0:00 Okay, we are down at the Bitcoin mining stage. If you have heard the word Drivechains over 0:11 the last few weeks or months, then this is a conversation you want to come in and sit 0:16 in and listen on. We got Paul Sztorc of LayerTwo Labs. He is the CEO and co-founder, also the 0:22 author of BIP300/301. So we have a great presentation coming up here right 0:27 now, Collecting Every Transaction Fee on Earth. 0:31 Okay, thanks. So yeah, here's the whole talk in one slide. So if you only want to glance 0:36 at this one slide, you have the whole talk. I'm the author of these BIPs, and I'm saying 0:42 that miners can earn billions of dollars more in revenue if they only do one thing, which 0:48 is the morally correct thing of becoming more educated on technical issues. And so these 0:55 two BIPs, 300 and 301, BIP300 aims to convert altcoin transactions into Bitcoin transactions, 1:04 and BIP301 gives all of those transaction fees to you, the L1 Bitcoin miner. So there's 1:10 like an accounting operation that compresses all of the L2 transaction fees onto L1. And 1:18 there's other benefits and details. And how to get it is actually very easy. You just 1:23 have 51% of the hashrate update their software, but that is a touchy subject. So we'll get 1:29 into that slightly. But if you fail to act, there might be a future mismatch between L1 1:34 and L2 fees, which would lead to potentially further conflict. So this is the whole thing 1:39 in one slide. So if you are... But so what's going to happen now is the tech world and 1:46 the mining world are going to collide somewhat. And I just like to comment on how rare this 1:51 is. So this is the Miami Convention Center from where we had the big Bitcoin conference 1:56 in last year and in 2022. And these are all the different stages. And they always have 2:02 the miners far away in their own little room. And open source is also far away. And we're 2:08 sort of closer in our own small room. And now I'm going to... I'm coming over here. 2:13 So the worlds are colliding, which is a very rare thing, in fact. Before I was into Bitcoin, 2:18 I was a statistician at the Yale University Economics Department. And then I described 2:23 myself as a Bitcoin researcher. So I've written quite a bit about Bitcoin. And then my big 2:29 break, so to speak, was when Atomback linked to my blog. And I wrote this essay down here 2:36 that later became this essay with a famous title, Nothing is Cheaper Than Proof of Work. 2:42 And so that was sort of big. So I've been around for a very long time. I've done quite 2:49 a few things, including given many Bitcoin technical talks. Since that time, I've gone 2:56 all around the world. And then I wrote BIP300/301. And then last year, we raised 3:00 $3 million to start LayerTwo Labs. So that was the whole first section. So this is the 3:08 much longer second section about what is BIP300/301, which is also called Drivechain. 3:15 The goals of 300 and 301 are to make every transaction in the world a Bitcoin transaction 3:23 and have each of these contribute to minor revenues. But all those secondary goals are 3:30 that we want there to be many different networks to accommodate different people and different 3:33 use cases. And we also want there to be competition among networks and developers. So like in 3:39 other words, they all hate each other. So I'm pro-hate because I'm pro-competition. 3:44 And the more people hate each other, the more motivated they will be. And the harder they 3:48 will work to make the user happy. And the harder they work for the user, that means 3:52 more transaction fees for minors. And it means more Bitcoin adoption. So competition is good. 3:59 So BIP300 is the conversion. And BIP301 is pulling the transaction fee from each of 4:06 those into Bitcoin minors. So that probably doesn't make any sense at all. So I have a 4:11 little bit of an image here, which I'll flesh out, where this is the website cryptofees.info, 4:16 if you didn't know, which is a website that has all the different transaction fees paid 4:20 by all the different crypto networks. And normally, of course, Ethereum is usually around 4:28 10 times the size of Bitcoin, but Bitcoin has been on a tear recently. And so now it's 4:35 only about twice as much. So I have some... Let's see here if we can get... Yes. So BIP300 4:42 would be to kind of convert... You see converting Ethereum into a different thing that 4:46 would call BitEthereum, where it's the same as Ethereum, but you use Bitcoin only and 4:51 there's no Ether. And that's BIP300 to do all that. And BIP301 takes all the transaction 4:58 fees and compresses them into the L1 Bitcoin network transaction fee. And this is not limited 5:06 to altcoins that exist. It can be any network, including a centralized network or a new blockchain 5:11 network that we build from scratch to meet whatever use case that we like. And Earth 5:17 has 1.1 trillion transactions last year. And at $0.10 each, that would be $100 billion 5:22 per year in revenue from just from payments. And that figure doubles every five years. 5:26 Now, of course, $0.10 is a completely made-up napkin math figure, but it's not the... That 5:34 would make it already much cheaper than the explicit fee paid by every payment network. 5:39 And it also means that you can only be undercut by about $0.09. And it's highly unlikely that 5:46 the end user would care about $0.09. So it's just much easier also to chase revenues instead 5:50 of cutting costs because you get a two-for. You get a two-for-one. More users is more 5:55 Bitcoin transaction fees, but also more users is more Bitcoin adoption, which is a higher 6:01 price and more of a guarantee that the network is going to survive and make it. So this is 6:09 probably hard to believe, but there's really no financial cost to using this idea at all. 6:16 You just have to activate BIP300, which I'll get to. There are other costs, which include 6:21 that miners have to curate the portfolio of sidechains. But this is very easy since miners 6:26 have all the leverage. They can pull the plug on a sidechain at any time. So no one will 6:33 pollute the portfolio, so to speak. You also have to moderate disputes with respect to 6:38 withdrawals on the sidechain. But this is very, very easy to do because you run a node 6:42 and you only run the node if there is a dispute. And nodes are very cheap, even sort of the 6:47 worst of the worst networks, Solana, et cetera. Those only cost $3,000 to $5,000 a year, and 6:53 they only take a few days to sink. And there will probably not be any disputes because 6:57 of the way it's set up, where everything is prepped three months in advance and then it's 7:02 compressed to just one hash. So miners can defer to bulls anyway. So basically, there's 7:07 no financial cost to actually do this and pick up the $100 billion eventually. And there's 7:14 a lot more details about that, but we only have a very short amount of time together, 7:17 so we can't get into them. But now I wanted to give an idea that this is not vaporware 7:24 and it's actually highly endorsed. So it was a mere blog post in 2015, but there was a 7:29 software release in 2019. And then in 2022, we had cloned a few altcoins and even made 7:35 our own custom purpose Drivechains. And then in 2023, Luke did his work in progress 7:43 pull request to Bitcoin Core, which of course still needs review, but it's far from vaporware. 7:49 And we do have a lot of endorsements. So I have some of my three favorite endorsements. 7:52 So Adam Back, he said this live on stage in front of everyone at Baltic Honey Badger last 7:57 year. He said Drivechains are pretty cool and arguably could have been more important 8:00 or useful than let's say Taproot. And then Fiat Jaffa, the creator of Nostar, he said 8:06 we need Drivechain or the work of thousands in the last 13 years will be in vain. He's 8:09 referring to Bitcoin. He said Drivechain is our only hope. So he's an even bigger fan 8:13 of the project than I am. Rene Picard, author of Mastering Lightning, he said we need your 8:21 project, of course, for the obvious reasons. But there's actually another endorsement. 8:24 It's Robin Linus, founder of Zerosync and the creator of a BitVM. He said this recently. 8:30 The brain drain. This is a good microcosm of the whole idea. The brain drain is real, though. 8:36 I know dozens of bright researchers and engineers who left the Bitcoin community because it takes 8:40 more than a decade of pointless drama to activate even the most simple updates like covenants. 8:47 And this is very important because it's miners who do this activation, and it is miners who 8:52 have inadvertently created the pointless drama. And it is miners who can bring that to an end, 8:58 because we should activate BIP300 and then also the base layer. 9:02 So we do have detractors, and the detractors are people who are either hopelessly confused, 9:08 or I think there is a Bitcoin death cult, for lack of a better word. So they're hopelessly 9:13 confused. For example, Peter Todd, he mistakenly believes that this idea could cost miners as much 9:19 as $40,000 a year in software, which he says may harm small miners. That's not true, but it's also 9:25 irrelevant since every mining input costs something. And if Bitcoin is to succeed, 9:31 the revenues will increase enormously, and then as revenues increase, difficulty will increase, 9:36 and costs will increase. So the death cult is there's a lot of people in Bitcoin who think 9:42 that it shouldn't improve or can't improve because it's already perfect. Or they think 9:46 that Bitcoin shouldn't compete or doesn't compete for users. And they're also unwilling to give 9:52 altcoins any credit for innovation. They just kind of want to make Bitcoin part of their personal 9:57 brand, and then they want to be like sort of a king of the small pond. And those are the main 10:05 detractors in my opinion, but you certainly shouldn't take my word for it. 10:10 Now I have some more details. So this idea, by allowing people to switch software networks 10:15 whenever they like, we solve all of Bitcoin's biggest problems, which is my bold claim here. 10:22 And I'm going to put a little more details on this, but I think I want to get in. Yeah, 10:27 the zero risk part is very important to get into because every action should have some risk, but 10:34 not really this one. Because what you do is you take Bitcoin Core and you add BIP300, 10:39 301 soft fork, you get a new version, but it's interoperable with the old version. 10:44 And so the soft fork is easy to add, and it's optional. So people don't have to add it if they 10:53 don't want it. And it's also easy to remove. Even being optional, it's easy to subtract it later by 10:59 you take the blue thing, and then you add a new soft fork that bans BIP300 messages, and then 11:04 you're back to where you started. So you can always control Z this idea. So there really is 11:09 not really any risk. And we don't have anywhere near enough time to go into detail on these, 11:17 but I have a tiny little line of detail for each, so I'll just read that at you. 11:22 And in general, this is the different strokes for different folks kind of situation where 11:26 Bitcoin the network has the flexibility to grow and change as needed. And that solves lots of 11:32 different problems. So you have people who want different things on the blockchain, but it also 11:37 solves scalability, since you have a team of region-specific chains that each have a large 11:42 and growing block size. And you can onboard people directly to L2, unlike the Lightning Network. 11:47 We can immediately get the Zcash as a Drivechain and achieve Zcash-level privacy. 11:55 We can eliminate scams and distractions, since there's no reason to launch a new coin when you 12:01 can just launch this instead. It does solve the mining security budget problem, since you collect 12:06 revenues from all the chains. It does allow us to help with decentralization, since you can shrink 12:11 the L1 block size and then ossify L1. That's what Robin Linus was talking about. And it does actually 12:17 increase fundamental value of Bitcoin, since people will be incentivized to create chains 12:22 that are actually useful for real-world tasks. And so I'm going to go into, I think I have like 12:29 three or four slides about these, since we have nowhere near enough time to go into all of them. 12:33 But all these details are available on drivechain.info, and it's easy to find. I've given 12:39 many different talks on this. So the heterogeneity thing is that people say, oh, Bitcoin's great, 12:43 but can it do smart contracts or whatever? Can it do such and such? And instead of just trying 12:49 to explain yourself, you just say, yes, CBIP300. And then relatedly, you have a fringe idea. You 12:57 have an idea where you're not actually sure. It may be a genius idea, but you don't know yet. 13:01 And they say, well, I have my new idea. It just needs such and such. Can we merge it into Bitcoin? 13:07 And instead of trying to say, well, that's very difficult, blah, blah, blah, you just say, 13:13 OK, use BIP300, put it on L2. So yeah, with scalability, people will sometimes confuse 13:21 this idea with naive L1 large blockism, which is like Bitcoin Cash or whatever. That's not the 13:27 idea. The idea is you have an optional section of the Bitcoin network that is larger blocks, 13:33 so only the people who wanted them are over there. And that's the best of both worlds, 13:38 because those people get exactly what they want. They get cheaper fees, and they get more expensive 13:41 full nodes. And so, yes, we're almost at the end of the time. So I said how to get these BIPs. 13:49 It's very important that we bring this up and dwell on this slide for a little moment, because 13:56 something terrible happened in 2017, for those of you who don't know, where there was this activation 14:00 drama regarding SegWit. And that was the number, just a little one over 2017. And so before then, 14:09 Bitcoin upgraded in very many different ways, including the soft fork. But after SegWit, 14:15 the soft fork has fallen into disuse, and there's a lot of fear and hurt feelings and 14:24 and trauma as a result of this. And so we don't upgrade via the soft fork anymore. 14:31 Even though it's a very easy thing to do, you just have 51% of the hashrate upgrade the software, 14:36 we don't do it. And so this is not good, because BIP-118 is totally uncontroversial, 14:44 but it has been sitting around for years because no one wants to take the initiative 14:48 to ask miners to merge it. And then 119 had a very similar fate, where it was sitting around 14:56 doing nothing, someone tried to activate it. And then even though no one has a problem with the 15:01 actual content of the idea, just talking about activating it got this guy run out of town, 15:07 and he later quit Bitcoin development, and he actually quit Bitcoin altogether. 15:11 So basically, miners have to get involved and learn the issues if they want to potentially 15:15 help the Bitcoin network upgrade again, like it did before. And not everyone could be a specialist, 15:20 of course, but there are plenty of things you can do, like you're not a doctor either, 15:24 but you can get like a second opinion or a third opinion. There's things you can do to 15:28 pit different experts against each other and learn. So I'm just trying to say that, people, 15:34 we have to solve this soft fork deadlock problem, and someone has to take responsibility, 15:38 and it should be the miners, because they are the ones who will actually suffer the most 15:43 if Bitcoin underperforms. Okay, cool. Hey, thanks. Thank you very much. 15:46 Hey guys, thanks for coming out to the 2023 North American Blockchain Summit. 15:51 It was the best summit yet. We look forward to hosting you again next year. If you enjoyed the 15:56 summit or like what you saw in this video, be sure to subscribe. If you're interested in learning 16:02 more about membership in the TBC, go to TexasBlockchainCouncil.org to learn more.