0:00 Great. 0:01 Well today is the BitVM takeover of LayerTwo Labs weekly space, and so I'm excited to 0:09 talk to you guys today about BitVM, compare it with Drivechains, and learn some cool stuff 0:15 about it. 0:16 So, awesome. 0:17 I guess we'll get started, and I'll just give you all a brief overview of BitVM, and then 0:25 maybe we can get into some questions or something like that, or actually anyone can just feel 0:29 free to raise your hand if you have a question, and I'll be happy to answer them at any time. 0:36 But yeah, let's start with what BitVM is. 0:38 So, BitVM is a virtual computer that can run any program and render the results of 0:49 that computation in a way that Bitcoin transactions can understand. 0:54 And this is pretty cool because it allows you to have two parties agree to run a computer 1:00 together, one of these virtual computers, and use the output of that program in a Bitcoin 1:05 transaction in such a way that if either of them makes a false computation or tries 1:12 to run bad code through the machine, the innocent party can take the guilty party's money, which 1:18 is pretty cool. 1:20 So that allows us to do a bunch of cool stuff and basically, as the paper says, validate 1:26 or verify any computation on Bitcoin. 1:32 So that's what BitVM does. 1:34 It gives us a generic computer that we can run off-chain and use the results of computation 1:40 on-chain such that you can do stuff like have Alice and Bob put some money in a Bitcoin 1:46 address, run a program, and the program decides whether Alice gets the money or Bob gets the 1:51 money. 1:52 You can do something like that with BitVM. 1:56 So yeah, let me go over a little bit of the history of how we got here. 2:02 And once again, by the way, anyone is welcome to ask questions at any time. 2:06 Just raise your hand. 2:08 By the way, I want to let our host know that I did invite Alex Kravitz to join me today. 2:13 So if he raises his hand, I'd particularly appreciate it if you could make him a speaker 2:18 as well. 2:20 So thank you. 2:22 So let me talk a little bit about the history of BitVM. 2:27 So I think it all started about a year and a half ago when Robin Linus and I started 2:33 talking online about tricks that you can do with Bitcoin scripts. 2:39 So Robin Linus is a developer with zero sync. 2:44 They're trying to bring zero knowledge proofs to Bitcoin, and I guess now they've finally 2:48 done it. 2:51 So he's very familiar with trying to hack different things into Bitcoin, and he's got 2:56 a GitHub that's full of projects where he does that. 2:59 And I really like stuff like that, so I often implement ideas that do novel and unique things 3:06 with Bitcoin script. 3:09 So my GitHub is full of actual implementations, and his GitHub's full of research and ideas 3:15 about how you can do cool stuff. 3:17 So for about a year and a half ago, we started interacting with each other, working with 3:22 each other's GitHubs. 3:23 I was implementing some of his ideas. 3:26 We were coming up with fresh ones. 3:28 And we met in Bitcoin Miami, the Miami Bitcoin conference. 3:33 And while we were there, we started a telegram group in which the goal was to figure out 3:38 a way to hack a zero knowledge proof system into Bitcoin script. 3:42 That fit well with his area of research because his company, Zero Sync, does zero knowledge 3:47 proofs, and they're trying to bring them to Bitcoin. 3:49 And it meets with me because it was a big challenge to try and think of the simplest 3:53 possible zero knowledge proof system and bring it into Bitcoin. 3:57 A few other people entered that telegram channel, notably Sam Parker, who's also very familiar 4:03 with zero knowledge proofing systems. 4:06 And we started hacking away at it for probably about a year now, just coming up with ideas, 4:13 trying to think of ways to do it. 4:15 And it was in that telegram group that this ended up happening. 4:21 So eventually, you know, Robin came up with this idea, and it was immediately apparent 4:28 to him, but not immediately apparent to us, that it was not only capable of doing zero 4:32 knowledge computation, but any computation at all, any desired computation that can run 4:37 any computable function. 4:39 So he came up with this idea, tried to explain it to us. 4:42 We didn't understand it immediately, but he worked through it with us, and then we saw 4:47 the potential for this thing. 4:49 So within about five days after he proposed it, he had a white paper ready, and I had 4:56 some working code that actually demonstrates a proof of concept of how it works. 5:00 And so that's the sort of history of BitVM. 5:03 On October 9th, he released the paper, and on the same day, I released a proof of concept 5:09 showing how it works. 5:11 So that's where we're at. 5:13 BitVM is now a thing, and we're working to improve the proof of concept implementation 5:19 and make it ready for primetime. 5:22 So by the way, our host, I also invited Moon Settler to come up and be a speaker with me. 5:27 So if you'd also, if he wants to come up, you can raise his hand, and if you could let 5:31 him be a speaker as well, that would be wonderful. 5:35 So there's some general background on BitVM, and there is some history of BitVM. 5:42 And one of the things I wanted to get into today was a comparison of BitVM with Drivechain. 5:49 So I'd like to go into that, but before I do, I just wonder if anybody has any questions 5:53 at this point, because I'm happy to answer those. 5:57 So I'll give a few seconds for anyone to say, hey, I wondered about this or that or the 6:02 other thing before we move forward here. 6:05 Okay, cool, I don't see any questions, so that's fine. 6:10 Then let's get into a comparison of BitVM with Drivechain. 6:16 So can you make a Drivechain with BitVM? 6:23 I don't think so. 6:25 I don't think you can. 6:27 But I wouldn't be surprised if you could come up with something similar, or maybe even equivalent. 6:35 So BitVM allows you to run any computer on it. 6:42 And since you can run any computer, you can do any computation with it. 6:46 So a lot of things that might require a software in Bitcoin, we might be able to do with BitVM. 6:53 Because you can just run a copy of Bitcoin in BitVM that has that piece of software in 6:58 it, or that has that opcode activated, and then interact with this alternative version 7:05 of Bitcoin directly on Bitcoin. 7:09 So that's kind of something we're looking into. 7:11 We're certainly not anywhere near there yet. 7:13 It would take a long time for us to get there. 7:15 But in principle, you should be able to integrate any kind of opcode. 7:19 However, some opcodes require multi-party interaction. 7:23 And this is not something we've figured out how to do yet with BitVM, other than in the 7:27 case of two parties. 7:30 We have a working implementation where someone can run the computer as a prover, and someone 7:34 can run the computer as a verifier, and they can verify each other's computations. 7:40 But this is a two-person setting. 7:42 There's just a prover and a verifier, and no other people are involved. 7:48 And that's what we currently have working. 7:50 We've got some ideas for how to expand it. 7:53 But if we wanted to do something like a sidechain or a Drivechain, we would need more 7:58 than two parties, it seems. 8:00 It seems that you would need to have the ability for, you know, all the uses of the sidechain 8:05 to prove things together, or verify things together, and have some sort of prover who's 8:10 proving that the computation is being done correctly. 8:14 And that's not something we figured out how to do perfectly yet. 8:17 I think Robin might be presenting a theory he came up with at the Amsterdam conference 8:22 right now on how you might be able to do multi-party. 8:26 But as of right now, the only thing we have working is the two-party setting, and that's 8:30 not enough to build a sidechain or a Drivechain by itself. 8:34 So can we get there? 8:36 I think so. 8:37 I hope so. 8:38 It seems like a lot easier of a problem to solve than the one we did solve, which is 8:43 to get a computer that runs on Bitcoin. 8:46 But we'll see. 8:47 It's currently an unsolved problem. 8:50 If we can do it, if we can figure out a way, you know, let's just hand-wave away and say 8:54 we figure out how to get multi-party BitVMs working—I say multi-party, but I guess that's 9:02 the wrong term, because it already has two parties, and that's technically multi-party. 9:06 I'm not sure what's—like three or more. 9:09 If we can find a way to make three or more people be able to use BitVM, then how would 9:14 it look if we wanted to do a sidechain on this? 9:17 Well, there's a couple different models that you could use, and one of them is called a 9:23 roll-up, an Ethereum-style roll-up. 9:27 So this model would allow a single party, who would be the prover, to effectively run 9:33 the sidechain, to advance the state of blocks on the sidechain, as well as to process deposits 9:39 into it and withdrawals from it. 9:42 And under this paradigm, every time he processes this information, he would have to—he would 9:47 be required by the protocol to post the data that he did this to all of the members, to 9:55 all the people who are interacting with him. 9:59 And if he fails to provide the data, or if he provides false data, if he runs the computer 10:04 incorrectly, any verifier who's got money in this roll-up would be able to prove that, 10:11 and thus take—essentially peg out by taking money from the prover. 10:17 So that's one method you could use, and this is similar to the methods that Ethereum uses 10:23 for its roll-ups, its version of sidechains. 10:26 But this comes with some problems. 10:28 A big problem with this is the data availability problem. 10:31 I said that the prover has to prove that he supplied some data to every member of the 10:36 group. 10:37 Well, that's an unsolved problem in computer science, is how do you prove that you gave 10:41 somebody some data? 10:43 If I just ask them and say, did they give you that data? 10:46 They could lie. 10:47 So you can't just assume that everyone's going to be honest in this scenario. 10:51 It's got to be public somehow. 10:54 So that's an unsolved problem. 10:56 BitVM doesn't fix the data availability problem. 10:58 So if you wanted to do a roll-up, you'd have to find somewhere to publish this data that 11:03 everyone can agree on, and hopefully not just dump it all on Bitcoin like some of these 11:09 sovereign roll-ups are doing. 11:11 Okay, so that's an unsolved problem. 11:14 Another method that might work for doing a sidechain would be an SPV sidechain. 11:20 So if you look back at the original sidechain's white paper from 2015, it's available on Blockstream.com 11:27 or one of those. 11:32 They have the sidechain's white paper hosted at their website. 11:35 And if you read it, they didn't originally talk about making a Drivechain. 11:38 They talked about making something called an SPV sidechain. 11:42 So how that works is that you add an opcode to Bitcoin called something like op-prove-SPV 11:50 or something like that, and it would be able to take as a parameter a block of a sidechain 11:56 and assess whether it has a certain level of proof of work created in the construction 12:03 of that block. 12:04 And simultaneously, it would also be able to check a transaction and see if a transaction 12:10 is included in that block. 12:12 So combining those two things, this op-SPV proof opcode, if we had it, it would allow 12:18 us to create sidechain blocks, include transactions in them, and validate on Bitcoin whether those 12:24 transactions are included in those blocks. 12:27 And that allows you to do peg outs. 12:29 So if you had some money in a sidechain, you could burn it, you could destroy it, and 12:35 Bitcoin could actually validate that if we had this opcode. 12:39 And once you validate that on Bitcoin, then Bitcoin can allow you to take a corresponding 12:44 amount of money out of the sidechain. 12:46 So this is the original idea for doing sidechains back when the SPV, back when the side 12:52 chain's white paper came out. 12:54 And we might be able to do that with BitVM because, as I mentioned earlier, if it doesn't 13:01 involve multiple parties, you can emulate pretty much any opcode with it, or at least 13:05 we think you can. 13:07 And that would be an example. 13:09 You'd just have to emulate this op-SPV proof opcode. 13:15 So that's currently one of my initial goals with this thing. 13:17 I want to make the tools necessary to validate SPV proofs in BitVM because I think that's 13:26 a very promising avenue toward getting sidechains out of BitVM. 13:30 It's like one of my immediate goals, or medium-term goals with BitVM. 13:36 Okay, so I've given you two examples of how you might be able to make a sidechain with 13:41 this. 13:42 A third example of how you might be able to make a sidechain is an improved way of doing 13:46 a federation. 13:48 So we have sidechains today in Bitcoin, of course. 13:50 We have Liquid and we have Rootstock, and both of those are federated sidechains where 13:55 you deposit money with a group, and when you want to leave the sidechain, the group gets 14:01 to vote on whether you're allowed to take your money out. 14:07 And so far that works pretty well. 14:09 I'm not aware of anyone who has complained that they've not been allowed to leave Liquid 14:15 or Rootstock, but it does involve a considerable amount of trust in the members of this federation. 14:22 You have to trust that they'll validly process withdrawals. 14:27 One potential way that BitVM could improve this situation is by making it so that you 14:33 only need to trust one person in the federation, to be honest, and not the entire federation. 14:39 That would be a big improvement because, I say not the entire federation, but not the 14:43 core. 14:45 So in today's federations, you typically have something like 11 out of 15, or I think Rootstock 14:49 uses 8 out of 15, where you have to trust a certain number of people to be honest in 14:54 order to allow you to withdraw your money, either 11 or 8. 14:59 So with BitVM, we think we've come up with a way to make it so that you would only have 15:03 to trust one person in the federation. 15:06 So you could have a federation of, let's say, 100 people who are processing withdrawals, 15:11 and you only have to trust that one of them will do it. 15:14 And as long as one of them is honest, then you get your peg out. 15:17 Shinobi has outlined a proposal for how this might work in one of his papers for Bitcoin 15:22 Magazine. 15:24 So if you go to Bitcoin Magazine and search for Sentry, S-E-N-T-R-Y peg, Sentry peg, that's 15:30 what he's calling this idea for how you might be able to do this with BitVM, and you can 15:34 read more about that. 15:36 So there's three proposals. 15:37 We could do an improved federated sidechain, we could do an SPV sidechain, and we could 15:44 do a rollup. 15:46 Three different models of doing a sidechain, none of them work right now, it may be that 15:50 none of them will ever work, and each of them have downsides. 15:54 But yeah, that's where we're at, and that's the current state of the art, which is to 16:00 say very early stages, just thinking of ideas. 16:04 The state of the art is just thinking of stuff right now. 16:07 We're not building any of this yet. 16:09 Okay, so there's that, and then let's talk about how it compares with drivechains. 16:15 That's the next thing that I wanted to talk about today, but I do want to pause again, 16:18 and if anyone has any questions or would like to comment on any of this or has further thoughts, 16:25 this is a great time to speak them. 16:26 So I'll give a few seconds for that. 16:28 If anyone wants to raise your hand, happy to answer that, or if anyone wants to talk, 16:33 that's great. 16:37 Okay, so that's where we're at. 16:40 Okay, so now let's compare SPV sidechains with Drivechains and see which one's better. 16:47 Spoiler alert, in my opinion, Drivechains are better than any, well, than two of the 16:52 three models I just mentioned. 16:55 So let's talk about with SPVs. 17:01 A Drivechain versus an SPV sidechain. 17:03 Well, an SPV sidechain has a similar property to what Drivechain has, which is that in both 17:09 a Drivechain and in an SPV sidechain, if you want to withdraw your money from the sidechain, 17:16 there's a transaction that you have to post. 17:19 Now in a Drivechain, this transaction is posted on the sidechain itself. 17:23 You post a transaction saying, I want to withdraw, and then miners on Bitcoin begin voting on 17:29 whether to let you do that. 17:32 And if you get enough votes from miners over the course of a three-month voting period, 17:40 then you get to withdraw your coins. 17:42 So this explicitly asks miners, I would like to withdraw, please allow me to do so. 17:50 With SPV, it's more implicit. 17:52 With an SPV model, if you want to withdraw from the sidechain, you would post a transaction 18:00 on the sidechain burning the coins that you have there, and you would take a copy of that 18:05 proof and post it on Bitcoin in a Bitcoin transaction saying, here's my proof that I 18:12 destroyed X coins on the sidechain, therefore let me have X coins on Bitcoin from the sidechain 18:20 aggregator address where everyone's funds are. 18:23 And Bitcoin would validate your proof and then say, okay, he burned three bitcoins on 18:27 the sidechain, therefore he's allowed to have three bitcoins from the sidechain address 18:31 on Bitcoin. 18:34 This has the same issue as Drivechain, where miners get to decide whether this happens 18:40 or not, because in Bitcoin, miners approve all transactions. 18:45 If you can't get some miner somewhere to mine your transaction, then it's not going 18:51 to happen. 18:53 So in a sense, the SPV sidechain has the exact same issue where miners are still in some 18:59 sense voting to allow your withdrawal. 19:02 Some miner is going to process that transaction, and if the other miners continue building 19:07 blocks on top of his, that is effectively equivalent to them approving that withdrawal, 19:13 or at least this is how, you know, from my perspective as a person who likes Drivechain, 19:18 this is how I view a certain equivalency there. 19:22 But there is something that's kind of nice about SPV Drivechains, which is that they 19:26 don't explicitly ask miners to vote. 19:30 Like in a Drivechain, you do. 19:32 You say, here's my withdrawal request. 19:34 Miners please vote on it. 19:36 If we were able to do an SPV sidechain, you wouldn't explicitly ask them to do anything. 19:40 You would just post a transaction and expect Bitcoin to do what it does, which is if you 19:46 pay enough fees, your transaction gets into a block. 19:50 So I kind of like that. 19:51 I like the idea of a SPV sidechain a bit better than the idea of a Drivechain in the sense 19:58 that it allows you to do this stuff without just assuming Bitcoin will work as it has 20:05 always worked. 20:07 You're not explicitly asking miners to do anything different. 20:12 So that's my thoughts on that. 20:15 So maybe we could make an SPV sidechain through that. 20:18 It does have another downside though, which is that with an SPV withdrawal, if miners 20:24 decided to, you know, not mine your transaction, there's nothing in Bitcoin that like alerts 20:33 people to the fact that there's this issue happening where there's someone getting censored 20:39 by miners. 20:42 That's a feature that Drivechain sort of introduces by explicitly asking miners to vote and then 20:46 having them register their vote in Bitcoin blocks, like explicitly, like you can see 20:52 the votes. 20:53 It allows you to actually see what miners are doing. 20:56 It gives you insight into whether someone's being censored on a drivechain. 21:01 And the same thing isn't exactly true with SPV sidechains. 21:05 You could probably get something similar if someone wrote some software that like, you 21:10 know, allowed people to post a transaction and say, look, I paid a sufficient fee and 21:14 yet it's not being mined. 21:15 You could maybe do something like that. 21:18 But Drivechain like builds that into Bitcoin's consensus and SPV sidechains would not. 21:23 So this is one reason why Paul Sztorc often says that Drivechain is more secure than the 21:31 old, than the original SPV model, because it actually bakes in the consensus of like 21:36 checking on what miners are doing and watching for censorship. 21:40 It builds that right into Bitcoin, whereas with an SPV sidechain, it would not. 21:45 Okay, so that's some comparison of SPV. Let's also compare rollups for a minute with drivechain. And effectively, the argument here is the exact same. 21:57 If we had rollups, then similarly to how they work on Ethereum, the expectation is that you would post a proof that you're allowed to withdraw from the sidechain on Bitcoin. 22:10 And that would be, then you just do it. 22:14 Bitcoin would need to have some sort of op start verify op code that would then validate that proof. 22:21 An SPV proof and a zero knowledge proof are a bit different in that a zero knowledge proof doesn't reveal any information about the coins that you're withdrawing, whereas an SPV proof would reveal everything about them. 22:33 You have to say, these are my coins, here's my burn transaction, all of this stuff. 22:38 With zero knowledge proofs, you could hide a lot of that data. 22:42 But from a high level perspective, they're doing the same thing. 22:44 You're proving you're allowed to withdraw. 22:46 And then if the proof is valid, Bitcoin lets you withdraw. 22:51 But that also means it has the exact same downside, where if miners decide to censor that transaction, Bitcoin doesn't have any consensus level way of representing or informing node runners that censorship is happening. 23:06 And thus, node runners can't take action or they could only take action if they were running extra software that did make that information available to them. 23:15 Drivechain sort of bakes that in and has like an alert system, or at least I think it has an alert system. 23:20 If miners are not sure, I forget I said that because I'm not sure that's true. 23:25 OK, so that's a comparison. 23:27 The same comparison applies to both rollups and SPV sidechains. 23:31 They both have this similar quality where in comparison with Drivechains, there's less information informing the blockchain about what's happening. 23:43 And then there's the last one, which is the federations. 23:46 So in a federated model today, you're trusting eight people or 11 people or whatever the quorum for the multisig is. 23:54 If we improved this with BitVM using Shinobi's Sentry Pig idea or something similar, we could get it down to just trusting one person, to be honest. 24:03 And how does that compare with Drivechain? 24:05 Well, in Drivechain, you're trusting that miners will be honest, that as a set, miners will process transactions faithfully according to the rules of the sidechain and according to the rules of Bitcoin. 24:18 And with this other federated model, you're trusting at least one person in a fixed group. 24:25 So you pick a fixed group of validators, verifiers for this sidechain. 24:31 They're the ones who act as sentries. 24:33 And whenever someone requests that they want to withdraw from the sidechain, the prover would have to prove that they allowed them to do so. 24:41 And if their proof is invalid, the sentries, any one of the sentries can falsify the proof and show that it was wrong and thus take money from the prover. 24:54 But this requires that you trust at least one of the sentries. 24:58 So this is different from Drivechain, where in a Drivechain, you can't point to any particular person and say, I need to trust that person or this member of this group in order to withdraw. 25:11 But with a Sentry Pig or with any kind of federated sidechain, you can. 25:17 You can identify the group members. 25:19 You can identify their public keys. 25:20 You can say, these are the people who I have to trust in order for me to withdraw, at least one of them, for me to withdraw this money. 25:28 So that's a point of comparison with them. 25:31 I think for many people, that'd be good enough. 25:33 Like many people don't want or are OK with being able to point out and say, I know who I have to trust. 25:40 And it's at least one of this group. 25:41 You know, maybe the sentries are Matt O'Dell, Marty Vend, Peter McCormick and Guy Swan. 25:47 And you're saying, I just have to trust one of those guys is honest, but I do trust them. 25:51 Maybe I've met some of them and I don't think they would be dishonest in this. 25:54 So I'm OK with that. 25:56 Other people would want to say, yeah, I don't want to be able to name the person who I'm trusting. 26:01 I would rather be able to point to the whole amorphous set of miners that constantly changes and say, I'm trusting that amorphous blob of people without being able to point to any specific one and say, like, I know that this guy is one of the people I'm trusting. 26:17 So there's that. 26:19 So I've talked for 30 minutes now about Drivechain and I'm running out of things to talk about about the VM, I mean, and I'm running out of things to talk about. 26:29 So I'd appreciate some hands up to give me thoughts and prompt me. 26:34 Let's go with Satoshi and Joyer. 26:36 I think that's yeah, Satoshi and Joyer. 26:38 Looks like you've got your hand up. 26:40 What have you got to say? 26:41 So from those, I have some questions that might help the audience as well. 26:47 And so from the three versions of sidechains that you mentioned, SPV, Rollup and Federated, I just joined. 26:56 So I missed the earlier few minutes, but that's from where I heard. 26:59 And I have an important question where do you see any way to enforce whatever happens on the sidechains of whether SPV, Rollup or Federated, the transaction fees that are being used? 27:11 The fees to actually go back to miners. 27:15 Yeah, I do see some ways of doing that. 27:19 So Blind Merged Mining allows you to accomplish this and so does regular merge mining. 27:23 If one of the things that the sequencer or the prover has to do in order to advance the state of the blockchain is get a transaction mined in Bitcoin, then you can use the techniques of Blind Merged Mining or regular merge mining to do that. 27:40 And then the fees that he collects on the sidechain, at least some or maybe even all of them, go back to Bitcoin. 27:49 Depending on how the sidechain is modeled, you could even say he has to give like 50, 60, 90 percent of the fees to Bitcoin in order to get blocks mined. 27:59 So there are ways of doing that. 28:02 Do any of these sidechains really need that like validity to be like the finality to be a blind merge mined? 28:09 Can't they just because you really you're just you're just using these three models for the withdrawal. 28:15 So as long as there's something going on, on, you know, on other chain and you can prove that this is a withdrawal of that other chain, I don't see how that you can really enforce the fees to go back to the miners unless, you know, the miners can say, for example, we're not including any of these withdrawals unless, you know, you have a sidechain where we can blind merge mine, right? 28:34 Well, I suppose it depends on how you design the model. 28:36 So if you could have a consensus rule of the sidechain, say if there are $100 in fees, $90 have to be paid out to Bitcoin miners in a transaction fee. 28:47 You could do something like that. 28:50 But there are probably several models you could use to ensure that that money goes back to back to Bitcoin miners. 28:57 So, yeah, I don't know what would be the incentive of the, you know, of the sidechain to make this type of model. 29:05 I mean, maybe other than, you know, to get more adoption from the miners to include it and then like actual finality on the main chain. 29:13 But I kind of see like where, why would they even, you know, want to give any fees to the miners at all, you know? 29:20 Well, ordinarily, one of the reasons why it's nice to have things pegged into Bitcoin somehow is that it gives you, it allows you to inherit some of Bitcoin's double spend protection. 29:33 For example, if you, if in order to follow the sequence of blocks on the sidechain, you had to look at Bitcoin and say, you know, what are the, what block hashes have been included in a Bitcoin transaction in a mine? 29:47 That would allow you to like follow a sequence of transactions that have a lot of proof of work behind them, because Bitcoin has a lot of proof of work approving all of these transactions. 29:56 And that would make it so that it's difficult to double spend on the sidechain or to like redo a block, because in order to do that, you'd have to like undo a transaction on Bitcoin and replace it with a different one, which of course is really hard and really expensive. 30:11 So in general, that's the, that's the reason why merge mining happens, is so that a sidechain that otherwise wouldn't have the same amount of validators or block producers, the same level of proof of work, would inherit it. 30:28 So in essence, you're saying that the finality that they would gain from Blind Merged Mining is enough of an incentive for models to use that? 30:36 I think it's a good incentive. Whether it's enough depends on whether it happens, but it's a good reason to do it. 30:43 Okay. And there's one more thing I wanted to point out. As far as like the withdrawals of SPV Rollup or Federated, it would be a lot harder. I think it's fair to say that it would be a lot harder to, even though, yes, you can, the miners can censor and not include those, right? 31:00 But as long as like, you know, let's say 10% or 5% of a miner hashrate will include it. Now, the miners would just have to, you know, completely ignore and not build off those blocks. 31:10 And that's a lot harder, basically, to collide, to censor these type of withdrawals from these sidechains. 31:17 So I think these sidechains would have a benefit of a withdrawal from that point of view, where a Drivechain, you actually do need the supermajority approving it, where here, even if the supermajority doesn't approve it, it would have to be where the supermajority really doesn't want it, no matter what, and, you know, is not building off any blocks. 31:35 Well, in both cases, it seems to me, whether you're doing an SPV model or Rollup on the one side, or a Drivechain on the other, in order for miners to censor a peg out, they have to collude in both cases, because if any miner is just going to, if you can just trust that some miner will mine your withdrawal transaction, then it'll go through, then miners aren't going to censor that. And you're good. You're not going to get censored. Some miner is going to do it. 32:04 You're good on SPV, Rollup, or Federated, but you're not good on the Drivechain if just any one miner wants to include it. 32:10 Well, so, right, with the Drivechain, there's a voting mechanism where miners explicitly vote on whether to allow a withdrawal. And if they, the only way your transaction's not going through in a Drivechain context is if a certain percentage of them agree to block your withdrawal, and the other miners don't fix that situation. 32:40 Like by booting them out or stopping, not building on their blocks. But in both cases, you're still at the mercy of trusting that some percentage of the miners are not going to collude to prevent your withdrawal. 32:54 I think they're very similar in that respect. But with Drivechain, you actually build that assumption into Bitcoin and you say, we're actually going to keep an eye on them and see what they're voting on. 33:06 We're going to have this as part of Bitcoin that all nodes get to see this. And with the SPV model, that's not built into Bitcoin. You could build that software separately, but Drivechain tries to make that part of Bitcoin's consensus. 33:20 And I think that's wise, personally. 33:24 Thank you. I can go on about this, but I kind of want to let Alex talk. I think I bought in before him. 33:31 No problem. Can you guys hear me? 33:34 I can hear you, Alex. 33:35 Okay. SupertestNet, I have somewhat of a theoretical question. So far, my understanding is that BitVM can emulate an optimistic roll-up. Is there a reason why a regular ZK roll-up cannot be emulated as well if we continue the game between the prover and the verifier to one more step, which is to prove that no fraud proof exists? 33:59 And therefore, the proof provided by the verifier becomes equivalent to the ZK roll-up proof of valid computation without needing to take anybody's bond or do things like that. 34:13 I do think you can do a ZKP roll-up on BitVM, but it would also have characteristics of an optimistic roll-up because the entire paradigm of BitVM is optimistic. 34:33 The prover doesn't have to prove anything if he's not challenged. 34:39 And so this model where you assume he's going to act in good faith and you only take money from him if he does not gives whatever program you're running the characteristic of an optimistic protocol where there's this assumption that the prover will act well and there will only be some kind of on-chain proof if that assumption fails. 35:06 So yeah, you could do a ZKP roll-up, but it would have characteristics of an optimistic roll-up as well. 35:15 When you say it would have characteristics of an optimistic roll-up, do you mean that it would have to have the same challenge response protocol and only if the protocol succeeds, then the coins are either withdrawn from the bonded oracle, bonded computer oracle, so to speak, or go somewhere else as punishment? 35:35 It would definitely still need the challenge and response thing, but also it would need the verifier. 35:42 You would need to either be a verifier or trust a verifier to make that verification. 35:52 If the verifiers aren't doing it, then the prover can get away with anything. 35:56 So the optimistic roll-up scenario assumes that at least one verifier who might be yourself is actually doing their job. 36:03 But you just stated that BitVM can emulate a non-optimistic, in other words, a regular ZK roll-up, which doesn't have a fraud proof. Instead, it just provides proof of correctness of computation. 36:18 So how do you square that circle? 36:21 It's like inside the BitVM, you'd be running this ZKP thing where from the computer that's running this perspective, there's no optimism happening. 36:33 But all of that's happening off-chain. 36:35 On Bitcoin's blockchain, none of the results of the computer are verified or falsified unless a verifier wants to do it. 36:47 I understand, but what I suggested two minutes ago, which is that if you take the game one step further, which is to say that in the optimistic roll-up, the prover plays with the verifier, and then the verifier can manufacture a fraud proof that decides which way the coins that are locked up in the contract go. 37:07 If you take that game one more step where the verifier basically says, I have not detected a fraud proof and the off-chain BitVM computer produces zero or one output with zero being, let's say, invalid computation and one being valid computation. 37:24 Can't Bitcoin smart contract that's native on Bitcoin L1 decide which way to send the coins without necessarily exposing the off-chain game altogether? 37:38 In other words, then it would be a better emulation of the ZK roll-up than the conventional optimistic roll-up game that so far has been proposed. 37:49 I think it sounds like you could, if I'm understanding you correctly, you could make a program that just outputs a zero or a one using zero knowledge proofs. 37:59 And there could be a script on Bitcoin that allows the prover to take the money if it's a one and the verifier to take the money if it's a zero. 38:08 However, that script will only activate if the verifier makes issues a challenge. 38:15 That's where I'm saying it inherits the characteristics of optimism, where at least one verifier has to do something. 38:22 Right. But you mentioned that, for example, in the SentryPeg proposal, there is a federation which bonds itself and then there is a hundred sentries that police the federation. 38:34 But visualize that we could relax the assumptions about the economic game a little bit and visualize that instead of a federation that bonds itself, somebody on Bitcoin essentially tries to peg out into a smart contract on another chain. 38:53 And then the smart contract on another chain has hundreds of verifiers that participate in the smart contract on the other chain. 38:59 And then when somebody wants to peg back out of that other sidechain, he needs to act as a prover to basically peg out his own coins. 39:12 And therefore, he has to play a game with a smart contract on the other chain where it would be sufficient for one verifier to play the game out to the end with them and produce a bit that would allow him to release the coins that he locked up himself when he pegged into this other chain. 39:27 The idea of using another smart contract on another chain to act as the verifier or I suppose the prover is an interesting and a novel thought to me. 39:42 And I'd like to think more about it. 39:44 Let me elaborate on that idea a little bit. 39:47 The conventional idea that I saw in BitVM assumes that there is a game, economic game played by off-chain actors. 39:56 My idea is that rather than having liveness assumptions on these off-chain actors, in other words, a federation composed of parties that have to do some stuff and then a bunch of sentries that are off-chain but interactive actors. 40:11 You can maybe replace both the federation and a set of verifiers with a single smart contract on another chain. 40:20 And the advantage of the smart contract is that anybody participating in that smart contract cannot cheat at all because the rules of the smart contract do not allow cheating. 40:28 They're locked in. 40:29 So therefore, rather than having a bunch of parties that represent the federation and a bunch of parties that represent sentries, what if you could simply have a smart contract on another chain that essentially the peg would work something like this. 40:44 I want to peg out, let's say, one Bitcoin to this other chain. 40:47 I talk to the smart contract. 40:50 I generate a deposit address on Bitcoin. 40:54 Then I deposit my own Bitcoin into this deposit address, but I cannot withdraw it yet. 40:59 And then later I can go back to the smart contract and then talk back to the smart contract and say, look, I'm going to burn this token issue to me by the same smart contract in the same amount as my deposit. 41:12 And then anybody who wants to participate as a verifier in that smart contract is a non-interactive party that simply could be anybody else pegging in and out of that smart contract can sort of temporarily assume duties of a verifier. 41:26 And when somebody else shows up to peg in or peg out, that verifier can verify my proof and that verification would presumably release my peg in to allow me to peg out if the proof is actually valid. 41:40 One of the things that sounded a bit dangerous with your idea, there's something in your idea that sounded a bit dangerous and correct me if I'm wrong, but it sounded like you create this Bitcoin address and there's only one key holder in it. 41:57 No, it was a one key holder. 41:59 That would be unsafe because you couldn't store the private key on this other chain safely. 42:04 That's what I was about to say. 42:06 Right. But as a mechanism to guard that deposit, you would need to do some kind of. 42:14 And again, this is just sort of a stream conscious. Don't judge me too harshly because I don't have all the details worked out yet. 42:20 But you could have some kind of multi-party computation that generates a deposit address where one party is the depositor on Bitcoin. 42:28 And the other party is a collection of passive verifiers as opposed to interactive verifiers. 42:34 It's just a collection of people who want to either serve as verifiers inside the smart contract on this other chain. 42:42 And therefore, one of them will be sufficient to peg out, assuming that verifier checks the prover who is trying to prove burning of coins on this other chain. 42:50 Or anybody who wants to participate in that smart contract to peg in their own Bitcoin assumes the duty of the verifier temporarily. 43:01 And has to peg out anybody who's waiting to be pegged out in the queue because the other side of the multi-party computation key was generated by the smart contract. 43:12 And presumably together they generated a deposit address and they have to cooperate in order to compute the withdrawal transaction together. 43:22 It sounds like there are a couple of ideas in your stream of consciousness there. 43:29 One of them sounded a lot like the sentry peg. 43:31 At one point you mentioned having anyone who wants to be a verifier on this other chain can do multi-party computation in order to create the private key that's going to be the second key in the 2 of 2 multisig. 43:46 And that certainly sounds plausible. 43:48 I think you could design that. 43:49 And I think that's kind of the direction that Shinobi is trying to head in his idea of having sentries. 43:55 So maybe look into that for more. 43:58 And then because I was thinking of what to say in response to that, I was able to observe that you seemed like you were elucidating some alternative model to that. 44:07 But I didn't fully catch it. 44:09 I think that there's slight novelty in my idea, which you mentioned earlier, which is to replace one of the parties in the game. 44:17 Instead of having online interactive parties to just designate a smart contract on another chain as a mostly passive non-interactive party that plays the role of the verifier. 44:30 Whereas the person who wants to peg in the coins into this other chain will be forced to act as a prover and therefore interactivity assumption is already true by default because they want to peg out their Bitcoin at some point in the future. 44:44 So if the smart contract on the other chain acts as a passive verifier, the smart contract could have hundreds of thousands of sentries that just simply sign up to be one of the honest verifiers in exchange for, let's say, one tenth of a percent fee or something like that. 45:02 And as long as one of them shows up and verifies the proof, perhaps that's enough to peg out securely. 45:07 Or the extension of that idea was that anybody trying to peg in or peg out has to assume the duties of the verifier temporarily and peg out the previous guy who tried to peg out. 45:20 And this is how you eliminate the interactive requirement on a set of verifiers to run as interactive online parties. 45:28 I'm not able to fully keep up with your stream of consciousness, but it sounds pretty good. 45:34 If you could write some of this out in the Telegram chat, the BitVM Telegram chat, I think that would be really helpful and it sounds really interesting and I might be able to follow along. 45:46 I was thinking of doing that. I'm just too ashamed to do it at this point because the idea, even though it seems novel and interesting, possibly has some fatal flaws. 45:54 So maybe I'll write it to you in a private message in Telegram and maybe we can discuss there. 45:59 Sure, that's fine. But I will encourage you to not be afraid of failure and of being incorrect. 46:06 Thomas Edison was wrong 10,000 times before he figured out the way to make the light bulb. 46:12 I admire people who don't have the fear to just say, I'm going to throw out an idea, even if it might have a fatal flaw. 46:20 But there you go. Feel free to also DM me if that's a concern for you. 46:25 Okay, so cool. We've talked a little bit about Drivechains, about BitVM, its history, its limitations, the kinds of sidechains we might be able to create with it. 46:36 We've compared some of them with Drivechain. I think we're at a pretty good position here. This is going really well. 46:43 Are there any other hands up or anyone who'd like to contribute some thoughts on this topic? 46:50 I'm not seeing anything. Moonsettled, I'm going to volunteer you, if you would come up here and provide us with some of your thoughts. 47:02 I think that you've had some excellent criticism of some of the limitations of BitVM, and I don't feel like we've gone over those sufficiently. 47:11 He's not up here, so I guess he doesn't want to. In that case, let me try to go over some of the limitations. 47:17 Let me try to go over one of the limitations that I see with BitVM that has, I think, not perhaps received enough attention yet. 47:25 And that is fee costs. So one of the things that affects BitVM, and it affects most off-chain protocols, is that usually you're using Bitcoin as a judge in case something goes wrong. 47:39 We do this in Lightning, for example. You have two parties who make a Lightning channel together. If one of them broadcasts incorrect state, then only then do you go on Bitcoin's blockchain to say, here's the correct state. 47:53 But that assumes you're able to do that and that you have a monetary incentive to do that. 48:00 For example, you might not if you only have a dollar in that Lightning channel and the fee to actually adjudicate on-chain to make a transaction on-chain would be $30. 48:12 You're probably not going to want to do that to save yourself $1. 48:16 The cost of some off-chain protocols increases if they require more than one transaction in order to adjudicate. 48:28 If you require any multiple of that, let's say you require 10 transactions, then the amount of money you can safely lock up in one of these protocols is multiplied by 10. 48:38 If it took 10 transactions to withdraw from a Lightning channel, then it wouldn't just be that you're not going to adjudicate if there's only $1 at issue. 48:49 Now it's $10 because now it's going to cost me $10 to adjudicate. I'm not going to do that unless the amount of money I have is more than $10 at stake. 48:59 In the case of BitVM, you could have maybe even 100 transactions depending on the complexity of the program. 49:09 If you wanted to withdraw from a BitVM address through the hard path, through the one where you say your counterparty gave some incorrect computation, 49:22 then you could have to do, depending on the complexity of the program, a lot of transactions in order to prove that they did something incorrect, that their code was bad. 49:34 That makes it really expensive. 49:37 If fees are $30 a piece, as they were just last month, then if you have to do 100 transactions, you're talking about a $3,000 fee in order to withdraw from a BitVM in the difficult case or in the problematic case. 49:54 That means you're not going to do that if you have less than $3,000 in a BitVM address. 50:00 That's a limitation of it that I think is worth mentioning. 50:06 At least until we come up with a better design, you're probably not going to want to put a small amount of money in a complicated contract because you wouldn't be able to enforce it if you needed to. 50:20 That's a limitation that is not… 50:23 I have a question about that limitation, if you don't mind. Is that a limitation only for the verifier player, as the model stands right now, not for the prover player? 50:33 No, the fees are shared between them. 50:36 They could be shared. Are they just assumed to be shared or they could be shared in any way? It's up to the protocol between them, isn't it? 50:44 Yeah, it's up to how you design the protocol and you could design different models. 50:49 In fact, the version that I implemented is different from the version in the white paper, but the version in the white paper is the smarter version. 50:57 At least I think it's better than my version. 50:59 In his version, for every step of the computation, there is a challenge and a response. 51:06 Both of the parties, the prover and the verifier, each have to take turns broadcasting a Bitcoin transaction and paying for it. 51:15 If either one of them stops doing it at any point, then that person loses. 51:20 You have a certain amount of time to do the challenge or do the response, and if you don't do it, then you're the loser of the game. 51:29 That makes it so that they share costs for doing incorrect. If one of them does an incorrect computation or does a challenge, then they share costs for that. 51:38 In my implementation, which is much stupider than Robin's idea, the prover bears the entire burden of all the costs. 51:47 The prover has to do everything. 51:49 I think the challenger just has to make one or possibly two transactions, and the verifier just has to make one or two transactions, and the prover does everything else. 52:01 When you say everything else, you mean the prover will still have to broadcast 100 transactions or the prover will have to carry the burden of paying for one? 52:11 The prover has to broadcast all of the transactions. 52:13 If there's a challenge, he has to prove everything. He has to go through the whole program in my implementation and prove that everything was correct. 52:21 That's a stupid way of doing it, but I did it that way because it was easy and because I don't know how to implement the hard thing that is in the white paper. 52:33 Can I ask you a question, maybe a leading question? 52:36 If you assume that the prover and verifier engage in this protocol and assume that the prover has everything to lose by losing the entire bond or half of it gets burned or something like that, is there a simple way for the prover to prove that the verifier failed to complete the protocol? 52:56 Well, time locks are the way that Robin does it. 53:00 The prover puts the ball in the challenger's court, in the verifier's court, by saying, hey, you've got to make a transaction in order to say what part of this you think I messed up. 53:13 And if the verifier does not do that, if he just bides his time, a time lock expires and the prover can take his money because the challenger didn't say, here's where I think the mistake was. 53:23 But like you said, in order to take his money, the prover has to broadcast the whole sequence of challenge response transactions that preceded that point in the protocol, right? 53:34 Not a whole sequence. He just needs to do it once. 53:39 The challenger initiates the challenge, says, I think you did the computation incorrectly. 53:44 And he does that by saying, I think you got this part of the protocol. I think you did this step of the execution incorrectly. 53:51 The prover can then reply and say, here's my proof that I did it correctly. Now the ball is in the challenger's court again. 53:57 And if the challenger doesn't move from there, if he doesn't make another challenge, then the prover gets to take the money after a time lock. 54:05 Which to me is equivalent to what you were asking, is there a way for him to prove that the verifier didn't have anything to say? 54:12 Yeah, you just wait until the time lock expires. 54:15 Well, but this time lock idea has implicit assumptions on the nature of the game between the prover and the verifier. 54:21 For example, it assumes that the prover and the verifier are both online parties engaging in an interactive protocol. 54:27 I was just hoping that there would be a way to make the sidechain itself with its own rules or a smart contract on that sidechain be one of the parties. 54:37 Namely, I would like that to be a verifier rather than a prover, because a prover would be the person trying to prove that they burned Bitcoin on this other sidechain. 54:46 So in that model where you have passive verifier smart contract, let's call it that, with multiple sentries or multiple verifiers perhaps. 54:54 In that model, do you think there would be a way not to depend on Bitcoin time locks, but simply to depend on the prover eventually being able to advance the game? 55:05 Simply because somebody on this sidechain will interact with that smart contract, which will force the game to be advanced one way or the other. 55:15 And the game will bubble up to be either one or zero at the top of the NAND tree, let's say that. 55:21 And that will allow the prover to either take the money or not take the money on Bitcoin. 55:27 It sounded like you had a very long question, but I think it started out with do you think there's a way? 55:35 We think there's a way to do it without time locks, basically. That's the beginning. 55:39 And then I suggested a way to do it without time locks, kind of implicitly suggested a way. 55:43 And that would be rather than having a time lock, you simply wait for the game to terminate on the sidechain by prover interacting with the contract, which represents one or more verifiers. 55:56 And then that interaction eventually, because the sidechain is progressing and the smart contract has people coming to it and invoking it. 56:04 So eventually after a subsequent invocation by the prover himself or somebody else with a smart contract, the smart contract will be forced to complete the game essentially. 56:17 And then completion of the game produces 0-1, which allows the prover to peg out these coins and take them back on Bitcoin. 56:29 So it seems like you're inviting me to comment on the model that you just proposed, as well as asking me if I think there's any other way to do it. 56:38 Yes. 56:39 Sorry for two complicated questions in one. 56:41 Yeah. 56:42 So let me answer the first one first. 56:46 I don't currently think that there is a promising way to do it without time locks. 56:53 So that's my answer to the first one. 56:56 But I guess part of that answer is also I think there might be a way to do it that hasn't occurred to me. 57:04 I would like to see additional thoughts on this, so that if we could come up with a way to do it without time locks, that'd be great. 57:11 So then secondly, your particular proposal involves having the smart contract itself be something that acts as a counterparty in this thing, rather than using a time lock. 57:25 Rather than using an interactive online federation or an interactive online set of sentries and a federation. 57:34 Just a smart contract on the other chain. 57:36 And the advantage of the smart contract, as you will understand, is that it cannot misbehave. 57:41 It can be assumed to be engaging in the protocol perfectly correctly, because it cannot deviate from its programming. 57:48 So that's an additional advantage to using a smart contract, because you can simply assume that the smart contract will never cheat. 57:54 I'm not entirely willing to admit that a smart contract can never cheat, when we've seen a lot of them that have had bugs in them. 58:07 Unless there's a bug, of course, right? 58:09 Right. That's all I wanted you to say, was unless there's a bug. 58:12 Setting aside that assumption, right, like of course there's an assumption of no flaw or a bug in a smart contract. 58:18 But setting aside that, the smart contract can be constrained much more than an online interactive federation together with a bunch of online interactive sentries. 58:31 From my perspective, a smart contract is effectively the same as a very large multisig. 58:36 Because you're relying on the assumption that miners of this alternative chain, as well as the node operators of that alternative chain, are going to run the code of this smart contract. 58:49 And so you expand the concept of a federation to include all of the node runners and all of the miners, which is good. 58:56 I like the idea of having such a large federation. 58:58 Actually, I'm not making that assumption, believe it or not, because it's not necessary, right? 59:02 Because the only thing you need to assume is that there is a smart contract that's programmed to engage in this game with provers. 59:10 And it's programmed with bugs, assuming it has no bugs, of course. 59:15 It's programmed to never cheat in this game, but it does need a bunch of sentries or a bunch of participants that enable the game to complete. 59:24 As long as one of them participates by interacting with a smart contract and essentially providing liveness to the smart contract. 59:32 It's not necessarily necessary to assume that either miners or node operators of this other chain participate. 59:39 It's just that anybody can come up and become a sentry or a verifier by maybe signing up with a smart contract and getting a small fee for verifying the game. 59:50 But the verifier will be constrained by the smart contract to simply provide liveness and interactivity. 59:57 We don't need to police any party invoking the smart contract, because the smart contract is already constrained to only do what it's programmed to do. 1:00:06 It sounds pretty good. The more you talk about it, the more I like it. 1:00:11 So I hope you give some more details about it in a Telegram post or similar, and then we can talk about that. 1:00:20 By the way, Hampus mentioned in the comments that it would be really good if everyone was directed to where they can actually join the BitVM Telegram group that we keep on mentioning. 1:00:32 So I think I'm going to spend a couple of minutes... 1:00:50 Okay, we lost you, so maybe I'll ask a question for now. 1:00:55 Alex, are you saying where anybody can become a verifier, kind of like the auto-compounding contracts work, where anybody can push the auto-compound? 1:01:06 Is it something like that? 1:01:07 Well, I mean, my initial idea to improve on the sentry peg that I saw being proposed in the brainstorming session of the BitVM hacker group, which was a federation that bonds itself and then there is a bunch of policing sentries, 1:01:21 is that the problem with that sentry peg is that there is a lot of actors that need to be online and be interactive with each other. 1:01:30 In order to make the protocol work, which creates these economic incentives that are difficult, right? 1:01:36 So my idea was that the person who wants to peg into the sidechain has to act as a prover rather than a verifier. 1:01:45 And the verifier simply needs to verify that that person has burned the sidechain Bitcoin that was supposed to be there. 1:01:53 And the verifier simply needs to verify that that person has burned the sidechain Bitcoin that was issued by a smart contract back to the smart contract that verifies the burn. 1:02:05 So you could essentially replace both the federation and a bunch of sentries or verifiers with a single smart contract in theory. 1:02:13 Now, mechanics of how to do this are difficult because it's not really a multi-sig setup where one of the members of the federation has to peg out and a single online sentry can detect the foul play by the federation and therefore they can slash the federation. 1:02:35 That was the proposal. So the details of how the smart contract enables on Bitcoin are a little vague in my head, but this is something that Supertestnet... 1:02:49 I have a question on the original model. From what I understand, the federated and the sentries, are they predetermined beforehand? 1:03:01 Well, there's discussions on making one or both dynamic. That's potentially possible, I think, because you could potentially have multi-sig setups which have dynamic membership in theory as opposed to a fixed membership. 1:03:16 At least that would be desirable for sentries. Whether or not that's possible, there was some talk of doing some kind of frost protocol or something like that where people can come and go as being sentries and therefore it would not be strictly like a whitelisted set of predetermined sentries or whitelisted set of predetermined federation members. 1:03:37 That was my understanding that you can start out with a fixed set, but potentially it's possible to generalize it to a dynamic set for either federation or the sentries or both. 1:03:48 I see. Because from what you're saying, it seems like your model would be solving and making it more dynamic. 1:03:56 Well, my model, if it holds any water, and this is why I'm reluctant to post a proposal because I suspect there might be some kind of fundamental flaw in it where it's impossible altogether. 1:04:07 But assuming it's not fatally flawed, my model would be that the person who wants to peg out has to perform the role of a prover who proves that he's burned the Bitcoin to a smart contract that issued that Bitcoin on the sidechain. 1:04:24 But the smart contract on the sidechain would need to have a bunch of sentries that at least one of them has to verify the prover. 1:04:33 But rather than having an online interactive sentry that has to participate in the interactive online protocol with the verifier, it's the smart contract itself that participates non-interactively with the verifier. 1:04:47 But the smart contracts are notoriously passive unless they're invoked. 1:04:51 And therefore, you would have a situation where essentially all the invocations would come from the prover while the smart contract would have to respond to the invocations and act as a verifier passively in this challenge response protocol. 1:05:06 And then the game between the prover who is trying to peg out and the smart contract which has to approve the peg out upon proof of burn, that game could be initiated by the person trying to peg out. 1:05:19 But it could be completed with this proof of non-fraud as I kind of call it for now, which is that it produces the right bit 001 which enables the prover to withdraw Bitcoin back to himself on Bitcoin from the contract. 1:05:40 That's not necessarily time locked. 1:05:42 Supertestnet said that he doesn't see a way to do it without time locks, but I think there may be a way to do it. 1:05:49 It's still an open question. 1:05:52 Maybe Supertestnet will come back and comment on that. 1:05:55 Yeah, I think it's still an open question. 1:05:58 I'm not confident yet that we found a way to do it. 1:06:01 But I like your idea. 1:06:03 I would like to have more thoughts on it. 1:06:04 It's helpful for me if I can see it written down so I can compare earlier parts with later parts. 1:06:09 Stuff like that. 1:06:11 I want to go to one of the comments from the chat. 1:06:16 So somebody in the chat asked two questions. 1:06:19 His name is BTC Jonas and he says, do you think possible additional features like BitVM will give new government regulatory, regulative attack surface? 1:06:29 So, yes. 1:06:32 No, you said will. 1:06:34 No, I don't think it will, but I do think it might. 1:06:37 An example of something that I hope gives us a new government regulative attack surface. 1:06:43 I would like to make something on BitVM similar to Tornado Cash so that you can send money to like sanctioned countries and stuff. 1:06:51 And if we do that, then I definitely like if we get to a point where you can do that on BitVM, then that would open up a new government regulatory attack surface. 1:06:59 They could try to shut it down on the grounds that, you know, that's illegal or something like that. 1:07:04 So I hope, you know, something like that happens and I'll be putting in my efforts to make it happen. 1:07:10 But yeah, currently, I don't think we'll right now. 1:07:13 I don't think we'll get there. 1:07:15 So that so I don't think it will. 1:07:18 But I hope it does. 1:07:20 And secondly, the question is, is there or even is there is will be a security budget issue might be BitVM be a solution to keep miners busy and proceeds sustainable? 1:07:33 Well, it is an off-chain protocol. 1:07:36 So by design, most of the stuff that happens in BitVM happens off-chain. 1:07:40 And as long as that's happening, as long as everything's happening off-chain, they don't contribute to Bitcoin's fees. 1:07:47 However, if BitVM was popular, then perhaps you have a lot of people adding money into these BitVM addresses. 1:07:56 And so that would result in an increased amount of transactions on Bitcoin and consequently increased fees. 1:08:02 So yeah, if BitVM becomes popular, then yeah, then you could it could help Bitcoin security budget by increasing the number of transactions on Bitcoin in order to access this new layer two. 1:08:14 So I hope that answers both of your questions. 1:08:17 Does anyone else have any thoughts on either of those things? 1:08:20 Yeah, I have a thought on the regulatory attack and like additional features can add more regulatory attack. 1:08:27 I think like the way I look at it, any any really any transaction can have a regulatory attack. 1:08:34 For example, regulation can say this specific UTXO, any miner that adds this UTXO or builds off a block that includes this UTXO. 1:08:41 Right. It can it can just put pressure already right now. 1:08:45 So I don't see how like any additional features are really like adding pressure when there's already at any moment that can be there. 1:08:53 So either Bitcoin can and will withstand things like that and additional things or or, you know, or there's a there's a bigger there's a bigger issue. 1:09:01 Yeah, and I sort of welcome such attacks, because I think we hopefully design Bitcoin in such a way that it can withstand regulatory pressure. 1:09:11 And so far, it's stood up to China to regulatory pressure in China. 1:09:15 My hope is that it can withstand any regulatory pressure. 1:09:19 But I'd like to see that that hope tested and find out if we're right, because if we're wrong, you know, if Bitcoin can be shut down or if miners will stop buying Bitcoin. 1:09:30 Stop mining or censorship people, then we've got to find a solution to that. 1:09:35 And I'd like to know sooner rather than later, personally, if that's going to be an issue. 1:09:47 Super testnet about the regulatory attack is so the idea that just came to my head is that we know that there is coin swaps that can improve privacy. 1:09:57 Right. Is a coin swap mediated by Bitmedium would be superior in any way to a regular coin swap or not? 1:10:07 In my initial two thoughts, one one was no. 1:10:12 And then the other one was yes. So let me tell you both of them. 1:10:15 No, I don't think they would be because coin swaps are already off chain. 1:10:19 When you do a coin swap, the the the information that you share with your counterparty in order to initiate the swap is done. 1:10:28 It's done out of band. It's not that information doesn't go on the block chain. 1:10:33 And in fact, the most common way that coin swaps are done today is over lightning, which is like entirely off chain. 1:10:39 Once you're in the lightning network, your coin swap, you're swapping coins all day long every time you make a transaction. 1:10:44 And unless there's a problem, none of that goes on chain. 1:10:47 So my initial thought was no. And then my second thought was, well, yeah, actually, it probably would, though, 1:10:52 because it could become the same thing where you deposit money into a BitVM address. 1:10:57 And then from inside of there, you're doing coin swaps all day long and they're not on chain. 1:11:02 So isn't isn't that essentially a tornado tornado cash? 1:11:06 As long as you extend the game to end parties where you simply can't have anybody in the world show up, 1:11:11 a million people deposit arbitrary amounts into the BitVM address, 1:11:16 and they all participate in this end person game that eventually allows them to withdraw somehow the same exact amount. 1:11:23 But the anonymity set is much larger because there's end participants in the swap. 1:11:29 It's yes, I think it is. It's probably it's probably equivalent to tornado cash. 1:11:35 And I think lightning has been doing this for a long time already. 1:11:39 But the problem with lightning is that it's full of cancer nodes by chain analysis companies that actually de-anonymize all the flows. 1:11:49 So lightning doesn't actually give you much anonymity because they look at your IP addresses and they like most of publicly routable lightning nodes are actually cancer nodes of chain analysis companies. 1:12:00 You essentially have illusion of privacy on lightning rather than real privacy. 1:12:06 I don't think that's true. 1:12:07 I think that may or may not cost them any much much. 1:12:14 There's no proof of work needed for 90 percent of lightning nodes that are publicly routing payments to be launched by chain analysis companies. 1:12:21 It's the same kind of attack that was happening on TOR before TOR introduced proof of work, where most TOR nodes were cancer nodes that would DDoS TOR or whatever, because there was no there was no work required to cyber attack TOR network. 1:12:37 And there's still no work required to cyber attack lightning network, right? 1:12:42 Well, I think there is there is considerable amount of work required to cyber attack the lightning network, because in order for you to have an analysis node, it needs to it needs to have quite a bit of connections. 1:12:55 It needs to have quite a bit of channels. 1:12:56 And not only that, but it gives you no guarantees that you're getting accurate information because that you can't because an intermediary node can't tell the sender or the recipient of the transaction. 1:13:08 But that's true. 1:13:10 But if you have two nodes that happen to be on the flow and both of them correlate the flow, then essentially you're seeing the whole kind of well, anyways, we're probably digressing from the VM here. 1:13:21 Yeah, definitely are. 1:13:23 But yeah, but I think what's it called BitVM could be another way of doing this. 1:13:30 And so if we have I like more options, I would like you to be able to do tornado catch like stuff on lightning. 1:13:36 I would also like you to be able to do tornado catch stuff like stuff on BitVM. 1:13:41 Before we get there, I would I want to mention before we close out, because I think we're about ready to finish up this this thing. 1:13:48 I do want to mention that it's something that I have to say every time I talk about BitVM is to mention how early we are in it. 1:13:56 Currently, the bit we have, we have a virtual machine that kind of works. 1:14:00 It's but we only have my implementation, which is the stupid version that doesn't that does everything wrong that doesn't even follow the white paper. 1:14:10 So we that's the only thing we currently have working. 1:14:13 And that stupid version of the virtual machine can only currently there are only three functions that work in it. 1:14:20 I've got addition working in it. 1:14:22 I can add two numbers to 32 bit numbers. 1:14:25 I've got checking if a 64 bit string is all zeros. 1:14:29 If there's no ones in that string. 1:14:32 And I've got a function that can check if two 32 bit numbers are which one's bigger and which one's smaller. 1:14:39 I've got a function that can do that. 1:14:40 So that's all we have currently working in the worst possible version of the bit of the virtual machine. 1:14:47 And so all of this ideas of building a tornado cache in it or building coin swaps inside of it, building a roll up building is speedy proof. 1:14:56 And that's far away. 1:14:57 Like we need a lot more building blocks in order to make that stuff available. 1:15:02 So yeah, don't don't get too excited about the capabilities of BitVM yet. 1:15:07 Or or do get excited, but allow that excitement to motivate you to help us build the stuff for it. 1:15:14 So yeah, my GitHub is I think if you if you go to my GitHub, github.com slash super testnet. 1:15:21 It's one of my most recent most popular repositories is called tapleaf circuits. 1:15:25 It's where I'm building out my implementation and adding additional functions to it. 1:15:30 Check that out. 1:15:30 If you're a builder, help me help me make it improved. 1:15:34 Like make it actually compatible with the white paper and do things the smart way. 1:15:38 That would be great and help me design additional functions that can actually run in this virtual machine. 1:15:43 So we can get to a point where we can build all this cool stuff. 1:15:47 I think that's it. 1:15:48 I think we can close out the space. 1:15:50 So so I thank you everybody for participating. 1:15:54 Of course the the link up there in the description will show you. 1:15:58 Not the description, but if they're in this group chat, shared chat, shared tweet things. 1:16:04 We'll show you the BitVM telegram group where you can go to get more information. 1:16:08 And yeah, hey guys, let's go. 1:16:10 Let's let's build this thing out and and make all this all these cool dreams into reality. 1:16:17 I just want to add a little bit the bitcoin address in the white paper. 1:16:21 I guess is where you guys are accepting sats as funding donations. 1:16:26 So I would encourage people to send some sats to that address in the white paper. 1:16:31 That's the only valid address, right? 1:16:34 All others are hacker impersonations. 1:16:39 I don't know. 1:16:41 I haven't actually seen any. 1:16:43 So I don't know. 1:16:44 But definitely use the one in the white paper though. 1:16:51 All right, great. 1:16:51 Thank you guys. 1:16:52 And I guess I think that wraps it up. 1:16:56 Thank you, SuperTesla. 1:17:05 I would encourage Moon Settler to come up to the stage if you want to speak more 1:17:09 on the or layer two host or whatever. 1:17:17 We also had some others come up to the stage if they have comments or questions. 1:17:24 They can feel free. 1:17:25 Sol or Pen5 and anybody else that wants to come up as well. 1:17:34 Hey, I had come up earlier, had a comment or question, but then the conversation kind 1:17:41 of set my brain on fire a little bit. 1:17:43 I think one thing I was going to ask is or request maybe a BitVM function to do like 1:17:52 a hash string matching. 1:17:55 That might be useful to say there's a hash added to the transaction and then later the 1:18:07 added to the transaction and then later the file, the linked hash file is published to 1:18:17 prove a certain output. 1:18:22 A BitVM can do a hash string match adds a little integrity to that. 1:18:30 If I could comment on that for a second, I think SuperTesla has like a really busy schedule. 1:18:35 So he had to leave, it looks like, but perhaps I could comment a little bit on that, which 1:18:41 is like my expectations on BitVM are such that it's an incredibly, incredibly long term 1:18:50 and super complicated research project. 1:18:52 I mean, it makes the lightning network look trivial by comparison. 1:18:56 So what he said about like we're so early because we have a single one, two or three 1:19:00 super primitive functions is very true. 1:19:03 So we might not see anything actually usable for one, two, three years, even if 100 people 1:19:09 are working on it 24 seven. 1:19:12 So all these functions that you might want to request in theory, they could be, they're 1:19:17 just things that BitVM could compute in the future. 1:19:20 But to actually build a computer that's usable on top of BitVM will take a long time. 1:19:26 And if you've been waiting for the lightning network to take off and it's been in place 1:19:34 since 2016, right, and it's still not really fully taken off, I would like encourage you 1:19:39 guys to like lower your expectations of BitVM because it's a major research project that 1:19:45 is way more complicated than lightning. 1:19:47 And there's a lot more work there. 1:19:50 We're talking like a factor of 10 or 100 more work maybe than to do a lightning network. 1:19:57 But in theory, everything is possible. 1:20:05 But you know, there's a computer science slang for this kind of system where it's called 1:20:10 a Turing tar pit where in theory, you can do a Wikipedia search for Turing tar pit to 1:20:15 see what's going on. 1:20:16 But in theory, everything is possible. 1:20:18 In practice, everything is extremely difficult unless you build up a whole stack of developer 1:20:23 tools bottom up. 1:20:25 And this is we're talking about assemblers, compilers, libraries. 1:20:28 This is like you have to build a whole operating system bottom up in order to get BitVM running 1:20:34 and operational. 1:20:49 I had a few comments. 1:20:50 Can anyone hear me? 1:20:52 Yep. 1:20:54 Hey, what's up? 1:20:55 Yeah, when you guys mentioned federation and agreement and smart contracts, I was recently 1:21:00 reading a book by, it's a very classical book, if you're like into sociology, which correlates 1:21:06 with economics, the Tocqueville Democracy in America in the first 200 pages, he mentions 1:21:13 the decentralization of American government and how they kind of came to discover how 1:21:18 to separate two sovereignties and kind of resolve that conflict. 1:21:22 So even though it's like, you know, outside of, you know, it's not as directly related 1:21:27 to economics and Bitcoin. 1:21:29 I think that, you know, anyone that is building on the Bitcoin network can definitely profit 1:21:34 from that discussion of governance and federations and how we can implement that through code. 1:21:41 So those are just my two cents. 1:21:53 I mean, I have a comment on this whole notion of federation and the peg is that I don't 1:22:00 really see, for economic reasons, I don't see a federated peg, even if it can be policed 1:22:06 by a bunch of sentries or verifiers, I don't see it as workable in practice, even though 1:22:13 in theory, it would be much better than any other, any other two way peg that we have 1:22:21 for Bitcoin, because it would have smaller trust assumptions. 1:22:25 In reality, you would need like, for economic reasons, people would not want to participate 1:22:31 in the federation because there's very little to gain for participating in it. 1:22:35 And there's a lot to lose, which is the whole bond of the federation or most of it or whatever. 1:22:40 So it may be, in theory, a practical game. 1:22:42 But in practice, I don't think this sentry peg would be viable for practical purposes. 1:22:51 So unfortunately, yeah, it's like more research needs to be done into how to leverage BitVM 1:22:56 into some other kind of two way peg, in my humble opinion. 1:23:21 Is anybody out there or we have only passive listeners? 1:23:43 Henry Muntzettler. 1:23:44 Um, yeah, it seems like not much want to come up. 1:23:52 Maybe Muntzettler can't be active right now. 1:23:55 I'm just a passive listener. 1:23:57 A lot of this stuff is like, way too advanced for me. 1:24:00 But I'm loving people innovating new ways to use Bitcoin and things like that, learning 1:24:07 about it. 1:24:11 I mean, I guess people can come and go whenever they want. 1:24:16 I just want to comment something on BitVM, which is that initially, when I saw the idea 1:24:21 in the white paper, I was less impressed than I am now. 1:24:31 Because it seemed like a Turing tar pit where everything was possible in theory, but nothing 1:24:37 is practically possible. 1:24:38 But the more I study the idea, the more optimistic I become about it, because there's just a 1:24:46 huge unexplored continent that was discovered and we just landed on it right now. 1:24:51 So perhaps a real two way peg that's truly trust minimized or real ZK validity, ZK rollups 1:25:00 or whatever will be possible using this idea. 1:25:08 Yeah, that'd be pretty cool. 1:25:15 It kind of reminds me of the situation that quantum programming is right now, where the 1:25:20 only way to program on quantum computing is very low level, circuit board level. 1:25:32 The problem is not so much that it's a low level computer. 1:25:35 The problem is that we haven't explored all the games that could be played between one 1:25:43 verifier and one prover or multi-party games between provers and verifiers yet. 1:25:49 The computer being like super low level is not actually a problem because the computations 1:25:55 never happen on Bitcoin chain and they could happen between the parties off chain and it 1:25:59 could be super expensive and take a beefy computer a long time. 1:26:04 It doesn't matter. 1:26:05 It's designing the interactive and hopefully non-interactive games that allow the two 1:26:11 way peg to materialize or tornado cache to be developed or something like that. 1:26:17 I think that's the bottleneck. 1:26:21 Not the fact that this is like a primitive computer that needs a billion leaves in the 1:26:26 top leaf tree. 1:26:28 It's also interesting to think about the timeline of BitVM and how that coincides with 1:26:35 the timeline of the future role of miners post-having and how they may or may not want 1:26:46 to start diversifying their role to expand into things like Bitcoin. 1:26:52 Being verifiers, for example. 1:27:22 Yeah, Alex, I would encourage you to post your idea definitely to others, even if there 1:27:37 is a fatal flaw. 1:27:40 The fact that you post it already shows that you put thinking into it and whatever it is. 1:27:45 And even more so, there might be a dramatic way to make it better from other people's 1:27:50 experience and skill set. 1:27:52 So why not? 1:27:53 What do you got to lose? 1:27:54 That people will see that you had a fatal flaw? 1:27:56 No, I mean, I guess I'm not so much as ashamed as the idea is too raw. 1:28:03 For example, if I had a good formulation that SuperTestNet could fully grok, then I would 1:28:08 be ready to post it. 1:28:09 But maybe we'll talk in DMs with SuperTestNet and come up with some kind of formulation 1:28:15 that works and then one of us will post it into the group. 1:28:19 So you feel like it's a little too abstract right now? 1:28:21 It's kind of, you know, it hasn't been thought through entirely, but the basic kind of idea 1:28:27 is to replace interactive verifiers with a smart contract on another chain. 1:28:33 And if that's possible, then many of the problems that a federation or a bunch of online 1:28:44 interactive sentries like that whole model is, in my mind, it's not economically viable 1:28:50 because there's just lack of incentives for parties to participate. 1:28:54 But presumably, the one party that's incentivized is the party that wants to peg out and get 1:29:00 their Bitcoin back. 1:29:01 And that would be the prover. 1:29:02 And they would just need to interactively interact with a smart contract. 1:29:06 And presumably, the protocol could be conducted that way. 1:29:10 And then, again, my hope is that as a result of this interaction, the Bitcoin is either 1:29:17 released or not released to the prover. 1:29:20 So the contract would be the one like holding state and people withdrawing would be updating 1:29:27 the state on the contract side. 1:29:29 And then who's going to peg in would actually finalize that state back to base layer or 1:29:35 something like that. 1:29:36 No, it's not. 1:29:38 I mean, in my mind, it's more like before you can peg into the sidechain, you would 1:29:46 have to go to the contract and interact with the contract to generate a deposit address. 1:29:51 And at the same time, the contract might also say, OK, well, here's the current withdrawals 1:29:58 that you need to add. 1:29:59 Right. 1:30:00 Right. 1:30:00 So my hope was that anybody interacting with the contract could assume temporarily the 1:30:06 duties of the verifier. 1:30:08 And that's how you would have a dynamic set of verifiers that in order for the contract 1:30:13 to release you back, you would have to verify prior withdrawal requests that are pending. 1:30:21 And that's how you have actually a dynamic set of verifiers as opposed to a white list 1:30:26 of verifiers that sort of are officially white listed by the contract. 1:30:30 You could have anybody trying to peg in having to perform the duty of a verifier and then 1:30:36 essentially engaging in the protocol to approve pending peg outs. 1:30:44 Right. 1:30:44 I'm also thinking as far as like fees, right, because fees to withdraw, there might be many 1:30:50 output UTXOs. 1:30:52 So you need to have some type of, let's say, incentive model for the person pegging in 1:30:56 to want to include all these outputs for the withdrawals. 1:31:00 So the contract side can also have, you know, some sort of, you know, incentive for the 1:31:05 person to include these. 1:31:07 But then you go into the issue of, well, the fees are very volatile. 1:31:11 But maybe you can prove by current block height or something like that with the current block 1:31:17 what the average fees are of like, let's say, you know, past whatever many blocks. 1:31:21 So this way the contract would know, all right, well, this is what the average cost of transactions 1:31:26 are right now. 1:31:27 So this is the incentive we'll give you to include these. 1:31:31 Well, I understand what you're saying, but in my idea, the incentives would be unnecessary 1:31:38 because anybody who wants to peg out, peg into the sidechain, right, that's the terminology. 1:31:46 Bitcoin has its own terminology, but outside of Bitcoin it's called bridging out and bridging 1:31:51 back in or whatever. 1:31:52 But basically anybody who wants to send Bitcoin to the sidechain would have to engage with 1:31:57 this game with the contract to generate the deposit address. 1:32:01 And then presumably the person, the same person or somebody else who can prove destruction 1:32:10 of the exactly same amount of Bitcoin as is pegged in into one of these UTXOs would 1:32:17 then be approved by the verifier that's implicit in the smart contract to withdraw one of the 1:32:26 UTXOs back out. 1:32:27 So like... 1:32:28 Yeah, I'm still looking at like scalability issues, right, because if these do continue 1:32:34 to go up on layer one, you know, you're still going to run into things that are just too 1:32:38 limited as far as like price amounts, right? 1:32:42 So social amounts to peg in or peg out. 1:32:44 Yeah, but that's not really a problem because if you have something working like this, then 1:32:50 there could be professionals appearing that do this for other people, right? 1:32:54 So there could be like these liquidity providers that peg in and peg out all day long. 1:32:59 And then they could amortize the fees, like people could go to them and do, right? 1:33:06 They don't make larger peg in, peg out. 1:33:09 Exactly. 1:33:09 Like it would be like 10 Bitcoins peg in and 10 Bitcoins peg out. 1:33:12 But on the peg out rather than maybe... 1:33:16 What if also like the peg in combined previous UTXOs? 1:33:20 Like every peg in combines previous UTXOs. 1:33:22 This way there's, you know, less of a UTXO footprint. 1:33:27 But you see, that combination would be difficult because the only way that this proposal would 1:33:32 work is that there's like two ways, right? 1:33:35 The UTXO has to be encumbered by TimeLock, which is the existing model in the BitVM. 1:33:42 Or it has to be encumbered because the private key is not yet known until the protocol completes. 1:33:49 And only when the protocol completes, the prover is able to derive the private key, right? 1:33:55 Well, you would first interact with the smart contract, right? 1:33:57 You would tell the smart contract, I want to peg in this amount of Bitcoin. 1:34:01 And then the smart contract would tell you, okay, fine. 1:34:03 You want to peg in this amount of Bitcoin. 1:34:05 Here's the raw UTXO, the raw transaction that you need to broadcast. 1:34:08 And the raw transaction would already include previous UTXOs to combine them. 1:34:13 And your UTXO as well that you want to input. 1:34:16 And it will already, you know, determine which address to... 1:34:19 I see what you're suggesting. 1:34:21 That would be like a great optimization. 1:34:22 But presumably to combine previous UTXOs, you would essentially need to play all these 1:34:28 previous games to the successful conclusion in order to move these previous UTXOs into 1:34:33 a new combined UTXO. 1:34:35 So this would be like a huge amount of computation. 1:34:37 Yeah, but there can also... 1:34:40 If this model works from the beginning, then there will only ever be like, let's say, two 1:34:44 UTXOs, right? 1:34:45 Because there's just a previous one that you need to add to yours. 1:34:48 That's a very, very good point. 1:34:49 I haven't thought about that because if all the previous UTXOs are always aggregated, 1:34:55 then it's not that much trouble to... 1:34:59 Yeah, I just feel like, you know... 1:35:01 But actually... 1:35:02 ...a lot could be thought of for the footprint at the end, right? 1:35:05 Your idea sort of fixes the covenant problem at the same time as fixing the validity roll-up 1:35:15 problem kind of thing, right? 1:35:17 Because you're trying to aggregate, you know, one or two UTXOs to represent the whole, you 1:35:24 know, all the Bitcoin pegged into the sidechain. 1:35:29 Yeah, I feel like it's extremely important when we start thinking of, you know, second 1:35:33 layers, sidechains, whatever they are, for the aggregation of the UTXOs pegging in. 1:35:39 Otherwise, you end up with, you know, you end up with a mess, I feel like. 1:35:42 You would end up with a bunch of fragmented UTXOs that have all been... 1:35:46 Yeah, and it becomes... 1:35:48 Like, it might not be an issue today, but fees go up. 1:35:50 Let's say, just fees go up out of nowhere and they stay up for a few months, right? 1:35:54 Previous UTXOs might become more cumbersome. 1:35:57 You have to create incentive models for previous UTXOs. 1:36:00 Maybe it might be solved, like you said, for aggregators, you know, bigger liquidity pools. 1:36:04 But, you know, if you can abstract that away from the beginning, it might be better. 1:36:09 You know, the difficult part in my idea is... 1:36:12 I mean, like, I like your optimization and it could be added into the idea for sure, 1:36:16 probably, assuming that the idea works. 1:36:19 If it works at all, then probably your optimization would not be too difficult to add to it. 1:36:24 The difficult part is encumbering UTXO without a timelock. 1:36:28 And that would require some kind of multi-party computation where 1:36:33 neither the person pegging in nor the smart contract can move that UTXO 1:36:40 unless they engage in a successful game that allows them to generate 1:36:46 a transfer transaction together. 1:36:49 And that's very much what this multi-party, two out of two multi-party computations do, which is that there is like, you know, some blockchains use it where you have a multi-party protocol where two parties engage in multi-party computation first to generate a deposit address, and then they can engage in a two out of two protocol to sign a transaction withdrawing from that address in such a way that neither party knows the private key that corresponded to that deposit address. 1:37:11 In such a way that neither party knows the private key that corresponded to that withdrawal transaction, but they can engage in a protocol to generate the signature. 1:37:23 And of course, from the point of view of the person pegging in, keeping his secret share to this multi-party protocol is incentive compatible because they're trying to not lose their peg in so they wouldn't leak their secret share that's required to generate this. 1:37:39 Ah, I see, I see. So it's kind of like you actually want them to have their own UTXOs because they're... 1:37:44 No, you cannot have them have their own UTXOs because they cannot be allowed to move UTXOs, right? 1:37:53 The only way to move those UTXOs, aside from time locks, which is what's proposed in the BitVM paper, is to somehow decrypt a private key or to generate a moving transaction through this game using like multi-party computation or two out of two or something like that. 1:38:13 You know, like this is what SuperTestNet called two out of two or N other than multisig, but... 1:38:18 What I'm saying is they don't have their own UTXO, but they have their own... 1:38:22 Share. 1:38:23 Yeah, exactly. 1:38:24 Secret share to that UTXO, right? 1:38:27 And presumably, this is... 1:38:29 Okay, this is now you're coming to the secret sauce. 1:38:32 If there is a secret sauce in my idea, then it would be hidden in here, which is how does a smart contract engage in this multi-party computation protocol? 1:38:42 Where without storing any secrets inside the smart contract, because, hey, it's a public blockchain, you still generate a transaction that can allow the prover to move the UTXO into whatever address he wants when the protocol is successful. 1:39:00 Yeah, this seems like the core... 1:39:04 The core problem. 1:39:06 How to exactly solve that, right? 1:39:08 But I'm optimistic because you can have like one out of N types of setups where anybody who... 1:39:18 Like, for example, there's like a single honest verifier assumption in the protocol described by Shinobi, where you could set it up in such a way that a single honest verifier is all that it takes in order to follow the protocol, even if the others are not online or unwilling to cooperate with a prover. 1:39:41 I'm hopeful that the set of online verifiers or sentries, as Shinobi calls them, could be replaced by either people interacting with a smart contract because they need to do their own business with it or by some kind of subscribers to the smart contract that are like, okay, for a small fee, I will provide one out of N services to the smart contract. 1:40:10 Where if I see some withdrawal pending, I will show up and, you know, co-sign essentially this multi-party computation game that allows you to generate the transaction to move the coins. 1:40:26 If the smart contract itself is incapable of such a feat. 1:40:32 Yeah, like the smart contract holding the keys itself without you showing them, right? 1:40:37 There was another idea of how not to do this interactively, which is you could pre-generate a million deposit addresses ahead of time by engaging in a massive ceremony where, you know, 10,000 people show up like Ethereum had that KZG ceremony where like 200,000 people showed up. 1:40:56 And as long as one of them is honest, the combined secret generated by 200,000 people is secure. You could pre-generate perhaps a million deposit addresses ahead of time by 100,000 participants. 1:41:10 And as long as one of them deletes their share or refuses to engage in conspiracy with everybody else, right, then this million deposit addresses would remain secure. 1:41:23 And hopefully the smart contract can then, and this is part that I don't have yet and this is why I'm not posting my idea because this is kind of the crucial missing part, how to do this non-interactively without online parties. 1:41:40 Hopefully the smart contract can engage in the game with the prover and essentially as a result of this game, the spending transaction is generated that the prover can then broadcast and take the coins back out. 1:41:59 I have another idea. First of all, I think it might be interesting to look into Emblem Vault and like where the keys are held there. It might just be completely centralized, but I'm not sure how Emblem Vault works exactly. I don't know if you know about that. 1:42:13 But what I'm thinking another model would be is if you basically incentivize over-collateralization by giving a tiny fee, right, so you would have like let's say some type of, you know, whatever it is, a federated model, it would be better if it's like a dynamic federated model. 1:42:33 Same thing with the verifiers are dynamic. But at the end of the day, whoever's signing the outputs, they basically have control, but they're incentivized to do the right thing because they're using their own collateral and the amount that they are able to withdraw will be less than their, you know, they basically over-collateralize as far as being, you know, proper, honest users. 1:42:59 And if they were to, you know, do something incorrect because they're over-collateralized, you know, we can slash them or something like that. 1:43:29 I think Thorswap might also look like that. 1:43:39 Which one? 1:43:40 Thorswap. 1:43:41 Thorswap, right. I think Thorswap is similar, right? 1:43:44 Similar, yeah. 1:43:45 But Thorswap has an interesting trick up its sleeve. It uses its own altcoin as a bridging currency. 1:43:53 This is where I feel like things can go wrong. Once you add more assets, you know, obviously assets are volatile and they have different prices. So like the collateralization just, you know, can end up really being like fake. It could just be like a market price. 1:44:06 Worse than that, like the Thorswap recently basically shut itself down because, you know, there was like, I don't know, $400 million worth of Ether laundered through it into Bitcoin. 1:44:20 I think that was just the front end, though, that shut down. I don't know. I don't look too much into it. 1:44:24 You're right. They shut down the front end. But the point is that, you know, when the government shows up, these people that are running this peg, you know, this blockchain as large stakers of ruin, all of a sudden they start disappearing. 1:44:39 In other words, it's a model vulnerable to regulation precisely because it has interactive online parties that have a lot of this, you know, stake. 1:44:50 A lot of funds under their control, basically. 1:44:52 Exactly. 1:44:53 Even if they're collateralized. 1:44:55 Exactly. And the problem is that it's not necessarily the case that you can incentivize them properly because whatever modest fees you would charge of people trying to peg in and peg out, those fees would not necessarily add up to the cost of locking up capital into the bond. 1:45:16 And it also doesn't end up being the cost of going to jail, too. 1:45:19 Exactly. So that's a hidden cost potentially 10 times larger. Right. Which is why I see all these federated models, even if one honest participant is enough, as not viable because like the people in the federation don't want to bond, you know, a thousand bitcoins in order to enable a thousand bitcoins to be pegged into the sidechain because, you know, it's a lot of money to lock up and not be able to use. Right. 1:45:46 So the incentives are we will do it, but will people pay, let's say, 5% fee to peg in and peg out? I doubt that. Right. So the system is kind of the model of self-defeating and that to make it economically viable, it has to have high enough level of fees. 1:46:01 But with that high enough level of fees, nobody will be interested to use it. So you have a classic kind of chick in the neck problem where, you know, the system is not usable if the fees are high. And if the system is not usable, then the fees will not appear at all because nobody will be using it. 1:46:16 Yep. You know what? I want to take some time because I think last time you spoke and you had some possible criticisms to Drivechain. So I was wondering if we can all switch a little bit to that. I mean, if everybody's OK with it. 1:46:33 No, I mean, actually, I'm a Drivechain supporter. I don't have any criticism to Drivechain. I think I had a disagreement with Paul about the fee problem. And this is kind of a major disagreement. And Paul believes that there's a security budget problem. And I believe that the feepocalypse is inevitable. 1:46:51 So, like, if one of the underlying causes for Drivechain to be deployed is that the security budget is a problem for Bitcoin, like, it may not. Like, I just don't see a long term security budget problem because I think yesterday I saw somebody posting all the Wikileaks data that was leaked in 2012 or 13, whatever it was, 11, into ordinals, right, into the inscriptions. 1:47:18 So my prediction is kind of coming true that there will be immutable, censorship resistant, a lot of amount of this data that will be essentially dumped into Bitcoin blockchain for censorship resistance and immutability. 1:47:32 And incidentally, this kind of posting started only recently because only a few weeks ago, the ordinals protocol finally specified the collections standard of how you can have ordinals. 1:47:48 The parent child? 1:47:49 The parent child. And before the parent child, you know, there was no incentive to do this because you would just have a bunch of sort of disconnected. 1:47:58 Well, you still have the provenance is still on chain, right? If you have one origin address. 1:48:03 Yeah, the provenance is on chain with this new protocol parent child. 1:48:08 Even without this new parent child protocol, you know, schema, this scheme is really just for the explorers or, you know, and or the indexers. 1:48:19 But what I'm saying is without it, right, without it, you can still prove provenance on chain if you have like one origin address. 1:48:25 And that one origin address is the one that created, let's say, a hundred inscriptions, right? 1:48:29 It's obvious that since all the funds came from that one origin, they are really all connected by, you know. 1:48:35 Yeah, I mean, you could prove it. But again, that would be the standard makes all the difference. 1:48:40 Yeah, the standard makes a difference. But what I'm saying is you can have an explorer that just sees that, right? 1:48:44 So that's why I'm saying that this standard is really more on the explorer side to show it, right? 1:48:49 Well, yeah. 1:48:50 On chain, you are including the parent in the transaction where the child is born. 1:48:55 Right. But until that standard is specified, right, you know, it was a free-for-all because people would dump whole collections of inscriptions. 1:49:03 Yeah. 1:49:04 If you look at like sub-1k inscriptions, what people did is they would just have like a sort of manifesto, a text file of all the inscriptions in their collection or a text file of all the hash, like the SHA-256 hash of the images they're about to inscribe. 1:49:19 Right. But then you would lose provenance as soon as you would transfer those inscriptions somewhere else, right? Because you would basically not necessarily be able to trace it back to the creator. 1:49:28 Of course you can. You can see it on chain. 1:49:31 Again, this is kind of like possible in theory but not really workable in practice type problem that, yes, I agree with you. You could trace the history back on chain. 1:49:41 But one additional feature that was added by this new protocol for provenance or collections is the ability for the creator to burn the root inscription or the root ordinal. 1:49:54 I don't really know how they do it. 1:49:56 You can burn one of, whatever it is, whatever the parent is, you can burn the parent and then that parent can't have any more kids, right? 1:50:05 Right. Which is absolute scarcity visible on chain now. 1:50:09 Right. But it's only as far as people adopt this standard and like hold this standard over any other standard, right? 1:50:17 Right. But all other standards are de facto inferior. In other words, they may be superior technically. 1:50:24 Yes, but what I'm saying, there's still a social aspect to it. Let's say I launch a collection, right? And it's X amount of inscriptions and I burn the parent, right? I burn the parent. 1:50:32 And then, you know, the people in the community, we all agree together we're going to add more, right? 1:50:37 Like nothing really stops that. We couldn't add more because that goes to the point of like, you know, most of the projects are really centralized and aren't really decentralized because there's a coordination between, let's say, just developers. 1:50:48 If the users agree to whatever the developers want, there's no reason to not change the rules at any moment. So, yes, you're right. It is on chain, you know, limited, but it's still limited to social actors agreeing to this, which can change at any moment, right? 1:51:04 Kind of like Bitcoin is 21 million limit. But if everybody does agree, it changes. Except here, you have way less people that need to agree. 1:51:18 I don't hear you. I'm not sure if you're losing connectivity. Do you guys hear me? If I'm the one losing connectivity or you guys are? 1:51:30 I can hear you. 1:51:37 Okay, well, then maybe it was Alex. All right. Well, Alex, if you do hear us, you can let us know. 1:51:44 The last conversation you were just having, though, it was kind of funny. It was a little contradictive where the burning is just a native Bitcoin transaction. 1:52:04 Whereas the provenance with the parent-child, obviously, Ordinal's protocol doesn't need to structure that to have a parent and child, like you were saying. So, it's kind of like you guys are on both ends of the spectrum. 1:52:25 It goes the same as far as limit, right? If I launch a collection without parent-child and I say, hey, this is the limit, right? There's not going to be any more, right? If I do launch more, the community could just reject those and be like, oh, those aren't part of it. 1:52:37 Because in the beginning, he said that those are the only ones. Really, that's really what's just going on at the same time, except now, you know, it's more in a protocol level. But at the end of the day, I feel like, you know, that's still very like a social aspect anyways. 1:52:55 Yeah, but I think Ordinal's are really interesting. It brought a lot of people over to Bitcoin for sure. And it opened the door to, you know, people learning about Bitcoin and hopefully more type of, how do you say, more use cases for Bitcoin. 1:53:12 And I feel like it definitely opened more talk about, you know, Drivechains for sure and sidechains and things like this too. Alex, I see that, I don't know, you moved. There you go. You might be back. Are you back, Alex? You are muted. 1:53:28 I don't hear Alex. Does anybody else hear him? Because I know sometimes I glitch out. You guys don't hear me either. Okay. All right. Well, we don't hear you, Alex. 1:53:45 In the meantime, if anybody else has things to talk about or wants to come up, please feel free. Yes, we see you raise your hand, Alex. Try to unmute yourself and talk. You might have had some connectivity issues. You still seem like you're muted on my end. So I'm not sure. 1:54:15 Well, we see your emojis. 1:54:44 But it looks like your mute button is stuck. I wonder if you hear me or if you hear others. Maybe I'll message you and see what's going on. Maybe I will go down and then come back up. I don't know if I'm... 1:55:05 Waiting to be added as a speaker. 1:55:08 Oh, there we go. We hear you now. 1:55:11 I think Layer 2 host, which is I'm guessing that's Henry, was waiting to add me as a speaker for a while because I had to restart the Twitter web browser to get back in, basically. 1:55:25 So, yeah, I was just saying that you're right that on a protocol level, Parent-Child definitely adds something. And you're right that the standard is everything. Yes. As long as people follow it. But I just wanted to add that if I launched a collection pre-Parent-Child and I said that there is a 10k limit, and then the next day I added 10k more, the community could just be like, oh, well, the next 10k that he added, we're just going to reject them. They're not part of the collection. 1:55:49 As far as it's really just like a social layer and an explorer to add this social layer. I feel like it definitely makes it a lot easier for explorers to add it. And especially because it's indexed on the protocol level. But I still feel like it's very much still, you know, not like 100% immutable because, you know, even if I have a Parent-Child and I burned the parent, I can always add more and say, oh, well, these are part of the collection. 1:56:15 And if I if I convince Magic Eden or whoever, you know, a marketplace to add them as part of the collection and everybody that's part of the community, they all agree with it. Well, then, you know, they're still added more, you know, so but you are right in one aspect. I just wanted to point out it is still a social aspect as well. 1:56:34 But yeah, you cannot convince Magic Eden to invent their own addition to this meta protocol, right? Because the protocol lives or dies by all these indexers and marketplaces being in sync with each other in this meta protocol. So there is like meta consensus going on there. 1:56:53 Yeah, yes and no, because you can look at previous times. Well, even before Magic Eden, the most collections were held on a Git Rehub, a Git repo by Ordinal's Wallet. And they had a thing where you had to submit a PR of a collection and then, you know, they would approve it. And then other marketplaces would just use their repo as like the starting point. And then anybody that wanted to add collections, they would talk to the marketplace directly. 1:57:19 I believe that's how Magic Eden did it. And I think there was another one. 1:57:26 Yeah. 1:57:28 What I want to say is there have been collections that they added more to. 1:57:32 This is similar to the early genesis era of Bitcoin. But Casey right now is Satoshi. And once the protocol stabilizes sufficiently, hopefully like within a year or so and Casey officially leaves the protocol, it will be quickly sort of ossifying towards nobody being able to change much. 1:57:51 Because in this genesis era, you could have all kinds of crazy, you know, voluntary changes because the community is so small. There's, you know, two, three or four big marketplaces that can still push it around. 1:58:06 But I think Moonsettler finally showed up. Hopefully he will come in and get the speaker position by the host and say something. Oops, he disappeared. Still around. 1:58:23 Yeah, so I think this is the early genesis era of inscriptions and ordinals. Within a year, I think the protocol will start ossifying to a point where this kind of crazy, you know, add me to a collection, do this, do that stuff will stop working basically. 1:58:39 This is 2009 of Bitcoin basically. 1:58:43 Yeah, I agree with that. You know, Casey definitely has a huge say these days. And probably, hopefully, you know, later on, he would just like leave more. 1:58:51 Yeah, he's kind of like a benevolent dictator, but not for life, maybe for a year. 1:58:57 But there's also examples where he wanted to do something and the community completely was against it. And then at the end of the day, it didn't happen, right? 1:59:02 Yeah, he decided not to do renumbering and not to erase curse. 1:59:08 Well, you can also say what if he did push it, right? What if he merged it, right? Can, like, let's say the whole community just not use that indexer and use their own? 1:59:17 My answer to that is it doesn't matter, right? Because either he wins or the community wins. Either way, it will ossify the winner, right? So it doesn't really matter who would win. 1:59:26 True. 1:59:27 It's just a question of stabilizing the protocol. 1:59:31 Yeah, I agree with this. I want to go back to as far as the fees. Even before Ordinals, like even several years ago, I always saw the fee apocalypse, or how you put it, as an inevitable thing. 1:59:41 Because I just felt like black space on Bitcoin is such a valuable thing. It's extremely undervalued. And, you know, to me, it was like, well, it's a no brainer. The fees are going to go up. 1:59:50 Even before Ethereum, I always saw it as that. And over the years, to me, it was like, wow, why are the fees really empty for so long? 2:00:00 A lot of it could have been because of altcoins and things like that. And because of that, there's less usage on Bitcoin. 2:00:09 And I do agree with you where previously anybody can put data on chain, but it wasn't as easy for the average user, regular person to put data. 2:00:16 Where now, that's why I feel like Ordinals and Inscriptions, they added a point where this is more interesting to me than actual, you know, like the collections or trading or the art. 2:00:24 The fact that literally anybody can actually just put data on chain, and it makes it very, very easy. And I think that that just raises the floor to the black space demand. 2:00:36 Absolutely. 2:00:37 And I think it's very slow in the beginning, but eventually it will just be like, well, it's so like, why wouldn't I just want to put data on chain versus anywhere else? 2:00:44 I have an explanation for why the fees have been very low, which is basically comes down to three factors, which is when SegWit was activated as a soft fork in 2017, you had kind of a perfect storm. 2:01:00 Because what happened was that the fees did spike high briefly, and that forced all the exchanges to do batching, right? 2:01:09 So batching could essentially eliminate two thirds or three quarters of the demand for block space once adopted by most exchanges. 2:01:16 That's number one reason. Number two reason is that SegWit quadrupled the amount of block space. 2:01:22 So you had this huge additional supply where from one megabyte it went to four megabytes, as we know now. That's the second factor. 2:01:29 And the third factor is before popularity and rise of stable coins, essentially Bitcoin was the bridging currency between exchanges where traders would transfer Bitcoin between exchanges. 2:01:39 And actually a large percentage of Bitcoin transactions, I don't know, 60, 70 percent had to do with inter-exchange transfers done by traders and not actual organic usage by Bitcoin users. 2:01:51 So the combination of all these three factors essentially quadrupled the supply. 2:01:56 And divided the demand by a factor of five. 2:02:00 So you basically had like a huge additional amount of supply of block space and huge increase in the demand for block space. 2:02:08 And the adoption simply had to take another five years to catch up where this, you know, there's like this wave of adoption and still strictly limited block space. 2:02:17 So even without Ordinals, the slowly rising tide of adoption would hit the wall of the block space limit and there would be a hypocalypse with or without Ordinals. 2:02:27 It's just that Ordinals brought it forward by one, two or three years, essentially. 2:02:32 Yeah, I agree with you. 2:02:33 But I also hear Paul's argument where, you know, the way me and you would look at it as, you know, kind of like what happened on Ethereum. 2:02:41 Me and my friends, we called Ethereum the billionaire chain and we were using other layers like during the times of really expensive transactions, you know, or for things that were, you know, that you had liquidity for. 2:02:51 Right. And there was still demand for, you know, really expensive transactions on Ethereum. 2:02:55 But I feel like a lot of that was because of the complexity of transactions on Ethereum and because of the liquidity of these, you know, contracts where on Bitcoin, because it's a lot more primitive, it's really just a value transfer. 2:03:09 And is there going to really be enough of a demand for just simple value transfer to only be on the base layer? 2:03:16 And I hear you on the point of like nation states and banks trading with each other or big institutions trading with each other. 2:03:24 They're going to want to settle on base layer because, you know, they're not superior than anything else. 2:03:28 And that might be enough for the actual, you know, dramatic rise of fees of, you know, I'm talking about hundreds of dollars just to make a simple transaction. 2:03:36 Right. It might be. 2:03:38 But then again, they would be incentivized to build rails between themselves to not pay that much. 2:03:44 So I think still the base layer demand will go up because I feel like it's extremely undervalued just from my point of view. 2:03:53 But I do hear the like the other argument where people are going to think. 2:03:58 Yeah. You're expressing Paul's argument about I call it substitutability of a block space in that, you know, if it's too expensive here, let's use the lightning network in a private channel or let's use some other chain to settle. 2:04:12 So Paul's argument actually has two flaws in my mind. 2:04:15 One, I mentioned earlier in earlier spaces here, I said that the first floor is that it has an implicit assumption that the fee market has already existed for years. 2:04:26 And I claim that it only starts existing the last day that the block, the mempool clears. 2:04:32 Right. That's the beginning of the real fee market. 2:04:34 So it hasn't existed. 2:04:35 I agree. And hopefully it will happen. 2:04:36 But we don't know. It might not happen yet. 2:04:38 Right. It could have been right. 2:04:40 We will only know this post factum. 2:04:41 But so far it hasn't cleared since April 23rd. 2:04:44 So you cannot go back five, seven, eight years and do any kind of saying, see, the fees have always been low except for bull markets because there's been no fee market because block space is like instantly perishable commodity. 2:04:56 So unless unless the blocks are always full, then the price falls to zero immediately. 2:05:02 And there's essentially no no no fee market unless the mempool never clears. 2:05:07 So that's one. My first objection to Paul's model was that he would actually assume that the fee market has existed all along. 2:05:14 And I claim it hasn't. 2:05:15 A second objection is this perfect substitutability of block space, which is not all block space or not all settlement mechanism are the same. 2:05:23 Right. The base chain is the most secure, the most reliable for large transfers. 2:05:29 It is true that, you know, big institutions can create lightning channels which are private and they can settle instantly in those lightning channels. 2:05:37 But that comes with a trade off because they have to manage liquidity in these lightning channels and liquidity is locked up in the channel. 2:05:43 And therefore, that's, you know, cost of capital being locked up. 2:05:47 So there is like hidden cost of lightning besides the actual close to zero or zero fees and private lightning channels. 2:05:54 The hidden cost of lightning is the cost of locking up your capital with a counterparty. 2:05:58 So there is no free lightening. 2:06:01 Another example is like they can use a federated model like liquid because between exchanges that that might be good enough for them. 2:06:07 Yeah. But that's liquid has already failed because it was essentially proposed as a sidechain exactly for that, which is let exchanges settle with each other once. 2:06:15 I think it has a use case for, for example, high volatility traders that are, you know, like very high frequency that might want to. 2:06:21 And by frequency, I mean by, you know, when when the volatility price, when the price is very volatile, they need to make, you know, transactions that are very time sensitive. 2:06:29 Right. Yeah. They're incentivized to use something like liquid because they're already implicitly trusting the exchange anyways. 2:06:35 So if they're trusting the exchange anyways, they're not really lowering their trust. 2:06:40 That's that's you're essentially expressing the official business model of liquid. 2:06:44 Right. And liquid produces blocks exactly once every minute. 2:06:47 It doesn't have a probabilistic distribution of block times. 2:06:51 It's just once every minute there's a new block. 2:06:53 And OK, I'm just giving an example of a federated model model that institutions, big players can have within themselves, which would eliminate the pressure of them using the base layer and be just as, you know, between themselves. 2:07:06 But the whole the whole beauty of base layer as opposed to this kind of thing. 2:07:11 Like, in other words, what you might have in mind is some kind of euro dollar Bitcoin, euro dollar system where a thousand big banks agree to use some kind of federated chain and sell themselves. 2:07:22 Yeah. Even even a single custodian like or like RapidCoin, like they might trust that. 2:07:26 No, I know. I know. I know the whole point is not to trust anybody. 2:07:30 Right. Like so if they actually end up do if they do end up sending Bitcoin. 2:07:34 Right. So the question is, is there going to be enough demand to not trust anybody? 2:07:38 Right. Because that's that's essentially what's going on. 2:07:40 Absolutely. I mean, look at the world right now. 2:07:42 Nobody. I think there's multiple wars going on and nobody can talk to anybody else. 2:07:45 Right. So this is the whole point of Bitcoin is not to trust. 2:07:49 I lean on more with you that I do believe that there will be enough demand to not trust anybody and just use the base layer, even if it's, you know, banks within each other, nation states within each other or big institutions within each other. 2:08:00 I think that just the base layer will be superior where, you know, it's just and they will pay. 2:08:05 And if you're moving a million dollars, you don't mind. 2:08:07 Exactly. And also, don't forget that, you know, right now, you know, those 50 million Global South Labs can't afford to use Bitcoin if the fees rise. 2:08:17 Many of them will not be able to use Bitcoin, but there will be this sort of like middle class and sub whales or minnows or whatever you want to call it. 2:08:24 That cohort is also growing with adoption as well. 2:08:27 So people who want to transfer five thousand dollars worth of Bitcoin will still pay that 50. 2:08:32 So there's going to be like these and I tweeted about this like in February that there's block space buyers of last resort now due to inscriptions and the mempool did clear that one time after after I tweeted that. 2:08:43 So I was wrong so far. 2:08:44 I was wrong like one time. 2:08:48 But like you said, yeah, there's going to be still demand by if it goes down a little bit. 2:08:52 Well, now the people that can pay that will pay that. 2:08:54 And if it goes down even more, there's going to be people that are ready to pay. 2:08:57 Also, the same logic applies on the way up. 2:08:59 Right. Like as the fees rise, the only people who still are paying fees will be people who don't care and can afford them. 2:09:06 Right. Therefore, the fees can rise until they attain some kind of equilibrium. 2:09:11 And this equilibrium you saw in Ethereum world, right? 2:09:13 Once the fees attained equilibrium, they started spilling over. 2:09:16 But Ethereum as well paid for it now because it has millions of dollars per day in fees and those fees are not dropping back to zero, which is what Paul's model was predicting that as soon as there's competition. 2:09:27 So Ethereum has a whole bunch of layer twos that are super cheap, doesn't give his. 2:09:31 Yeah, but to give his own view like more, I would say it's just because Ethereum has more complexity. 2:09:37 It's not really just a regular value transfer that is driving up the fees on Ethereum. 2:09:41 There's there's way more complexity that can be done on Ethereum. 2:09:44 And that's the reason for, you know, fees going like staying higher. 2:09:48 It's possible, right? 2:09:50 Well, I agree with that. 2:09:51 Right. So the only outcome of that, the fact that Bitcoin has low complexity is that it takes longer to fill up the bucket with simple use cases and hit the wall, at which point there's a nonlinear response in fees. 2:10:05 Whereas in Ethereum, you can invoke a smart contract that costs $500 to execute, but it's worth it for you because you're aware of an institution swapping $10 million for another stable coin. 2:10:14 So that ends up eating up the block space in Ethereum, whereas in Bitcoin, you have pleb adoption where, you know, many more simple transactions will still fill up the bucket. 2:10:24 And once the bucket is full, you know, the fees will respond nonlinearly and start spilling over into second layers and third layers. 2:10:31 Right. The only thing that it changes, the higher complexity of Ethereum just simply means that Bitcoin needs more time in order to reach equilibrium. 2:10:39 Yeah, hopefully we are right on just the demand for simple value transfers will be enough to secure the chain. 2:10:49 I believe it will be. 2:10:51 Well, like there's evidence, right? 2:10:53 Yesterday there was evidence. 2:10:55 I haven't found the link yet and I haven't seen the collection of these inscriptions, which is posting Wikileaks. 2:10:59 I don't know how many megabytes that's being posted in there or gigabytes. 2:11:02 Who the hell knows? 2:11:04 But that's kind of an opening shot in the use case. 2:11:06 This gets priced out, though. 2:11:08 This gets priced out if the fees go up because. 2:11:10 No, it doesn't actually. 2:11:11 It does not because. 2:11:12 It does because it's some of it does get priced out. 2:11:15 The reason why is because it goes up like because it's, you know, if something costs $100 to inscribe versus, you know, $1 transaction, a regular $1 Bitcoin transaction, right? 2:11:30 10 times higher, 10 times higher fees mean it's 100 times 10 or $1 times 10. 2:11:36 So it actually does price out. 2:11:38 I agree with your math calculations. 2:11:40 What I disagree with is the following. 2:11:43 Like I have a counter argument to your being priced out argument. 2:11:46 Do you remember what happened to Julian Assange in 2011 or whatever? 2:11:50 They started posting this stuff. 2:11:51 He was running Wikileaks.org website, which itself costs money to run. 2:11:55 Right. And then he was being hunted by whatever. 2:11:59 And there was basically no way to publish immutable and uncensorable information until the inscriptions. 2:12:05 So I think that some people would pay $1,000 to pay, you know, to post a few megabytes worth of uncensorable. 2:12:12 Yeah, for sure. It doesn't get priced out 100%. 2:12:15 It's like don't forget the price of going to jail as the cost of not doing it. 2:12:20 Right. It's the opportunity cost of not doing it. 2:12:23 It's like it's still niche, though. 2:12:25 It's very niche, but if somebody wants to post a video of some war crime, right, that they... 2:12:31 It's going to be extremely expensive to post videos because that's just so much space. 2:12:35 No, no, I know. But it's very cheap compared to not going to jail. 2:12:39 Right. So therefore, it's not a purely economic consideration. 2:12:43 If somebody obtains a video of a war crime or a massacre that takes, you know, 10 megabytes or 50 megabytes to post, 2:12:50 but costs $1,000 or $5,000 to post, people would rather pay that and post that than run a website that can be taken down 2:12:58 and they can be arrested and pursued like Julian Assange, right? 2:13:04 Yeah, for sure. I noticed Troy Cross is in the audience. 2:13:07 If it's the real Troy Cross, I love your content and I've listened to a lot of your episodes. 2:13:12 I want to give you a chance if you want to come up and share anything, ask questions, comment on BitVM or Drivechains or really anything Bitcoin. 2:13:20 I think you're an amazing person in this space. Sorry for anybody else in here that I don't know or recognize. 2:13:28 Troy, you give us a thumbs up if you hear me or if you want to come up, that'd be great. 2:13:39 I briefly saw David Siroy, but he came in and out. He would also be a good contributor if he came up to the stage. 2:13:47 Hey, guys. Yeah, I'm just listening and I'm just enjoying the conversation. Thank you for the shout out, but I'm just listening and learning. 2:13:56 Cool, cool. Earlier, we had Super Testament here that was talking more about BitVM and Alex here had some interesting ways of potentially creating two-way pegs for sidechains 2:14:09 with keeping a contract on the other side. They were talking about a bunch of stuff. 2:14:14 Yeah, anybody here that hasn't seen Troy's content, definitely check it out. I'm a big fan. 2:14:23 Yeah, just keep it going, guys. I'm just going about my day and listening to experts. I'm enjoying it. 2:14:30 I missed the BitVM part. Is it recorded? I'm trying to learn everything I can about that project. 2:14:38 It will be once we terminate the space, then the recording will appear. Perhaps that's more friendly content. 2:14:47 Yeah, I really love that they're recorded because whatever parts I missed later, I can watch at 2x and just listen through. 2:14:54 After it's done, you can go back and listen through it. 2:14:57 Security budget is also very interesting to me. Henry and I have had long debates in the DMs about it. 2:15:06 Yeah, I have opinions, but I'm still trying to formulate exactly what I think about it and what I don't. 2:15:15 The main thought I've had, actually a year ago, I talked about this on Peter McCormick's show at the Blast Pacific Bitcoin. 2:15:27 I just noticed that Bitcoin mining was going to become a kind of auxiliary business. 2:15:37 I don't see it as a standalone business long term because any miner that pairs up with a buyer of heat is going to do better than a miner that doesn't. 2:15:50 Other things being equal, but also because Bitcoin can serve as a load balancer and it could pair up with a firm buyer of energy. 2:16:01 Like, let's say, Microsoft or Amazon or Google, where they need firm power. 2:16:06 They can pair up with that firm buyer to finance new build out. 2:16:14 I didn't say this on the show, but my analogy is that Bitcoin is like the submissive partner in any relationship. 2:16:25 It always gives way to the other partner. 2:16:29 I know maxis are not going to want to hear this because it runs against their hyper masculine picture of Bitcoin. 2:16:36 But I'm thinking about it purely in an economic sense. 2:16:39 If you have a business that, say, needs a certain amount of heat, then Bitcoin will scale to that need. 2:16:48 Or if you have a certain amount of excess energy in a location, Bitcoin will scale to that. 2:16:54 And the reason why Bitcoin is the submissive partner is because it's so price sensitive to electricity price and it's portable and it's flexible and it's scalable. 2:17:05 And it doesn't have a supply chain. 2:17:07 You just have to get the miners in place and then you don't have to ship the good and you don't have to ship goods in. 2:17:14 The only input you need is really power. 2:17:17 Whereas all other businesses that Bitcoin will pair with will have supply chain needs. 2:17:23 You know, they're making something and shipping it. 2:17:26 I shouldn't say all. 2:17:27 Maybe, you know, maybe the other data centers also don't don't have this. 2:17:30 But any like anything they pair with, like wastewater treatment facilities, let's say, or paper mills or any other business that buys low grade heat or at least has they right now pay something to generate low grade heat. 2:17:47 All of those other businesses have constraints that Bitcoin doesn't have. 2:17:52 So I realized that Bitcoin will size itself to to the need of these other businesses. 2:17:59 They will dictate the terms and Bitcoin mining will just like flow to fill in the niches of demand for when and where it makes sense. 2:18:09 And when I realized that I realized, OK, Bitcoin mining is not really motivated by the block reward or that's not what's really paying the bill. 2:18:22 What's paying the bill is that plus these alternative revenue streams such as methane mitigation on on flare sites, such as reducing the heating costs for for firms that are already heating. 2:18:38 And anyway, that realization made me and I said this on Peter's show a year ago, much more relaxed about the near term security budget than I was prior to seeing that because I was like, OK, where does mining flow right now or where is it going to flow? 2:19:01 It's going to flow into these situations where power is super cheap. 2:19:05 And in fact, they may spend more than a Bitcoin to mine a Bitcoin, but it'll still make sense to do that mining. 2:19:13 And if you wanted to attack the network, you would you would have and you wanted to get 51 percent. 2:19:20 You have two choices about how to do that. 2:19:23 One is you could buy out those existing miners and gather capture their hash rate. 2:19:30 And the other is that you could build your own mines, acquire new ASICs, acquire new power supplies and deploy them. 2:19:40 And I realized that that second option would be very expensive, more expensive than you might might have thought by just looking at, say, the block reward, the block reward, block subsidy and and fees together because the hash rate will be a lot higher than you would imagine just looking at that. 2:20:04 Why? Because the businesses that are mining are also doing this other stuff and they're actually spending more on power and ASICs than they are making in Bitcoin. 2:20:17 And it only makes sense because they have these alternative revenue streams that push them over the top. 2:20:22 Right. But if you set out to do it, if you if you want to spend the same amount that, say, half of the miners are spending now or if you want to double hash rate and you spend what the miners are spending now and you can't buy from the existing mine, let's just let's just suppose you can't. 2:20:39 Then you have this very arduous road ahead of you because you you can either, you know, build out new power, you can build out new power supplies or buy what is available on the market power wise, which is very expensive. 2:20:56 You're going to spend you're going to spend more than a Bitcoin to mine a Bitcoin like everybody else. 2:21:02 But you don't have these alternative revenue streams because the businesses that needed Bitcoin as a pair have already taken them. 2:21:10 And so you're just in a green field building out power, buying up ASICs and mining Bitcoin for, you know, more than a Bitcoin without that alternative revenue stream. 2:21:21 So so that anyway, that's what made me think maybe we have a cushion here while we work on the security budget long term, maybe in the medium term. 2:21:35 The cost to attack has been underestimated because we assume something like we assume that either existing miners will sell and maybe that's doubtful because miners don't want to sell to an attacker. 2:21:51 Or or we assume that the price of mining a new Bitcoin, the marginal price of mining, adding to hashrate is is equivalent to the the marginal price of adding hashrate or the mean cost of hashrate, something like that, the mean cost of hashrate right now adding hashrate. 2:22:11 And those assumptions look look false. 2:22:14 So anyway, sorry, I didn't want to jump in here and lecture, but that's where I was a year ago. 2:22:22 And that's not a solution, I think, in the very long term. 2:22:27 But it's a consideration in the short term, if you're just thinking practically like an attacker, that that is more complex than just looking at what is the security budget. 2:22:38 And if I can spend, well, it'll be quite quite a bit less than that. 2:22:44 If I spend enough to push other miners underwater, if I spend enough to push other miners underwater, then they'll turn offline and then I can add more hashrate. 2:22:53 And that's actually also a complex, you know, that's also a complex calculation. 2:22:58 I don't have to spend I don't have to double the Bitcoin network spend to double hashrate because once I start pouring money into into hashrate, I drive up the hashrate, drive up the difficulty and other miners start throwing up a white flag and leaving the business and selling their basics back onto the market. 2:23:16 And that makes things cheaper. 2:23:17 Right. That's a countervailing consideration. 2:23:20 Anyway, I'm in the middle of thinking it through. 2:23:23 Those are preliminary thoughts. 2:23:25 I don't have worked out thoughts yet, and I don't mean to say anything definitive here. 2:23:30 I'm I'm in learning mode. 2:23:32 I think this is a serious consideration and I haven't got to the bottom of it yet. 2:23:37 So, yeah, I'm just going to sit down. 2:23:40 I would add to this as well that the mining incentivizes infrastructure to be built for electricity generation in like areas where there's no incentive for electricity generation, whereas like stranded energy or things like that. 2:23:56 But then also I can see a future where like almost all all major electricity generation are going to be Bitcoin miners as well. 2:24:05 It's just it seems like it will be an eventuality, like all nuclear plants or any like big energy generations are going to have miners on site or, you know, close by or either either directly connected or indirectly, but closely connected because they're just the buyers of last resort. 2:24:24 And and like the biggest points of as well for like the balancing the grid. 2:24:30 You know, I just feel like there's a lot more things to mining than just the reward of the block subsidy and the fees like you're putting up. 2:24:41 Yeah, I agree. And I just want to add to that, that the big question is, you know, as once generation generation wakes up to the fact that, you know, they will be well served by having flexible load on site and running it themselves instead of going through miners. 2:24:56 Like once they wake up to that, then the question from an attacker's perspective is, how hard would it be to purchase that hash rate from from those generators? 2:25:09 Right now, I think miners are just not going to sell their hash rate to an attacker. 2:25:13 Like I think that's a I can't see that happening psychologically or socially. 2:25:17 I can't see like, you know, Riot being like, well, you're going to lose a little bit more for your hash rate than than its value in Bitcoin. 2:25:24 So we'll just sell it to you for that. 2:25:27 But but the question is who holds hash rate in the future and whether that will continue to be the case. 2:25:34 Because once you appreciate that the marginal cost of adding hash rate is going to dramatically, I think it pretty dramatically be higher than the cost of existing hash rate. 2:25:44 Then then the gap between those two modes of attack means like you're really much better off as an attacker buying existing hash rate than you are adding adding new stuff. 2:25:55 So then the question is, like, who's who's willing to sell it to you and for how much? 2:26:00 And in the short term, I feel pretty comfortable that. 2:26:04 Yeah, I see Harriet down below. 2:26:06 Grid is not going to sell to an attacker and neither is, you know, Fred Barathon. 2:26:12 And neither is I mean, even. 2:26:14 Yeah, well, maybe Bitdeer. 2:26:16 OK, that piece of the New York Times, like maybe if there's enough Chinese mining, maybe they sell to attackers because maybe the attacker is the maybe the attacker is like the communist party. 2:26:25 But but I think by and large, existing miners are bitcoiners and they're locked into their own their own profit model and they're locked into a vision. 2:26:39 They're basically all long bitcoin. 2:26:43 But in the future, if it becomes if if if hash rate goes to generation and generation is highly regulated by governments, then then the government, you know, getting that or an attacker getting it with you. 2:26:58 If the attacker's interests are aligned with the generators and the and the government somehow becomes a new kind of vulnerability, right, I'm just trying to see out that far, because I completely agree it'll it'll I think I think everybody sees this, that it'll merge eventually with generation in some way, but but then how does that change the security, less clearly, you know, I think it's going to be a little bit more complicated, I think, 2:27:25 but it's clear to me, on the one hand, the generators like, hey, we need this load, it helps us operate if we attack the network, we lose demand for Bitcoin and that's against our interest. 2:27:34 But on the other hand, like these generators, as we know right now, are not bitcoiners. They don't share our values deeply and they are also highly regulated and controlled by governments, which is also different from the Bitcoin mining that we see now. 2:27:48 It's just another kind of one of those one of those unknowns we can all have an opinion about right now, but I can only see darkly. 2:28:08 Yeah, hopefully the incentive models will will work where like you're saying, you know, if we become an attacker, that's hurting our, you know, baseload and, you know, our other potential revenue. 2:28:20 And as far as like regulatory and government, I think they're just people and they are in their own interest as well. 2:28:25 And as time goes by, more and more people in the government are going to, in my opinion, understand Bitcoin and the electricity generation people, you know, maybe they also don't share the values right now. 2:28:36 But if they do become, you know, directly connected with mining, they are eventually some of them are going to understand the values and they're going to adopt it. 2:28:43 And, you know, as people grow up, like most kids are growing up with Internet money on video games and things like that. 2:28:51 So I feel like Bitcoin and virtual money is a lot closer to them. 2:28:54 And eventually they get older and they get into the government. Right. 2:28:56 And so I think like the future isn't so much of governments attacking. 2:29:02 I think it's more of like the future is governments adopting just, you know, my thought. 2:29:08 Yeah, I mean, just to be just to be totally transparent here, you know, in 2011, I thought Bitcoin was going to be 51 percent attacked. 2:29:17 I thought the likelihood of that was extremely high. I don't remember if it was 2011 or 2013, but I did this calculation on the cost to attack the network in a sustained way. 2:29:31 And and the number I came up with so pathetically low and I was looking at Wall Street bonuses at the time, you know, in that post 2008 thing. 2:29:39 It was so low that one one VP bonus from Goldman Sachs was sufficient to like I can't remember for how long, but to attack the network for like seriously attack the network. 2:29:50 Just a bonus in one year for one VP from Goldman. 2:29:54 And I remember writing something at the time. Maybe it was 2013 because it might have been on Reddit. Don't search this. 2:30:01 But I remember writing something to the time at the time to this effect. 2:30:05 Like you're telling me this technology is going to upend all the finance. 2:30:11 We're going to disintermediate like Wall Street and and the world of finance in London and in China. 2:30:22 And it's like we're going to upend everything and empower all humans to transfer peer to peer and disintermediate this this entity. 2:30:30 And we're also going to disempower governments by like limiting the ability they have to print money. 2:30:36 And you're telling me no one is going to put up like one what like one bonus from a major Wall Street firm, like no firm will put up that much money to to long term to take out this threat. 2:30:51 And of course, it wouldn't take it out, but it would like seriously damage its rise and slow it. 2:30:56 And until until it can be dealt with. Right. And I was like, I just think the probability of that is extremely low. 2:31:03 Well, here we are. Here we are. Whatever it is, 10 or 12 years later, nobody did that. 2:31:09 The relevant parties like didn't take it seriously for long enough that it became cost prohibitive to attack it. 2:31:16 And so, I mean, I've been on this like pessimistic kick like the entire time and I've been wrong the entire I was wrong the entire way, you know. 2:31:27 So I like I like what you're saying. And it's you know, it's really it's a good thing that it's a good thing. 2:31:34 We have adversarial thinkers and skeptics and pessimists like myself. 2:31:38 And it's also a good thing that, you know, we have people who don't care and who can see who can see a brighter future. 2:31:47 And because they were right, they were right. And I was wrong. 2:31:52 Well, I'm your I'm your friendly neighborhood radical optimist. And I believe in the systems that we're all working on. 2:31:59 I'm sorry, a little little bit loud in the background. We'll get better. 2:32:03 I just wanted to hit on the sort of energy capture piece a little bit, because I think it's misunderstood and more important than we've taken credit for. 2:32:14 Which is just that the the playbook to me is very straightforward, which is that hash rate will become the critical enabler for large scale energy systems to function properly. 2:32:26 And so the only way to continue to utilize mining hash rate within those energy systems is for Bitcoin to remain unchanged and uncensored, 2:32:37 because ultimately the quality of the economic center of mass that sits on top of Bitcoin. 2:32:47 Will be the critical enabler for our power systems to function. 2:32:51 And so if you think of sort of the hierarchy of economic systems, the base money economic system will sit ahead of any single country's direct interest in the economic system. 2:33:03 And then the energy system sits below the country in that hierarchy. 2:33:07 And so in order for this to kind of play out the right way, Bitcoin needs to be the apex economic center of mass. 2:33:15 The United States will become the downstream economic center of mass. 2:33:19 And then each individual energy system will basically be able to leapfrog that intermediary by being enabled by this larger economic actor, which is the Bitcoin network. 2:33:37 Yeah, makes sense. 2:33:49 I want to comment on the bankers and attacking Bitcoin early on. 2:33:55 I had some talks with people that were bankers in 2013, 2014. 2:34:02 I was telling them about Bitcoin and I was like, this is going to take over your job. 2:34:06 You know, they laughed at me, you know, many years later when it went up, you know, they were like, oh, wow, this guy was a wizard. 2:34:11 He knew about Bitcoin. He was telling us about it. Right. 2:34:14 But I feel like when it was the early days, it was easy to attack it. 2:34:17 But they all laughed at it. They felt like it's a toy. It's a joke. 2:34:20 They didn't take anything serious, you know, and it had time to grow. 2:34:25 I think at this point, people start to realize the benefit of it, like as a human, like a humanitarian thing. 2:34:31 Like, it's just there's so many benefits, you know, like the electrical grid side, the generation side, you know, the balancing side. 2:34:38 But like just the value and the censorship resistance and the mutability. 2:34:42 I think people slowly start to learn that and like they're less incentivized to attack it. 2:34:46 Even governments like, yeah, sure, governments like collectively might want to attack it or a government collectively might want to attack it. 2:34:52 But it's still individuals in that government. And I feel like the individuals in that government are still for their individual self-interest. 2:34:59 And I feel like they still do learn about Bitcoin. 2:35:01 And eventually when they do, they see that it's a benefit to themselves. 2:35:04 They want to hold Bitcoin and it's a benefit for them, for the government to treat it nicely. 2:35:09 So I think that like, you know, from that point of view, they, you know, maybe short term they might want to attack it. 2:35:16 But it's just hopefully the cost is going to continue to rise. 2:35:19 And hopefully they would just start to realize that they're better off really joining than even attempting to attack. 2:35:25 Like they'll benefit more by joining. 2:35:30 I mean, we haven't seen that so far from the U.S. 2:35:34 We've seen pockets of the U.S. 2:35:37 But when we look at how, say, Treasury thinks about it, doesn't seem to be that way. 2:35:44 And I think that's because of something else that Bitcoiners say, which is this thing is going to disempower the money printer. 2:35:54 So I think we have to expect resistance when it starts to do that. 2:36:01 You know, either you drop that talking point of saying Bitcoin disempowers the money printer or you acknowledge the money printer. 2:36:08 You have to drop that talking point. 2:36:11 Sorry to interrupt. 2:36:13 Yeah, no, it's got to be one or the other because you can't say, I mean, I'm just channeling my 2011 self here. 2:36:20 You can't say they're going to welcome us with open arms and also we're going to take all their power away in the same breath. 2:36:26 I also think that from one point of view, they're the most aligned to adopt it because they could just buy it. 2:36:31 You know, since they have the money printer, they could buy it and they could position themselves really nicely. 2:36:35 And what are they doing? They're selling it right now. 2:36:38 They don't even need the money printer to buy it. 2:36:40 They seize it from criminals. 2:36:42 The FBI is auctioning off their Bitcoin as we speak. 2:36:46 Yeah, but personally, they might be buying it. 2:36:48 And if they're not, they just haven't learned enough about it, in my opinion. 2:36:51 And they eventually will, right? 2:36:54 Troy, I have to disagree with you a little bit because, you know, it's not one of the two choices in this dichotomy. 2:37:03 In other words, either it disempowers the money printer or it does not. 2:37:07 There's actually other alternatives. 2:37:09 And I have a catchy name for one third alternative, which is, I call it Bitcoin fixes nothing. 2:37:17 You know, Bitcoin goes to a million dollars while fixing nothing. 2:37:21 This is the third alternative to the money printer being disempowered or not. 2:37:27 But basically, that's my baseline projection for what will probably happen if nobody figures out a way to scale Bitcoin on layer twos. 2:37:37 And that requires a real two-way peg, essentially. 2:37:41 Bitcoin could go to a million dollars but remain an exotic, sterile store of value worth, you know, $20 trillion, just like gold or like fine art is worth $27 trillion. 2:37:51 And yes, institutions and governments will allocate 1% of their portfolio to Bitcoin, just like they allocate 1% or 2% of their portfolio to some gold ETF. 2:38:00 But the scenario where Bitcoin goes to a million dollars and then it sort of gains equilibrium with the existing system and fixes nothing, quote unquote. 2:38:09 That's kind of my sort of Cassandra-like bad outcome that I'm trying to fight. 2:38:18 Well, it definitely fixes some things. 2:38:20 I can't say it fixes nothing. 2:38:22 Well, I mean, the reason I claim that it fixes nothing is because if it goes to a million dollars and the hypocalypse happens, as I predict, 2:38:31 then it's essentially only a play toy for whales and institutions. 2:38:35 And it's an exotic store of value like fine art, which can be sent over the Internet. 2:38:40 OK, that's nice for whales and institutions. 2:38:42 But if the plebs cannot transact and, you know, it's essentially a very overpriced asset that sort of is just an exotic store of value, I don't see what it has actually fixed. 2:38:55 It still fixes or helps like grid balancing, for example. 2:39:00 Right. And like methane emission things. 2:39:04 I mean, I agree with you. 2:39:06 It will have some impact, but not. 2:39:09 The reason I call that scenario Bitcoin fixes nothing is to essentially to oppose the laser eyed perspective that Bitcoin will fix everything. 2:39:20 Right. This is kind of a provocative name for that outcome. 2:39:23 I specifically want to provoke the laser eyed who claim that Bitcoin fix the money, fix the world and it will fix everything. 2:39:30 Yes, it will fix methane and it will allow some rich whales to have uncensorable wealth, which is highly volatile. 2:39:38 But I don't see it as fixing much in this world. 2:39:42 That's not much of a fix. It's just another menu item on the menu of store values for rich investors and institutions. 2:39:49 Yeah, but I would I would challenge that even with today's level of scalability and. 2:39:55 I don't know, programmability is a meme, but but those ideas, one of which is that every business is now able to scale to an enormously larger base of users. 2:40:07 So the ability to start new businesses with more diverse and interesting customer sets is immediately available. 2:40:14 The second is the pricing of fair value of labor starts to change as well. 2:40:19 I have to push back on that. How is it immediately available in a world of permanently high 50 or 100 dollar fees? 2:40:26 Can you explain? 2:40:27 Yeah, no, that that's that's that's fair is that there's a there's a fee environment where some of those customers are priced out. 2:40:35 So maybe it migrates to higher quality services first or higher value transactions first. 2:40:41 But it still is a huge trade enabler in a way that neither gold nor art could possibly be in their instantiation. 2:40:50 You mean like maybe for international settlement between institutions then? 2:40:55 Well, yeah, there may be a settlement, an institutional purpose for that. 2:40:59 But but it but it may but it may just mean cars or houses, not subscriptions on the Internet. 2:41:06 So it's a it's a it's a huge trade enabler, even at a 50 or 100 dollar fee. 2:41:11 Do you mean to say that somebody from Brazil will be buying a car from China and paying for it in Bitcoin? 2:41:16 I don't see that happening, actually. 2:41:18 Even at a 50 dollar fee, right? 2:41:22 Maybe not from China, but maybe from somewhere closer. 2:41:26 Yeah, but, you know, a close a close manufacturer or retailer of cars will use a local Fiat rail to settle. 2:41:35 Why would they? Why would they use Bitcoin? 2:41:40 Because the government just said that you can't use fuel burning cars. 2:41:44 Well, yes. I mean that you would essentially like the outcome that you're predicting has to assume some kind of version of global North Korea. 2:41:53 In other words, either it's like the whole world becomes one giant North Korea and then it's like Bitcoin is like resistance money where guerrilla fighters use Bitcoin. 2:42:02 Or it's a milder version of North Korea where the personal restrictions and et cetera, et cetera, don't allow you to buy cars or other things. 2:42:09 And you have to become like an amateur guerrilla fighter against that. 2:42:13 And I don't think that's like a good assumption for the happy outcome of Bitcoin, because that may not happen, for example, right? 2:42:23 I agree with you. I agree with you. 2:42:25 But I think I think there's I think there's a lot more room in between where we stand today and permanently. 2:42:33 I agree with you there. There is a lot more room for the number to go up. 2:42:36 But actually, paradoxically, the higher the number goes up, the higher the fees will go up because they go up together. 2:42:42 And the number going up high and the fees going up high simultaneously prices out larger and larger percentage of the global population out of Bitcoin market. 2:42:53 And it leaves more and more whales and institutions only. 2:42:57 And once you have that one percent playing with Bitcoin, how is it different from fine art that you can send over the Internet as a store of value? 2:43:04 Both are volatile and both are stores of value, but both are sterile, pain or yield. 2:43:09 And you essentially have nothing but an additional item on the menu for wealthy investors to add to their portfolio as a store of value. 2:43:18 But that doesn't that doesn't change the idea that I'm still able to price my labor. 2:43:23 Maybe I'm batching my labor into bigger chunks. 2:43:26 And so maybe it's a ten thousand dollar labor contract of some kind. 2:43:30 But I'm still able to make my my time and my work available to an enormously larger market. 2:43:35 Oh, I see what you're saying. So like third world labor providers will be paid by Bitcoin by the first world. 2:43:42 You know, absolutely. Absolutely. Yeah. 2:43:46 We're seeing that. But what we're seeing a lot more of is that these people who work, who want to have their labor offshore, they actually want to be paid in stable coins, not in Bitcoin. 2:43:56 And there's a reason for that. Well, not just today, but I think that that will develop further because stable coins are inherently like better ways to settle this kind of transaction. 2:44:09 Why? 2:44:10 Well, because if I'm a creative person in India and I want to earn a hundred dollars for doing some kind of creative project, assuming that AI doesn't eliminate all those jobs, first of all. 2:44:23 But if I'm a creative person in India and I want to get paid a hundred dollars for doing some kind of graphics project, do I really want to get some sats that may or may not cost ten dollars to move later? 2:44:34 Or would I rather be paid in Tether? Well, probably I would rather be paid in Tether today. 2:44:38 But the only problem with Tether is that Tether is a custodial, privately issued currency, which may or may not go bankrupt. 2:44:45 But you could imagine that Tether and stable coins in general will evolve towards replacing a Euro dollar system. 2:44:53 So you can think of them as being Euro dollar system 2.0. And then you will have stable coins issued by JPMorgan Chase and Deutsche Bank globally. 2:45:02 Whether or not the U.S. approves of that, the Euro dollar system will provide the stable coins offshore just like they provided Euro dollars. 2:45:09 And those stable coins issued by large commercial banks backed by their respective central banks will be essentially way more competitive than Tether is today. 2:45:18 And Tether is already empirically seen as preferred for payments. You know, just look at what's going on. 2:45:23 Because like if you in your scenario, right. On one side, you're saying they're not going to want sats because, you know, the fees will be too expensive for them. 2:45:32 Volatility as well. Right. 2:45:34 Let's say volatility as well. Yeah. But then on the other side, they will be totally OK with the centralized authority like Tether or even worse. Right. 2:45:41 So I think that there is also space for them to put, you know, 5 percent or 10 percent or whatever of their earnings into Bitcoin with enough education and possibly with enough education. 2:45:49 They might want to put more. And if volatility continues to go down over time and the price does continue to rise over time and they do actually do the research. 2:45:59 Yeah. Today, I agree with Harry. They might want, you know, a stable coin. But I think in the future that there is definitely space for them to learn more and desire Bitcoin over the stable coin. 2:46:09 And even if it's that even if it's Bitcoin, that's like rapid coin on another chain or, you know, just like a centralized Tether. 2:46:15 If they're taking the trade off of centralization anyways, they might benefit from taking that trade off with actually Bitcoin and eventually either settling on chain or even if they can't settle. 2:46:25 You know, I do think that they will be incentivized in the future if the price continues to go up and the volatility continues to decrease and they do enough research. 2:46:35 Some percentage they would they would want to put in Bitcoin anyways. 2:46:39 Well, I agree with you, which is why we've seen, you know, 50 million proverbial, you know, Nigerian plebs, you know, start accumulating Bitcoin savings. 2:46:50 Right. I mean, of course, they're not just Nigerian, but they're basically all over Africa and Asia. 2:46:54 But once the fees start rising inexorably, which I'm assuming is going to be the case with or without ordinals, you will see those people think twice before actually using Bitcoin for their savings because their savings are not large enough. 2:47:07 That's just layer one Bitcoin. 2:47:09 Well, I know. 2:47:10 They'll continue to use centralized layers. 2:47:12 Yes. Well, in theory, they could be using a lightning network today. 2:47:17 But imagine like my sort of proverbial example is to really see Nigerian villagers wanting to manage liquidity with adversarial counterparties and essentially be like a euro dollar bank de facto, which is what it means to run a lightning. 2:47:33 But their alternative is a currency that debases. 2:47:36 No, their alternative is U.S. dollars in one of the million forms and U.S. dollars right now. 2:47:43 But if U.S. dollars continues to debase. 2:47:46 But they don't debase. 2:47:49 Let me push back on the debasement of the U.S. dollar. 2:47:52 If you've ever been to a country like Russia or Brazil or Turkey, whenever the local currency debases and there's high inflation in local currency, actually prices in dollar terms fall. 2:48:07 So actually purchasing power of your dollar is rising, even though it debases in the U.S. and over the long term, the global dollar is losing purchasing value. 2:48:15 But whenever local currency falls, people holding dollars experience not the same purchasing powers before, but increased purchasing power. 2:48:24 So you're saying if the dollar is debasing, then their local currency is debasing even higher. 2:48:28 Which is what normal people observe. 2:48:31 I hear what you're saying. 2:48:33 But I still think that with enough education and they will still eventually start using. 2:48:38 Like, for example, the example that you gave of the people in Nigeria and, you know, they might get priced out with fees going up. 2:48:44 They'll get priced out of the base layer, but that doesn't automatically incentivize them to switch over to U.S. dollars. 2:48:50 Well, it's like they don't need to be incentivized to switch over to U.S. dollars because empirically they all want U.S. dollars today, like by a margin of 10 to 1 relative to Bitcoin. 2:48:59 Just because the fees on the base layer are going to go up? 2:49:02 No, not that, because the fees are low on the base layer now. 2:49:05 I'm saying if you go to Turkey where they had high inflation or Argentina or Nigeria or whatever, you actually see people that send millions of USDT tethered transactions on TRON and they never heard or care about Bitcoin. 2:49:17 Let me ask you this way then. 2:49:18 If you were in that area, right, in whatever area, would you prefer with your knowledge Bitcoin or U.S. dollar type currency? 2:49:25 It depends on my net worth. 2:49:27 If I have enough money to invest into an exotic, highly volatile, uncensorable store of wealth like Bitcoin, then I would stash a certain percentage of my money into it. 2:49:36 But for those people, they need to have sufficient savings and sufficient knowledge and competition should be absent as well. 2:49:44 And the U.S. dollar in the form of tether just happens to be very competitive relative to Bitcoin for 95% of them right now. 2:49:52 I think right now, sure. But I also feel like over time, you know, Bitcoin stability. 2:49:58 Well, I agree with you on time, but the problem is that these people don't have long term savings anyways. 2:50:04 They can't afford them. So for them to have dollars for a few months or a few years is good enough. 2:50:09 In other words, you can also see that stable coins definitely have a product market fit and you're seeing sort of the genesis of the stable coin era. 2:50:18 Right now, stable coins are still marginalized and hounded by the regulators. 2:50:23 But if you saw what's going on in Europe, right, for example, they just issued regulations that allow European banks to issue essentially stable coins. 2:50:31 And there's already a French bank issuing digital euro and digital dollars. 2:50:36 So just expect the euro dollar system offshore outside the U.S. to start issuing offshore stable coins that are like a better version of the euro dollar. 2:50:45 And those will be issued by too big to fail banks that will be backed up by their central banks. 2:50:50 And therefore, they will be almost as good as Fed's own CDBC, right, which can never default. 2:50:57 So what I'm saying is that the stable, we haven't seen all the competition from stable coins yet. 2:51:01 It will intensify. And my sort of nightmare scenario is, first of all, if the apocalypse prices out people, but also there's additional competition that makes Bitcoin less and less relevant for payments and more and more of a store of value only asset. 2:51:19 Right. Unfortunately. And that sort of to me, that's all headed to the scenario where, yes, Bitcoin will go to a million dollars because enough whales and institutions will want to have one or five percent of it of their portfolio. 2:51:31 And so Bitcoin will go and stay at a million dollars. But if it's only accessible to institutions and whales, what does it actually fix? 2:51:38 So I call that scenario Bitcoin fixes nothing, even though it goes to a million dollars. 2:51:44 I like the scenario that Bitcoin fixes nothing. And it actually seems kind of bullish to me because it avoids, as you said, the dilemma that I spelled out. 2:51:55 You know, it destroys the dollar, but they're going to also adopt it. 2:52:01 It's a nice response to that. 2:52:04 But right. This is the outcome, right? 2:52:06 So it's like, I'll give you another model, like the Hal Finney model of potentially, you know, banks or private banks having their own currency that's backed by dollar and some of them are backed by Bitcoin and some of them are more backed, some of them are less backed. 2:52:20 You know, that can also potentially happen in the future. 2:52:22 Yeah. What I was going to say is I think near term that looks to be happening and that looks to be already underway. 2:52:29 I think, you know, earlier Bitcoin's narrative was as a payment network and we're going to bank the unbanked around the world. 2:52:39 You know, the Antonopoulos popularized this narrative and stable coins are coming in and really doing it instead of Bitcoin. 2:52:47 I think this is upsetting to a lot of Bitcoiners or they're in denial about it. 2:52:52 I don't think they should be. 2:52:54 It's like what we're trying to do here with Bitcoin is turn something into money. 2:52:59 We've always known we'd go through a period of price discovery as people feel out the technology and determine its odds of becoming money. 2:53:09 And we've always known that that would mean tremendous volatility. 2:53:12 And we've always known that tremendous volatility is incompatible with being a medium of exchange that's widely used. 2:53:19 So we've always known that we would go through a phase like this and we that we couldn't really bootstrap bunny into Bitcoin through the medium of exchange route. 2:53:29 Because because medium exchange is driven by really it's what buyers and sellers want in an exchange. 2:53:38 Right. The buyer wants to give away the shit money for a stable good. 2:53:45 The seller wants to get an appreciating money for a stable good. 2:53:51 And so buyer and seller have opposite needs in any transaction of what they want from the money. 2:53:58 A stable money best serves both buyer and seller. 2:54:01 It's where the buyers needs and the sellers needs compromise against each other perfectly. 2:54:07 Which is why an ideal medium of exchange is just stable. 2:54:10 And it also allows you to plan. 2:54:12 It also allows you to plan. 2:54:13 You get some money and then you know you can pay for what you need with that money. 2:54:18 So we've always known that. 2:54:21 So what's the only route that Bitcoin has to becoming money proper. 2:54:25 It's that it has to achieve stability relative stability first before becoming a widespread medium of exchange. 2:54:34 And what what can allow that. 2:54:37 And they're here like the economists standard refrain is nothing will ever allow it because Bitcoin supply is inelastic and unresponsive to demand. 2:54:46 And I've heard that I've heard that that was the very first thing out of the first economist that I talked mouth of the first economist I ever talked to about Bitcoin was like but wait you're telling me it has fixed issuance then it can't be money. 2:54:58 Right. To which I've always thought I still think no it could become stable over time. 2:55:04 If you look at say gold. 2:55:07 Yes the supply of gold is elastic but the elasticity in the supply of gold does not explain the stability in the price of gold because it's slow. 2:55:17 It's very very slow to respond right. 2:55:19 Like you have a spike in demand like right now I see gold is spiking right now. 2:55:25 Do you think that the mining of gold speeds up in response to this latest spike like which is only weeks in length. 2:55:33 Like no it just takes much longer to get a gold operation going. 2:55:36 And then the amount of inflation in gold is so small anyway that it doesn't. 2:55:43 Basically the mining dynamic with gold does not explain its stability because it is too slow. 2:55:51 It can't possibly be responsive to those spikes. 2:55:54 Or if you look at if you look at Bitcoin's spikes in price the God candles the crashes like if we had gold's level of mining and level of of elasticity. 2:56:07 Do you think that the price spikes would be any different. 2:56:11 No not measurably different on a short time scale. 2:56:13 No. So what what explains the stability of gold is not its elasticity of supply. 2:56:21 I just can't buy that. 2:56:22 And so anyway if Bitcoin mining achieves gold like distribution so that you know actors are balancing out the bulls and the bears are so widespread and balanced and acting against one another all the time we achieve relative stability in pricing with Bitcoin. 2:56:41 Then it's suited to be a medium of exchange. 2:56:42 And then you know Alex your point. 2:56:44 How do we how do we actually enable people to use it. 2:56:47 If at that point it's a bubble for rich people. 2:56:50 Well and fees are very high. 2:56:53 Well you know we either get some some development where we get a trustless to a peg or we we have as we have varieties of trust levels whether it's FEDI or whether it's how Finney's banks allow people to use it. 2:57:12 I agree with you. 2:57:13 I just want to I'm sorry to interrupt but I agree with you and I like how Finney's idea and FEDI mints and all this other stuff. 2:57:19 But guess what. 2:57:20 We have seen this movie before. 2:57:22 This movie was called classical gold standard right. 2:57:25 And the classical gold standard you had gold which was in theory the dollar was defined as a certain amount of gold. 2:57:32 But in practice you know the money supply kept rising even though the amount of gold was the same because there was fractional reserve banking and gold de facto was only a reserve standard for commercial and central. 2:57:43 Well there were no central banks before the Fed whatever. 2:57:46 Yeah but there's a difference here. 2:57:48 The difference is it's a lot easier to transfer and it's a lot easier to custody and it's a lot easier to verify it. 2:57:54 So it could have similarities to gold centralization of you know of large amounts when the price is very high. 2:57:59 Yeah but it's not it's not I'm not claiming you know there is like a third outcome here. 2:58:04 I'm not claiming that Bitcoin will centralize like gold and therefore it will end up like gold. 2:58:09 I'm making a weaker claim. 2:58:11 I'm just saying that if the fees are high at $100 or higher let's say and the price is high a million dollars higher you will not have volatility decline. 2:58:21 Like imagine as a thought experiment that Bitcoin hyper Bitcoinizes and replaces all the money in the world. 2:58:27 Well in that case it represents the global economy right. 2:58:29 And in that case in that best of all possible outcomes of total hyper Bitcoinization you would still expect the volatility of Bitcoin to be slightly less than the volatility of S&P 500. 2:58:40 You can think of it as like a global stock index on the whole world economy right. 2:58:44 And I'm saying that an asset that has a terminal volatility like a global stock index will still not be good enough as a unit of account. 2:58:52 There is like a certain minimal volatility that Bitcoin cannot potentially get lower than even if it's like 10 million dollars of Bitcoin and everybody in the world has adopted it completely right. 2:59:03 I think you're missing something where you know the example of Troy gave when you know more gold is mined doesn't hit instantly affect the price. 2:59:12 Same of like when you know more and more dollars are printed it doesn't instantly affect the prices of S&P and things. 2:59:18 No it does affect the price you know down the line. 2:59:21 Well the same thing here you know just because the productivity of the GDP of the world fluctuates I don't think it instantly affects the price. 2:59:28 And in the event in the world where you're saying where it does become a standard I think that it becomes sticky as a unit of account. 2:59:36 And even with that was that was just my thought experiment I'm saying in order to get to that hyper Bitcoinization right. 2:59:42 It has to go through a bunch of stages first like it can never become a unit of account until it becomes a medium of exchange first. 2:59:49 I hope that's not controversial. 2:59:51 Yeah but it can become a unit of account in like in bubble areas right. 2:59:55 Areas that are not as like connected with trade outside of themselves like you know circular smaller circular economy. 3:00:02 They can be you know you know if you if you look at the way El Salvadorans use Bitcoin they don't actually use it as a unit of account even though it's technically like you know a medium of exchange or whatever like a legal tender in El Salvador. 3:00:15 They see some of them use Bitcoin for savings. 3:00:18 That's true. So we're back to the reserve asset right. 3:00:20 Like in other words my scenario of Bitcoin fixing nothing does not even get it to the reserve asset. 3:00:26 That scenario is simply an exotic store of value that's that's just sterile like gold or fine art. 3:00:34 Now if Bitcoin overcomes that obstacle of evolving from a sterile store value then the next step in its evolution will be a reserve asset. 3:00:44 And what does that mean. It means that it will be kind of like gold in the classical gold standard where banks and governments will have it on their balance sheet as some kind of percentage of allocation. 3:00:54 And against that balance sheet the euro dollars will be issued like they're issued today. 3:00:58 Right. So it's not necessarily needed but the global system will not need to use Bitcoin as medium of exchange just because it has finally evolved to be five million dollars now. 3:01:09 And it's become like a reserve asset that people have allocations to. 3:01:13 It's just more assets on the balance sheet to issue dollars or euros against right. 3:01:21 Yeah. Also I think they'll just become more interest to holding Bitcoin versus other assets right over time. 3:01:28 At that point if Bitcoin does evolve to that reserve asset then it starts competing with the one with all the first class reserve assets that exist today such as U.S. 3:01:38 Treasury bonds German boons you know Japanese bonds and all these other. 3:01:43 And then eventually also Gresham's law right where a better money will drive out. 3:01:49 But it's not money yet right. 3:01:50 Because if just being a reserve asset is not good enough to be subject to Gresham's law if it's just something you keep 5 percent of your balance sheet and like you can imagine you know JP 3:02:01 Morgan Chase and the Fed both keeping 5 percent of their balance sheet in Bitcoin and it still doesn't fix much. 3:02:08 It just you know in other words in that world Bitcoin is still a plaything of play. 3:02:12 I assume full institutionalization. 3:02:15 I assume that all banks and central banks have it on their balance sheet but that that world it fixes maybe some things. 3:02:21 For example it prohibits U.S. 3:02:23 government from printing infinite amount of debt because the interest rates will go higher because there will be an alternative to U.S. 3:02:30 Treasury bonds. 3:02:31 So that that particular thing might be fixed by Bitcoin being a real reserve asset and not just the volatile not just a sterile store of value like finer gold. 3:02:40 But what else does it fix. 3:02:41 I don't see much in other words but the good news from Troy's perspective is that in that outcome where Bitcoin fixes nothing either because it never progresses 3:02:50 beyond sterile store of value or because it simply becomes another reserve asset with allocation from from commercial and central banks. 3:02:58 The good news there is that nobody will will consider attacking Bitcoin at all right because it'll be just you know just a better version of gold 3:03:05 that banks and governments have on our balance sheets. 3:03:07 Everybody will be a friend of Bitcoin. 3:03:09 So there's no danger of of the world becoming North Korea and trying to suppress Bitcoin or U.S. 3:03:13 government attacking miners or any of that. 3:03:16 That's kind of the good news. 3:03:17 The bad news is that the plebs and inflation like inflation will remain and you know government restrictions will remain and I don't see much 3:03:25 benefit for the plebs other than the fact that maybe government bond markets will shrink some more. 3:03:31 Right. 3:03:32 They will not be as huge as they are because Bitcoin will be competing with government bonds. 3:03:36 But right. 3:03:37 But there's also an aspect here that it can also fix another niche where you know if inflation does persist they have another option for a light 3:03:46 bulb other than you know let's say real estate. 3:03:48 It has a barrier. 3:03:49 You need a lot of a large amount or whatever other barriers. 3:03:52 Yeah but you know I might be easier to get into Bitcoin as I know but you're forgetting the no free lunch part here which is that if there 3:04:00 is full institutionalization of Bitcoin where banks and governments have it on their balance sheets bank then the governments will start 3:04:07 taxing your Bitcoin which they're not doing right now. 3:04:10 Like in other words yes I mean real estate is is a great store of value because it's tax advantage and Bitcoin is a better store of 3:04:17 value. But is Bitcoin really a better store of value when the government forces you to pay like wealth taxes on your Bitcoin holdings. 3:04:23 Yeah I'm not sure there is an option here too but you also got to look at for example you know people that will completely just you 3:04:29 know go around that right. 3:04:30 Like for example the like weed being illegal for many years or even alcohol during the prohibition people still did it on the ground 3:04:38 right. 3:04:38 And now weed is legal in many places you know for tax purposes you know you got to pay taxes on buying and selling weed but people still 3:04:44 do it. 3:04:45 And just yeah but if you're talking you're talking about the black market which will always exist in any legal substance or you know 3:04:51 there will always be real fighters and if you start taxing Bitcoin like that would just incentivize more of a black market. 3:04:55 Yeah but imagine if they start taxing Bitcoin only after one million dollars worth of holdings right now you're taxing rich people 3:05:02 that are afraid to go to jail and they will pay the tax. 3:05:04 And yes you know like people with less than one million dollars in Bitcoin you know the global plebs will be sending Bitcoin to each 3:05:10 other. But what I'm saying is that the Bitcoin's competitiveness as a store of value will not necessarily be as good as it is now. 3:05:16 Yeah. But you also got to look at the incentives here because most of the government laws are controlled by the people that do have 3:05:23 more than millions right. 3:05:24 Well right right. 3:05:25 So the people usually vote to tax the rich and you know the Bitcoin whales will have to bleed some blubber basically in this world. 3:05:31 It depends because the rich also want to make sure that they're not taxed right that there's loopholes for them. 3:05:37 Right. That's that's the oligarchic outcome right. 3:05:39 Like in other words if Bitcoin becomes fully institutionalized then then the elite becomes the Bitcoin elite gradually and then you're 3:05:47 back to sort of fixing very little. 3:05:49 It's just that the old trad file it was next to the money printer and the new and the new elite is is is Bitcoin whales that you 3:05:56 know between now and 50 years from now when this outcome may happen. 3:06:00 Right. And you're still giving the average people a light bulb in some way or another even if it's on a second layer or a more trusted 3:06:05 layer. But it's another it's another light bulb. 3:06:07 It's a it's a it's a it's a savings it's a savings mechanism that may be better than S&P 500 index fund or may not be better than 3:06:14 an S&P 500 index fund because well the fact that it's a better asset right is just makes it better automatically. 3:06:20 Yeah. But but we know that 90 percent of people cannot like there's been studies that people who got Bitcoin three four five years 3:06:28 ago from friends and family 90 percent of them have lost their keys right and they cannot access it. 3:06:33 I've seen the current generation but in 50 years I don't think that's going to be the case. 3:06:38 I mean the other thing is that Bitcoin is a censorship resistant network. 3:06:43 It's the premier censorship resistant network. 3:06:46 And if you need censorship resistance it's not going to be cheap in your scenario because fees are high. 3:06:54 But that's a need that it can meet. 3:06:56 So yeah why would you send a payment in Bitcoin rather than this like regulated stable coin. 3:07:01 Well maybe you really need the censorship resistance of the network. 3:07:07 Well maybe you do and maybe you're a guerrilla fighter and maybe you're trying to avoid taxes but you're talking about a 3:07:12 minority use case like there is another kind of piece of bad news that I that I could share with you guys for why Bitcoin will 3:07:19 fix nothing. And that's I mean recently I saw I heard a podcast between Jeff Booth and George Graham on I think it was on 3:07:28 what Bitcoin did. And I found George Graham on I think that guy's name is a macro guy with his own with his own podcasting 3:07:36 show. But I find his arguments for human nature being being the problem for Bitcoin kind of interesting and convincing and 3:07:42 novel which is like all of his arguments can be reduced to the following idea that whenever in human history you have 3:07:48 savings the next thing that appears is collateralization rehypothecation leverage and derivatives. 3:07:55 That's always been the case and it will continue to be the case with Bitcoin because people need you know lower rates on 3:08:02 their loans and people will have greed to get higher yield. And whether or not you have Bitcoin as a reserve asset 3:08:08 collateralization rehypothecation financialization in general including leverage and derivatives will appear on top of those 3:08:15 savings. So this is not whether or not Bitcoin settles fast in 10 minutes or enlightening network or gold sells slow. 3:08:22 That's like orthogonal to this human human flaws of wanting higher yield and lower interest rate to pay. Right. And there 3:08:30 will be providers that appear and say hey would you like to pay somebody a fraction of a percent per year to store your 3:08:39 Bitcoin or would you like us to give you 8 percent annual yield on your Bitcoin. Right. And lo and behold you have Bitcoin 3:08:45 banks in the style of how many. Right. And these Bitcoin banks go fractional reserve because you know they need profits and 3:08:52 they will go fractional reserve and they'll start printing Bitcoin. And I don't know how you can stop that. I mean proof of 3:08:58 reserves is pretty straightforward. Yeah. But if you want to fully backed but but but but you can you can get you can ensure 3:09:06 it is it's straightforward but it's also moot. You know why. Because if if JP Morgan Chase has 1 percent of their balance 3:09:13 sheet in Bitcoin and they can prove it. What does it matter to you that it's only 1 percent of their balance sheet and they can 3:09:19 prove it because they have other assets and God knows how many other liabilities. Right. So the proof of reserve that they have 3:09:25 you know 50,000 bitcoins on their balance sheet. OK. They can give it to you but it doesn't mean much in the big picture for JP 3:09:32 Morgan Chase. And you're still doing business with JP Morgan Chase and they still make markets in the futures markets with 3:09:38 Bitcoin perps that print Bitcoin out of thin air. And I don't know how you can stop that. So you know like the real supply of 3:09:44 Bitcoin is already higher than 21 million people. It's just that the laser eye community wants to be in the denial of that idea 3:09:51 that Bitcoin is printed on futures perp exchanges even today let alone in the euro dollar 2.0 system or 3.0 system where Bitcoin is 3:09:59 a reserve asset and everybody's doing collateralization rehypothecation leverage and derivatives all on top of Bitcoin as a 3:10:06 reserve asset. So definitely a good video. The one you're talking about. Good episode. It's a good perspective just to see different 3:10:14 views. I think that there's a lot of counters to it as well. I want to give Bitcode a chance to say something as patiently as his 3:10:19 hand up. Oh what's the name left. Yeah. Hi guys. Hi guys. How are you. I love what you're talking but I disagree with with some 3:10:32 things. Why. Because what what Alex said. Yeah it's true. And everything that we see today is more and more going away from the 3:10:44 Bitcoin blockchain. And we need to separate the BTC from Bitcoin blockchain. That's that's the first thing. So we we start talking 3:10:53 about you know the future. Why. Because one thing is using the BTC in different form shapes and you know centralized way 3:11:03 derivatives and whatever. But different is using the Bitcoin blockchain and only only if we if we want to Bitcoin as a project to to be 3:11:16 successful. I agree mostly with with Paul's view and and actually the usability of Bitcoin blockchain because. I will ask anybody 3:11:29 what what what means when if if Drivechain is enabled what means when somebody locks up the Bitcoin to to open a sidechain. It is a 3:11:43 reserve. It is a reserve currency. So automatically you start by using the Bitcoin blockchain creating the reserve currency. Why I'm 3:11:53 saying this. Because as you know many many of the of the Maxis not OGs but especially Maxis they are pre Bitcoin they they were a gold 3:12:05 box and probably they're still gold box. So I have gold and silver but I'm I'm not doing I'm not pushing the narrative of gold. So they 3:12:17 created this narrative of gold and they want to replicate the narrative of gold on Bitcoin. So gold the for example like you was 3:12:27 talking I was listening for an hour maybe even more. And then I want to interact with you. I mean not to be a monologue but like I know 3:12:39 that let's say the the latest mining gold mining that was opened and mistakenly they they started being on a different site and they they 3:12:51 tried to sell now. They spent two hundred and sixty five million dollars to open the mining. So how much cost you know Bitcoin Bitcoin good 3:13:04 facility with hundred thousand miners. You know just just example. So it's it's kind of like yeah not not comparable. It's still it's still 3:13:15 nothing but how we can not infiltrate but how we can penetrate and change the system. Because what I see up to now because the Satoshi vision 3:13:30 was very long time ago abundant and we know what what he planned to do and etc etc. And you know that this is the thing. If the Bitcoin 3:13:44 blockchain is not used this is not my opinion. This is like I do a deep research of everything and I understand Bitcoin very well because the 3:13:53 Bitcoin is carrier of the of the digital unit of of the data. And that's a bit. So that's inside the Bitcoin and nothing else. Everything else uses 3:14:04 the bit. Only Bitcoin carries with with with the BTC. So the the thing is if we do not have a way to penetrate with the blockchain in the end 3:14:21 upgrade the system change the old corrupt system with the new decentralized you know even Bitcoin is 15 years. That's a new technology. Yeah. But 3:14:31 this is the way. And I think the Drivechain is the only solution for this to be achieved. And the other thing is that I see so many kind of financial 3:14:45 people coming into Bitcoin and pushing their narrative from the traditional finance onto Bitcoin which is wrong. We need to push the Bitcoin onto them. So we 3:14:55 change them and we decorrupt all the system. And it's not only for the United States. It's global. And I see many many people are talking only for 3:15:05 the United States. Bitcoin is global. So and that was the case very early in Bitcoin and Satoshi you know that you know pre 2015 16. I think pre the ICO 3:15:18 era was too different. 3:15:23 Much more different than than today. Even the people in the community. 3:15:28 But I mean I agree with you a bit code and that's why I say that my Bitcoin fixes nothing scenarios assume that there is no scalable L2 and I do not 3:15:48 consider lightning to be a scalable L2 because it's naturally centralizing into custodial lightning because there is like recent research 3:15:59 revealed that 93 percent of of all the Nostra Zapps are custodial lightning Zapps. So that's a pretty pretty bad outcome. Right. If we see 93 3:16:10 percent of retail payments being custodial then lightning is just another way for institutions to connect to each other. And it's not something that 3:16:21 plebs or Nigerian villagers will use because they cannot afford to use baseline Bitcoin because the fees are too high. They will just use 3:16:30 custodial lightning wallets maybe that emulate stable coins or simply have stable coins in them. But it's not a scalable solution 3:16:38 essentially in my mind. Alex do you do you agree that anything can be medium of a change. Because you see I mean like I was listening in the 3:16:51 space and this was a financial space. You know financial people from like serious financial people. And they were saying like listen 3:16:59 nobody. 3:17:00 Uses Bitcoin for transfer. Everybody uses stable coin. 60 70 percent of the of the crypto transfers between this what we are talking you know the the countries like in jail anywhere else. They transfer stable coins. 3:17:17 So where is this kind of you know store of value and you know reserve currency and medium of exchange in Bitcoin. 3:17:29 Yeah sorry about that guys. Yeah it's not there right. It may never appear. I mean the medium of exchange is a very difficult barrier to scale. And I'm saying like I mean at this point Bitcoin is a volatile like monetizing commodity. 3:17:53 It's not even a store of value yet. But like the best outcome which I call Bitcoin goes to a million dollars and fixes nothing. That just gets you to a store of value like gold or fine art. It's the same market cap 20 trillion dollars as those two. 3:18:07 But before you can get to medium of exchange you still have to go through a bunch of other barriers. You have to become a reserve asset. Right. You have to start competing with government bonds. And then after that it may not progress like there's another two or three steps before it actually becomes medium of exchange somewhere. 3:18:24 Let alone in the world. Right. That's a very long journey and it's a very difficult journey. Right. And I'm saying that there will be like if Bitcoin doesn't scale on L2s because there is no Drivechains or there is no decentralized or trust minimized two way peg then the journey will probably end in the store of value phase and will not even become a reserve asset. 3:18:46 So yes Bitcoin will go to a million dollars. It will fluctuate like gold up and down around a million dollars depending on how many dollars are printed. But it will essentially top out somewhere there but it will not become a reserve asset on balance sheets of global banks and governments. It will be just an exotic store of value for whales and institutions. 3:19:06 Yeah. Agree. Agree. And I think for me like looking about the fees and all that kind of oh in the future we will have a high fees. Like if Drivechain is enabled and the let's say decentralized economy starts I'm not saying doing companies on Drivechain. 3:19:30 I'm saying using the sidechain as an infrastructure for the companies and through that you create a high volume on transactions for a small fee. But on the L1 is a good chunk of fee for the miners which is will be not expensive on L1 even to transact. 3:19:50 And on both L2 Drivechains and L1 will be cheap to transact. But because you will have a high volume of transactions on L2 you get kind of a good amount of fees for the L1. So I think more transactional volume on L2 is much beneficiary for everybody on L1. 3:20:16 I don't know. What do you think about that? 3:20:47 Because they don't transact on level one which will inevitably have high fees. That network effect is going to be 10 or 100 times larger and that will allow Bitcoin to go from fixing nothing and just being like fine art and gold to maybe the reserve asset. 3:21:02 And maybe after that it will go to reserve asset that can be collateralized on chain or something. Like at some point it has like it's all about extending the network. Like in a sense you can think of my position as being digital scarcity maximalist not a monetary maximalist. 3:21:20 You know like Paul Sztorc was talking about that Maxis today are all just thinking of they're all just trying to be Bitcoin is sound money and nothing else. But the original position of OGs was that it's digital scarcity that has unbounded number of unknown unknown applications. Money is just one of them. 3:21:40 So let's extend the network effect to naming decentralized naming. Now thank God we have that with ordinals and inscriptions. But there's like 100 other applications that could extend the network effect and therefore demand and usage of Bitcoin. And that helps the number go up. 3:21:55 And the higher the number goes up the better all these other use cases become because Bitcoin is more valuable and liquid etc. So it's just the question in my mind is where the network effect stops. If it stops just at the sterile store of value which unless there is some kind of scalable L2 that's trust minimized and not like lightning that's the path that we're on right now. 3:22:20 But maybe BitVM opened up some new possibilities for a two way peg or bridging. If Bitcoin goes beyond that then it becomes like a reserve asset and then it becomes bigger. And then there's two or three steps beyond that to get the medium of exchange and then eventually like unit of account for the world that's the full hyper Bitcoinization. 3:22:43 Yeah I agree with you. I mean I agree in general with you. Maybe you were talking about the other guy who was talking more financially. 3:22:58 And what is your criticism about the BitVM? Because I have so many criticisms because I know how the other EVM world works and what is going on there. 3:23:13 I don't I mean I don't have criticism of BitVM. I'm just a little concerned by its complexity and how much work will need to be done. And people who think that BitVM will solve all Bitcoin's problems probably should go away and come back one to three years from now and see what's happening because it's going to take one to three years in order for Bitcoin to be successful. 3:23:43 For this technology to actually manifest into something. It's a very complex you know it's very complex. It's like lightning network to two or three years to deploy and this might take longer even if it does work or it might not work. 3:24:00 It might not be might not amount to anything because of economic problems like not technical problems like maybe nobody is interested in running these federations with a single honest member for example for economic reasons right because you walk up to that capital. 3:24:18 And then decentralization because federated is not the central. 3:24:22 Also you can have even a bigger problem that you can have a situation and I would like to hear your opinion Satoshi and Jura on this is that you can have a situation where somebody invents a fully trust minimized two way peg using BitVM. 3:24:39 And people deploy one or two sidechains with that peg and nobody cares. Essentially just like nobody cares about RSK sidechain or liquid sidechain. You might have a situation where nobody cares even if there is a trustless two way peg to some sidechain that got deployed because that sidechain just like RSK sidechain doesn't have enough liquidity and people on it in order to compete with Ethereum. 3:25:08 I think that there's like a very unfortunate thing that I'm about to say. From my experience like even over the years or whatever like what actually gains traction is usually the things that are marketed the most or marketed in a bullshit type of way and just has a lot of speculation gambling like degeneracy. 3:25:34 Like for example how did BitConnect get adopted. They promised outrageous things that just weren't true that they have like some kind of back end that's arbitrage trading right. Completely bullshit. Or if you look at like you know even second layer EVMs which ones actually got adopted the ones that had like very high amounts of Ponzi's on top. 3:25:53 Right. Those got adopted. And even if they were temporary they got adopted for temporary reasons. Doesn't matter. But the adoption came from from like degeneracy and it also came from like flows in the market. Right. Like whenever certain areas of a market kind of became quiet. 3:26:08 Those speculators and gamblers were not really get getting any gains or whatever in that niche of the market. So they would start to flow to another niche. Right. And then that other niche would start to gain adoption and it could be a different layer or a different form of contracts or Ponzi's or whatever. 3:26:22 You can also see something similar to happen in ordinals. Right. Very beginning. You know like there wasn't really much adoption. But then once other people were interested and then like there wasn't even any marketplaces where people were trading it in discords. 3:26:35 But the fact that people were trading it in discords other people were speculating on you know others trading it and buying it for higher and that brought people. But then you can see that the majority that like entered was really from like BRC 20s which absolutely makes no sense. 3:26:47 It's the oldest model like you know just fungible tokens and tokenizing things is like a model that happened in 2013 with like a million different coins that were just copies of Bitcoin. Right. It was very very old model that happened over and over and over many years. 3:26:59 But for some reason this is like I can tell you the reason because apparently three billion Asians have missed the ICO boom of 2017 and a lot of it went into BRC 20 speculation. 3:27:11 Yeah. But you can also look at in 2013 there was plenty of old coins that were popping up. Right. 2014 2015 plenty of them. 2017 ICO bubble plenty of them. Right. And 2021 2022 meme coins plenty of them. 3:27:25 So it seems like it's a cycle where people are really interested in you know speculating. It's the new waves of adopt. It's a new wave of refugees into crypto that come in and they haven't seen the previous bubbles and apparently BRC 20 bubble was just people speculating. 3:27:42 It wasn't even it was like very very tiny. It's very hard to use very hard to know how to even send the BRC 20. There's a lot of limits and barriers there. Extremely you know like inefficient. But what I'm saying is like previously I thought that like during ICO bubble I thought OK maybe this is just like a dotcom bubble to one in a generation type of thing. 3:27:59 You know but then the meme coin bubble happened as well and the Ponzi's that that happened later happened again. You know so I came to the point later. My my point like my view kind of evolved where where it's more right now like that people always want to gamble at a casino for one reason or another. Like their casinos are in business and people always want to gamble. Right. 3:28:17 And but they know that a casino that the house always wins. They know that they know that the edge is not on their side but they still gamble. People still do. But in crypto people don't know that they actually think they have an edge. Right. They hear their friend got rich or they hear somebody got rich or they think that they heard the marketing from from from coin XYZ. Right. Oh this is the coin that's going to win because of marketing XYZ that I was lied to about. Right. But they don't know it's a lie. Right. They hear all these buzzwords. They hear all this crazy talk from the from the marketing that's extremely misleading. And now they think they have an edge. 3:28:47 Now they think they pick the right one that's going to about about 200 X and just everybody doesn't know yet. Right. So I feel like this whole idea of speculation is it seems like it's just it's going to persist. Now it's a double edged sword because it definitely brings a lot of people to the space. Right. And hopefully people do learn and then they learn about Bitcoin or you know whatever it is that that interests them. 3:29:08 But then from the other side it seems like these are the type of things that actually bring adoption. And you asked about you know if we do have a trustless two way tag or like RSK. How come RSK is not adopted. It's to me it's an unfortunate thing. But you just need not need. But it's like what people desire is to think that they have an edge to be misled actually you know to be misled and lied to and to think they have an edge to make a million dollars. And that's what actually brings adoption. 3:29:34 It's very unfortunate. Maybe maybe you can have more fair Ponzi's where people know that this is a Ponzi. They know it eventually will collapse but they know the rules. The rules are fair. Right. Akin to something like that. That might bring adoption too because they are participants in a casino but they know it's a casino. They know that Ponzi's are bad or they know that it's a greater fool theory whatever it is. As long as they understand the mechanisms behind it. I feel like that might not be as morally bad. 3:30:00 Then then like completely misleading people. Right. But I feel like that both of that happens. People do get misled. Eventually they get smarter and they start learning more about the mechanics of certain Ponzi's. 3:30:11 And Joyer I agree with you completely but I want to add something to what you said. It's everything you said I agree with but it's worse. In other words it's not enough for the sidechain to be a casino although it helps. It's not a sufficient condition. The sufficient condition is actually liquidity. 3:30:29 So you can see this because you had remember all these Ethereum killer L1's that existed that basically said well every protocol that works on Ethereum we just copy paste it to our L1 and instead of paying you know $100 fees to execute contracts on Ethereum come to Avalanche and execute the same contract for 50 cents. Right. 3:30:48 So there was speculation in there and these Ethereum killer ones there was the casino but they still failed anyways because they didn't have the liquidity of Ethereum. Right. So it's not enough. 3:30:59 Over here there might be a benefit because like what you're saying is for example how AVAX incentivized everybody to move over and there was a short period of time where you know you can get better gains on AVAX for you know simple similar things that you can do on Ethereum. Right. And because they they they they might have incentivized it from like the AVAX team they might have paid out to you know certain builders and things like that. 3:31:18 So the yields was higher and people came there but it was temporary. Eventually the yields dry up the market dries up and they go back to where Ethereum is. Exactly right. But over here it's a little bit different. The reason why is because Bitcoin does have the liquidity that's higher than than everything. So in a hypothetical scenario I create a sidechain right and I mislead everybody with a Ponzi. I completely lie to people and you know I make it seem like this Ponzi is going up with you know like I do a Twitter raid with like many many bots crazy marketing. 3:31:46 I make it seem like there's real users right and the price is going up. Meanwhile I own like 99 percent of it. Right. Just by showing people that like there's an interest here even if it's fake it will automatically drive other people to be interested. And obviously it has to be timed perfectly. Right. It has to be when the market is looking for something like this or whatever it is. Right. It has to be an interesting new Ponzi. It doesn't matter. But it's possible to gain the users. Now what you're saying is to keep the users is extremely hard because of the liquidity. Right. 3:32:13 But over here now what I'm what I'm thinking is if this sidechain is is is an EVM compatible right. The only thing you're really fighting with is number one is the network effect that Ethereum already has. Right. 3:32:25 Ethereum already has network effect and interoperability between other liquid contracts right. Other DeFi contracts that have TBL. So you're competing with that number one. Right. But what you're really competing with in the long run is the monetary the monetary policy. Right. If you can somehow over time gain liquidity and even if it's small. Right. Eventually the the the biggest difference would be really just the underlying monetary asset. And if the monetary asset is the only thing now. 3:32:54 Eventually being the competition then people will have a choice. Well the new participants. Right. They're like I'm entering the space. I can either have potentially more liquidity on Ethereum or I can have less liquidity or potentially the same liquidity on Bitcoin. Most likely if the education is proper they would choose the asset that is nominated in Bitcoin. 3:33:11 And I think that's more of the view of LayerTwo Labs thinking of Drivechains that you know could eventually take over you know EVM or Monero or things like that. Where yeah in the beginning you might have less liquidity less network effect but in the end you're really fighting with just just the monetary policy and hopefully Bitcoin's monetary policy beats them in the long run and it eventually wins on the liquidity side. 3:33:33 I agree with everything you said but I'll kind of add to it that one additional necessary condition which is that yes Bitcoin has two advantages in Ethereum right now. One advantage is it has more total liquidity because it has larger market cap. And second advantage is that it's better collateral because it's less volatile. Right. 3:33:55 But also its monetary policy is more you know standard. That's that's already that's already debatable because you know Ethereum has this sort of like deflationary monetary policy. 3:34:09 But this deflationary aspect is if you can say from like a more higher level thing it's current. Right. But you can't guarantee in the future. Right. No I agree. You know you cannot guarantee it but you can see Ethereum has started ossifying already. 3:34:23 Right. But let's say it has a really good monetary policy that's better than Bitcoin. But the fact that it changed over the years you can make you can make the argument that you know it's not very credible but it's subject to the Lindy effect. Right. Like the longer this current monetary policy is in effect the more people will trust it. And in a sense. 3:34:39 Other issues of like you know like for example fork risks from you know USDC liquidity. 3:34:44 I want to take your argument agree with it but take it to its logical conclusion. Like in other words you suggested that the sidechain should be EVM sidechain. Right. Because you can then copy paste all the Ethereum protocols. 3:34:55 And you know one other mode of protection that Ethereum has besides liquidity is it has composability between protocols. Right. Because you can make calls through a bunch of protocols and they're all liquid. 3:35:08 So it's not enough to copy paste all the protocols the way Avalanche did because yes you can have the shallow shallow pace that have no liquidity but the protocols will not compose with each other and therefore there's like an additional mode around Ethereum. 3:35:21 The third mode you can easily breach by simply adopting the EVM as a virtual machine and therefore all the Ethereum contracts can run on the sidechain. 3:35:30 But let's take your argument to the logical conclusion. Why would you deploy a sidechain with a trust minimized two way peg and then hope for it to become liquid and usable enough. 3:35:41 I think it's simply enough to bridge Bitcoin to Ethereum itself and then you call up Ethereum's network effect. Like in other words let let Ethereum defy take off. But if Bitcoin can go back and forth trust minimized it will essentially outcompete Ether on Ethereum. 3:35:57 So you don't need to fight Ethereum. 3:35:59 That's actually a good point. But you still have the issue of Ethereum's long term stability and consensus model to actually work. 3:36:11 It's more of a concern. It's more of a conserved troll. No offense. But it's like yes it has a potential issue there. But I'm saying. 3:36:19 But even in your model the issue gets exacerbated because if you do bridge over Bitcoin to Ethereum and a trustless two way peg. Right. 3:36:29 And then the economic activity eventually moves to Bitcoin being the collateral reserve into all the defy products. Right. 3:36:36 And let's say the value of Ethereum starts to even if it goes up but it doesn't go up as high and as fast as Bitcoin does it doesn't outcompete it. Right. 3:36:45 Then the security model of Ethereum because it's priced in ETH might become an issue. But you can also say then well you can start paying the validators in Bitcoin. 3:36:54 Well but not only that but if you actually look at the security budget the Ethereum security budget is 10 X the security budget of Bitcoin today. Right. Because the fees are 10 X higher. 3:37:02 Yes. Yes. But that's only that's only in the model today. But that's not that's not guaranteed in a model where there is a trustless two way peg and the economic. 3:37:11 No but what guarantees viability of Ethereum long term is not the fact that ETH as an asset will not be outcompeted by somebody else something else. 3:37:20 It's it's got such a broad network effects because it has a very viable ecosystem of L2s now. 3:37:25 You're saying what's the incentive of you of creating this Bitcoin denominated sidechain when you could just if you have this two way peg you might as well just do it on Ethereum. 3:37:35 Not just that but I'm saying if you can't beat them join them you just co-opt Ethereum's network effect by simply bridging Bitcoin to Ethereum and let that Bitcoin spread across all of Ethereum's L2s. Right. 3:37:46 Right. Right. Just like any other ERC20 token. 3:37:48 In this event you actually Bitcoin gains. Right. 3:37:50 You essentially infiltrate the enemy camp with the Trojan horse. 3:37:54 Yeah. Yeah. This is an interesting toy. 3:37:57 This is this is the Bitcoin's ultimate network effect sort of unexpected chess move. Right. 3:38:05 Because all that Bitcoin needs to do is to get to get to Ethereum and back and then it doesn't need any other sidechains because at that point it will essentially infect the entire Ethereum layer one and layer two ecosystem with a very trustworthy asset which has higher value. 3:38:20 Higher liquidity in aggregate and lower volatility in aggregate. So it's superior collateral. Right. 3:38:25 And then it will be very competitive because you know today you will have you have all these startups that are VC financed that are like creating 50 or 100 or 300 or 500 L2s for Ethereum because they want to create each app is seemingly creating its own L2. 3:38:40 So some video game can create L2 but they cannot use SATs in that video game. But once you get Bitcoin trust minimized to Ethereum there's no reason for them to use ETH. 3:38:51 They actually want to use SATs that will be bridged from ETH to this L2 and back. 3:38:55 That's interesting. So you're saying the L2s are going to be using the L2s of ETH. 3:39:00 L2s of ETH are the final frontier of Bitcoin. 3:39:03 You're saying that they're going to start using Bitcoin as their transaction. 3:39:06 Exactly. Because it's a more liquid and less volatile collateral like the volatility also matters even more than liquidity potentially in some DeFi apps. 3:39:16 So what I'm saying is. 3:39:18 Also like the treasuries of these you know whatever protocols that are being built on top games or whatever it is. 3:39:24 Since their treasury is dependent on longer term right. 3:39:27 You can call this model Bitcoin impregnates Ethereum instead of fighting it. 3:39:33 And then Ethereum and Bitcoin have a baby that's mostly Bitcoin. 3:39:37 And Bitcoin proliferates on all the Ethereum L2s. 3:39:40 So you basically don't need RSK or these complicated federations with a single honest member because my hunch is that nobody will care. 3:39:48 But everybody in the world will care because we've seen them create 300,000 WBTCs. 3:39:53 Everybody will love Bitcoin on Ethereum. 3:39:55 There's already product market fit there. 3:39:57 So if you have Bitcoin on Ethereum that you can trustlessly pack back out to Bitcoin that's game over essentially. 3:40:03 Bitcoin will never be defeated by Ethereum. 3:40:06 That's all you need. 3:40:08 And you don't even need to launch these EVM chains or anything. 3:40:11 It's interesting because you also got to think of you're adding some sort of credibility to the asset of Ethereum right. 3:40:16 Because the asset of Ethereum will have more of a use case at least in the short term. 3:40:22 Yes but you know if and when it's so-called flippening happens. 3:40:27 And in fact inside Ethereum world they even call for a lappening which is flippening multiple times. 3:40:32 If and when the flippening happens I can guarantee you that all the laser eyed priests on podcasts will simply rationalize it away by saying well but wait a second. 3:40:41 Ethereum is just a giant tech company like Google or Apple. 3:40:44 Those have $3 trillion market caps. 3:40:46 Who cares. 3:40:48 They're just run by dev team right. 3:40:50 That will be the rationalization if the flippening happens. 3:40:52 But that rationalization also can be used to answer what you just said. 3:40:56 Which is that if you reinforce Ethereum's own network effect and usability its price can go high. 3:41:03 But it will only go high if it actually has high enough usage to justify fee income to justify its valuation. 3:41:10 Because Bitcoin will take over the store value part of the Ethereum's valuation on Ethereum if it's bridged there trustlessly right. 3:41:19 Like in other words Bitcoin might demonetize Ethereum but Ethereum still has a chance to become a big tech with multi trillion dollar market cap. 3:41:29 If the fees do appear to be you know $100 million per day instead of $5 million per day. 3:41:35 But Alex do we want that. 3:41:39 I see a problem there with centralization because not only the amount of nodes or the network is centralized but also they're hosted. 3:41:50 And they're hosted on the centralized. 3:41:53 Again like everything that I've said assumes a trust minimized back to Ethereum. 3:42:01 So if Ethereum experiences any problems. 3:42:02 The fact that the spec is trust minimized always allows you to escape back to Bitcoin with your Bitcoin no matter what problems happen on Ethereum. 3:42:09 So that so so by the assumption of a trust minimized back to Ethereum these problems are essentially more or less addressed. 3:42:19 Yeah I understand but like you know the way how Ethereum works and what's happening on Ethereum. It's like no future for that. 3:42:33 Smart contracts do not have future. Everybody is moving from smart contracts. 3:42:37 Well you may be right but you may be wrong. 3:42:40 At the end of the day there's definitely a lot of users probably even more users than Bitcoin. 3:42:44 Yeah yeah but look at Ethereum L2s you know there's millions of transactions going on on L2s right and there's going to be billions. 3:42:52 Yeah yeah L2s are even more volume than Ethereum. Some of them. 3:42:59 Yeah there's still some issues because like this like the really good trustless two way pegs in my opinion you want to actually give the fees to the miners. 3:43:11 You know that's one of the reasons I really like you know potential Drivechain type model or when I was talking I was asking SupertestNet earlier about the other two way models. 3:43:21 The two way pegs for them to have also fees going back to Bitcoin. Right. 3:43:26 So that's a really good thing because if you don't really have that I think that the attack vectors are like if you just have the two way peg the trustless two way peg to Ethereum. 3:43:37 It could still make Ethereum's asset price. Like another thing that I want to say is I'm trying to wrap my head around it but I agree with you on how they would rationalize it away. 3:43:48 And I kind of look at it in a similar way if there's a flipping. 3:43:51 Like for example if there is some kind of like really really good Ponzi that is marketed really really well you know like on every you know whatever every commercial on TV everywhere. 3:44:00 Somehow it gains a lot of traction and somehow it eventually feeds back to the Ethereum loop. 3:44:06 Ethereum asset and Ethereum flippance. Right. That's a potential thing that can happen. 3:44:10 I don't see that not you know I don't think there's a zero chance. I think there's a non zero chance of that happening. 3:44:15 And I think that you know it could it could flip it. And you're right. They would look at it as at least I would look at it as that's just a company. 3:44:21 Ethereum is a company and a company can you know outperform Bitcoin in short term or whatever. 3:44:27 Well yeah. Apple Apple has $3 trillion market cap at some point. So who cares. 3:44:31 I still. Yeah. So I still think of it as because Bitcoin is a different type of asset that has different type of you know actual like its fundamental intrinsic value and properties are totally different than Ethereum's that you know the desire for Bitcoin will still be there. 3:44:49 And even if it's you know a lower market cap than Bitcoin. And I think that that wouldn't automatically legitimize Ethereum to you know to the Bitcoin maxes because I don't think they don't they care about Ethereum or not from its market cap. 3:44:59 I think they care about Bitcoin because of its properties. Right. 3:45:02 But when you say that Ethereum doesn't have these properties you have an implicit on state of assumption and I'll try to reveal it. 3:45:10 Imagine that 10 years from now Ethereum ossifies completely and it doesn't change organically. Not because there's a bunch of priests broadcasting on podcasts all chanting ossify ossify all the time. 3:45:21 But every time Ethereum does a hard fork those hard forks take longer and longer because it's undergoing natural ossification. So you can see how 10 15 years from now Ethereum will naturally ossify. 3:45:32 Yeah ossify isn't the main thing though because you can say ossify is the main point for the you know the monetary asset to be limited. Right. You can say that the scarcity. All right. 3:45:40 But there's still other parts. You can still argue other parts of you know like the USDC centralization point of fork regulations of forks from USDC. I think that there's other properties there that make it different. Different enough. Right. 3:45:54 No no. Yeah. It's a weirder animal. I agree with you. But I think like it's a mistake to underestimate Ethereum and it's been consistently made this mistake for years and years. 3:46:06 All I'm saying is that if Bitcoin. OK. So there's two ways you can bridge Bitcoin to Ethereum. One way is that the one that you are worried about that nobody gets paid for it because you're bridging directly and there's like miners not being paid for this or something like this. 3:46:18 That's one with one model. The other model is that Bitcoin becomes like a layer two to Ethereum. There's some kind of bridging as if Bitcoin is a layer two to Ethereum and it can go back and forth or something like this. 3:46:32 This is just a completely novel stream of consciousness. So I haven't thought it through. But my point is it doesn't really matter if the miners are paid or not. It's like if there is a secure enough bridge to Ethereum one way or the other it will that little tunnel will will become a major flood flooded river. 3:46:50 Right. Like because the demand is incredibly high. We saw 300,000 WBTCs that you basically completely custodial crappy version of Bitcoin on Ethereum. And it was just it had insane demand. Right. So it's an interesting thought. If we do have a trustless two way peg. Right. Like most likely the first thing that's going to happen is is the peg to Ethereum. Like that's just it seems like the most natural thing. 3:47:12 It would seem to be the most natural product market fit development. But if you look in the BitVM hackers group and the Bitcoin community this is the last almost like the last thing on their mind because they're still thinking about oh can we create a sidechain that will enable this and that. And by the way this is my problem with Drivechains too. Because Drivechains assume that they can become popular simply because they're possible. But I'm saying that assumption may be unwarranted. 3:47:39 Right. Like it's not enough to be possible to become usable useful. And it's only usable if it's useful. Right. It's only valuable if everybody's there. Which is you know the liquidity the the the composability of Ethereum the EVM. It's like you know I was telling Paul that if you just copy paste Ethereum and launches it as a sidechain even if Drivechains were already enabled I would give it like a very low probability of success. 3:48:06 A lot of like Ethereum success I feel like came from marketing their you know developer conferences. 3:48:13 It's true but it's it's that's the old story. The new story is that it's got its own network effect that's spawning L2s and you know people are launching 8 point. 3:48:22 As a new VC in the industry right that's looking to raise capital and to build. Would they be incentivized to build on a on a lower market cap. Not a lower market cap but a lower network effect sidechain of Bitcoin denominated versus just building on Ethereum. 3:48:41 Of course that none of it nobody's incentivized to build on any. I mean we already have evidence that none of the VCs are interested in any of the existing sidechains of Bitcoin precisely because that's not what that action is. So like even if you were to create a brand new Drivechain or brand new. 3:48:59 I don't know if it's really because like like you're saying I don't know if it's really because there's not really a trustless two way model. Right. 3:49:05 Right. 3:49:06 That's the main reason because. 3:49:08 I'm exactly agreeing with you. I'm saying that trustless two way model may be a necessary condition but it's not a sufficient condition. 3:49:16 Yeah. I also think that because it's like you know do they really even care about that. You know why aren't they building on RSK. 3:49:23 Well they're not building on RSK because it's a ghost chain because there's 50 EVM L1 chains that have more activity than RSK. So why would you build on RSK. Like in other words there's 50 Ethereum killer EVM chains that all have higher total value locked in activity than RSK. 3:49:38 So the argument that you know RSK is a trustless two way peg isn't really the. 3:49:44 Yeah it doesn't it doesn't explain. It's basically a ghost chain precisely the same way as every other Ethereum killer is a ghost chain because that's not nobody's there so nobody wants to be there. 3:49:54 How do you explain for example like BSC. Do you think BSC is a ghost chain. 3:49:58 No BSC is not a ghost chain because it's actively promoted by Binance which has like 100 million accounts on it. Right. So it's kind of a corporate chain. 3:50:06 So you end up with you know a sidechain of you know in the model that we have Drivechains. You end up with needing some you know big company to want to launch. 3:50:16 Like a Binance or an Apple. 3:50:19 Yes but only some giant like Binance can launch a corporate chain that everybody knows is a corporate chain. And at the end of the day like I don't expect BSC not to become a ghost chain 5, 10, 20 years from now because it's a corporate chain. 3:50:37 So you might as well be talking to a database. 3:50:40 Do you expect it to become or not become. 3:50:42 No I expect it to become more and more relevant and therefore it will become a ghost chain. 3:50:48 Well there's two reasons why it might not. If the fees on Ethereum do go up then you know the activity will move over to BSC. 3:50:56 No the activity will move over to one of the L2s that's 10 times cheaper than BSC because those share. 3:51:01 Versus a chain that has way more marketing power. 3:51:06 It doesn't matter because those L2s on Ethereum they share in the Ethereum and the ERC20 network effect whereas BSC does not. 3:51:14 But it could you know you can still bridge over anything from Ethereum to BSC. 3:51:19 Well you could in theory just like there's bridges to every other ghost chain that was supposed to be an Ethereum killer and they'll fail. 3:51:26 Yeah but the difference here like you pointed out Binance has the money to market. 3:51:31 Alex can you point which chain failed and which chains are good because I need to push back on this. 3:51:38 I mean you can say Avalanche, Avalanche, Cardano all these. 3:51:44 No I disagree. I disagree with Avalanche and I will tell you why. 3:51:49 Because you are looking in a C-chain which is the EVM compatible subnet which is a sidechain in Avalanche. 3:51:59 Avalanche is constructed by three chains and that's X-chain, P-chain, C-chain at the moment. 3:52:05 You can make A to Z chains parallel scaling but they have a subnet architecture and that's becoming infrastructure. 3:52:18 And what's meaning this this is the same what Drivechain wants to do on Bitcoin. 3:52:26 And I believe they took the concept from Paul to implement this technology. 3:52:34 But I can tell you that you can't see the network effect. Why? 3:52:40 Because on subnets are mostly big corporations and they are doing sidechains like Lemonade, the biggest insurance settlement company, like Amazon, like many many others. 3:52:54 And now they even tokenize the assets and JP Morgan what they are doing they are doing with subnet on Avalanche. 3:53:03 So nobody like those things are a bit hidden from the normal people you know. 3:53:11 And for me when you see when you say Ethereum or BSC I have a question where is the usability? 3:53:19 What is the uniqueness of those chains? They don't provide anything else just digital activity. 3:53:26 Nothing more. No any benefit from them. 3:53:30 There is demand for it. 3:53:34 There is demand because you see millions of transactions. 3:53:38 Yeah but you know what Ethereum today is mostly driven by bots and everybody knows that. 3:53:46 It doesn't matter if the demand is from a bot. It's still demand. 3:53:51 Somebody has to pay the fees. The demand is organic. 3:53:55 It's like somebody finds it worthwhile to pay Ethereum fees whatever it is $3 to send an ERC20 token nowadays and maybe $20-$15 to execute a large smart contract. 3:54:05 Somebody is paying for that right? 3:54:07 There is no better indication of organic. 3:54:10 Yeah but bot is not organic. 3:54:13 Somebody is funding the bot. 3:54:15 You can say that a lot of Bitcoin transactions are automated from exchanges and withdrawals. 3:54:22 It's a bot doing it. It's a script doing it. It doesn't matter right? 3:54:25 The fact that there is a demand for it is at the end of the day what really matters. 3:54:29 It's like saying Ethereum is no longer cool like a restaurant because it's always crowded. 3:54:35 Well it's crowded for a reason because it's cool. 3:54:38 So just because you don't want to be in the crowd that doesn't make it unpopular. 3:54:44 The use case is there is more expressibility. 3:54:46 The use case is important. 3:54:48 The use case is there is more expressibility. There is more you can do with it. 3:54:51 Does anybody want to do with it? 3:54:53 I'll tell you what the use case is. 3:54:55 The use case is Frax launching its own L2 because they want to have a stable coin ecosystem on its own L2. 3:55:01 That's the use case. 3:55:02 The use case is nothing but settlement of L2 transactions. 3:55:05 It doesn't need any other use case. 3:55:07 It just needs an asset like Ether and ERC20s issued on it and it needs to do settlement. 3:55:12 The Ethereum Max is now talking about like nothing should ever execute on Ethereum. 3:55:17 It should just have blobs from L2s period. 3:55:19 That's the use case. 3:55:21 The use case is to be the central hub of 1 million L2s. 3:55:25 That's the use case. 3:55:30 Yeah but what the L2s are providing? Nothing. 3:55:33 Same thing. 3:55:34 Well but L2s have to live or die on their own merits. 3:55:40 So the ones that don't provide anything will die and the ones that provide something will live. 3:55:44 So you don't need to worry about the L2 ecosystem because it's like Darwinian evolution in there. 3:55:49 So whatever L2s still exist, you know that they're useful because otherwise they would have died off. 3:55:57 Yeah but you know I see a different way. 3:56:02 I have a question like what can create more volume and network effect? 3:56:07 The biggest corporations with billions of users or you know digital world where you know. 3:56:15 But what if you see JP Morgan Chase issue a stable coin onto Ethereum or one of its L2s? 3:56:22 You think that will improve Ethereum's network effect? 3:56:24 I think that might take it 100x. 3:56:27 They will not issue first of all because they want to be private. 3:56:31 So the only way is to be private. 3:56:33 They don't want to be private because they want to issue dollars offshore as stable coins just like EURUS dollar banks. 3:56:40 And they all talked about having their own private Ethereum chains. 3:56:44 But they're all abandoning that because they need one shared global ledger that all these EURUS dollars are issued on. 3:56:50 So that they can all interoperate using core protocol, right? 3:56:54 Yeah but they can do an avalanche with subnet. 3:56:58 They can be all those companies can have their subnet. 3:57:02 They're interconnected. 3:57:04 It's like I don't know if you're like I'm old enough to remember the early days of the internet. 3:57:10 When all these companies said why do we need the internet? 3:57:12 We'll just build our own internet with our partners. 3:57:14 Why do we need to be next to the porn on the internet? 3:57:17 Whenever you say that somebody will build their own avalanche subnet that sounds to me like. 3:57:22 But that's exactly what you're saying Alex. 3:57:25 Subnet I can create in one day. 3:57:27 In 24 hours I have my blockchain. 3:57:29 I get it but you can also copy paste you know a Linux kernel and run your own private internet. 3:57:39 But in both cases you will have a ghost town, right? 3:57:43 Your private internet will be ghost town and your avalanche subnet will also be a ghost town. 3:57:48 Why will it be a ghost town? 3:57:50 Because the only ghost town is Ethereum. 3:57:53 That's why. 3:57:55 That's the only place that's not a ghost town. 3:57:57 No seriously. 3:57:59 It's like yeah but I can look but you need to look from the perspective of a company. 3:58:07 Because if I want to use and I have an investment bank like JP Morgan. 3:58:13 I want to create my blockchain. 3:58:16 No you don't. 3:58:18 I'll tell you why. 3:58:19 You don't want to do that. 3:58:20 Because yes you can create your own blockchain that's completely private. 3:58:23 In that case why do you need to use avalanche? 3:58:26 Create your own in-house database and have your customers connect to it, right? 3:58:29 No because… 3:58:31 No, no listen. 3:58:33 If JP Morgan wants to interoperate with Japanese banks they both cannot have their own private blockchain. 3:58:41 We need to see the blockchain as an infrastructure. 3:58:44 First of all like if you go on what was the measurement for decentralization. 3:58:53 And you can see Bitcoin is first most decentralized, second is avalanche. 3:58:57 It's no Ethereum. 3:58:59 So like when you have ability to create something for your company and use as an infrastructure. 3:59:08 Plus you use decentralized security. 3:59:12 There is. 3:59:13 You don't need anything else. 3:59:17 Except if you want to have partners that are not held hostage by you. 3:59:24 It's like a public square. 3:59:26 You can create your own world garden. 3:59:28 If you are JP Morgan and you can say to all the other banks in the world. 3:59:31 Come and play inside my blockchain. 3:59:34 Or I just created an avalanche subnet. 3:59:36 Come and play because I control it. 3:59:38 Nobody will come and play. 3:59:41 What they are using now? 3:59:43 JP Morgan Chase. 3:59:44 They cannot own. 3:59:46 They both cannot. 3:59:47 They need neutral infrastructure. 3:59:49 And what's neutral infrastructure right now? 3:59:52 No, they don't like neutral infrastructure. 3:59:55 Because even they don't use neutral infrastructure. 3:59:58 They have their system in the company and then they interact with others. 4:00:02 You already have European banks issuing stable coins into Ethereum. 4:00:06 You already have Goldman Sachs issuing bonds into Ethereum. 4:00:09 Yeah, but that's wrong. 4:00:11 They will switch. 4:00:14 Why is that wrong? 4:00:16 Time will show us. 4:00:18 Because this is the usability of Drivechains. 4:00:22 If Drivechains are enabled. 4:00:24 All of this. 4:00:25 Like JP Morgan, Amazon. 4:00:27 Everybody can come and create their sidechain. 4:00:29 And there you have usability. 4:00:31 There you have volume of transaction. 4:00:33 There you have huge fees. 4:00:36 But the L1 will be relaxed. 4:00:38 It will be not a high fees environment. 4:00:41 So, this is the usability. 4:00:43 When every single company, institution, government, whatever in the world starts using the blockchain as an infrastructure. 4:00:50 Creating a token somewhere. 4:00:53 It's not controlled by these companies. 4:00:57 They like centralization. 4:00:59 But to make a balance, you need to give them opportunity to create their private blockchain. 4:01:06 But use the decentralized environment. 4:01:09 Decentralized security like Bitcoin L1 with sidechain or Drivechain. 4:01:15 And that's the perfect. 4:01:17 I'm all for it. 4:01:18 I'm a Bitcoin guy. 4:01:20 I like where you're going with this. 4:01:23 I'm just saying that today they can do that by launching their own L2 on Ethereum. 4:01:27 They don't need to wait for Drivechains or trust minimized sidechains. 4:01:32 And they're doing it. 4:01:34 That's what I'm saying. 4:01:36 Avalanche already has that platform. 4:01:39 They don't need to create L2. 4:01:41 Because to create L2, they need 2-3 years, 4 years, 5 years. 4:01:45 You go on Avalanche and you can create it in one day. 4:01:48 They can take the shelf stacks that are available and essentially within a day or two launch an L2 on Ethereum. 4:01:53 There's multiple software stacks. 4:01:55 You guys are both right. 4:01:58 You can see that a lot of whatever gaming projects, they'll create their own L2 for Ethereum. 4:02:04 That's what you see most of that happening. 4:02:07 Yeah, probably. 4:02:09 Not just gaming. 4:02:10 I disagree that this is just gaming. 4:02:12 Yeah, like the example of Frax that you gave. 4:02:15 Right. 4:02:16 Example of Frax is a good example. 4:02:18 But you know what's even a more scary example for Bitcoin? 4:02:21 It's the example of formerly L1 Ethereum killer blockchains essentially pivoting to become L2s of Ethereum like Swooey and others. 4:02:32 There's been two or three L1 Ethereum killers that essentially abandoned that game and simply joined the Ethereum network effect because they had to or they died. 4:02:42 So that's happened before. 4:02:45 And from the perspective of like you have to see why people are doing that, why they're abandoning their own L1. 4:02:52 How exactly are you defining their own L1s that are EVM compatible versus an L2 of Ethereum? 4:03:01 Because you can say any. 4:03:02 Well, you're defining it as follows. 4:03:04 If you have your own L1, which is EVM compatible, you have your own mining or you have your own like you have to build your own validator set with your own capital locked up to secure the chain. 4:03:13 Or you can abandon all that and simply get inherited Ethereum security for the same or less money per transaction by simply becoming an L2 of Ethereum. 4:03:21 It's like a no brainer. 4:03:23 Yeah, you were talking about that previously. 4:03:25 Any L1 of its own can also just include X amount of blocks, a hash into Ethereum. 4:03:30 Right. 4:03:31 That doesn't provide them reorg security, immutability. 4:03:34 But worse, it doesn't let them join the network effect of all the Ethereum ERC20s and Ether itself. 4:03:41 They need to be where those liquid protocols are. 4:03:43 Otherwise, nobody wants to use them. 4:03:45 Are you defining L2 as that has a trustless two way pack between L1? 4:03:50 Yes. 4:03:51 I mean, like I'm looking at Ethereum ZK roll ups or I know like there is a table. 4:03:57 Would you say Arbitrum is an L2? 4:03:59 Well, it's an L2, but it's not trustless. 4:04:01 Right. 4:04:02 It may or may not be. 4:04:03 Until the multi-fig is gone? 4:04:04 Yes, exactly. 4:04:05 So like you can define it as L2 or not. 4:04:07 It's up to you. 4:04:08 What I'm saying is that in theory, Ethereum has a possible ecosystem of trustless or trust 4:04:14 minimized L2s that use validity roll ups or optimistic roll ups that have been. 4:04:19 And where Phantom is, you would say Phantom is more of an L1 because it has its own token, 4:04:24 its own consensus model. 4:04:25 Well, it's not more than L1. 4:04:26 It's just an L1 that's trying to compete with Ethereum and it's not really doing very well. 4:04:30 Right. 4:04:31 Even though it has superior technology. 4:04:32 But Phantom is just one of 10 or 20 Ethereum killers that have failed to manifest. 4:04:37 And some of them have just decided, instead of dying, to become L2s of Ethereum. 4:04:41 There's been one or two that I remember in the recent few months that have done that. 4:04:45 Yeah, you were talking previously about that. 4:04:48 And I can tell you that there is one other factor on Ethereum that's going to have long 4:04:52 strategic consequences. 4:04:53 This is the whole restaking situation that's going on there. 4:04:56 I don't know if you're familiar, Satoshi and Joe with that or not. 4:04:59 Eigen layer? 4:05:00 Eigen layer, exactly. 4:05:01 Exactly. 4:05:02 So that essentially makes becoming an Ethereum dependent chain, which is now enables not 4:05:08 just L2s, but it enables a whole other, like it enables you to outsource your security 4:05:14 to the subset of Ethereum stakers and you can do whatever the hell you want while inheriting 4:05:19 all the trust from that subset. 4:05:21 So it just dramatically expands the Ethereum's network effect because you can have this layer 4:05:27 and like that's not technically a validity roll up or optimistic roll up, but they will 4:05:34 have like 10 million transactions per second with like 500 millisecond latency while inheriting 4:05:40 security from Eigen layer and inheriting data availability from Eigen layer as well. 4:05:45 And also inheriting the transaction fees of the other layer as well, right? 4:05:49 Because they're restaking their Ethereum validators. 4:05:52 Right. 4:05:53 So the Ethereum validators will accrue the fees and additional yield, right? 4:05:57 So that creates an economic model that will definitely co-opt Ethereum stakers to join 4:06:03 the Eigen layer, right? 4:06:04 Because they all- 4:06:05 Do you think it's a financialization issue where almost everybody will do that? 4:06:09 It might become essential. 4:06:11 Like we don't like, it's kind of like, I don't know if you remember when MEV appeared on 4:06:15 Ethereum a few years ago and nobody knew what the consequences would be. 4:06:18 But like right now they're talking about adding MEV burn and enshrining it in the protocol. 4:06:24 So eventually they might do the same kind of fix for Eigen layer where they enshrine 4:06:28 it into protocol to prevent it from centralizing Ethereum. 4:06:32 It's too early to tell right now. 4:06:34 But a few years down the road, it will probably dominate Ethereum. 4:06:37 And you can see that you can basically see that you don't even need to be L2 to tap into 4:06:43 the network effect. 4:06:44 You can do any arbitrary system on the side that gets both trust and data availability 4:06:49 from Eigen layer while not losing ability to move assets trustlessly back and forth 4:06:55 with Ethereum because you can still build that bridge. 4:06:58 So it's sort of like the best of both worlds. 4:07:00 Like, you know, they don't really need a full blown L2 sidechain. 4:07:05 Or some kind of chain. You can just launch whatever, right? And it could be, you know, any arbitrary application that requires decentralized trust, right? 4:07:19 Yeah, I think it's really interesting. 4:07:20 Alex, who controls that protocol, Eigen layer? Who controls? 4:07:25 Well, I mean, you can you can look at their docs. 4:07:27 They still have a dev team and they have a plan to decentralize in the long run. 4:07:31 It's the usual story in Ethereum. 4:07:32 But like whether or not they will succeed, it doesn't matter to me. 4:07:35 It's more like this is where things are going. 4:07:38 Right. Like, in other words, they used to be only... 4:07:41 There are definitely things going there. 4:07:43 You know, everybody, I mean, if all L1 chains, they try to move from a smart contract because smart contracts are very risky. 4:07:54 I mean, we see what's happening. 4:07:56 Because smart contracts like DeFi in general is concentrating more and more on Ethereum because of liquidity, composability. 4:08:03 And, you know, it's hard to compete with that. 4:08:06 Like a few years ago when I saw these L1s launching with EVM, I thought, oh, wait a second. 4:08:11 This is great. EVM will have the network effect, but Ethereum will be just another L1 with EVM on top of it. 4:08:17 And then I realized how stupid I was because I didn't realize that liquidity, composability and other factors like presence of other existing L2s, that already creates a market for Ethereum. 4:08:31 Right. That's hard to overcome. 4:08:33 So the more L2s join the party, the more L2s will want to join the party so that you don't have any L2s on any other L1 Ethereum killer EVM chain essentially that have any usage. 4:08:45 Yeah, but I said like on Avalanche, you don't need to have L2 because Avalanche is a multi-core chain. 4:08:51 Yeah, but your argument is good in theory. 4:08:56 Like, yes, everybody can launch another subnet on Avalanche, but in practice, nobody cares. 4:09:01 Just like nobody cares about existing RSK. 4:09:04 Why do you think that nobody cares? 4:09:08 The issue with Bitcode is there's no network effect. 4:09:10 There's no network effect. So who cares? 4:09:13 Why do I need network effect, guys? 4:09:16 Because you want to be able to have your sidechain L2, whatever it is, instead of the Avalanche. 4:09:25 The reason why is because you would gain way more by interoperability with the TVL that is already locked in the contracts on Ethereum. 4:09:37 Yeah, but why do I need TVL when I'm using subnet for my business, for my company, for my… 4:09:47 Why do you need the blockchain for your business? 4:09:50 Why don't you just make your own L2 on Ethereum? 4:09:52 No, no, no. You need blockchain because they use blockchain because of the instant finality. 4:09:59 And by the way, I know maybe you don't like it, but the only L1 that is in this crypto world is Avalanche that is UTXO-based chain. 4:10:13 And Xchain on Avalanche is UTXO-based. 4:10:16 So another thing is that with subnet, you can plug and you can utilize any other VM or script from all the chains, even Bitcoin. 4:10:28 So on this Ager layer, you cannot do that. You can create L2, but you are limited. 4:10:34 So kind of like, you know, I know very well, I do research so long about this. 4:10:40 And, you know, I listened that Alex spoke about this Ager layer, but I checked and I don't know. 4:10:49 I don't like it because, first of all, because of centralization. 4:10:54 That's the main concern. 4:10:58 So. 4:11:02 But time will tell us, you know, time will tell us what will be much, you know, usable. 4:11:09 It comes down to marketing. If Avalanche markets really well and, you know, they incentivize TVL to move over to them, there's a possibility that they can compete. 4:11:19 It's going to be very hard, obviously, because of the network effect. 4:11:21 They already tried and succeeded for a while and then they fizzled out. 4:11:25 The thing is, it's temporary because they have to continue to supply more. 4:11:29 You have to continue to bribe people to come to Avalanche. 4:11:31 You have to bribe people, exactly. 4:11:32 People don't want to go to Avalanche. They want to be in Ethereum. 4:11:35 Like, I remember when Avalanche was marketing itself as a cheap alternative to Ethereum, their basic marketing was. 4:11:42 And then the fees went up. 4:11:44 I don't care about fees going up. They had two marketing points. 4:11:47 Number one, our fees are pennies. 4:11:49 And number two, we don't have like a leader election. 4:11:54 So, like, we don't have MEV while Ethereum has MEV. 4:11:57 But we have this advanced consensus protocol that converges without, like, somebody publishing a single block with all the transactions. 4:12:04 And if you looked at Avalanche, yes, indeed, you could do smart contracts for pennies. 4:12:09 But whenever you would swap $10,000 worth of one stable coin for $10,000 worth of another, because liquidity wasn't there, you would get $50 or $100 worth of slippage, which would be five times higher than the fee you would pay on Ethereum to do the same operation. 4:12:23 So, that's why for economic reasons, people would not abandon Ethereum and go to Avalanche because lower fees is not the whole picture. 4:12:30 It's like 1% of the picture. It's like 5%. 4:12:32 Yeah, I agree. I agree with you for retail. 4:12:35 I'm not talking about retail. 4:12:36 I'm talking about big things. 4:12:38 You know, nobody uses Avalanche. 4:12:41 Amazon didn't come to Avalanche because Avalanche marketed to them. 4:12:45 Amazon came because they recognized the technology they have. 4:12:50 First of all, Avalanche is using the Satoshi consensus plus another on classic, I think. 4:12:57 So, it's kind of like, you know, they came from Bitcoin. 4:13:02 So, even I saw a post that even they say, okay, we are Bitcoin L2. 4:13:07 But anyways, they focus on a big business. 4:13:10 They don't focus on a retail. 4:13:12 So, whatever is on the C-chain is a playground. 4:13:17 I know, but if they sell private versions of their blockchain to big businesses, that's not even like a blockchain, right? 4:13:25 Yeah, you might as well just use Bitcoin. 4:13:28 It's exactly like your private intranet in the early days of intranet where people would say like, 4:13:32 why do I need a global intranet with all the porn and all the problems when my general motors corporation can have its own intranet, right? 4:13:39 But people quickly… 4:13:40 Okay, Alex, what EagerLayer is doing? 4:13:43 The same thing. 4:13:44 Just when you see, I like to have a blockchain that by design have a good technology, then patching like Ethereum. 4:13:53 Ethereum is like, you know, old car patched all around, repaired. 4:13:59 I agree. 4:14:00 It's old news in the design space of blockchains. 4:14:04 But it actually, nobody cares because they just use it as a hub to create 1 million L2s nowadays. 4:14:10 Like Ethereum actually don't care about anything executing on Ethereum much. 4:14:14 Only whales and institutions run those contracts that cost a lot of money to do. 4:14:19 Like all the activity is moving to L2s. 4:14:21 So the fact that Ethereum may be technologically inferior is no longer relevant. 4:14:33 Wow, we've been going on for a while. 4:14:35 Went off the rails a lot. 4:14:37 Yeah, guys, it was a fun discussion. 4:14:40 Thanks for reminding me that there's a world out there. 4:14:42 I got to go actually. 4:14:44 But it was a good discussion, everyone. 4:14:46 Thanks for hanging out with us. 4:14:49 And the sooner we end this space, what is it called? 4:14:56 Space, Twitter space. 4:14:58 The sooner the recording will be available to everybody else. 4:15:08 I'm going to head out too, guys. 4:15:10 See you guys later. 4:15:12 See you.
