[AUDIENCE] My question's just around the next couple of weeks and months with Bitcoin.
[ANDREAS] Yes.
[AUDIENCE] Would you be able to just talk us through, or provide some comments,
in relation to the whole SegWit [debate] and scaling issues with Bitcoin?
How you think that will play out over the next month or two with a few of the key dates coming up?
ANDREAS: Well ... I wasn't prepared for that question. [Laughter] I didn't think anybody was going to...
ask me that tonight. Or bring a UASF hat.
Okay, first let me get a quick feel for the audience. How many people have heard of forks or SegWit
in this audience? [Hands raise]
Okay, great. How many people understand what forks and SegWit are?
About half of the previous group. All right. Bitcoin, within its protocol,
has this ability to fork, which means partition - split in two. When you have coordination of
10,000 computers around the world, if they disagree you need a way for them...
to temporarily disagree, come back together, and agree again. The blockchain does this. It's a fork function.
It happens two or three times a week. Nobody even notices it. The reason it happens is:
In order to keep all of these systems synchronised, if one side of the network goes out of sync for one block,
by the next block they re-converge.
There's a different kind of fork, which is when the rules change,
but only part of the network changes the rules. Remember I was talking about these rules...
you have to validate? One of the fundamental rules determines how big a block is.
Today there is a rule in the system that says a block is one megabyte.
That's it. Every ten minutes, one megabyte. Six megabytes per hour, 144 megabytes per day.
That's it for capacity. You have to fit your transaction in that space.
That causes some fee and capacity issues. Some people want to change that rule,
to about 2 megabytes, 4 megabytes, 8 megabytes, or whatever megabytes.
In order to do that, they either have to convince everyone or they split the network.
They go off and do their own "Bitcoin," which has a different set of rules than the other Bitcoin...
that has the original set of rules. That's called a contentious fork.
There has been an ongoing scaling debate for the last two years, which is about
how to make Bitcoin support more transactions. The problem isn't that it's difficult to
make Bitcoin support more transactions. The problem is it's difficult to make Bitcoin support more transactions
without giving more power to some participants than others.
Keeping it free, open, decentralised, while doing more transactions, is the hard question.
The easy answer is, "Let's make it less free and open." But a lot of people in Bitcoin don't like that answer,
so they're not willing to do that. That's the debate which has been going on.
It's coming to a head on August 1st, in just about three weeks,
with three competing proposals working at the same time.
One is a proposal called Segregated Witness, which restructures transactions in such a way...
that there are two parts to a transaction: one which contains the signatures
and one which contains everything else. Signatures are a big part of the transaction.
This reorganisation increases the space [in blocks] by about 1.7, so you get almost twice the amount
of space to do transactions. An alternative proposal is to just increase the block size by two.
And the third proposal is to do both, that's called SegWit2x. First do SegWit and then three months later,
also increase the size of the block by 2 megabytes.
Those are competing at the moment. The way this competition works is that everybody gets to choose...
what software they use. When you run a specific set of software, if you run your own Bitcoin software,
if you choose a specific wallet or exchange, the software you're running determines the outcome.
Then, depending on how many people are running different sets of rules at the end of the day,
there might be a change in the underlying rules if enough people agree.
If this plays out as I expect, and many people expect, we're going to have a fairly uneventful situation.
85% of the network is going to change the rules on July 31st. On August 1st we're going to have a new network,
which will have SegWit activated. Everybody's money continues to run as it was before.
All of the transactions continue to operate as they were before. There is a small possibility
that you have a small chain of the 10-20% who disagree. They create a separate Bitcoin.
Now, if that happens... Pay attention, because this is important.
If you control your bitcoin, if you have a wallet that controls your bitcoin, not parked at an exchange...
If you put your money on an exchange, you don't control it. The exchange does,
and it matters what they will choose to do.
But if you control it [in a non-custodial wallet], then after such a fork you now control "bitcoin" on both sides.
So if you had one bitcoin before, now you have one bitcoin "alpha" and one bitcoin "beta." Right?
Then you can choose to keep both, sell one, or buy more of the other. Do whatever you want.
So all you have to do, is do nothing for a few days before. A few days after, see how things play out.
But you must control your own bitcoin. If you do not control your own bitcoin,
if you put your bitcoin on an exchange, you are violating the most important rule of Bitcoin.
Bitcoin is about individual participants controlling their own systems, not trust somebody else with their money.
We already have a system of institutions where you can trust someone else with your own money.
It's called banking. Right? The problem is, in order to trust other people with your money,
you have to have all of these organisations whose main purpose is to make sure...
that those people don't run away with your money, because they have a tendency to keep doing that.
Pretty much any time in [human history] when someone has been trusted with other people's money,
very quickly after that they've run away with the money.
Banking is two systems: a system where other people hold your money and a whole other system where...
people watch them to make sure they don't run away with the money. Bitcoin isn't like that.
You hold your own money. If you give your money to an exchange for them to hold for you,
here's the problem: there's no system watching them to make sure they don't run away.
Guess what they're going to do? [whispers] Run away with your money! [Laughter]