Web3 Israel Newsletter #10 Special Edition - Interview with Meni Rosenfeld

Dear Web3 Israel Newsletter subscribers,

This time we have a special edition for you - exclusive interview with the Israeli Bitcoin legend Meni Rosenfeld! ????????????

Meni Rosenfeld is a mathematics M.Sc. Graduate of the Weizmann Institute of Science, specializing in machine learning. After being exposed to Bitcoin in March 2011, he has focused exclusively on activity in this field. He has established the Bitcoin community in Israel, founded Israel's first Bitcoin exchange service, and performed mathematical research on the algorithms that underlie the functioning of the Bitcoin and blockchain system. He now serves as the chairman of the Israeli Bitcoin Association promotimg Bitcoin and blockchain regulation in Israel for startups and corporations.?

Our team member Benny Attar was fortunate to have the chance to interview Meni Rosenfeld for the newsletter, as he's one of the pioneers in the Israeli and global Bitcoin ecosystem. Seriously, there are not many people in the world with experience in the early days of Bitcoin like Meni does. In this interview, Meni answers some overall industry questions, how the technology and political ideology of Bitcoin has evolved, and some of the overarching trends and problems facing the industry for the next decade. Additionally, Benny and Meni discuss sudoku variations, the Israeli blockchain ecosystem, and multi-gender Hebrew, amongst other things.

This interview took place on May 11th 2023 and none of it is financial advice.

Enjoy,

Tomer Niv

Editor in Chief

Thank you so much for taking the time to do this, Meni. First, we should start with our readers understanding who Meni Rosenfeld is. What is your story? Who are you? What's our readers know about Meni Rosenfeld??

Well, that's a broad question. I'm a mathematician by training; I studied for a B.A. in Mathematics at the Open University of Israel while I was still in high school, and ended up finishing my bachelor's degree before I finished high school. Following my service in the IDF, I studied for a master's degree at the Weizmann Institute of Science in the Faculty of Mathematics and Computer Science; my thesis was in the area of machine learning, on the topic of semi-supervised learning. After that, I've spent some time working at SimilarWeb as the Head of Algorithms Research. While I was employed at SimilarWeb, I had the chance to read one of my favorite blogs, LessWrong, which is closely associated with the Machine Intelligence Research Institute (MIRI for short). They started accepting Bitcoin donations back in February 2011, which was pretty groundbreaking. There was a post about that on the blog, and I read it like I did most of the posts - but I didn't know what was this “Bitcoin” they were talking about. So I started to, you know, to explore it, figure out what it was and - well, nothing could have prepared me for what I discovered.?

At first I thought it was some kind of payment system I didn’t know, but then I quickly realized this is something much more interesting than that. I realized this was significantly more interesting than what I was doing at SimilarWeb, so over time I ended up phasing out of my job at SimilarWeb and started being active full time in the world of Bitcoin. At first, I was doing research on reward systems for mining pools. Bitcoin, as we all know, has mining, and people need to use mining pools to participate effectively. The pool needs to distribute the income from mining in some way and it turns out, it's not as simple a problem as it might seem. There were several systems that were doing this back then, but none of them were very good. I started doing some research and analyzing the different systems we were using, which led to proposing some new systems which have advantages over systems that we were used previously. Another thing I started doing early on, was founding Bitcoil, which was Israel's first Bitcoin exchange service. If people wanted to buy or sell Bitcoins in Israel, the most efficient way for them to do that was using my service. Most people wanted to buy Bitcoin and not that many people wanted to sell, which kind of surprised me, because I did expect that there would be miners locally that mined Bitcoin and would want to sell them. The majority of the people wanted to get in, buy some bitcoins, and I provided such a service which was quite groundbreaking for Israel.?

Alongside all of this, I worked on building up the Bitcoin community in Israel in its early days. I started organizing meetups and community websites and things like that. Towards the end of 2013, we formalized this effort - Ron Gross, who is another prominent activist in Israel, myself and a few others, we established the Israeli Bitcoin Association, which is a nonprofit organization with the goal of promoting Bitcoin usage in Israel. Around the same time the Bitcoin Embassy in Tel Aviv was also founded, which is the physical center of the Bitcoin community in Israel. Like they say, the rest is history. Since then, I've done additional kinds of mathematical research concerning Bitcoin or additional work for the Israeli Bitcoin Association.

Incredible. Through all of these experiences with Bitcoin, are there any notable or memorable experiences that the typical Bitcoin enthusiast wouldn’t know about? Something special from the early days?

Okay, I guess I’ve seen both the good and the bad. One thing that I don't talk about very often is actually something that happened back in 2012. So back then, in essence, not a lot of people were interested in or talking about Bitcoin. The people who were talking about it were looking for interesting things to do with this new technology. This ultimately led to the development of a lending bubble, where people would lend bitcoins to one another at extremely high interest rates. And, you know, people thought that it made some sort of business sense, but of course, as they found out it didn't. Most of these lending schemes collapsed, and I had the misfortune of being somewhat involved there. I did lose some money, but not that much. I mean, it’s funny to think about how it was back then, and how the industry has evolved since.

Wow. I didn’t know about the 2012 Bitcoin lending schemes. Sounds eerily familiar to something we have in the modern day. Continuing with the past, over the past decade or so, how have you seen the Bitcoin ecosystem develop both in Israel and around the world? I guess let's start with Israel.

The things that happen in Israel are actually pretty well correlated with what's happening in the rest of the world. We have these cycles, where both the Bitcoin price fluctuates but also the level of interest in Bitcoin (media coverage, the amount of people who come to me, broader hype in Israel) are actually correlated pretty well with the Bitcoin price. It really goes both ways - when the bitcoin price goes up, it becomes a news item. People talk about it, and when people talk about this, more people buy it, and then the price goes up. Pretty typical cycle. Then, the bubble develops, and then it crashes. We've had this kind of cycle several times since I've been involved. What’s pretty neat however is that since we have a physical home for Bitcoin, the Bitcoin embassy, we can see it in a very tangible and physical way, not just theoretical. Whenever Bitcoin has its so-called “bull-runs,” significantly more people come to the meetups. There were some times where there was really overcrowding and a lot of people stormed the place trying to get their hands on some Bitcoins. I find it interesting to see how these cycles develop. But in a sense this is all very counterproductive because all this chaos, I think, stands in the way of us actually working to build stuff.?

For our readers who don’t know, can you elaborate on the Bitcoin Embassy? It’s a super important oasis for Bitcoin in the world. What are some of the daily things they do? What is their mission??

The mission of the Bitcoin embassy is to promote Bitcoin in Israel by helping people understand it through a community. It's both a way to get information and a way to nurture the Israeli Bitcoin community, and also a physical place where you can actually come and buy Bitcoins. There is a need for a physical location - of course, there are also online community hubs on Facebook and some other places, but there's a lot more value in an actual physical location. Israel has an advantage in this respect since it's physically a relatively small country. Through this one location in Tel Aviv, it becomes reasonable for people all over the country to come. The Bitcoin Embassy has really been the focal point for activity in Bitcoin in Israel since its inception. At all hours of the day, the Bitcoin Embassy aims to be manned by volunteers known as ambassadors, so that people can just walk in from the street and ask questions about Bitcoin and understand its technology. We also have weekly social gatherings on Sunday nights, and occasionally we have big events with notable speakers in the Bitcoin ecosystem from around the world. One of the newer initiatives is called the PlebTLV, which lately has been a more or less monthly meetup, where we have focus primarily on building Bitcoin related businesses and startups.

Since your introduction to Bitcoin over a decade ago, would you have predicted that Bitcoin would be trading at $30k? Would you have ever guessed that its peak would be $70k ten years ago? Was this ever an assumption in your mind then?

Well, I always certainly hoped so. It's worth mentioning that when Satoshi published the source code of Bitcoin, the first person to reply to the mailing list was Hal Finney who did the calculation and he said that if Bitcoin succeeds, each Bitcoin could be worth around $10 million if I remember correctly. He was also the recipient of the first Bitcoin transaction. The point is that even really early on people had this idea that Bitcoin could reach greatness. People recognized it as a distant possibility, not necessarily something that was particularly likely, but the thought did feature in conversations.

Was Bitcoin reaching $10 million something that you guys were talking about in forums or even in the early days of the Bitcoin Embassy? Or was it something that everyone thought individually? Was there broader communal support behind these ideals?

It was something that was talked about occasionally. I mean, we usually didn't talk so much about the endgame, but we saw that Bitcoin had been growing so fast for some time and we speculated that it might continue. We did expect some sort of fast growth. Sometimes, we discussed where it would end up eventually, but I don't think that was the main point of our conversations. It was certainly consensus that Bitcoin would continue appreciating in value; and this prediction has only proven itself correct. Over time, also, we grew to understand and handle the drops and peaks. Another thing, the Bitcoin price is not that much higher than the peak of 2017. It shows it has relatively stable value, but with regards to actual usage of Bitcoin it also feels like it has somewhat stagnated. It's not so clear how this will continue.?

Right now one of the things that we're very hopeful that will help push this forward is the Lightning Network. Another thing that is a major pain point is the regulation and the legal considerations around the world. Across the entire world, there are still regulatory hurdles, and regulators clearly still don't know what to do with this sort of thing. Specifically, in Israel, the regulators are still trying to figure out what to do, and in that time there is some sort of regulatory vacuum where the banks do whatever they want, hindering any business activity that relates to Bitcoin and cryptocurrencies. So that's an ongoing problem, which is something that we've been working on at the Israeli Bitcoin Association for about a decade. We have also recently established a forum for promoting sensible Bitcoin-related regulation, which works more closely with actual companies that are involved in this space and operates more as a business entity. Overall though, the development of Bitcoin has been surreal.

You're a mathematician by trade. Did you get into bitcoin originally because of its mathematical and computer science beauty? Or was it because of its political and economic ideals as a new groundbreaking form of money?

The mathematical and computer science aspect of it definitely played a huge part in me getting into Bitcoin. Regarding politics and ideology, it was kind of the other way around. After I got involved with Bitcoin, I got slightly more sympathetic towards the kind of ideologies that are associated with it. I wasn’t really exposed to the libertarian ideals before it, so I was exposed to them through Bitcoin.?

Do you think that's a common case where people get exposed to those ideologies through Bitcoin or is usually it the other way around?

I think it's more common that people who have these ideologies in the first place are more exposed to Bitcoin. But as you know, all kinds of people are in the Bitcoin ecosystem. There's no one rule that fits all. For me, the two things that made Bitcoin interesting to me were the practical aspects of having a form of money which is more efficient and technological, and the interesting use of computation power. The way that the process of mining makes use of computational power that can be distributed was fascinating to me. That’s precisely why I was involved with Bitcoin early on both with the mathematical research and with actually buying mining hardware and using it.

Fascinating, so I think we spoke enough about the past. Let's go into the future now. What are your thoughts for the next 14 years of Bitcoin?

Let's say I'm sort of cautiously optimistic. If the usability of Bitcoin improves, through the Lightning Network and regulation and so on, then Bitcoin will have a much stronger potential. There are still many challenges that we're not sure how well we'll overcome at all though. The Lightning Network is closely tied with the issue of scalability but I don't think it will be sufficient on its own. I think that to really improve scalability some changes to the base layer will also be needed. However, the development of the base layer is much much slower. People are not very eager to make changes. I do hope that eventually any change that needs to be done will be done, but I'm not entirely optimistic on that. People have really different views on what Bitcoin should be. This is actually pretty on topic because lately there has been an overload on the Bitcoin network and transactions fees have gone very high. Probably attributed to the rise of Ordinals and all kinds of new activities on Bitcoin, which you know, you could argue whether this kind of usage is good or not. The point is that I've seen too many people that are not happy about Bitcoin’s progression gang up and go against it. We just need to acknowledge that rising fees are a problem. And I'm not sure enough Bitcoin advocates acknowledge that there is or if there ever will be a problem. This worries me as the problem could get worse as more people try to get into Bitcoin.?

Interesting. Are you actively working on any solutions to solve these concerns?

As of now, no. I had some suggestions, but I’m not so active in developing these things.

Keep us posted if anything changes. Meanwhile, are there any tips or recommendations that you would give to younger students or entrepreneurs in the Bitcoin and blockchain ecosystems? What are some lessons that you want to instill in younger readers??

Tough question. One piece of advice I have is to find the right balance. One of the greatest problems that people have is going too much towards extremes. It manifests in all kinds of ways. In some ways, rejecting change and rejecting technology while on the other hand people have unrealistic expectations of new technologies and try to think that it's going to solve problems that just don’t exist. The smart thing is to find that balance while still being open to new ideas. Ensure you’re not gullible and believe everything that anyone tells you, but remain with faith in the capabilities of new technologies (but not blind faith that leads through you to impossible expectations!). Not enough people find their balance and it's a serious concern. Find the line between adopting innovation and not falling to the depths of fairytales.

Other than Bitcoin and blockchain, what else are you interested in? How else do you spend your time?

MR: I've actually taken an interest in Sudoku! Most of my life I thought that Sudoku was boring. And I was right, in regards to what I thought Sudoku was. I want to make a distinction between what is called Classical Sudoku and Variant Sudoku. Classical Sudoku is what we see in the newspaper with the nine by nine grid, good old boring fun. However, Variant Sudoku, which is like normal Sudoku but with additional rules and additional constraints, is significantly more fun. You can have arrows on the grid that suggest some digit is the sum of some other digits, lines that constrain the sequence of digits along them. You can have dots that represent consecutive digits or the ratio between digits, and all kinds of things like that. It's serious fun. Each puzzle is unique and you need to be creative to find how to combine all the clues together to get into the solution. It's extremely interesting and the solutions are varied.

Cool! Have you been playing chess lately??

I play occasionally.?

What openings?

Usually Spanish or Italian. My opening repertoire isn’t very broad.

We should play sometime. I usually play Scotch.

I’d be down for that.

Any last thoughts before I wrap up the interview?

Actually, yeah. Another thing I’ve been very interested in lately is multi-gender Hebrew. Right now, we’re talking in English, but English doesn’t have this problem because most words are gender-neutral. However, Hebrew is very gendered, and most words have a masculine and a feminine version. When referring to people of unknown gender, the default in Hebrew is to use the masculine form - and there is a growing understanding that this is exclusionary and problematic. All kinds of methods to alleviate this problem are in use; Multi-gender Hebrew is a system of new letters that can be used to create written words that combine the masculine and feminine form. It is the best solution which I’ve seen so far. It’s growing in popularity, and even at the Bitcoin emBassy we’ve been using it on signs and on the website. It’s a great cause, and I’m glad to be doing my part in it.

Really is a good cause. Thanks so much for speaking with us, Meni.

Meet the Team ????

Benny has been in the blockchain ecosystem for several years, professionally beginning his journey as a part of Tezos Israel in 2021. Following Tezos Israel, Benny did a variety of consulting projects for startups and corporates across blockchain strategy, technical writing, and DeFi research. Currently, Benny is a student at Columbia University and Tel Aviv University pursuing a dual degree in Economics and Middle Eastern Studies.

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Web3 Israel Newsletter Team (alphabetical order):?Arthur Shkolnik,?Benny Attar,?Noam Ben Zur,?Rea Gavriel Klayman,?Roee Hamuy,?Ruben Adhoute,?Shahar Yahav,?Tom Elia,?Tomer Niv,?Yoav Tietz