Bitcoin Developer Jimmy Song: Bitcoin Is Money, Not Technology

When did you first get involved in crypto and what got you started in the space?

2011. I read about Bitcoin on a website called Slashdot. If you don’t know what that is, that’s a techie website. There are all sorts of stories that are interesting to technical people like me. Among other things, there is stuff on new Linux releases, patent lawsuits, new language features, new languages, new Macbooks, stuff like that. It’s always on there. 

In it, I saw a story that I didn’t really understand at all. It said, “Bitcoin has broken one dollar” and I couldn’t even parse that sentence. I was like, “What is this, a change machine? What does it mean to break one dollar?”

I looked into it, because I usually know something about every story. This one was a little bit strange because I didn’t know anything about it. And wow, I fell down that rabbit hole pretty hard. Back then, you couldn’t really buy Bitcoin very easily. You had to transfer money over to Mt. Gox and then buy it there, and then transfer it out and do all that stuff. 

I saw a story that I didn’t really understand at all. It said, “Bitcoin has broken one dollar” and I couldn’t even parse that sentence. I was like, “What is this, a change machine?”

Probably one of the biggest regrets of my life was that after learning about it and wanting to buy it, it was too much of a bother — so I didn’t buy it. This was back when Bitcoin was $1. But that’s that’s how I got into it in 2011. 

By 2013, I had read enough about it that I was like, “OK, I need to use my programming skills for this thing,” and I started programming in some of the open source projects.

Nowadays, Bitcoin is obviously a lot more mainstream. How do you introduce it to programmers for the first time?

For them, it’s more about the technical aspect of it. What actually is Bitcoin, what is the actual ledger, what is the blockchain technology that these people talk about, and what are the actual bits that are stored on your computer? How do you interpret that? What does holding a private key mean? What does it mean to sign, what  does it mean to verify? I can explain it at that level.

But more conceptually, I tend to describe it as decentralized digital scarcity. It’s something that’s both digital and scarce, which we’ve had before. The U.S. dollar, for example, is both digital and scarce. But Bitcoin is decentralized, and that’s something that never existed up until Satoshi Nakamoto invented it in 2010.

You’ve already mentioned your biggest regret. Do you have any other learned lessons, since you’ve been around in the space since 2011?

I probably shouldn’t have gotten involved in altcoins.

I bought some Litecoin back in 2013, I did some other stuff with different coins. I regret ever getting involved in any of that, because I realize now that all of those were kind of useless. To a degree, they don’t add anything new, while taking away the most useful feature of Bitcoin, which is decentralization. I regret ever having involved myself in any of those.

One of the newest trends right now is yield farming in DeFi. Is it good or bad for the space to have that kind of hype around one protocol?

This is what Ethereum has been doing forever. First of all, DeFi is a misnomer. It’s completely centralized. You have to trust somebody — namely the people that are running Compound or all the other DeFi things — they almost always have some sort of back door in case something goes wrong, and they can pay the money back to themselves. It’s not DeFi at all. It’s completely centralized finance. 

There’s already a lot of centralized finance things out there, but they’re regulated. This is essentially a way to subvert bad regulation. Now, you could think of that as good or bad: if you have regulation, at least you have recourse should something go terribly wrong.  You can sue the company. 

With something like DeFi, it’s not regulated at all. It’s just as risky, if not riskier than a lot of really leveraged financial products that are already in existence. The yield farming stuff seems like picking up pennies in front of a steamroller, if you’ve ever heard that analogy. 

There are all sorts of things like that in the market today. If you know that Company A is acquiring Company B, and Company B’s shares are trading below what Company A agreed to buy them out at, that’s kind of like what yield farming is. 

The yield farming stuff seems like picking up pennies in front of a steamroller, if you’ve ever heard that analogy. 

You could carve that little bit. But that little bit is out there, because there is an actual risk that merger might not go through, in which case you get absolutely destroyed that one time out of one hundred where that merger doesn’t happen. That’s the sort of thing I think the yield farming is.

As they say in poker, if you can’t pick out the sucker in your poker table, then you’re the sucker. Most of the people that are getting into [yield farming] don’t know what they’re doing, they’re suckers. 

Those kinds of games and DeFi — at least Ethereum DeFi whatever — these are all zero sum games. Somebody wins, somebody loses. You don’t get something for nothing if there’s no additional value being added. It’s really just a form of gambling with very limited upside for people that aren’t in control of the protocol.

As they say in poker, if you can’t pick out the sucker in your poker table, then you’re the sucker. Most of the people that are getting into [yield farming] don’t know what they’re doing, they’re suckers. 

Are there any other big misconceptions in cryptocurrency that you’ve always wanted to correct?

I’ve said this before, but a lot of people think of Bitcoin as technology and not a money. This is the confusion around why people will go into altcoins. They built a better mousetrap: therefore, this is the one that we should use.. That works if it’s a technology. If you make a microwave and then you make a convection microwave, the convection microwave is better than the normal microwave.

But this is a protocol. This is a Schelling point, it’s a network effect kind of thing. And it’s money. It’s better if it doesn’t change, whereas with technology, it tends to be better when it does change and improve. 

I don’t know how many people have made the analogy that Bitcoin is the MySpace to X’s Facebook. They have no idea that they’re comparing apples to oranges — this is a protocol, not a technology. This is money, not a startup.

That’s a big myth. This is the trap that a lot of MBA types fall into, they see Bitcoin as a nail. They know how to hammer that nail from a technology perspective.They say, “OK, we have to get better features, and then we’ll take over Bitcoin and win.” This is what every professor coin has done, this is what every altcoin, ICO, they’re all on that same bandwagon. 

But they don’t recognize that it’s a different thing. It’s not a nail. It’s money and that’s that. You have to treat it very differently.

But they don’t recognize that it’s a different thing. It’s not a nail. It’s money and that’s that. You have to treat it very differently.

You mentioned that for a while you dabbled in altcoins and then regretted it. Have you changed your mind about anything else in the crypto space over the past nine or so years?

The “blockchain, not Bitcoin” working was one of them. I mean, I tried for two years at Paxos to make a blockchain work without Bitcoin — and it doesn’t. I’ve tried every which way. 

Back then, in 2015, 2016, there was this push that we can get blockchain technology to fix this, this, this and this. I looked into it, I tried to make it work, but there’s no way to really decentralize it very well. In fact, you almost always end up with some sort of centralized, trusted thing.

R3 and IBM’s Hyperledger — all of these projects that have tried to do blockchain, not Bitcoin — they inevitably fail, because there’s some central ordering service or somebody that figures that has to be an authority and it simply doesn’t work. That’s definitely one, I thought blockchain not Bitcoin could work.

I mean, I tried for two years at Paxos to make a blockchain work without Bitcoin — and it doesn’t. I’ve tried every which way. 

I also thought that that forking would be really, really, really bad for Bitcoin.

This is more about 2017 with the scaling debate. I wrote articles earlier in 2017 about how I thought it would be absolutely awful ,and that Bitcoin would absolutely get destroyed once you had Bitcoin A and Bitcoin B. 

It turns out that wasn’t the case at all; in fact, Bitcoin showed me that it was a lot more antifragile. Not just resilient, but antifragile in the sense that when you have a split like that, it actually makes Bitcoin stronger, because a lot of the bellyachers, people that disagree, got to go off on their own and do their own thing, which is exactly what happened with Bitcoin Cash. 

That in turn actually strengthened the community and gave it credibility, a long term credibility that it didn’t have before. That caused the market to value it even higher than it was. From all those perspectives, I would say that I was wrong about how fragile Bitcoin was.

In your current pinned tweet, you said that you thought that the Bitcoin halving would be the big narrative of 2020. Do you still think that’s true?

To some degree. There are people still arguing about stock-to-flow on Twitter right now, and that’s definitely a part of the halving narrative. 2020 has been such a crazy year that I’m not sure anybody’s predictions on anything is correct. Who knew that a pandemic was coming, or that we would have protests all over the world, no sports for six months? Nobody predicted any of that. 

I don’t know how the rest of the year is going to play out, but if it’s anything like the first half of the year, get ready to get some more gray hairs.

I’m okay with it not being completely accurate.. I would say that more than the halving, it’s more the economic reality of what’s going on. It’s basically governments all around the world printing insane amounts of money for the past four months or so, and that, of course, economies have been completely shuttered. Everything’s gone to hell in a handbasket. I think that is the bigger narrative at this point. 

I would say there is at least some chatter about halving. I don’t know how the rest of the year is going to play out, but if it’s anything like the first half of the year, get ready to get some more gray hairs.

Obviously, the world economy right now is in a relatively unstable position. Do you think that cryptocurrency is coming out of this as a shining example of what money can be?

I think it’s been a pretty good store of value, at least Bitcoin has. I don’t know about all these other altcoins; in fact, most of them have done terribly against Bitcoin. I think BCH is almost at an all time low against BTC right now, Ripple, it’s at a 52-week low [interview recorded July 2]. 

Almost everything else other than Bitcoin hasn’t done very well. I mean, there might be one coin pumping, but as far as I can tell, Bitcoin’s use case has been pretty good. It was about $9,000  at the beginning of the year, it’s about $9,000 now. That tells me that it’s done pretty well in keeping up at least. We did have that drop, but a lot of things had a drop right around then. 

The big thing to me as far as Bitcoin’s narrative is people are asking questions about the monetary policy of the entire world, and that the fact that Bitcoin has a credible monetary policy is something that a lot of people are looking into.

I do see Bitcoin as answering some of those questions that people are asking about simple stuff like — if they can just print the money, why are we paying taxes?

That’s not a small thing. I’ve had a lot of, quote unquote normies that are asking me about Bitcoin and saying, “Hey, I’m not comfortable putting money in the stock market right now. It’s just too crazy.” It’s not connected to any revenues, because who’s really generating revenue other than Netflix and Zoom? 

Everybody else is just like, “What is going on? Something’s not adding up. I’m not comfortable with this.” They’re looking into Bitcoin and asking questions about how to get some of this stuff, and how to diversify into this asset. How long that takes for people, and how quickly that happens is another question entirely.

But I do see Bitcoin as answering some of those questions that people are asking about simple stuff like — if they can just print the money, why are we paying taxes?

I saw that you co-wrote a book about Bitcoin in a “sprint” over a few days with a group of experts. Have you thought about “sprinting” in any other projects?

The book sprint idea came from stuff that I’ve been doing all my life. To some degree, all my professional life is just sprinting. When you’re doing any sort of code or startup, you try to get something out very quickly, what you would call a minimum viable product. That’s something that I’ve done quite a bit in terms of code, design.

Bringing that into a book was interesting because I wasn’t sure if it would work, but it turned out to totally work. In fact, that was one of the more enjoyable weeks of my entire life, and I think my co-authors would say the same as that.

When you’re in a room together and working on something, and you have a tangible thing that you have at the end, it’s very rewarding. If you’ve ever done anything like that, you know how satisfying it is. If there was a project in college where you had to get something done very quickly and it was an overwhelming amount, but you had a team of people around you and you got it done. It’s very satisfying. 

I would like to do more of that, but right now is probably not the right time to do that. With the pandemic, it’s not very practical.

I definitely want to write other books in this fashion, because you can get a book out much quicker. My other book, Programming Bitcoin, took me a year and three months, and I was told by other authors that is actually pretty fast.

I would like to get out books in this fashion, but not only books. I would love to try to do that for videos or some sort of audio thing or anything creative. If you get a lot of people cooperating instead of having it be a solo slog, it’s more enjoyable and you get a better product in a quick amount of time.