people are a bit too defensive?

Eric Voskuil: Well people tend to defend what they believe, until they come to understand otherwise and there's a lot of misapprehension about how things work. So yeah, I do see a lot of that. If somebody wanted a list of controversial topics or I forget what it was, the opening HoneyBadger thing, you see this every once in a while... I'm not using the right word, it wasn't controversial, it was unpopular opinions, there you go!

So I'm like, "yeah, just go to my Wiki and take any one of the 95 topics! A lot of them are unpopular opinions, but they're not opinions, they're unpopular proofs, economic proofs that I write and I try to strictly adhere to that. I don't present opinions as fact. If I'm going to make an opinion, I'll say, "this is just my opinion" and I generally don't do that because what good is an opinion if it doesn't prove anything. So I try not to make projections or give opinions, but there's a lot of things that I talk about that are unpopular, because people hold these other beliefs that I believe are unfounded.

Peter McCormack: Give me a good example? All altcoins are Bitcoin!

Eric Voskuil: Yeah, those are just taxonomies and just definitions and you can choose your own definitions if you want, but I wrote a classification or a taxonomy for Bitcoin like stuff, like "what's Bitcoin?" Well the way people use Bitcoin, it's like eight different things. So I just broke it down and said, "look, you can put these names on these different things", but that's just my taxonomy. It's not a proof of any behavior or anything, just clear terminology and anything that comes down to an argument about those things, is just marketing.

"We want it" and "you want the name, I don't care about the name, it's not that important to me", but I do care about being able to clearly define what aspect we're talking about. Are we talking about the conceptual security model that really defines the concept that Satoshi defined? He gave the name "Bitcoin" to these concepts first. So we use that for the set of concepts, that's all and then there's an implementation, it's got a name, there's a chain, it's got a symbol. Well we're history, right? There's a set of consensus rules which define the chain but don't determine its history, so those are different things.

BTC is a history and there's a set of consensus rules that define it. It could've had a different history. So anyway, these are separate things and I give them different names and I don't argue about like "what's a real this or that", I say, "if it follows these principles, it is one of those", it follows the principles. So like Litecoin follows the same principles as Bitcoin does.

I should say LTC versus BTC, where both sets of consensus rules are consistent with the principles that Satoshi laid out. Other things that aren't, for example, proof of stake or inflation only subsidy, those would not be consistent with the security principles of Bitcoin and so I just put them in shitcoin category, but only if people are promoting them as having the same security principles.

Everything falls into the category of not Bitcoin and you're only a shitcoin if you pretend that you have those same principles. There's a lot of different flavors of what could be an implementation of those principles, that's the stuff I care about. There's a lot of stuff that just doesn't conform to those principles, I call crypto dynamic principles, really just three things and I don't care about them. I don't get all upset about them, I just don't care. Why would I comment on these things? It's not interesting.

Peter McCormack: But what are your almost, let's not say unpopular opinions then, what are your most unpopular facts?

Eric Voskuil: Or theorems I guess. Most unpopular? I don't know.

Peter McCormack: What do you end up debating with people?

Eric Voskuil: Well, it's interesting, a lot of it comes down to just pure economic theory. So you take an economic fallacy and then you apply it to Bitcoin. So there's an awful lot of that. A lot of this comes down to misinterpretation of Austrian economics, sometimes by people who are well known, famous, credentialed Austrian economists and several of them you see this in and you go back to what they're actually referencing and you read it and they've misinterpreted it. 

For example, full reserve banking, the way you hear it today is a gross misinterpretation of the actual original concepts, which had nothing to do with lending, because you can't lend it full reserve and that's actually explicitly stated in those original concepts. So they progress from this valid concept to a totally invalid concept, but everybody just repeats it in a big circle and believes it.

So because it's so widely held, it tends to be controversial when you say, "look, there's no lending with full reserves. So if there's no lending, there's no production, there's no products, everybody starves to death." So it could happen, but it's probably not a great idea to push for and try to make Bitcoin the thing that makes that happen. It's not possible, first of all, so it's just a waste of time. But it is better I think, if people understand it.

Peter McCormack: But fractional reserve lending is evil!

Eric Voskuil: Yeah, but that's just another way of saying lending is evil and lending economically is no different than any type of investing. Investing economically is lending your money to somebody whether you do it through equity or debt doesn't make any difference, those are regulatory distinctions. So if you don't invest and you don't lend any of your money over time to produce things, nothing can be produced. Okay, so it's probably not a great idea.

The idea of full reserve comes back to condemnation of various attempts to explain and condemn the process of collecting your gold and issuing a certificate, what's called "the money certificate" in exchange for that, which you can take back even further and not states doing it, but say an individual, Rothbard uses the term "warehouse".

So you warehouse your gold and you get a receipt, he actually calls it a "warehouse receipt" and if a bunch of people are doing that and they all have their receipts, the contract is that the person has actually got your gold in a vault. Maybe you don't care if you get your gold back or somebody else's gold, if it's the same purity, but that's the agreement.

Then the warehouse decides to start lending out this gold or issuing more certificates to themself and then trading those. So that's considered fraud because it's a violation of that contract and then states do it, collect up your gold, give you federal reserve notes and then start printing more of those federal reserve notes or trading the gold, either way you have this growing disparity.

People take that concept and apply it to lending, where you actually lend your money to an organization which is tasked with lending it out to other people, so that you can earn interest. Rothbard is very clear to say that because there is no interest earned on these deposits in the warehouse, it's not a loan and therefore it's a problem. But as soon as you are consciously making a loan, you’re lending, you can't do it without giving up your capital. You have 100% of your capital and you lend some out, now you have a fraction of it, your fraction is on reserve, that's the only way it can be!

Peter McCormack: So what do you make of these interest accounts then? Because it's a growing part of the Bitcoin ecosystem, but they're not popular, a lot of people saying this breaks the, "not your keys, not your coins" problem. I've put a small amount in, I'm getting my interest and I'm happy.

Eric Voskuil: It's your keys, your coins, your own warehouse, right? As soon as you want to lend, you're lending then, you can't lend and keep. This is a fallacy that people, because they're trying to eliminate fractional reserve lending, which is the only kind of lending. This was posted to Bitcoindev recently, a mailing list that the core devs tend to use to vet ideas, I used it as an example at the end of my talk in Riga this year, where I highlighted four different common economic fallacies, just pure economics and then put the title and some texts from this proposal out.

The title actually included every one of the four fallacies in it, "we're going to solve this problem and it causes this and this and this" and all of them were misinterpretations and the solution was based on trying to lend without giving up your money risk, risk free rate of return. So the proposal is we create a covenant op-code in Bitcoin, which allows money to be spent under a script, which puts this output under covenant and I think this was time-based.

So after say one year or whatever time you put on it, the money that's being spent from this original spend under covenant, being distributed to all the people that are trading stuff for it, eventually comes back to the original owner. So I got my principle back for my loan and so you can demand interest as you make the loan, get the interest upfront and therefore you get your interest and your principle.

Even if you've got the interest later, you can be guaranteed your principal back. It sounds like a great idea, risk free rate of return. Risk free rate of return is a hypothetical concept that's used in economics as kind of a reference point. It's not an actual thing that exists.

Peter McCormack: I don't understand how it can exist!

Eric Voskuil: Well that's the thing, as soon as I saw the title and that, it caught my eye and I looked at it more closely. Basically if you look at it, what happens is the last people holding that money on the due date, now it's all taken out of their pockets, so it's the ultimate scam coin, where you get all your money back, but you also got all the stuff you traded for that money, in this case the interest.

But everybody going down the line, what happens is the last person is the bag holder. So once people figure this out, well nobody wants to be the bag holder so nobody can trade to anybody else and the zero value is imputed all the way back to the original loan. So it can't have any initial value.

Peter McCormack: It's like that game, there's a game where you've got a balloon filled with water and you pass it around and there's a timer, which you can't see and eventually somebody at the end holds it and it pops. That's exactly that.

Eric Voskuil: Why would you want to accept it? You'd want to get rid of it as soon as you could!

Peter McCormack: See I'm happy with these interest accounts because I see it as managing risk. I accept the 6.2% interest as the risk.

Eric Voskuil: Yeah, for the potential gain. But if you didn't do that, if nobody lent and everybody just held on to their money, the money be worthless and there'd be no products. Assuming maybe there's some other money that people are using or people are bartering, but if people only used Bitcoin and everybody just held onto their Bitcoin and there was no other capital flowing, no barter, no other money, nothing could get produced.

Peter McCormack: Well it works potentially because we have a standard fiat currency alongside it.

Eric Voskuil: So we can get this other system of money that everybody lends and uses and it produces stuff and then we just have Bitcoin...

Peter McCormack: But that we're meant to be trying to get away from! So if we get away from it and then we have to create a system with Bitcoin, which does include traditional financial structures...

Eric Voskuil: Right, so if you imagine a pure Bitcoin economy, that absolutely has to lend and it will lend at the same rate. This is something you don't have to promote, it has to happen, it will happen, it does happen. People lend based on their time preference and the interest rate is the representation of time preference. People make other assumptions like Bitcoin, let's assume no more increased supply, it's all been issued, Bitcoin is a deflationary money, because a fixed amount representing increasing capital, increasing production must increase. 

The money relation is changing, the ratio of those things is changing such that the coin represents more value. So therefore it can never be lent, that's another fallacy. It took me a while to kind of put my finger on exactly what's the formulation of the fallacy, but it's actually really straightforward. Growth, the increase in the amount of stuff that exists which people own, is a function of production being greater than depreciation. All things that exist depreciate over time and new things are produced.

The difference in say a given year of what's been produced versus what's been destroyed, is growth and what's been produced is interest. The interest on an investment is nothing but the net selling of the new things and all that goes back to the investors. So interest is production and depreciation is a function of how quickly things wear out. So interest greater than depreciation means growth. If you have interest less than depreciation, then you have recession and if that goes on forever, there's nothing and everything gets consumed. It's like your classic socialist economy, where it consumes all the capital and then there's nothing.

So you have to actually start producing things at an interest rate that's higher than the depreciation. So what this means to deflationary money is, the money only appreciates in purchasing power. This ratio only changes due to interest being greater than depreciation, there's growth. Well what's interest coming from? That's investment of the money. So interest always has to be greater than growth and we see this.

The interest rate and the economic rate of return, is typically around 10% per year and the rate of economic growth around 2% to 3%, which means depreciation of all stuff that exists is around 6% or 7%. So all things being equal, deflationary money could grow at a couple percent per year, but if you don't invest it, you have an opportunity cost of like 7%/8%. So it's got to be lent for the reproduction and it makes perfect sense to lend any money because of that.

Peter McCormack: Well this is where I see a certain hypocrisy from people, because there's a certain group of people who want to move away from a fiat system, yet calculate their Bitcoin gains in fiat, don't want to spend it and don't want to lend it out.

Eric Voskuil: That's just because it's in this monetization phase where the growth has been much higher than the growth you would see if it was the money and you had growth just due to economic growth.

Peter McCormack: But it's hypocritical to want to move to a better world with a better system, a better monetary system, but at the same time be so focused on your gains in the currency you want to replace.

Eric Voskuil: You have to be focused on your self-interest for it to work in the first place, because it's not irrational to look at it growing rapidly and saying, "well, I'm just going to hold it while it's growing rapidly because it's growing faster than the interest rate and it would be a loss for me to lend it." That's not irrational.

It would be maybe hypocritical to say that this is the only way it should ever be and that this money will never be used for anything but hodling and if that was the case, it would be absolutely worthless. If nobody's trading for it, when you wanted to actually use it and get some service out of it, you wouldn't be able to get any service out of it. If nobody accepted gold, it would not be worth anything. So with money, we talk about it being a store of value.

Well value can't be stored, value is in people's minds, it's subjective. What can be stored is things. These things, whether they're digital money or gold or whatever, cars, TVs, motorbikes, things can be stored and then if you want to trade them with somebody in the future, they can provide some value to you. But you can't store that value if people don't value them enough and they're not worth much to you. If they don't value them at all, it's worth nothing to you.

So you're storing the potential to trade it in the future at whatever value it will trade for, to get some service that you want and it's not unreasonable to assume that you would be able to do that in the future, but if nobody did it, it would be valueless.

Peter McCormack: Yeah, it sounds like you've got a book in you!

Eric Voskuil: Well, I have a book's worth of topics up on my wiki, in the Bitcoin Wiki.

Peter McCormack: So I think the Eric Voskuil lens over Bitcoin and economics would be something that'd be very useful. A group of articles is great, but a book which takes you through a certain narrative might be something particularly useful.

Eric Voskuil: I've contemplated just jamming all the articles into a book and that would not be a narrative, but it would still be useful.

Peter McCormack: You could probably bridge it, you could probably get somebody to help you do that, but it does sound like you've got a book in you.

Eric Voskuil: Yeah, there's something potentially there. I've thought about it a little bit. I wasn't planning on announcing it, but Roman outed me at HoneyBadger or he let me do it to myself on the last question of the first panel. So I'm contemplating a crypto economic conference in Hanoi in March.

Peter McCormack: Interesting! Well I'll be there for sure.

Eric Voskuil: All right, bring all your fans!

Peter McCormack: Yeah, I'm contemplating my own conference in Austin next year, but my focus is, I'm trying to get into communities outside of Bitcoin where it's relevant. So I do the odd show, I did one with sex workers, I did one on Venezuela.

Eric Voskuil: So you're going to bring in Defense Distributed, which is based in Austin?

Peter McCormack: Well perhaps! I mean there's a real problem with Cody Wilson at the moment, he's very difficult to bring in, but there's the girl, is it Paloma?

Eric Voskuil: Difficult to bring in?

Peter McCormack: Well, I think it's controversial to bring somebody who's been convicted of a sex crime...

Eric Voskuil: Isn't this always what podcasting is about, get some controversy?

Peter McCormack: Yeah, potentially! I find Cody Wilson very interesting, I would love to talk to him and find out the details of what actually happened, whether he was just an idiot, whether it was entrapment, but I think it's very difficult to sit there with a evil lens over someone like Jeffrey Epstein, but then give someone like Cody Wilson a pass if the same situation is that they slept with people under age, I find that a difficult thing. But I'd love to talk to him about it.

Eric Voskuil: Yeah his story is pretty straight forward, I think it's public record. He hired a girl who said she was 18 on a site which is illegal in the States and it turned out she was under age and she was lying about it. Her parents found out and told the cops and he got arrested.

Peter McCormack: I mean he was dumb as well.

Eric Voskuil: Judge it however you want, but that's what I believe the facts to be.

Peter McCormack: But yeah this conference, so I'm launching a second podcast in about 10 days and it's called Defiance. Whilst it'll have Bitcoin in its DNA, my first three interviews are with Alex Gladstein from the Human Rights Foundation, Thae Yong-Ho, North Korea's most senior defector, I've got Brittany Kaiser from the Cambridge Analytica and after this, I'm interviewing Mike Cernovich. So what I'm trying to do is, I find with Bitcoin conferences and Bitcoin Twitter and Bitcoin Reddit, it's Bitcoiners talking to Bitcoin about Bitcoin!

Eric Voskuil: Yeah I think bringing in the people that could actually get some real use out of it makes sense. But black market is big, it's maybe 20% to 30% of the world's economy. I'm not talking about most people who will use this, they don't like the term black market, they think it's judgmental, which is from my perspective it's not meant to be.

It's the free market, it's the market that's not allowed, but operates anyway. It's not the informal economy and some people have pointed out that I'm using the wrong term, I should use "informal economy". Well, if it's informal, meaning not directly regulated or taxed but allowed, that's white market to me and I'm specifically talking about what is disallowed.

Peter McCormack: But it's a very interesting area because...

Eric Voskuil: It's what Bitcoin is designed to do, to allow people to do things that are not allowed anyway. Even though Bitcoin might itself become illegal to use in any case, legal or otherwise, it stands to reason that the primary use case would be doing other things and using it to do other things that are also not allowed.

Peter McCormack: Well I'll definitely come to your event, that sounds cool.

Eric Voskuil: Love to have you. Seating will be limited and tickets are not for sale yet. I haven't figured it out yet!

Peter McCormack: Let me know If you need someone to moderate a panel, I'll happily do that. But I'd love to go in some capacity. All right, well we've done well here. There's only one other subject I just did want to touch with you, because I don't know your full perspective, but where are you at with Lightning and your feelings on Lightning, because I don't have a proper grip on what you feel about it.

Eric Voskuil: Well from a technical perspective, I tend not to comment too much on things I haven't implemented myself. So I've done a full stack implementation in Bitcoin of everything Bitcoin up to very recent stuff. It's about a half million lines, I've core developed my code, so I'm very comfortable speaking on that. I understand the broad outlines of Lightning, but I've got enough support to do in Bitcoin stuff to not be working on it yet.

But from an economic standpoint, I do look at this concept in general and I think people, like with Bitcoin, they tend to ignore certain aspects, certain consequences and I think there's a solution here to all of the potential fee problems in Bitcoin and this is not the case. So I have some topics that I've been writing, maybe one or two that mention it...

Peter McCormack: Can I tell you the one thing I've struggled with to get a solid answer too? So it comes back to when the subsidy goes. So once the subsidies ended or just so small that there is a need for fees and if Lightning is implemented in a way that it works perfectly and works brilliant, that's essentially going to be cannibalizing some of the fees as well. What reason would there be to use the base chain over Lightning?

Eric Voskuil: Well, there's good reason to use Bitcoin over Lightning and people do because Bitcoin is cheap to use right now. As it becomes more expensive to use, then people gravitate towards batching up their transactions in Lightning. Who's to say, I don't make predictions about prices and that's really a price prediction, is the price high enough?

There's a correlation between price and volume of transactions, so people always talk about how wonderful the fixed supply is, but they don't always talk about how wonderful the fixed transaction rate is and the fixed transaction rate is what determines the fee level, not the supply. The supply has nothing to do with it, it's how much people are demanding to transact and so that is essentially what pays miners, but it's also what people pay to use the money and that doesn't go away because of Lightning.

To open a channel, to close a channel, you pay the fee, so if the fee is 10% of what the coin is worth, that opening and closing a channel costs you two years’ worth of investment gains! No matter how many transactions you did in the meantime, you just used up 20% of your capital.

Peter McCormack: Well, this is why people probably will need access to a permanently open channel from a hub.

Eric Voskuil: So imagine everybody has permanently open channels and the fee level is what I just described. Is there any security in the system? No! You can't close out your channel because it's too expensive, so somebody can now just steal from you and you're like, "yeah, I guess I'm going to let him take that because it's way too expensive for me to stop him." So Lightning can't work that way, it can't work where all the money just floats in Lightning because then it's completely disconnected from Bitcoin, which is its base of security.

It's very analogous to taking gold and paper notes and at some point, severing the link, now we just use the paper notes. But there's nothing securing them anymore. So yeah that theory doesn't hold up at all, the idea of just using Lightning. If you can't settle, you'll get robbed. The security guarantees are based on being able to settle in an economically rational manner.

Peter McCormack: But there will be different levels of people using Lightning versus using the base chain. If the base chain becomes expensive to use, that won't be for everybody.

Eric Voskuil: Right, and what'll happen is by design, the utility threshold of Bitcoin rises, the amount of a transaction that you can spend or that you can confirm goes higher, the minimum. So this is basically dust. It's interesting when people talk about gold, they refer to dust. They're not talking about the atom, the divisibility of gold. The divisibility and dust are the same thing. The divisibility of gold is whatever dust is, the smallest amount you can transact.

You can't divide it down to the atom and still use it. The divisibility in Bitcoin is not the Satoshi, the divisibility in Bitcoin is that threshold level that you can transact, which is really dust. So dust rises up to a certain level because everything's being batched up. You can push an arbitrary amount of value through a transaction in Bitcoin, there's no scalability limit on value, the scalability limit on transaction rate and it's fixed. You can't add any more hardware to make it go faster.

So it's perfectly non-scalable in one sense and infinitely scalable in another, so we end up moving more and more value in transactions and then the fee level continues to rise and we do it more or we do it more. But every time that threshold is rising, we're wiping out all possibility of transacting below that level. So under the assumption that there's a lot more transactions at smaller values than there are higher values, you're essentially wiping out a proportional amount of value.

So as a fee threshold rises, you're wiping out more value, as you add higher value transactions and that is where you reach the limit of the money to be able to carry more value. It gets more use and wipes out more value, it gets more use, wipes out more value.

So it stays in this kind of place where that doesn't happen with anything else. It doesn't happen with gold, it doesn't happen with anything else because the assay cost of gold or anything else is essentially fixed, it doesn't really matter how much you have, it's not a function of how many other people are trying to trade it at the same time.

Peter McCormack: You don't always have a transaction cost. If I had gold here and I wanted to give it to you, I just hand it to you.

Eric Voskuil: Yeah, but I still have to assay the gold, I have to make sure it's real, so there's a cost of doing that. But that cost is not a function of everybody else doing it at the same time.

Peter McCormack: Say it is a $100 bill, you're just going to take it though, there's no cost to you.

Eric Voskuil: I wouldn't take it from you because I don't trust you, but I might take it from the bank.

Peter McCormack: You can trust me!

Eric Voskuil: But you've seen people get the pen out, look at the money, look pretty closely there, there is a risk and a cost of taking anything…

Peter McCormack: The time cost and a pen cost?

Eric Voskuil: Right. I took a $100 bill off a cabbie and it was counterfeit. I figured it out, right after I got out of the cab, I looked at it and I was like, "oh crap!" So there's a risk in taking paper money too and then you get arrested for having it, even though you took it from somebody else. So you have be careful as there's even more risk. But there's unique aspects about Bitcoin, fixed supply unique aspect in a way.

But there's other unique aspects, the fact that the cost of using it rises when other people are using, is unique need to everything in the world and people don't look hard enough at that and the consequences of that. So I want to fully understand how it works and that essentially amounts to a cap on the amount of value that the money can carry due to its transactability.

That has consequences and they're not fatal, but they lead to different conclusions and if people understood it, they'd probably work on some different things. So I try to help them understand it and understand it myself.

Peter McCormack: I think you need to do the book, I think it's in you! This was great and awesome. I really enjoyed this Eric. Just to close out, just let people know how they can find your work, read about what you're up to.

Eric Voskuil: Yeah, I tend to communicate publicly on Bitcoin Twitter, so @evoskuil and all my code work on Bitcoin is in the Bitcoin Github wiki Libbitcoin and the crypto economics writing is all in the Libbitcoin system repository in there, on the Wiki. So it's buried pretty deep and hard to find.

Peter McCormack: I'll find it and I'll share it on the show notes, but this was an absolutely pleasure, thanks for coming on.

Eric Voskuil: Sure, thanks for having me!

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