0:00 Good morning, good afternoon, good evening, everyone. 0:11 What is up? 0:12 I'm your host, Charlie Shrem, and you're listening and watching another episode of the Charlie 0:16 Shrem Show powered by Waxman, where together twice a week, we get to dive deep into the 0:20 heart of the Bitcoin and blockchain revolution, where I have been my whole life. 0:25 As I say it out loud, it's kind of funny, I feel old. 0:29 My whole life, I've been into this Bitcoin and blockchain and crypto world. 0:32 My whole life, since the last days of Satoshi, since shit, 2011. 0:37 But anyways, we're together, we're going to uncover the brilliant minds innovating behind 0:41 the scenes. 0:42 We'll be discovering the projects that are pushing the boundaries of blockchain technology. 0:46 And there are a lot of companies out there that you don't know about, right? 0:50 A lot of what gets talked about in the crypto space or what reaches the ears of the mainstream 0:54 audience is the final end product that a lot of cool technology innovation makes possible 0:59 behind the scenes. 1:00 But without the geniuses developing behind the scenes, blockchain technology wouldn't 1:04 be nearly as widely utilized as it is today. 1:07 In this episode, we're talking to three very different people and three different projects 1:12 that are pushing through the current limitations of blockchain and Bitcoin and developing what 1:17 we need to turn this technology into the norm for the internet users worldwide. 1:23 We're talking to some really cool people, Neil Samani from Eclipse, who's allowing everyone 1:28 to have their own roll ups. 1:30 Roll up for you, roll up for you, roll up for you. 1:32 Then we got Leo, co-founder of PEAQ, who's transforming the internet of things into the 1:38 economy of things. 1:39 Finally, we got an old OG, good friend of mine, he's been involved since the early days 1:44 of Bitcoin, invented and conceptualized the sidechain back in 2014. 1:49 His name is Paul Sztorc. 1:51 You don't hear about him a lot, co-founder and CEO of LayerTwo Labs, working with another 1:55 good friend of mine, Austin Alexander, who is a big part of Kraken. 1:59 He's a prominent Bitcoin researcher and developer. 2:02 So chill out, sit back, relax, and let's get started with these insightful discussions. 2:14 Our guest just got back from ConsenSys today, and we're going to talk to him about that. 2:19 Every year we kind of use conferences as the litmus test. 2:21 We've had the creators of some conferences, and I think we did a whole thematic episode 2:25 on how conferences are, if you look at the prices and the markets and the general feeling 2:31 of what's going on in the space, we use conferences as that kind of litmus test of how everyone's 2:37 feeling. 2:38 And so last year, I remember ConsenSys, Neil, thank you. 2:41 I'll introduce you in a second, but Neil, thank you so much for coming on the show today. 2:44 Oh, thank you for having me. 2:46 I remember last year's ConsenSys, it was still the top of the, it was a little bit later 2:52 in the year. 2:53 It was like maybe June and it was the height of the market. 2:56 And it was still a little bit craziness. 2:58 I remember getting pitched, decentralized email, which is a really cool project at a 3:03 pool party. 3:04 It was like the only time in my life, I felt like I was on a TV show because I'm putting 3:07 my VC hat on for a second. 3:08 I remember getting like the phone call, Charlie, you got to come downstairs right now. 3:13 You need to hear about this company. 3:14 And I'm like, this is the worst time, but I feel like this is the one, but this is like 3:18 happening. 3:19 This was ConsenSys, it was Austin. 3:21 It sounded like this year was a little bit more subdued from the guests that we've talked 3:26 to that have been there, but subdued in a better way because it sounded like a lot of 3:30 people were focused on the products and the services and the brand and less on the parties 3:34 and things like that. 3:35 Neil Samani, you have a super cool story in the space. 3:39 You're the founder and CEO of Eclipse, which gives everyone private roll-ups. 3:43 And I love that because we need the ability to have blockchain as a service. 3:47 I just saw a great statistic today about that and your scaling solutions of being able to 3:52 do it. 3:53 I'm excited to talk about. 3:54 You worked at Citadel as a quantitative researcher. 3:56 You also worked as a software developer at Airbnb. 3:59 And you kind of got your first foray into our lovely crypto space here in Terra. 4:04 And you talked about it and were excited about it, and then it blew up and things like that 4:07 happened. 4:08 And then you started Eclipse, and it seems like you've learned a lot of different lessons 4:13 very, very quickly. 4:15 And it takes a lot of people a lot longer to learn the lessons that you learned in your 4:20 career going from Citadel to Terra to now Eclipse. 4:24 Tell us about your background and everything like that. 4:26 I'm really excited to hear it. 4:27 Yeah, definitely. 4:28 It was kind of like speed running the life cycle of a company. 4:33 And yeah, I remember ConsenSys last year too, it was right after Terra de-pagged. 4:37 So it was in June, and it was super hot, and I was trying to explore what I was going 4:42 to build next. 4:43 And that's what I was thinking about at that time, just building another layer one blockchain 4:47 basically. 4:48 So I was basically thinking, let's take the Solana virtual machine, which is this highly 4:53 optimized execution layer, lots of folks are using it. 4:57 And let's give people the option to use a different ConsenSys like Tendermint, and then 5:01 spin up Cosmos layer ones that have the Solana execution layer. 5:06 In the same way that Atmos brought the EVM to the Cosmos ecosystem. 5:09 So just to take a step back, so basically my background was, yeah, I was at Quantum 5:15 Citadel. 5:16 Before that, I was a software engineer over at Airbnb. 5:18 I left in March of last year, and I was briefly building an EVM on Terra. 5:23 So this is a way to run EVM by code on the Terra blockchain. 5:27 So if you have like a theory of a small contract or something, you can deploy it to Terra. 5:32 And the reason for doing that was that Terra was doing pretty well at the time. 5:35 It was growing really quickly and there were a lot of people migrating there. 5:38 So this is a way for you to take your existing programs and then join that ecosystem. 5:43 And obviously, once Terra depacked, I scrapped the project and I was thinking about what 5:48 I would be building next. 5:50 And there was one thought that people just like fly to Ethereum and everything would 5:54 basically be a roll up on Ethereum or a layer two. 5:58 And then the other thought was that there would basically still be like sort of a 6:03 multi-chain future and there'd be lots of layer one blockchains. 6:06 And where we landed was that the right answer is some sort of hybrid between those two 6:10 answers where people do need their own chain for a variety of applications like gaming, 6:16 physical infrastructure, lots of highly regulated chains. 6:20 Or I think you mentioned something very briefly at the beginning, which is private 6:23 chains. And that's actually what's a subset. 6:25 But there's a lot of reasons why people want their own dedicated chain, even if it's 6:28 public. Gaming is a really good example of that. 6:31 So that's what we wanted to solve for and chatting with games in the space and just 6:36 understanding what were their constraints on Solana or now we have like Aptos and Sui 6:41 and all these other chains and understanding what are they able to do very easily and 6:45 what's really complicated or convoluted for them to do and what's the right path or 6:50 what are some possible paths for the future of on-chain gaming or the future of on-chain 6:55 physical infrastructure or some of these other categories. 6:58 How can we build those features that are required in order to facilitate those? 7:01 And that's what motivated Eclipse, where we let people spin up their own blockchain. 7:06 And there's other services that have historically let you do this. 7:09 There's sidechains, you could do a Cosmos chain, there's Polkadot, there's a lot of 7:14 stuff, there's Avalanche, Subnets, but the disadvantage of all those ecosystems is 7:17 typically one, those are full layer one blockchains that try to provide for their own 7:22 security. So they need to bootstrap a bunch of money to make that chain secure. 7:26 They have to get validators, they need to coordinate updates, they need to basically be 7:30 infrastructure. Yeah, exactly. 7:32 There's a lot of work that goes into it. 7:34 And so it's just highly inconvenient. 7:36 And the second part is that you're tied to that ecosystem. 7:38 So the beauty of a rollup or an Eclipse rollup in particular is that you could switch 7:42 the layer one that it's kind of pegged to and you're using the layer one for security 7:47 and for a consensus. 7:48 But it's kind of loosely decoupled in some sense. 7:52 The rollup seems to me like one of the best inventions out of the last really like where 7:57 rollups are being able to be taken to market like with your company, because all these 8:02 different real time products, like you said, gaming and real time infrastructure, you 8:07 can't wait for, you can't be on a layer one. 8:10 And a lot of times you can't be on a layer two that has a very slow block time. 8:13 You need to be able to to verify certain type of actions, certain type of computations in 8:19 real time. And then potentially later on, you can settle on to like that layer one. 8:24 And you've kind of built this this like plug and play, if you will, service. 8:28 So it's very unique to me about this is like I'm excited that our industry is so mature 8:33 enough that we need companies and services like yourself, because at the end of the day, 8:38 game developers from Web2 are going to are coming in day by day and wanting to get into 8:43 the Web3 space. And they go to you because they need their own like private block 8:48 chains. But at the same time, they they need to utilize and make sure it's faster. 8:53 Yeah, I would actually even veer away from the word private blockchain because it's not 8:57 private, right? Anyone can access it. 8:59 Anyone can put their smart contracts on it, but it is dedicated, meaning that it's one 9:04 blockchain for one app. 9:05 And there are some of these chains like what we're doing for Injective or Polygon or some 9:09 of these folks where it's a general purpose chain and there are multiple apps there. 9:13 But yeah, privacy is like one option. 9:15 But you can even have public blockchains, too. 9:18 I totally agree. And I think the dirty secret is that the industry isn't really quite 9:23 ready for it because there just isn't enough block space to support even the chains that we 9:28 have running right now. We have something like 20 of these extremely high throughput 9:33 chains, essentially like Solana scale chain that need that much block space to 9:38 correspond to them. And that's not really going to be available until close to July when 9:42 some of these DA solutions go mainnet like EigenDA, Celestia and so forth. 9:47 You were at ConsenSys. Who are you looking to meet? 9:50 Are you looking to meet more like people in our industry? 9:53 Are you trying to meet folks who can who can use Eclipse and create their own new 9:58 blockchains or experiment with it and things like that? 10:01 So I was mostly meeting existing customers that I'm really excited about this company 10:06 called React. It was recently rebranded Daylight. 10:09 And these guys basically stick a meter into your house so it tracks all your electricity 10:15 consumption. Then they'll track your solar panel, your thermostat, if you have a battery 10:19 installed in your home. The idea initially started with just batteries, but that's 10:22 become more broad. 10:23 What's it called? Daylight? 10:24 All this data. 10:25 What's that? 10:25 Daylight? 10:27 Daylight. Yeah. 10:29 Or I think if you search React network, that's what it's called right now, but 10:33 they're going to do a rebrand pretty soon. 10:34 OK, cool. 10:35 So, yeah, these guys track all your data. 10:37 Ultimately, it'll all be put on chain, whether that's encrypted or not encrypted. 10:41 And there's just so many things you can do with that, whether it's you can optimize the 10:45 user's power consumption or, like, for example, maybe you want your house to be cool by 10:51 6 p.m. or something, but you've been having your thermostat run all day. 10:56 Then they can optimize that and turn off the thermostat in the middle of the day and 10:59 then turn it back on. They can do all kinds of fancy things once they have all that 11:02 data. They can figure out when you should charge your battery, when you should sell 11:05 back to the market. And I have a power background. 11:08 When I was at Quantum Citadel, I mostly did power and natural gas. 11:12 So I just think that the idea is really interesting. 11:14 So it's an example of a decentralized physical infrastructure network. 11:17 Another project that we met over there was Wave, W-A-E-V, and it's kind of like, yeah, 11:23 on-chain data tracking for, like, regulatory compliance and other reasons. 11:28 So, yeah, that's another project that we're really excited to have on Eclipse. 11:32 Are you finding any constraints with the blockchains of today? 11:35 Do you think people will keep launching new blockchains? 11:39 I think that for these types of applications in particular, definitely, yes. 11:42 Like Wave, it takes hours for them to upload all of their data on-chain. 11:47 But when they have a dedicated blockchain where they can batch some of the 11:50 operations or kind of conserve block space or compress block space in some clever 11:54 ways, then it becomes much more tractable. 11:56 Why are they putting their data on-chain? 12:00 Yeah, they're putting like all, every time you submit a form, every time you really 12:04 do anything online, that's going to be available on-chain for, let's say there's 12:08 another, like another website wants to request access to that data, then this way 12:13 they can enforce that you actually signed off on that website having access to it. 12:17 And then it'll facilitate that data sharing. 12:19 I love that concept. 12:20 And we've been talking about that for so long. 12:23 What's the watershed moment for something like that? 12:26 How do we force, because there's like a little bit of friction there, right? 12:29 How do we force new businesses to use a company like Wave? 12:33 And then we have enough, like you're using it enough places where it actually takes 12:37 over. I would love to, that's what I think it's partly about bootstrapping the supply 12:41 side of the marketplace first. 12:43 So you just right now, businesses already do some amount of data sharing. 12:47 So first replace their existing solution without any additional like GDPR 12:51 related features where you ask users to share their data or whatever. 12:55 Just ignore that for now. 12:57 And then once you have all this, it's like huge, like warehouse of data, then you can 13:01 start incorporating users and maybe even letting them monetize their own data and 13:06 getting compensation for sharing their data. 13:08 So unique and so interesting. 13:10 It's how did you how did you learn that our industry needed all 13:15 of this when you were working at Citadel? 13:17 So when I was at Citadel, I definitely was not thinking about it because I was 13:22 actually, I think I had a really naive view toward crypto, which was just that there 13:26 were going to be a lot of chains and they all needed to be EVM compatible. 13:30 And EVM compatibility, if the audience doesn't know, this just means the blockchain 13:34 needs to be able to support Ethereum smart contracts, Ethereum wallets. 13:38 But what I come to realize is that EVM compatibility, such as what Binance Smart 13:43 Chain did or Polygon POS, isn't actually like a reason for people to deploy to a 13:48 chain. It's just a go to market tactic. 13:50 And the quality of applications on these EVM chains has gone down so much. 13:54 On Ethereum, we still have some unique stuff, but a lot of these other chains just 13:58 have forks of other EVM projects. 14:00 And I think that's what's kept like, for example, the Solana community, the average 14:04 quality of project is actually pretty good. 14:06 Or if you look at what was going on in Terra, because there's that barrier of entry to 14:10 use CosmWasm and Rust, the average Terra project was also good. 14:13 Even though these blockchains obviously, you know, they've had their ups and downs 14:17 from a price perspective and also from like a TBL and user activity perspective. 14:22 I'm just saying that the types of apps in terms of uniqueness and just the raw quality 14:26 of the app is probably higher than your average app on Ethereum. 14:28 That's a really interesting concept. 14:30 So you're seeing that the more, the higher the barrier of the entry, then sometimes 14:34 the better the quality of the app. 14:36 I mean, you look at the Apple App Store as one example that if you want to have an app 14:40 in the Apple App Store, there's a certain like standard of excellence that you'd have 14:44 to have there. And that's why you don't have that. 14:46 But at the same time, there's like pirated, you know, app stores back in the day when 14:51 you'd put them on your phone and you'd download some of those apps, they were like 14:54 kind of janky and crappy. 14:56 And I have noticed that since EVM compatibility, aka like cross-chain ability, aka 15:05 everyone is like chain agnostic all of a sudden, it's kind of funny. 15:09 But then what's the point? 15:11 That's why I keep asking, what's the point of launching these new chains? 15:15 It's kind of funny that at one point, all we did was focus on for so many years from 15:21 2014 onward, we just focused on having new blockchains that were so different. 15:26 And then now all of a sudden we want to connect all the chains back together. 15:30 Yeah, it's such a good point. 15:31 And it's also like, why are these people going multi-chain? 15:34 It's just because it's the naive advice that someone will give you. 15:38 But ultimately, what apps should be focusing on is, one, increasing the user experience, 15:42 like making a better quality app, and two, increasing the number of unique users that 15:47 have access to their chain. 15:48 And if you're looking at like the 50th L1 out there, it's unlikely you're actually 15:53 accessing new users by deploying there. 15:55 And also, users don't come for free. 15:57 You're going to have to actively invest in the go-to-market unless you're offering 16:01 something unique. 16:02 And then, I mean, the whole idea of like build something and they will come is not as 16:06 common as these developers are hoping. 16:09 Yeah, no, you're totally right. 16:10 And I don't want to outfall entrepreneurs out there. 16:12 I want them, I want everyone, myself included, I want us to hear this, that there was a 16:16 decade of like the macro cheap money. 16:18 But what that did was create for us is like the constant free user. 16:23 So any of our apps and our crypto applications, as long as it was cool and we built it and 16:27 it was fun and it was crypto, users were there ready to use it. 16:31 And it was cheap acquisition for new. 16:33 That's why some of our companies acquired so many users so quickly and they got into 16:37 crazy valuations because it was cheap and easy. 16:40 But now it's different. 16:41 And now, if you're not building something that's in its category, for example, you're 16:45 an infrastructure and services, very unique category. 16:48 You're actually what our fund invests in specifically. 16:51 But if you're building out there like a retail application, you need to be building 16:55 something that's good for the mass user out there. 16:59 Now, the time that we build for the crypto user, it's over. 17:03 We need to build out for everyone else because we need to prove our own utility. 17:08 Yeah, plus all those users that were just coming there for the hack or just because 17:12 they're just being handed money are essentially mercenary. 17:15 The moment that money stops, unless you built a good app, they're going to leave 17:18 anyway. So it's like that's really good for pumping your metrics and convincing 17:23 someone to invest in a crazy valuation. 17:26 But the moment you're on the public market and then your users leave, then I think a 17:30 lot of that goes away. 17:31 That's like token investor loyalty. 17:33 How do you gauge that? 17:35 Yeah, yeah, really true. 17:37 And then I think a lot of people were kind of fallaciously tricking themselves into 17:42 thinking that there's an actual community just because their token price went up and 17:46 their community loved them. 17:48 But that doesn't actually mean if you have like a borrow-lend protocol or something, I 17:52 don't want to like I'm sure there are borrow-lend protocols that have this. 17:55 But my point is that in traditional financial infrastructure, like loans or 17:59 something, there's no loan community. 18:01 There's a little bit of a commodities community, but not really. 18:05 Like usually financial instruments don't have communities behind them just because the 18:09 price of the financial instrument went up. 18:11 So it's like a unique thing to crypto and I don't think that's, I think a lot of it is 18:16 because it's driven by retail speculation, but I don't think that's a sustainable source 18:21 of community. A sustainable source of community is like, if you look at these consumer 18:24 apps like games, games can have community because people do it as a hobby. 18:28 They'll like go home, they'll hop on with their friends. 18:31 They know the people they're playing with or even if they don't, but they'll stream and 18:35 they have like there's just a lot of community elements to it. 18:37 The same thing doesn't typically apply to like a borrow-lend protocol and therefore you 18:41 need to design your app a little bit differently and your ways of measuring community 18:45 should like be different consequences. 18:47 It's brilliant that you said that because it's somewhere along the way crypto became this 18:53 incentive layer and it was decided that all applications need tokens and incentives and 18:58 that's how we're going to build community with financial incentives. 19:01 But that's not the way community should be built around hobbies and then maybe crypto can 19:06 be used as what, like a complementary add-on to these communities? 19:10 Yeah, it could also be used as like a like network effects bootstrapping tool. 19:14 I think that's a really valid use and I know that like crypto people hate this, but no, 19:18 we have to talk about it. Crypto is like, yeah, you give something to someone that's worth 19:22 something to them, but it costs you nothing to give it to them and that asymmetry, at 19:26 least initially, it's worth nothing to you and then eventually like it needs to actually 19:30 grow into that value. But I think that's partly like the beauty of it that we should 19:34 lean into. But it's just like you can't be, it's like back in the beginning of Uber, I 19:39 remember Uber rides were like a dollar a ride or something like that. 19:43 It was just crazy. I could like, I was using Uber everywhere and that was like the, to 19:47 me, that was like peak VC subsidized days. 19:50 And now Uber rides are like super, to get like across the street, it cost me 20, 30 19:54 bucks or something. But I think that's like the kind of thing that these other apps that 19:59 were using tokens to bootstrap network effects need to realize that they have to grow 20:04 into Uber today. 20:05 I never understood how, like I was a, like you said, when Uber, I grew up in New York 20:11 City and so in 2000, maybe it was like over 10 years ago, 2011, 2010, I was like using 20:18 Uber when it was just, it was all only black cars and it was because my friend from high 20:23 school ended up becoming one of the first New York employees and he's like, hey, you 20:26 got to use this. And it was amazing because it was like I was able to have a black SUV 20:33 sitting outside of like a restaurant while I ate for six hours with a chauffeur driver 20:39 for like $10 an hour. 20:41 And I was like, this is, I don't know. 20:42 It was pretty crazy. 20:43 Yeah, like this is the future. 20:44 I don't know how they're doing this. 20:46 That is this, I don't know how this Travis guy is doing this thing, but God bless him 20:50 for like seven years. 20:51 He bootstrapped my transportation. 20:54 Yeah. And then it's like you drive to your destination and you can order a coffee to be 20:58 delivered the moment you get there. 21:00 So imagine the level of wealth that you'd have to be at to have this just like 30, 40 21:04 years ago. And now it's just like accessible to everyone. 21:07 It is pretty remarkable. 21:08 It sounds like you, one of the things you learned too, is that everything is just taking, 21:13 it's going to take a little bit more time to get where we need to be than what we 21:17 thought. I think there's also just like a mismatch between like, I mean, there's a lot 21:23 of great engineers in this industry and I think there's also some guys on the economic 21:27 side. But it's kind of rare that you see like someone who's kind of like a quant that can 21:32 be a hybrid between those two, because as a result, you end up with these weird 21:35 constructions. I think choosing a Filecoin is really cool. 21:37 And I think there's arguments that it is sustainable, but like a naive argument, it's 21:43 like, oh, it's like someone like the other day was telling me, oh, well, they feel like 21:47 as a Filecoin user, they're paying less. 21:50 And the guy who's providing the storage for Filecoin is making more. 21:54 So it's a win. 21:55 And then like, it's kind of silly because it's like something like obviously the yield 22:00 must be coming into the system somewhere. 22:02 And right now, the way it comes in is that we have people speculating on the price of 22:06 the Filecoin token. And that's why the token is worth more. 22:09 So when Filecoin compensates the person providing storage, they're able to basically 22:13 rely on that speculation and give it as compensation to someone else. 22:18 But the moment that yield stops entering the system, and it will eventually, then you 22:22 need other revenue sources. 22:23 And Filecoin actually has ways of growing into that. 22:26 But yeah, I'm just giving it as like an example of like, if you just left it at that 22:30 like simple analysis, then if you put a thousand dollars in for storage and you're 22:34 getting five thousand dollars of storage out, obviously there's a mismatch there. 22:38 And like crypto people seem to think that that's not an issue. 22:41 It's one of the best, I think one of the best projects in the space. 22:44 We had like two, we had the two different founders on the show from Protocol Lab. 22:49 And the cool thing about Filecoin is it's an actual invention that's taken from the 22:54 Byzantine generals problem created, you know, they theorized about IPFS for many 22:59 years, applied a lot of different technologies, used crypto as this incentive 23:04 layer, and then figured out a way to do it. 23:06 And they fully, like you said, understand that this is a long wait. 23:10 But the cool thing about their speculators, their speculators, the cool thing about 23:15 their speculators is that they are speculating on the value of the future network that 23:21 they can still use and play with today. 23:24 And I think that's kind of fair because it's a really cool network. 23:26 And when you understand how it all works and that you can actually use it now, a lot 23:30 of people are going to are speculating on the on the future value, which is kind of 23:34 what stocks are in a way, too. 23:35 Right. Yeah, that's what it's supposed to be used for. 23:37 That's a good point. Yeah. 23:39 But the rest of it is just a lot of it is it's hard, but we're going through we're 23:43 going to go through a renaissance, I think, over the next year or two, because the 23:47 barrier of entry in our space is not. 23:51 And to like what you said, the barrier of entry is a lot harder now. 23:55 People to raise money is harder now to to convince yourselves and your family to that 24:01 you're going to leave your job and start a Bitcoin or crypto company is a lot harder 24:04 now to grow your company and get users is a lot harder. 24:08 Now you see it at these conferences. 24:10 It's it's just a lot different. 24:12 And so maybe out of that, we'll start to get these like really, really, really good 24:17 applications. And we're starting to see like on the Solana chain, you're seeing really 24:21 good applications and and stuff like that. 24:23 So so you're giving me optimism for the for the years to come. 24:27 Oh, thank you. Good to hear that. 24:29 Yeah, I think people will be a little bit more thoughtful about whether what they're 24:32 building is actually really unique, too. 24:34 But I think that's the last part that I think multi-chain really was a huge distraction 24:39 for, which is people weren't thinking about like whether they're actually building 24:44 something new or something zero to one. 24:46 And instead they're like, let's just take this protocol and we're building it for 24:49 Aptos or we're building this protocol for Solana. 24:52 And that's a really bad way of building applications or building things that last, 24:56 especially since like when you're building like X for Solana and you just rip it from 25:00 Ethereum, the Solana blockchain is so much it has so much higher throughput and there's 25:05 things that you can do on there that you straight up can't do on Ethereum. 25:07 So why don't you do more of those things rather than just fork in AMM, which was 25:11 designed with the constraints of Ethereum in mind. 25:13 If you were a company or like a blockchain that launched on the premise of just connect us to as many chains as possible and offer some really cool scaling solutions and users will come like, and if they're in that space now and they don't have any real applications, like what advice would you give them? 25:28 I'd honestly, I think that a lot, I mean, for these companies that may be like raised at too high of a valuation and they can't grow into it, there's only a few options. 25:38 But if you're really early on and a lot of the capital is left, I honestly think maybe just return the capital because that's kind of the situation I was in with the Terra EVM where the assumptions of what I was building were just no longer true or I no longer had conviction in them. 25:51 And you're better off just not going through with the round or not continuing and then taking a step back and thinking about what is actually compelling to you. You can raise again, you're probably going to want to change the cap table too, because maybe those old investors that you had, had a different thesis on what the future of crypto scaling looks like. 26:10 At the same time, being upfront and public about your history and your career, it seems like from my own personal history and yours too, it seems like the more integrity you have to the community that you work in, the more respectful they'll be back to you. So that's always a good thing too. 26:30 Yeah, I think you can also prevent other people from making the same pitfalls. If you announce really publicly, you're like, look, this thing didn't work out, then I think people, if someone else tries to do the same thing in the future, they're going to see that evidence in history and hopefully they learn from it and understand why. Maybe they could take a totally different approach, but at least they know that you went down that same path too. 26:50 Neil, thank you so much for coming on the show today. Neil Samani from Eclipse. I'll have all your information in the show notes, but very enlightening conversation, very eye-opening at the same time. Thanks for taking the time today. 27:04 Thanks, Charlie. 27:20 And that is why they are producing the show right by my side. What an amazing team we have now. It's so amazing. You guys have been hearing some great updates and following along. 27:29 If you don't know, Waxman is the leading global strategy and communications firm advising the next generation of companies in Web3, disruptive technology, Bitcoin, crypto, fintech, artificial intelligence, and venture capital. 27:43 Waxman's clients are ambitious leaders and businesses that are on the frontier of this whole new economy because they really do believe that the future belongs to us and we're the ones building it. 27:53 With services across everything from digital marketing, public relations, social media, investor relations, financial communications, recruiting, and public affairs, they're helping companies and individuals like myself seize the business opportunities that we deserve, overcome challenges that we all are going to face, and achieve sustained success. 28:15 Head over to Waxman to learn more. You guys are going to love them. We have them in the show notes. Check it all out. It's W-A-C-H-S-M-A-N.com. That's W-A-C-H-S-M-A-N.com. 28:28 We're on this great, great subject right now, talking about crypto platforms, development, Bitcoin scaling. We've been on this theme. A lot of what gets talked about in the crypto space or what reaches the ears of the mainstream audience is the final end product. 28:43 But a lot of this cool technology actually is happening behind the scenes. Without understanding what is happening behind the scenes, it's really hard to understand how these things will come together. So I'm excited to introduce my guest today, Leo Leonard Deloscher. I definitely screwed it up again. I'm so sorry, but Leo, thank you so much for coming on the show. 29:03 Thank you so much for having me, Charlie. 29:06 You're a graduate of the Berlin Institute of Technology. You're the co-founder of Peaq, P-E-A-Q, and a very unique company. You guys are looking at crypto platforms and scaling in a very different way. Very, very different. 29:20 You're working on what you call transforming the Internet of Things into the economy of things by giving vehicles, machines, robots, devices somewhat of a sovereign identity, access, and payment capabilities so they can do services and have an economy between them. And we're already seeing that. 29:37 We've got Teslas and all our new refrigerator. A lot of these new washing machines come built in with chips and having these technologies to be able to talk to each other. And for me, I look at efficiency. I want all of everything in my house, refrigerator, dryer, anything, pool heater, whatever, to be just under this hyper, hyper-efficient kind of mechanism. 29:59 And you're trying to build this out using these decentralized physical networks, the D-PINs. You think they're going to change the blockchain landscape from everything that we know. How is this different from layer ones? I guess, take me from the top. 30:13 Yeah, absolutely. Now, you summarized it super well. And what Peak essentially is, is a layer one for what you just said, D-PINs, decentralized physical infrastructure networks. This is a new term in Web3, which just emerged recently. Misari coined it, actually. 30:31 And it's kind of uniting a lot of the efforts that have been going on for a long time. So there have been many efforts in terms of creating decentralized networks, so incentivizing individuals, for example, to deploy hotspots at their home. Helium is an example who did that. Or to offer storage in order to store files and so on. Filecoin is an example of that. 30:56 So there's been a lot of efforts going on already. And we've been looking at that space starting in 2017, where we had our inception. We did a lot of work with many big enterprises. Audi called us up one day in the morning and basically said, hey, we have a massive problem. Our customers don't really have enough charging infrastructure. 31:17 So one of the managers had that brilliant idea of saying, hey, what if all the home charging stations could be actually made available to the public? And that's another example of D-PINs, where people can use their private charging stations at home, deploy them and make them available to their communities. 31:35 So it's really essentially incentivizing individuals and enabling individuals to share the resources they have. And we focus on the IoT resources, like anything that can transmit data, that can generate or sell energy, that can store files, that can record video. 31:57 This video data can be shared with people and sold. And Peak is really a layer one network designed for that space. 32:06 A lot of people have been trying to do this for a very long time. It's definitely novel and unique. And it's almost like the Holy Grail of being able to do this. I remember going back almost like seven, eight years now, when after Ethereum was first conceptualized, people were talking about doing the Internet of Things of sharing electricity and solar power, being able to share the helium mesh network and do decentralized cell phone networks. 32:31 But what has been the barrier to entry? Why have none of them? Although you saw helium did take off, and it helped that people were home a lot during COVID lockdowns. Why hasn't this really taken off yet? 32:43 Absolutely. It's been a long journey also for us. We've done a lot of R&D. We work with many big firms. And it's taken until now to really get its own name, to become its own thing in Web3. For many years, we first had to get the infrastructure scalability right. Like on Ethereum, you couldn't build these things. 33:04 Back in 2017, we looked at working with IOTA, because it promised to solve a lot of issues. But it didn't at that time, right? The technology wasn't ready. So until 2021, I'd say, we didn't have the infrastructure, the blockchain infrastructure tech to actually build such a layer one, and to really make those use cases come alive. 33:25 Now this is solved. We have incredible frameworks. We, for example, built with the substrate framework that's used to build the Polkadot ecosystem. So that really provides us with the infrastructure tech on the blockchain level that's required to build such a layer one with very low fees, high throughput, and so on. 33:43 And on the other hand, I think incentives and economics haven't been figured out really yet. You mentioned Helium as an example. It's a fantastic example of really creating a massive network of the supply side. But there hasn't been really much demand yet for using the Helium LoRaWAN network. 34:04 Why not? 34:05 Because the IOT connectivity through LoRaWAN is not used on massive scale yet. So the idea was, okay, we're going to deploy this network everywhere. And then Citi is going to use this LoRaWAN IOT connectivity and companies, but it's not that much used yet. It might scale up. Helium now switched also to focus more on 5G. But it hasn't been used so far as promised. 34:33 So there's a massive supply side. The model works. You can bootstrap those networks. You can build up the supply side. But the demand in Helium's case wasn't there yet. 34:41 It wasn't there yet. And a lot of this stuff is still experimental. But going back to the electric cars and that network example, I think that's one of the best ones. I just read an article somewhere that one of the reasons that Elon Musk actually opened up the supercharger network to the whole US was because there was pressure there that electric cars weren't going to continue to grow in the US if it was seen that Tesla had a monopoly on almost all the superchargers in the whole country. 35:11 And so there was almost like government pressure to open that up. And I understand why. So your solution is like a decentralized version. It's like most people are charging. They're not going to superchargers. They're charging at their home or their office. So why not be able to share those resources? 35:28 Correct. And the charging use case is one of the use cases. And it's actually the first deepened use case that was built on the peak network because really Audi as a massive automotive firm kind of initiated that and said, hey, we need to solve that problem that end users have 10 to 15 different accounts, charging cards. If they have a Tesla, they can charge up the Tesla superchargers, but not everywhere else. 35:55 And there's so many home charging stations that are not available to the public. And if you think about like if you give all of those charging stations an identity on an open blockchain network and then anyone can see them and reserve them and pay for them peer to peer, that really can massively scale the charging infrastructure and it can solve this massive fragmentation that we have today. Right now it's super fragmented. 36:23 Not only that, you're looking at it from a very like altruistic perspective, but I'm looking at it from like a capitalism perspective. And the way I look at it is that you have this huge multifamily property boom going on right now there. 36:38 You have most people who are property real estate investors own, you know, they don't own really a lot of single family rentals, they own like these buildings or apartment buildings or homes where you can have multiple families live in them. And we're seeing the growth of these all over the country. And these are owned by, yeah, you have private equity and stuff, but they're owned by like, smaller investors, people are diversifying their assets. 37:00 And there's no incentive for me as like an Airbnb operator, you know, or someone who owns a multiple family unit building to build superchargers, because how many of my guests are going to pay extra to use it? However, if I had them there, because it's now part of a network that can give me an extra income stream, I think that's very promising. 37:22 100%. And if you scale that model to different use cases, right, you have the charging infrastructure, you can utilize your property, wherever you have it, you can build charging stations and make money by any car that passes by that wants to charge there. Or you use the roofs of the houses you own and install 5G hotspots, because traditionally, you have to be a big telco company that builds a massive 5G network. 37:48 But now, it's going to be flipped around and deepens like those decentralized physical infrastructure networks, enable anyone, any property owner to install 5G hotspots on their property and provide connectivity to the people to the community around. 38:03 So you're spot on saying that this is an incredible opportunity to decentralize how money is being made, right? Like, anyone can start making money more on the side, and it's less concentrated in the hands of a few big companies. And individuals, investors, or if you own your private property, can start making money. And we like to call this democratizing the age of automation. 38:29 I love that. I love democratizing the age of automation. Do you see like, this world of multiple blockchains that people are still launching is going to exist in the future? Or do you think that it'll be more of like, normal people, businesses and companies and industry will interact with this kind of like, decentralized middleware that will then filter into whatever blockchains that it wants to use on its own? 38:53 Yeah, like, I do. I do think that the multichain future will exist. And I think many, many industries will be transformed in terms of many companies that traditionally exist, will start that will not exist any longer, right? They will, or they will have to transform a lot in order to continue to exist. And in terms of many different networks being launched, like on an interoperability level, I see incredible progress in terms of all 39:22 those different networks really being able to talk to each other, being able to exchange information and also tokens and value. So that is being built a real web three, which is interconnected. And many business models are being completely flipped around. So I do believe, for example, telco, and energy, as we talked about it now, like, I think the energy grids of the future are going to be highly decentralized, much more in the hands of individuals and people. 39:51 Who produce energy, store it, and also sell it. So I think, yeah, many businesses that we know as of today, in that, for example, field of infrastructure, are going to be disrupted and transformed. And web three is, yeah, enabling that. 40:10 You guys just launched something called Peak Control, which allows users and owners of the Raspberry Pi computer, which is like a very small computer, half, you know, it's a tiny one, half the size of my cell phone. It allows owners to connect to your network and get rewarded for simulating how machines such as electric vehicles and drones will interact with it. Why are you paying people for simulating data? 40:34 That's a good one. And we do this in order to really enable people to start experimenting. So this is happening on a canary network of ours. So it's not happening on the main network that will be launched later this year. So this is really there in order to give people a feeling of how the economy of things is working and how it functions. 40:58 And we're testing basically people to like we're testing how the network behaves, how people interact with it. And we're using Raspberry Pis because it's basically an IoT middle layer. You can connect any sensor, any charging station, any car to the internet, to the peak network using a Raspberry Pi. 41:17 So it's basically one IoT middleware with which you enable all the IoT developers out there to prototype and test deep and use cases very quickly. That's why we launched initiative to really enable everyone to get started super quickly and try things out. 41:33 How many people are connected? 41:35 So right now there are, I think, four to five hundred Raspberry Pis connected. 41:40 Can you almost like do a decentralized Mechanical Turk in a way? 41:46 Decentralized Mechanical Turk. 41:48 Where it's like using, if you have, it's not just about sharing resources, but if you have hundreds of thousands of Raspberry Pis connected and they're acting as like decentralized oracles and they're bringing in data, you can build into your network a mechanism to tell if any outlier data is lying or being dishonest. 42:07 You could like ask simple questions like what's the weather where you are and compare it with the actual weather sources, but then you can use it to like have a decentralized incoming data oracles from the real world. 42:20 A hundred percent. This is like one of the deepness, like sensor networks is a big part. 42:27 Yeah, sensor networks. 42:28 Exactly. There are weather sensor networks being built recently. Just today we announced how a camera sensor network joined our network. So they are having smartphone cameras and the smartphone cameras are basically the sensors monitoring traffic, creating real-time maps. 42:44 Oh, that's so cool. 42:45 Absolutely. Yeah, it's incredible. Like you can get data on anything, anywhere, air quality, weather data, traffic data. It's crazy. Like this deepened space that's emerging, the real world impact you can have and crowdsource data and reward individuals to contribute with sensors they install at home or in their cars. Yeah, it's crazy what's happening now. 43:12 We have this problem here in Florida. It's the bacterial problem called red tide is the shorthand for it. But what happens is when it rains a lot or there's like sewage dumpings or there's like situations where there's a lot of fertilizer or just chemicals in the ground. 43:28 It's not man-made. It's a natural reoccurring thing in the water, almost like a wildfire. But it gets exasperated by man a lot, by us, having like water runoff from our lawns into the oceans and things. And in Florida, maybe like once or twice a year, we get this really bad. 43:47 They're very regional and almost very local, but you get these outbreaks and like all the water will turn red and you'll see like millions of fish just layering on top of the water and it's sad and it's dead and everything dies in the water. 44:04 One of the ways to combat it is to find the outbreaks when they're small. And then the local marine laboratories that we have here that are like public-private funded, they know how to stop it. But when it gets too big, they can't. When they turn into fish kills, you can't. 44:20 I wonder if there was some like sensory mechanism that we could develop and then the way to incentivize people that own properties on the water to put them in their homes, pay them some sort of like incentive. But it doesn't even have to be like a monetary incentive. It could be like a discount on your tax bill or something like that. 44:39 Absolutely. That's a fantastic, that's a perfect deep and use case really. You need a sensor or device that can recognize when this is happening. And then like you said, you incentivize people, you give them a token reward and that token reward they can use to, like you said, reduce taxes or any other benefit really. But that's a perfect use case. 45:01 I'm going to work on this. I'm very close with the city and then I just got to get with the aquarium marine laboratory and ask them how they're working on the sensor. Because right now the way it works is that my friend Jay called the other day and he offered me, he's like, hey, we need more people just going out into the water and on the beaches testing. 45:22 It's an actual work. Someone has to go out there and do it. And like, how are we going to stop these outbreaks if we're relying on like eight day old data, hoping someone did it the right way? No, we need sensor. 45:35 Real time sensor network. Absolutely. 45:38 Leo, thank you so much for coming on the show today and giving me my next business idea. 45:43 Super happy and super happy to help, Charlie. Like, please, please let us know. And we're happy to support with everything on the on the deeper level. 45:53 Yeah, I'll get in touch. It's really awesome. I'll talk to you soon. Thank you. 45:56 Thank you. Cool. 45:57 We're on this theme of crypto platforms developing on top of Bitcoin, kind of connecting all of these blockchains back together because it seems like over the last year or so, there's just been this push to figure out how to allow for liquidity to jump from one blockchain to another without having like losing decentralization. 46:24 You know, especially when some blockchains are very are very busy. Like right now, there's been a huge amount of activity on the Bitcoin blockchain. 46:32 And it's been reviving a lot of talks that we had many years ago on back on Bitcoin scaling, because as much as Bitcoin has grown and scaled into, you know, you have lightning and we have sidechains and Drivechains today. 46:44 We're going to be talking to my guest, Paul Sztorc. Paul, you're the co-founder and CEO of LayerTwo Labs. You're a well-known Bitcoin researcher and developer. You've been working on and proposed this concept of the Bitcoin Drivechain on a sidechain in 2015. 47:01 But it was very different times because right now you have these ordinals and different type of activities that are being built on top of the Bitcoin main chain. But we should be figuring out how to scale in different ways so we don't see high congestion and high fees anymore. Paul, welcome to the show. 47:19 Hey, thanks for having me. 47:20 You were also an economist at Block and a director of research at Tyrion. But what's interesting is that when you proposed Drivechains in 2015, and I just want to read like the first few words you wrote, with sidechains, altcoins are obsolete. 47:34 Bitcoin smart contracts are possible. Bitcoin Core and Bitcoin XT can coexist and all hard forks can become soft forks. Cool upgrades to Bitcoin are on the way. Now, this was eight years ago. 47:46 Yeah, that last sentence, the rest of it was spot on. 47:51 But what was going on in 2015? 47:54 Yeah, I've got a lot of stories. So what happened was there was the block size dispute and that was going worse and worse. It started a long time ago and it just got worse and worse every year. 48:08 And in 2015, it seemed like it couldn't get any worse, although, of course, it would go on to get much worse after that. But in 2015, we organized these conferences called Scaling Bitcoin, which was supposed to be like everyone meeting and we'll talk this out. 48:22 We'll figure this out because Mike Kern had proposed Bitcoin XT along with Gavin Andreessen, which was a hard fork increasing the block size, the infamous block size. 48:33 Bitcoin was at the time, and this story has been covered a lot, not only on the show. There's a great book, I think it's by Jonathan Beer from BitMEX, and he wrote this book called The Block Size War. I didn't read it, but I heard it. 48:49 Yeah, I skimmed it, but I was like... 48:52 Well, we lived it. I don't want to relive it. 48:55 Yeah, I do worry that if I read it, I'll be in the awkward position of having to publish some kind of memo or something. Because my experience is also very different than what... 49:09 If people show up later, they kind of are fed a very simplified story and it doesn't match what I lived through. 49:17 Since then, has Bitcoin scaled to where you would like to see it scale? 49:26 Well, I think scalability is sometimes... It's often under-emphasized. It's very important, but it should have even more importance. 49:37 I think partly this is because anyone who brought up scalability was seen as a large blocker, and so they're just immediately painted or they're immediately disparaged because the large blocker side was so wrong for such a long time. 49:53 And they tried so hard to win, and then they lost. They're completely humiliated, really, to this day. So people want to avoid even going in that direction. 50:03 It's just too awkward a topic. But people talk about it as though there's privacy, scalability. 50:05 So at Scaling 3 in Milan, Scaling Bitcoin 3, the third conference, the days were broken into categories. 50:10 And there was like fungibility was the first half of day one. And then there was like... 50:15 Scalability was just like one bullet point among many things, like interoperability, et cetera. 50:21 So I think that's kind of a mistake. I mean, that's fine enough to have the bullet points, 50:27 but the scalability is key because of the network effects of money. 50:32 Like when you go to Japan, you can only spend yen. You can't spend even the U.S. dollar. 50:37 And then, God forbid, you take yen to Great Britain or something. 50:42 It doesn't matter how much yen you pull out of a giant briefcase. 50:46 People are going to be really confused, and they will not take it. 50:49 It will lose all of its persuasive force. Whereas if you took British pounds, 50:54 you took hundreds of thousands of British pounds, and you said, 50:57 I need to buy this shirt off your back or something. 51:00 You'd persuade all kinds of people to do all kinds of crazy things. 51:03 Money has that magical persuasive power, but only the money that the people recognize socially in their little group. 51:09 So the smaller... Each place doesn't really contain... 51:17 Each currency area doesn't really contain a rival cryptocurrency. 51:22 Excuse me, a rival currency of any kind. 51:24 Our industry is in a kind of temporary space where we have many of these 51:29 for a wide variety of reasons that are just people scamming. 51:32 What? 51:33 Just innovation, fringe innovation. 51:35 It's hard for people to realize that there was a time where we just had one blockchain. 51:40 There was a time where you would say, yeah, we're going to do it on the blockchain, 51:44 and no one would ever say which one. It was just always on the Bitcoin blockchain. 51:48 But no one was really talking about this term of smart contracts and doing other things. 51:53 The scaling conversations at the time was mostly around just getting more transactions for money. 51:58 It was just about transactions of money. 52:00 It wasn't like new data smart contracts of running an insurance company on a Toric complete system here. 52:06 That's true. I wonder if that has evolved in a very interesting way. 52:15 It's worth pointing out that back in 2015, the whole reason why we had the scaling Bitcoin conferences 52:22 was to avoid splitting the community in two. 52:25 Because, in fact, at the time, most people believed that that would just kill Bitcoin. 52:31 That's kind of bizarre, which is that it later split into two and basically almost nothing happened. 52:37 And then we had Bitcoin Gold, Bitcoin Diamond, all this other stuff. 52:42 Reality played out a little differently. 52:47 There's a website. You can go to hardfork.info and you can see all the forks of Bitcoin. 52:52 You can paste in an old Bitcoin address and see if you have any coins that are owed to you based on that. 52:58 But now the conversation's changed. 53:01 Even this podcast and during those fateful days when the community did split, 53:07 I would argue that Vitalik starting another blockchain, Ethereum, 53:13 and then that gave definitely a good amount of wind in the sails of the folks that wanted to fork Bitcoin into their own. 53:21 Because they said, oh, if they can do it with Ethereum, we can do it with this one, except we'll just call it Bitcoin something else. 53:27 But now that conversation has changed. 53:31 There were all these splits, but now I'm looking at VC pitch decks all the time. 53:37 And all I'm seeing is companies and blockchains and projects. 53:41 Very rarely will it be on the Bitcoin blockchain. 53:44 They want to be on the Bitcoin blockchain, or they want to connect to the Bitcoin blockchain or connect Polygon to Bitcoin. 53:49 It's like there's this huge renaissance of bringing Bitcoin back into the circle of all the other blockchains. 53:56 What's going on? 53:58 I think all those things are related, actually. 54:00 There was a time when, again, at the beginning, everyone thought there will only be one coin that wins. 54:05 Anyone who did anything else was disparaged. 54:08 So if they do Feathercoin or something, it was all seen as a joke. 54:13 So that was the beginning. 54:15 And then really after the scaling conference, 1, 2, and 3, in the year 2016, people kind of lost hope that Bitcoin would resolve its dispute. 54:26 And that's when Ethereum kind of broke in a little bit. 54:28 And then I think this is all related. 54:32 It was because the dispute wasn't resolved quickly enough, Ethereum broke in. 54:37 And then it's because after Ethereum broke in, there was kind of like a sour grapes type of thing. 54:42 Where it was kind of like, well, we never wanted smart contracts anyway. 54:46 Because now we can't have them. 54:48 We never wanted those anyway. 54:50 And we, you know, screw larger blocks. 54:52 And then the block size war. 54:54 And then the fork in 2017 with the large blockers losing the battle for Bitcoin or whatever you want to call it. 55:00 That made everyone extra complacent in the Bitcoin world. 55:03 So the Bitcoin world was just like, we will just do nothing. 55:07 In fact, we will resist all change. 55:09 Change is bad. 55:11 Change is like people trying to corrupt the protocol. 55:14 And that led to the proliferation of all this other stuff. 55:17 And that those people had more freedom since they didn't have to go through the crazy bureaucracy of Bitcoin Core. 55:23 They invented a bunch of stuff that 99% of it was terrible, but some of it is decent. 55:27 And then I think over time, those people have slowly learned that there actually is no future. 55:32 There really will only be one winning coin. 55:34 Like what I was saying before with networking. 55:36 And that if you invent something, it'll be open source. 55:39 Or even if it's not open source, someone will eventually reverse engineer it. 55:42 You know what I mean? 55:43 It's a community of people learning from each other. 55:45 So whatever is invented will be like bolted on. 55:48 It'll just be – all the technology will be what was called blockchain agnostic. 55:52 It'll just be like whatever. 55:54 So now I think people are sort of returning to the idea that stuff should be attached to the one winning currency, which would be Bitcoin. 56:03 I think it's also the case that the complacency after 2017 has actually led us nowhere. 56:11 And people are slowly realizing that. 56:14 And 2017 December, we got to whatever, 20,000 a coin in terms of the price. 56:19 In terms of the attention, in terms of all this stuff, I think we've actually not been going anywhere. 56:25 And over time, it's installed the wrong podcasts, the wrong speakers, the wrong conferences have risen to the top temporarily. 56:36 And people are getting tired of it. 56:38 And they're actually getting bored with the spiel that we should just do nothing. 56:45 The good thing is that market forces kind of like are making it happen. 56:49 At the time, Bitcoin was like going through this two-year bear market. 56:54 And solving this seemingly political problem, coming up into this having that was happening a year later or something, seemed like the solution that needed to bring in the next bull market. 57:06 So people were more interested in fast scaling. 57:09 But at the same time, when I say fast scaling, smart scaling is better than fast scaling. 57:15 Fast scaling is better than slow scaling because that's what happened. 57:19 We got complacent. 57:20 And I was one of those people that I remember saying like, well, we got SegWit and Lightning and everything will build on top of that. 57:26 And all these other blockchains will just be the experiments. 57:29 But we're seeing these experiments be successful as much as we see a lot of failures and scams and broken chains and things like that. 57:36 There are some really unique and cool concepts out there that would be cool to connect into Bitcoin. 57:42 And I think a lot of people want to do that. 57:44 That's why we're seeing that again. 57:45 And market forces almost are saying that if there is some sort of like huge breakthrough in a decentralized way, that could bring about the next huge crypto spring. 57:57 Well, that's what I hope. 57:58 But the question I have for you is, yeah, right. 58:02 But the question I have for you is like Drivechains, right? 58:07 When you proposed it, you almost were doing it in a way that didn't require any changes from Bitcoin software itself. 58:18 Therefore, everything can be backward compatible, right? 58:20 Like all the propositions that we're seeing now, they're all based around like Bitcoin not doing any changes. 58:27 Well, yeah. 58:28 Now, it's interesting. 58:30 There were what were called hard and soft changes back in the day. 58:36 And that was renamed to the hard and soft fork type of upgrade. 58:41 Then hard fork came to describe something else. 58:44 So the terminology has gotten horrible. 58:48 But the idea like there was a time when it was like the only change you could propose was a soft fork upgrade. 58:56 And then it was discovered that even the soft fork is actually very powerful. 59:00 And in fact, SegWit was used. 59:02 There was a soft fork that was a block size increase. 59:06 So this was part of the problem of, you know, if we go back to scaling. 59:11 It was all political. 59:12 People didn't understand how is it that we can't do a block size increase. 59:17 It's a hard fork. 59:18 But, you know, some, you know, essentially Peter Wilde Blockstream. 59:21 This is how it was framed, you know, incorrectly. 59:24 But that's just how it was perceived. 59:25 People just thought, well, Blockstream somehow it's a technological magic. 59:29 They can do a block size increase to 2.3 megabytes with SegWit. 59:33 But the miners cannot do Bitcoin Classic 1 megabyte to 2 megabytes. 59:37 So there was all this, you know, there was all this confusion and kind of mistrust. 59:42 It came out to a political thing. 59:43 You had this huge civil war, which you could argue that almost every country, like if you look at America, 59:51 or like these, you know, new countries or new technologies or new industries, like they almost have to go through. 59:56 And we, you know, we're looking back and we're sad. 59:58 You and I look back at those times in a sad way because we went through it and we lost friends. 1:00:04 And, you know, relationships were broken apart and businesses and things like that. 1:00:07 But the rest of the world looks at that almost like it's good that Bitcoin went through it because it brought all of the, 1:00:14 brought everything up, all the dust and all everything on the bottom of the ocean. 1:00:19 It brought it all up. 1:00:20 It's nice to see that finally people are embracing Bitcoin again. 1:00:24 It was almost like a year or two ago, you couldn't talk about being a Bitcoiner. 1:00:28 And now when I talk on the show, I could be literally talking to the founder of any other blockchain. 1:00:33 And I can say, hey, if being a Bitcoiner means that these core principles, are you a Bitcoiner? 1:00:39 And people aren't afraid to say yes anymore. 1:00:41 But there was like some sort of like scariness, like you said. 1:00:45 Was it a complacency? 1:00:47 It was like a fear of being considered a big blocker. 1:00:50 Or then it was a fear of being considered like a maximalist, right, for a couple of years. 1:00:54 Yeah, well, maximalism, again, started as something that was just self-evidently true. 1:00:58 Like back in like 2013 or 2014, it was just like every other coin was terrible. 1:01:03 The market dominance index was always like 98% or something. 1:01:08 It was like 98% Bitcoin. 1:01:10 And then it was like a thousand other things were like this tiny little thing. 1:01:14 This was like when like BitShares and like whatever, like NXT and all this stuff was like being invented, you know. 1:01:19 Remember all that? 1:01:20 And then, and that was like before Ethereum was like, you know, it was like just this tiny thing. 1:01:25 And so they were all, most of those coins just died off. 1:01:28 Only one of them rose to be an actual, you know, sort of challenger to Bitcoin that people have even heard of. 1:01:35 Which was Ethereum, of course. 1:01:37 And so the maximalism went from being like 110% true. 1:01:42 And then it has traversed a long journey, which is the over-complacency, the over-confidence, and the complacency of just thinking like all we have to do is nothing. 1:01:52 And then we will defeat everyone. 1:01:55 So you and I, so we're looking at that from like a scaling perspective and a growth perspective, right? 1:02:00 And we're looking at it and we're comparing ourselves, Bitcoin, we're comparing ourselves to all these other chains that are like growing, doing, building, experimenting, throwing things at the wall, raising money, having a lot of fun. 1:02:11 But let's look at Bitcoin from like a, hey, I'm holding onto Bitcoin forever perspective. 1:02:18 And I don't want it to ever change too much or not be like backwards compatible. 1:02:22 Where if you're holding Bitcoin now, or if you held Bitcoin in 2009 or 10, or you buy some Bitcoin tomorrow, you never need to worry about like needing to turn on the software in a few years to upgrade or do something. 1:02:36 That backwards compatibility is very important, which why people were afraid of doing those hard forks. 1:02:41 Because Bitcoin was created, yeah, to be, you know, I have almost a white paper like memorized by now, but it evolved into also being this like safe, hard money that people can go to. 1:02:52 Because as Americans, we didn't really need that until now. 1:02:56 Now we have banks failing left and right. 1:02:58 But these bank failures and hyperinflations and crazy inflation and nowhere to put your money has been happening in the rest of the world since Bitcoin's existence and even beforehand. 1:03:07 So like from that perspective, I look at Bitcoin as a hyper success. 1:03:14 Well, yeah, I mean, you can't be reliant on upgrading the software, because what if it upgrades to something that is just completely different than what it was, and it won't have any properties. 1:03:25 And then we want, you know, we want reliability. 1:03:28 All that was very normal to want. 1:03:30 There was a faction that you can, you know, like the Merchant for Pesky. 1:03:33 Remember, there was a faction that said never update the software. 1:03:36 And they ran like a version 0.5 or something. 1:03:39 He passed away or something. 1:03:42 He may have died, you know, surfing in Central America. 1:03:46 Oh yeah, everyone's pretending they're dead nowadays. 1:03:49 He faked his own death. 1:03:50 But his point of view is now like the Michael Cera point of view also, which is that, you know, this is already a hundred trillion dollar asset. 1:03:58 Is there like a business that does this? 1:04:00 That like Epstein and all these guys use? 1:04:03 To fake their own death? 1:04:04 Yeah, there must be like a plug and play. 1:04:07 It doesn't seem like it's that involved. 1:04:09 Like a couple of journalists involved, you know, you tell them that you just have an intermediary feed them the story. 1:04:16 Then you have like some stuff. 1:04:18 Maybe even like Go and you get like a fake cadaver and you have like a shark. 1:04:23 Yeah. 1:04:24 Face or something. 1:04:25 It's always based around. 1:04:26 Clothes on this thing and throw it in the ocean. 1:04:28 This person's dead. 1:04:30 A lot of people like that. 1:04:31 Well, like that one guy, the guy who died in India. 1:04:35 I'm pretty sure that guy's still alive, right? 1:04:37 So, yeah, I think everyone knows that guy's still like in their heads, but we don't have any proof or anything. 1:04:43 Okay. 1:04:44 So in a perfect world, what were you proposing and how is it applicable today? 1:04:50 Because you guys are growing layer two. 1:04:52 You raised. 1:04:53 You just raised a couple million bucks. 1:04:55 Yeah, it's very applicable today. 1:04:56 Yeah. 1:04:57 The point of the project, the Drivechain, the Drivechain concept, which became BIP300/301. 1:05:05 Bitcoin improvement proposal. 1:05:06 And then which became this company in a way. 1:05:09 The goal of that project is to make every single transaction on Earth a Bitcoin transaction. 1:05:15 And that includes all those payments. 1:05:17 And it also includes any kind of, you know, smart contract or fringe privacy, you know, zk-SNARK, Zcash thing. 1:05:25 It includes every type of thing. 1:05:27 So that's the goal is to have Bitcoin go from being just one size fits all to this whole spectrum of sensibility, privacy, you know, even decentralization. 1:05:37 Because, of course, not every. 1:05:39 This is the type of thing that's difficult to say because it breaks with the Bitcoin orthodoxy. 1:05:43 And most people are not, you know, they're not independent, creative thinkers enough to wrap their heads around it. 1:05:48 They just think we'll do decentralization is good. 1:05:51 Large, large blockers wanted a central. 1:05:55 It's almost like people are afraid to even bring up these subjects anymore because. 1:06:00 Because of that. 1:06:02 So like the centralization example, people are different and transactions are different. 1:06:07 So like the coffee transaction, it doesn't need the same level of decentralization as like, you know, another kind of like someone capital flight out of a tyrannical country or like an online darknet market. 1:06:23 You know, that would need a lot of privacy. 1:06:25 That would be a lot of decentralization. 1:06:27 Decentralization. 1:06:28 That would be donate to an activist. 1:06:30 Yeah. 1:06:31 Or something. 1:06:32 Now you need the privacy and the decentralization. 1:06:35 But when you're buying coffee in person and you go there every week and every day, you know, like there's, you know, there's no reason to keep that private per se. 1:06:44 And there's no reason to care about like, no one is going to try to censor that because that is a very normal thing to do. 1:06:52 So you don't actually need the, you know, there's cases where we compete with like Venmo. 1:06:56 And we want to make sure that we, you know, on Venmo, everyone is just posting like exactly whatever they just announced publicly to the whole world. 1:07:03 Like everything, you know. 1:07:04 It's really annoying. 1:07:05 The whole public pizza, like everyone's seeing what you're spending. 1:07:09 But that's what made Venmo so popular, especially during the pump. 1:07:12 Of course, it's the FOMO. 1:07:13 You hang out with your friends and you do the thing and then they see that they weren't invited. 1:07:17 You're right. 1:07:18 The business model. 1:07:20 Anyway, the point is we have different needs for decentralization. 1:07:25 You know, there's a whole spectrum. 1:07:26 In a perfect world, you'd have like. 1:07:28 So Bitcoin is claimed. 1:07:29 Bitcoin is posted up in the high decentralization part. 1:07:33 We've got like a fortress, which is great. 1:07:35 No one wants to. 1:07:36 No one wants to lose that. 1:07:38 Especially not me. 1:07:39 But we want to be able to go the whole spectrum. 1:07:42 So the idea behind the idea of Drivechain or whatever is that you can use different systems, different blockchains. 1:07:48 But there's no coin on them. 1:07:50 We just send Bitcoin to them. 1:07:51 And then they come back through like a kind of clever filter where the layer one node does not need. 1:07:58 You don't need to know what's happening on layer two node in order to process the withdrawals. 1:08:02 And so that's the trick behind it. 1:08:05 But the idea is that you have all these different blockchains. 1:08:07 You have like a Zcash blockchain. 1:08:08 You have like a Monero blockchain. 1:08:10 But there's no XMR. 1:08:12 There's only BTC. 1:08:14 And so that's the idea. 1:08:16 You created like some slow withdrawal system at the same time. 1:08:20 What does that prevent? 1:08:22 Yeah. 1:08:23 The idea is you don't want. 1:08:25 There's a naive way of accomplishing sidechains, which is just to require everyone to run a full node of everything. 1:08:33 But that doesn't work because what if someone makes a node that is like has eight terabyte blocks or that just is impossible to run? 1:08:39 Like the software just doesn't work or it works in a chaotic way or something. 1:08:45 So your question is how do we police the sidechain so that the withdrawals are accurate? 1:08:52 But we don't actually want to put in the effort of like hiring the police or whatever, which is running the nodes. 1:08:58 You know what I mean? 1:08:59 We don't want to be on the hook for that. 1:09:01 Because that's why tokens are created in a lot of these chains. 1:09:03 Well, yeah. 1:09:04 So that's how when they're an altcoin, that's how it would work. 1:09:07 But in this, we want to be able to do that with no. 1:09:10 We're not expending any effort or any energy. 1:09:13 So what I do is I have the sidechain summarize what it's been doing. 1:09:17 It checks in at a very rare rate of like once every few months. 1:09:21 And it summarizes everything that it's been doing in one hash. 1:09:25 And then the hash is just a tiny string of characters, which is very, very small and very easy for the human eye to perceive. 1:09:32 And then we have in the layer one mainchain Bitcoin core blockchain, there is just a little, the hash is encoded in the Coinbase transaction. 1:09:41 And then the miners can upvote it or downvote it. 1:09:45 And if it takes three months worth of upvoting and they put all their weight behind this one hash, then that is considered the canonical summary. 1:09:54 Which includes the withdrawals. 1:09:56 So it's very, very slow. 1:09:58 The idea behind it is something like if you're going to take an iPad or something, an iPhone from the Apple store, it has to move very, very slowly. 1:10:08 So you take it. 1:10:09 So if you're leaving the store, like if you try to steal an iPhone is the troublesome case. 1:10:15 You grab the iPhone from the person on the counter and then you run for the store. 1:10:20 It's exit. 1:10:21 Now, if you immediately go into slow motion where it takes you three months to get out the front door, then no one has to worry. 1:10:29 They can go home. 1:10:30 They can call the police. 1:10:31 The police can say, we'll make it there on Tuesday. 1:10:34 It gives it time. 1:10:35 People can be on vacation. 1:10:37 It doesn't matter because it takes three months for them to get out. 1:10:39 So you have a long, long time for the police to show up or for anyone to do anything about it. 1:10:46 You can take a photograph of this person and send it all around town and say this person is a thief or whatever. 1:10:51 So it's a deterrent, the speed. 1:10:54 And then the reason why this is not, the flip side of this, isn't it inconvenient for the user? 1:10:59 But the answer is really no because going into the sidechain, the deposits, going from layer one to layer two, that is instance and that always works. 1:11:09 It's because it's the asymmetry of requiring the full node, layer two full node to run the layer one full node. 1:11:14 So that direction always works perfectly and it's instant. 1:11:18 It's only the coming back that is slow and sort of fraught with the risk. 1:11:24 But it's done by design. 1:11:25 It's by design. 1:11:26 When you now allow instant deposits, you are also enabling those coffee type of transactions that can now be instantaneous. 1:11:34 But then if someone was using double spent Bitcoin or cheating or stealing or whatever, the mechanism for withdrawing it is like running out of an Apple store really slowly. 1:11:46 But then a market can be created to let people get their money faster, but then those middlemen would be taking that risk. 1:11:55 And it creates this kind of market and prevents... 1:11:58 Exactly. 1:11:59 And what it's like is there's people outside the Apple store already and they have a bunch of iPhones. 1:12:05 And they say, well, listen, if you buy it from the store, you have to walk it out slowly, but I'll sell it to you for whatever. 1:12:13 And since anyone can do this, anyone can go into the Apple store and do the slow thing. 1:12:17 Anyone can just buy them. 1:12:22 They can swap the coins out instantly to this person. 1:12:25 And then the specialists, these few numbers of specialists, maybe like 500 or 600 people, they would use the slow withdrawal. 1:12:32 And so those would be the specialists who walk the thing out. 1:12:35 But then it's just time value of money. 1:12:37 It's just an extra fee for you to just withdraw instantly through someone else. 1:12:41 So someone else is basically, they say they have a bunch of Layer 1 coins. 1:12:44 They have 14 Layer 1 coins and they buy... 1:12:47 You have 14.1 or 14.01 Layer 2 coins. 1:12:52 And they say, listen, we'll just swap. 1:12:54 It's the same HTLC that the Lightning Network uses or any exchange, Coinbase or whatever. 1:13:00 You make it really easy to make all the connections all point together. 1:13:04 And you've been around a long time, so you understand what needs to happen. 1:13:08 And it's not just about math. It's also about socioeconomics too. 1:13:12 But Paul, that's all the time we have today. 1:13:14 Thank you so much for coming on and talking to us about Drivechains and sidechains and what you're working on at LayerTwo Labs. 1:13:19 Thanks for having me. 1:13:25 I hope you guys liked that. 1:13:28 That brings us to the end of this episode. 1:13:30 A huge thank you to our producers, to our guests, the writers, everyone. 1:13:34 Neil, Leo, Paul, the folks at Waxman, everyone for putting the show together. 1:13:39 For the in-depth discussions about the innovative projects pushing the boundaries of blockchain technology. 1:13:43 As we continue to explore the world of blockchain, remember your feedback is so crucial to us. 1:13:48 Your feedback, your views, everything, subscribing. 1:13:51 Please take a moment to leave that review, share this episode. 1:13:54 I love doing this for you guys. I love you all. 1:13:56 Stay tuned for next week's episode, more enlightening conversations. 1:13:59 Until then, I'm Charlie Shrem. 1:14:01 And as always, thank you for listening. 1:14:03 Keep exploring, keep learning, keep questioning, keep challenging the status quo.