Nic Carter: The Second Bitcoin Civil War

I think the technology and the financialization of Bitcoin are intertwined. And you can't have one without the other.

Mm-hmm.

And as we move into this intermediate term with ETF flows and things like that, these allocators will continue to ask themselves is there interesting stuff happening on Bitcoin? Why Bitcoin is supposed to any other blockchain? And just being the only crypto asset with an ETF, I don't think is sufficient. So we do have to continue to show that there's like actual technological developments happening.

Bankless Nation, welcome to a conversation with Nick Carter. Over in Bitcoin World, there is a second civil war forming. It's been forming for a while. It's always been there. We unpack it here today on the conversation with Nick Carter. But this camp is the filtering camp versus the Bitcoin rationalist camp. There's not really any good names here. These are the monetary maximalism versus the Bitcoin expressivity camp, the Satoshis only versus the Ordinals camp. Some of these people want to only have Bitcoin the blockchain be good for BTC transfers. And the other camp is for Bitcoin expressivity, ordinals, BRC20s, layer twos on Bitcoin. And this has worked its way up to the Bitcoin core part of the stack. We're not going to hard fork the Bitcoin chain. That's never going to happen. But there are still places where these different philosophies want to exert control. And so there's been uh political fights over what gets merged into Bitcoin Core. And overall, there's just been a divide in the Bitcoin community about uh what Bitcoin can do and what Bitcoin should be good for. Apparently, the the very, very radical side of this camp wants to go so far even to make a filter that filters out Bitcoin transactions that have arbitrary data in them. Anything that's not just a simple raw BTC transfer doesn't go through the Bitcoin blockchain, at least at the surface level, not the actual chain. I thought I think this is super interesting. And I love the fact that the Bitcoin expressivity side of things, the Ordinals, BRC20, layer two side of things, have crescendoing momentum and in my opinion, have a date with destiny of success. At least that's where I think uh things are going. Nick Carter and I unpack all of these different conversations and his opinions on this thing and where he stands. Nick has been very, very early to uh rejecting Bitcoin fundamentalism, Bitcoin monetary maximalism, and been a uh a fan and an investor in Bitcoin expressivity, Bitcoin utility. Uh and so I just wanted to check in with him and kind of kind of peer over the fence as to what's going on in in Bitcoin world because I think it's been it's been interesting ever since Ordinals came about, and it's only been growing in its interestingness. Uh and so we we have this conversation here on the show today with uh Nick Carter. So let's go ahead and get right into that conversation with Nick Carter. But first, a moment to talk about some of these fantastic sponsors that make the show possible. What's up, Nick? How's it going?

Good man. Good to uh be back. I feel like uh

I don't know how many of these we've done now. A good number.

Yeah, you well, you are number two, number most frequent bankless podcast guest, but also the instances of where it's just been like you and me going at it is also like creeping up there pretty well.

Well, I'm honored to be back. I feel like it's been a while. So thank you.

Yeah, well, it's because there's like some shenanigans going on in the Bitcoin, uh the Bitcoin sector. I think there's like a lot, there's a lot to talk about in the Bitcoin world, which like isn't usually the case. Uh, but for the last like 18 months or so, like the conversations to be had about Bitcoin are like up only.

Are you uh are you a Bitcoiner? Do you consider yourself a Bitcoiner? Turning the tables.

Do I have to own Bitcoin to be a Bitcoiner?

Uh yeah, I think so.

In that case, I am not a Bitcoiner.

Not even one mere Satoshi, David.

Not even a single swap. Yeah.

A Bitcoin believer, Bitcoin, like I think belic Bitcoin, I believe in the Bitcoin ideology.

And I I think the Bitcoin Bitcoin ideology like was extremely precise on a lot of very

deep truisms about crypto very early.

And uh there it's an ideology that I I like largely agree with in a lot of different respects. And so in the in that way, if I can define Bitcoinerism like that, then I am a Bitcoiner.

Okay, well, we're a big tent.

Yeah.

So we'll we'll have you.

Yeah, yeah. Okay, but one of the things that's going on recently is like that Big Ten is like splitting. Uh there's like uh of another Bitcoin civil war like bubbling at a higher level in the stack. Uh is that how you would uh define the landscape in this present moment, or would you change those words?

Yeah, I mean it's been going on. Don't you think there's been a Bitcoin Civil War for years? That's how I feel, at least. I mean uh

Between the laser eyed Uber Maxis and the Bitcoin pragmatists?

Yeah, like I don't know what any of the camps are called anymore, but there's like basically the fundamentalists or the purists, the light laser eye, maxis, if you want to call them that, and then there's like

the moderates, maybe the like uh, you know, integrationalists, um, the Bitcoin season twoers. Um

This is what CK was calling them the Bitcoin C it was the fix the filter camp versus the Bitcoin season two people.

Yeah, I think the so basically the core divide is like the maybe call them Bitcoin monetarists, like people that think the Bitcoin the protocol should be only interested in moving around units of Bitcoin versus people that

think it ought to do other things as well. And

that debate has been happening on Bitcoin forever. I mean, uh like there was uh issues with counterparty back in the day,

I think in 2013, maybe, if I'm not getting my timelines mixed up.

There were debates over Operaturn, Vitalik has referenced those in the past. I think he might have even mentioned that as a a catalytic moment for him wanting to go the Ethereum direction.

Uh, the realizing that op return was too limited and you know, whole new protocol is required. So that same debate is happening. And so, like, now of course, the main concern is uh ordinals and inscriptions, and like, can the protocol filter out non-monetary data? Is this spam? Uh, does the does the benefits towards fee accrual uh do those matter or do fees not matter? Should there be fees? Is there a security budget questions? All these questions are pretty intertwined. And so I would say broadly, like the the debate is that between folks that are interested in Bitcoin being more richly stateful, to borrow the Ethereum term, and between the folks that think Bitcoin is just about moving Bitcoin around and uh pretty much nothing else. Uh, but it's certainly come to the fore recently, in particular with ordinals, but uh we're also seeing that same debate um with the covenants um proposal, right? Uh soft fork, the opcat proposal, and you're gonna see it now with roll ups as well as those become you know something that is a thing on Bitcoin, I think, in in the next year. Uh and yeah, so certainly like a a pretty like heated uh episode uh in sort of like that that debate.

I think trying to actually define the line uh between these two camps has been like murky. Um, but I think one perhaps definition that gets us uh does a lot of work, a lot of good work is like, does this trend this Bitcoin transaction have extra data beyond BTC transfers or does it not? And I think that definition kind of gets us most of the way there. But I I heard there was like some like drama around this one uh coin join protocol, which was about um Bitcoin privacy and Bitcoin um kind of like a tornado cash equivalent, um, just like a privacy tool for a privacy gadget for Bitcoin transfers, which I think even like the Bitcoin fundamentalists, the monetary maximalists would say like we enjoy that those properties, but if you filter out uh transactions from Bitcoin that have arbitrary data, then you also lose this one CoinJoin implementation. And so even that isn't a perfect definition because um the the CoinJoin people uh are monetary are enhancing the monetary um uh properties of Bitcoin, and you wouldn't really clump them into the ordinals category, but they do need that extra stateful data about Bitcoin in order to um run their program. And so even that definition isn't perfectly precise. But I think that that one line kind of gets us most of the way there in terms of determining who's on what side. Do you agree?

Yeah, I mean I think it's a silly debate because Bitcoin has always always had non-monetary data in it, literally from the first block, right? I mean, uh Satoshi put the Genesis block information in there, and people have always found ways to put arbitrary data into Bitcoin, including people that are on the filtering camp. They're on the side of filtering. So Luke Dash infamously in 2011 put uh Bible verses into Bitcoin.

Uh, and they're still in there if you look. If you go to an explorer that supports uh text searching for arbitrary text data in Bitcoin,

you can find his verses. I think they um

I'm trying to remember exactly what they were, but he ran a mining pool called I think Allegious, which I think is a biblical reference. And uh you'll see you'll see that in there. I mean, Coinbase outputs always have non monetary data, basically saying which mining pool mine them. And people have always found ways to insert.

non-monetary arbitrary data into Bitcoin, even outside of OPRTERN, like using malformed transaction types. So and you know, even very respected devs that have been very influential in Bitcoin, like Andrew Puelstra, have made this point.

You can't actually really uh inhibit uh arbitrary data insertion into Bitcoin. You can maybe try and like soft fork out uh the uh you know blob space associated with inscriptions, but you can't actually stop people doing people will find a way to do it, and it's just a matter of like how efficient it is and how useful for uh operating a node, like how burdensome that data is on node operators. So I find it to be silly. Um people will use Bitcoin for whatever they want, and from my stance, I think it's very useful to have you know other transaction types on Bitcoin. I'm always of the view that we should have like a rich and active, you know, set of different patterns of network usage, whether that's L2s or inscriptions. I think the ordinals thing is great. Um, but I guess a lot of that comes from my view that like having fees and usage is good. And some people would rather preside over a wasteland where no one ever moves their Bitcoin, everyone just sits on the Bitcoin. And I guess a lot of people are content with that, but I'm not.

Why can't we have both? Because why why can't we just have two versions of a Bitcoin uh node software? One that actually does filter out arbitrary data to satisfy the monetary maximalists, to satisfy the fix the filter camp, and then have a different implementation of a Bitcoin node software that does all of the expressive stuff. Why can't we have both?

Bitcoiners generally are skeptical of multiple competing implementations

and uh I think Bitcoin Core is pretty much the only dominant

Uh form of software, and I think the risk is that it would there'd be consensus um issues with multiple implementations. I don't I'm not that up to date on Ethereum, but I think there's like it's trending in the direction of one major implementation that people generally use. Am I correct in that assertion, or is it still pretty fragmented?

There's like a there's a nuanced conversation here. So like guest dominance is on the execution layer, and there's been a very big push to reduce guest dominance down from its heights of like 82 to 83%, and where it is now at 75%. So still pretty dominant. Um, but and but other execution layers are coming online, like Georgios from Paradigm is making Rust, so uh Rust Ethereum. Uh, and that's just on the execution layer. On the consensus layer, uh, that we have actually a pretty good healthy state of diversity of four different clients where you need to combine at um at minimum two of them in order to get over um over consensus thresholds.

Yeah, I so Bitcoiners, I think the general design philosophy is like there ought to be one major implementation, and there's significant risk to consensus if there are different ones.

So this is a fight over Bitcoin Core.

Um yeah, in a sense,

from what I've seen of the fix the filter debate, and I've honestly kind of ignored it because I think there's no chance for the like filtering camp to win here. It's very clear to me they're not gonna win.

Um

They I think are mostly just talking about transaction propagation and I don't think they're talking about some way to actually eliminate inscriptions um it you know in the sort of core protocol like undo taproot or like undo segwit or something. I think that that'd be very far fetched. And so then what you might just get is a situation where people email transaction data to miners directly to get it. Let's say they did filter out and they made inscription transactions non standard.

You could just email your transaction data to a miner.

And so you know you wouldn't really eliminate those transactions from the actual ultimate inclusion in the blockchain. You would just make it more unwieldy to get them in, but people would still do that. And it would create a shadow mempool, which I think wouldn't be good at all. And it would create out-of-band transactions and things like that. So

I don't know. It seems like pretty silly to me, the whole thing. And you know, I don't think those people have like the critical mass to get anything done here.

I do think it's interesting that there are these two different philosophies. Call it the

The monetary maximalist fix fix the filter camp versus the Bitcoin expressive camp. Um I like the I really like the word expressive, and I think that's kind of like some of the ideology that's being expressed on the like arbitrary data, where like adding more expressivity to Bitcoin is I think it's no coincidence that like Vitalic pushed out from that early like opcode thing and then goes make literally a fully expressive smart contract platform. And so we're starting to see Bitcoin land dabble into this. Um, but like who has the incentive to filter out transactions? Is it like why are they so motivated to care so hard?

Yeah, I mean, I think they don't want Bitcoin to host like

uh, you know, NFT activity. They they don't want to reward those kinds of people, and they don't want their node software.

I mean I don't want a lot of things in this world but but a lot of things don't also motivate me to get out of the bed in the morning to go like change the world in that particular state 'cause I don't have the incentive to. Like w like they can want that, but why do they fight so hard?