0:05 Welcome to Drivechain Twitter Spaces, where we discuss Bitcoin Improvement Proposal 300 and 301, the project known as Drivechain. 0:17 Drivechain is designed to strengthen and expand the potential of Bitcoin through enabling sidechains that are more peer-to-peer, 0:28 sidechains that increase Bitcoin's extensibility, Bitcoin's capacity to platform a wide variety of valuable applications, features, and customizations for Bitcoiners by Bitcoiners. 0:44 The objective of Drivechain is to enable Bitcoin's community to resolve disputes about how Bitcoin should be coded without resorting to internal civil wars. 0:57 Instead of civil wars, we can just have innovation on sidechains. So, for example, people who want to experience Bitcoin in a way that's more private and more higher fungibility can do that on a privacy-focused sidechain. 1:14 And that has already been developed by the developers focused on Bitcoin for advanced sidechains, specifically the Zside sidechain, which exists on the Drivechain testnet. 1:28 So we already have this privacy-focused sidechain up and running, an experimental beta version. And in addition, there are other exciting sidechains out there, like Thunder, which is another Drivechain-style sidechain, and this one has large blocks. 1:50 So unlike Zside, which is for privacy, Thunder is for large block Bitcoin. So it has very high throughput, very high capacity and volume, and lower decentralization. 2:05 So it's like a clone of Bitcoin, except it has large blocks. So this is a great example, perhaps the simplest example, of what sidechains can do. Sidechains can allow someone to just increase the block size if they want and use that in a Bitcoin sidechain. 2:22 So this enables the feature of large blocks on an optional basis. No one has to use it. And people can experiment with that. And that's what Drivechain is all about. Sidechains are all about experimentation and innovation, testing things, tinkering, trying new things in a way that doesn't harm layer one. That's the goal. 2:45 Hello, welcome. Moon Settler, one of our favorite and most frequent speakers here at the Drivechain Talk Twitter spaces. What's up? Are you going to be at Bitcoin Miami 2023 like we are? Or will you be just observing from afar? 3:00 Oh, no, I'm just going to watch the streams, I guess. So I wanted to ask you if you managed to get any info on the stuff I asked, I'm not sure you saw it, about Thunder and Lightning. So I'm just gonna find the tweet. 3:26 Let's see. And yeah, here it is. So I asked you if Thunder we have covenants at the start, if you are planning to do something like APO or CTV or some other stuff, I guess APO would be the easiest for a new Lightning oriented sidechain to add. 3:56 Yeah, I don't have the answer to that. But a great place to find the answer is to ask a question of a technical nature to Paul Sztorc and CryptAxe, who are the leading designers working on sidechains within the Drivechain community. 4:18 And they'll know whether the Thunder plan, the planned sidechain called Thunder, for which the code is available on GitHub, they'll know whether it has the feature you're talking about. And also, it might be possible for you to suggest changes, like you can go into GitHub and do like a pull request to add the extra code that you would like. 4:44 And maybe that will be included in the code by the administrators of that. 4:51 I see. So if I want something, do the PR, right? 4:55 Basically, that might be the way it is. I put in the nest, a link to the GitHub for Thunder. So it's on there. It's on GitHub. Anyone who wants to can check out what it's all about. 5:11 My understanding is that it's a large block version of Bitcoin. And if we had done this in the past, if the Bitcoin community had enabled Drivechain in the past, and then a large block version of Bitcoin could have existed as a sidechain, then it's very possible that the entire block size war might have been avoided. 5:33 Because maybe all of the people who were excited about low fees on Bitcoin through large blocks, they could have used the sidechain. 5:42 And recently, when Bitcoin's fees spiked, maybe Bitcoin lost some users because of the congestion that they experienced high fees. So maybe it would have been great for Bitcoin to have a large block sidechain enabled. 5:59 That way people could just use that when the fees are high on mainchain. 6:03 It's interesting to see that the fees have come down. Some people were celebrating high fees, like me. People who want to see Bitcoin have high fees because, as Greg Maxwell wrote in December of 2017, when fees are very high on Bitcoin's mainchain, then we see evidence that high fees are possible that would sustain Bitcoin's economic security. 6:31 Far into the future, as the Coinbase is halved every four years. 6:37 But in the last couple of days, the fees have come back down, down to their usual level. 6:43 I think right now it's about $2 or less to send a Bitcoin Layer 1 transaction. 6:49 I just checked a few minutes ago. That's what I was seeing at mempool.space, a website that I very much appreciate Rafael in the audience pointing me towards from time to time. 7:03 The website shows that it's about $2 a transaction. So that's what we've seen for the last five years, except during these times where the fees spiked. 7:13 So it was great that fees spiked recently. It prompted a lot of great discussion and conversation about, are high fees good or bad? 7:22 We saw people like Tomer Strohleit, an excellent thinker in the space of Bitcoin. 7:30 He's been saying that the ordinals and inscriptions are not good and the BRC20s are not good. 7:38 We don't want all of this altcoin style gambling and frivolity on Bitcoin. 7:44 We want to keep Bitcoin pure and the high fees aren't so good. 7:49 So some people don't actually like the high fees, but I feel certain that it's much better for Bitcoin to be a place where everyone can come and do whatever they want and their money is accepted and their value is accepted. 8:08 Kind of like at Walmart. Walmart is very successful because they sell almost everything a person could need and they do it in an efficient manner. 8:19 It wouldn't be good for Walmart to exclude a lot of their customers because of moralizing or other reasons. 8:27 So it would be great for Bitcoin to have a bunch of sidechains that would meet all the needs of these different kinds of users. 8:33 Those who wish to gamble on NFTs, there's a planned drivechain for them, a planned sidechain called BitAssets. 8:42 And for DNS, there's BitNames and there's Thunder for large blocks and Zside for privacy and Ethside, a clone of Ethereum for smart contracts. 8:53 There's all these different sidechains. 8:57 Moonsilver, what are your thoughts on the possibility of a future where Bitcoin has 10 different sidechains providing different features for different kinds of uses? 9:07 Do you think that that would be a great path towards high fees in the future on the main chain, enabling a strong security budget and a large community of users all satisfied with the features on their respective sidechains? 9:22 Does that vision appeal to you? 9:27 Yeah, I'm generally very interested in blind merge mining. 9:43 I think blind merge mining is great. 9:45 But, you know, the other stuff is up for question. 9:52 So, as I said not so long ago, I think something will pick up the slack, right? 9:59 So Bitcoin block space is obviously a limited scarce resource and it looks to me that it will remain so because the high replication, the high data availability of Bitcoin is a very tempting target for people to put all sorts of things there relatively cheaply. 10:24 And so I think it will probably have to remain very scarce, even if demand for block space grows. 10:35 And I think something will have to pick up the slack. 10:39 I said that either altcoins or sidechains will, I think. 10:42 So if we don't do sidechains, I think that will legitimize certain altcoins and they will simply just provide this alternative block space and they will start moving very closely with Bitcoin. 10:57 You know, the aggregate demand for the altcoin asset and Bitcoin is going to find some equilibrium and they are going to trend to a volatility factor of 1 to Bitcoin. 11:10 Those that somehow make it. 11:13 And this basically in effect in some ways breaks the 21 million limit, right? 11:19 But it also does not require anyone's permission. 11:24 So people who think can actually stop adding more block space to Bitcoin are going to be disappointed, I think, because people can really just start using alternative chains. 11:37 But would you say one more time, who did you say would be disappointed, do you think? 11:43 The people who think they can keep people from adding more block space, other people, or they can somehow magically convince everyone to abandon altcoins and they all go to zero. 12:00 I think those people will be disappointed. 12:02 If sidechains don't pick up this, you know, don't satisfy this demand for more block space in the future, then I think altcoins will. 12:14 We're in agreement about how the lack of drivechain or something like it legitimizes altcoins. 12:24 But it sounds like you're saying that it will be demand for block space that leads people to do altcoining. 12:33 Whereas I think that the kind of classical argument for drivechain, like the Paul Sztorc argument for drivechain, which is different because some people support drivechain for different reasons. 12:44 But I think that drivechain was invented because of the narrative that when there are disagreements within the Bitcoin developer community over how the blockchain should be organized, like, should it have this feature or that feature? 12:59 Should it have large blocks or small blocks? 13:02 Disagreements internal to the Bitcoin community, such as how large the block size should be. 13:08 Disagreements like that are the reason why we need drivechain. 13:12 And if there isn't something like drivechain, then people, when they have those disagreements, will go to altcoins. 13:18 So that's the argument, whereas the argument you're making is one that's more economic. 13:25 Whereas the one I was giving was more about technology design, like the design of Bitcoin, how should it be. 13:31 Where you're saying that economically, if there isn't enough block space, if there is high fees on Bitcoin, then people will flow to altcoins. 13:38 Is that correct? Is that what you're saying? 13:40 Yeah, because if you think about it, like, technologically, Bitcoin works for a very specific use case. 13:50 And there is probably going to be a larger demand for that use case than what Bitcoin can satisfy on Layer 1. 13:56 So that is why I think altcoins don't need to do anything crazy or anything very special to get adopted. 14:05 It can just be for the block space. 14:11 And of course, they can have features that people want and stuff. 14:17 But I don't think that is, in certain times, that is not the main reason for adoption. 14:25 I just listened to an interesting podcast where they said the Ethereum hype had nothing to do with actual smart contracts. 14:37 So the whole thing can be very closely correlated to China, you know, clamping down on the top four crypto assets. 14:46 On the top four only, and Ethereum was fifth, so they did not actually ban people from using Ethereum. 14:52 And the people just went for the biggest thing that they could use to get their money out of China and into Western countries, Western markets and stuff. 15:08 So basically, it can very well be for so simple economic reasons that something gets adopted. 15:17 It's entirely not sure that it has anything to do with the feature set. 15:23 I mean, I can't rule it out, but the way I see it, it can be that simple. 15:29 I see. So if I understand correctly, your view is that peer-to-peer electronic cash or even just electronic cash that is demanded, and that's the killer app for blockchain in your view. 15:45 Whereas I think the classical drivechain view is that about half of all blockchain activity in the future will be money. 15:55 And the other half will be all of the other kinds of variations on blockchain design that Bitcoin doesn't have. 16:03 My point is you can't even satisfy the money use case. 16:08 If you are trying to do everything only on Bitcoin, you can't actually do that. It doesn't work. 16:16 I'm pretty sure we already kind of proved that. 16:19 Yes. 16:20 And the big thing is I don't think the peer-to-peer is a good discriminator or a good way to distinguish things. 16:32 Because the way I see it, eCash, I'm not sure how familiar you are with eCash, but eCash is a lot more peer-to-peer. 16:42 In some regards, a lot more peer-to-peer than anything on a blockchain. 16:51 But in another perspective, it's an IOU. That's how it works, right? 16:59 So it's someone's liability. It's a fiduciary media. 17:04 And the thing that blockchains, especially Elans, have in common is that they have this weird decentralized game theoretical consensus. 17:19 And ideally, no one is the ruler of that consensus. 17:24 And basically, people want that. They actually want to participate in that. 17:30 And it is not so much peer-to-peer. As I said before, there are many ways to define peers in such networks. 17:39 And probably we're never going to have an agreement on the exact definition of peer. 17:44 And you can absolutely use these blockchains in a non-peer-to-peer manner, right? 17:49 So you can use them in a server-client manner. It doesn't matter. 17:52 That's not the point that makes people want to use them. 17:56 It's not the right thing that attracts people to hold assets on blockchains. 18:04 They are on blockchains, I think. 18:05 Okay. Well, you expressed that the peer-to-peer attribute of Bitcoin is not as important as some people would say. Is that what you're saying? 18:33 No, no, no, no, no. I'm saying it's a total misnomer, right? So that's not how Bitcoin works. 18:39 When you are sending someone Bitcoin, it's not a peer-to-peer transaction. 18:44 What's a peer-to-peer transaction is if you put that Bitcoin on an OpenDime or a subscribe or some other physical add to and you hand it over to someone, that's a peer-to-peer transaction. 18:57 But if you send Bitcoin over the blockchain, that's not peer-to-peer. 19:01 And arguably Lightning payments are not peer-to-peer either, right? 19:06 Especially in the directions we are going, the whole ecosystem will be extremely reliant on LSP, Lightning Service Providers. 19:16 So it's not exactly peer-to-peer either. 19:19 I think people get a little bit confused about how peer-to-peer is meant. 19:24 I think when Satoshi was writing about peer-to-peer electronic cash, he used the phrase peer-to-peer to refer to the network, not to a transaction. 19:38 So when you said that handing someone an OpenDime is more peer-to-peer than like doing a layer one transaction, I think that's not peer-to-peer in the way that Satoshi meant it. 19:47 Peer-to-peer in my understanding means that every role in the network is a role that is not socially granted, but instead is available to everyone with the only barrier to entry being economic. 20:02 So anyone can mine, anyone can have a node, anyone can transact. 20:05 There's no special role, there's no privileged status, there's no party that has a special role. 20:10 So that's what I think. 20:12 You can define it that, but we don't even know what Satoshi meant by that. 20:17 Because at first, Bitcoin, I think, didn't even have addresses, right? 20:21 So you could send Bitcoin to an IP address, basically, and someone had to run the node to receive the Bitcoin. 20:29 And that was, in a way, in some perspective, especially if they both run the miner process, right? 20:37 If they both generated blocks, then it was a pretty peer-to-peer thing. 20:41 Because if the recipient could generate blocks and they could get included in the blockchain, 20:48 and they received this over IP, you know, direct connection, 20:52 then it was definitely a peer-to-peer transaction by any definition. 20:57 But that's not how Bitcoin works today, like at all. 21:02 Welcome, Paul, to the stage. 21:05 Oh, hello. What are we talking about? 21:08 Are we talking about anything good? 21:10 We're talking about sidechains. 21:13 And we had an interesting discussion, Moonstellar and I. 21:16 He was talking about how demand for block space will tend to, over time, continue to legitimize altcoins. 21:26 I think he means, and correct me if I'm wrong, Moonstellar, 21:29 that you're saying that when there are fee spikes in Bitcoin's block space, 21:33 then people will migrate to altcoins, and you think that will happen until we have a large block sidechain on Bitcoin? 21:40 No, I think I meant, and I think Eric Voskouly has tweeted about this as well. 21:47 He has this particular view that it's perfectly normal, perfectly sensible, 21:52 that people will find alternative goods to satisfy their needs 21:57 when you have these price hikes, these supply crunches, or whatever you want to call it, 22:06 when the mempool completely clogs up and fees go up. 22:10 So it's a perfectly rational and normal human behavior to seek alternatives. 22:15 And either sidechains or altcoins, we are going to have to satisfy that need. 22:21 That's what I actually meant. 22:23 And I think it's up to Bitcoiners which direction they want to take it. 22:28 But if they don't do anything, then it will be altcoins. 22:33 Yeah, I completely agree. 22:34 That's sort of what I said in my second fees post about, and in the first one, really. 22:41 But in the second one, I especially made it clear that there's no difference between Litecoin's block space, 22:49 as far as the block space is concerned, and just stamping out a copy of BTC four times, 22:56 and then you just have more space. 23:00 And I completely agree with Eric that it's a completely different type of good. 23:06 The block space is a completely different type of good than a lightning channel. 23:11 There's a lot of reasons why people would prefer one. 23:15 They like the blockchain message because you just get in, you get in and out, 23:20 and you get infinite liquidity. 23:23 You don't have to have a hot wallet. 23:26 So I completely agree with all that. 23:29 Paul, what is your view on the latent expressivity of Bitcoin as demonstrated in recent months 23:36 with the BRC-20 and the ordinals and inscriptions? 23:40 Do you think that people will continue to find ways to do new things on Bitcoin without a soft fork 23:47 and that that might create a lot of demand for the block space in the future? 23:51 Or do you expect that your posts on the security budget will be vindicated in their expectation 23:58 that there's a high likelihood that fees will remain low until we have drivechain or something like it? 24:05 Well, I'm not sure they have as much to do with each other. 24:09 So, for example, if people figure out how to do BRC-20 tokens, 24:14 that may increase the demand for a block space, 24:17 but it really just doesn't change the fundamental fact that the fees paid are what the miners earn. 24:25 And so that's just the equation. 24:29 So does that make sense or no? 24:30 Because the miners want to earn a lot of money, but the users don't want to pay a lot of money. 24:35 But it's the same value, so only one of those people is getting what they want. 24:46 It's probably going to be the users who will just not pay. 24:51 The miners will then not have a lot of money, which will be low security budget. 24:56 So if I understand correctly, your view is that with a layered system, 25:00 then we can achieve high income to the miners by collecting the fees across the entire blockchain economy. 25:06 So if all blockchains were sidechains of Bitcoin, then the fees would be high enough. 25:14 Well, the fees have no ceiling. 25:17 The total fees collected by miners, there is no limit to the growth, 25:24 so the growth could just grow geometrically forever, 25:28 which is what everything else does, like what Visa does and what. 25:32 Yeah, and the security budget actually can be, I think, can be really evaluated in itself. 25:41 So it has to be viewed in relation to what is the amount of value transferred 25:48 that is actually secured by proof-of-work, Nakamoto consensus. 25:53 Because there are multiple ways to achieve finality. 25:59 So it's entirely possible that proof-of-work only really works for a specific size of transactions 26:07 and changes over time naturally with the subsidy declining and the fees and stuff. 26:13 And it may not work for microtransactions. 26:16 It might not work for hundreds of billions of dollars, right? 26:20 But it might find the paying demand, the transaction sizes that it can actually provide good finality for. 26:32 Well, I think, I mean, if the security budget gets very low, then it may change quite a lot, 26:39 where it will be very insecure for proof-of-work to send almost every transaction 26:45 that person, that anyone considers reasonable. 26:49 Like just to take an extreme example, if it only cost, you know, 10 cents to do a thousand block reorg, 26:58 that's just an extreme case. 27:00 But then you can see that you don't really need to compare it to the size of the transaction necessarily, 27:06 because it's like a transaction of basically any size is dead in that situation. 27:13 Yeah, that's what I tried to explain to people that when you have like 10,000 Bitcoin transactions 27:21 and people assume that it is secured by proof-of-work 27:25 and the total miner revenue is like 0.1 Bitcoin in the future, that doesn't make any sense. 27:34 That just doesn't make sense. 27:36 It's not a workable thing. 27:39 And the way the entire thing is constructed with this push towards increased efficiency 27:48 and increased sized settlements on layer one, secured by a lower and lower miner revenue, 27:57 it doesn't seem workable long term unless something changes. 28:06 And like I said, one option is to defect from proof-of-work and find alternative means to achieve finality. 28:15 So maybe that will happen for these large settlements. 28:18 But that begs the question that why would Bitcoin and proof-of-work be tolerated in a world 28:23 where it does not actually secure the volume transacted, right? 28:28 Yeah, I think it's like it's all interacting systems. 28:32 So it's like, you know, what good is the circulatory system without the muscular system or the nervous system? 28:40 You know, it's like they're all kind of like intertwined. 28:43 So I think it's pretty clear that Satoshi had a bet that proof-of-work would be used. 28:50 Satoshi clearly had in mind that there would be lots of transactions using Bitcoin in some way. 28:55 He clearly had in mind many different merge mine blockchains. 28:58 In fact, he clearly had in mind that either he says that line about, 29:03 there's a lot of things that are ambiguous about what Satoshi believes. 29:06 But he said, you know, in 20 years, there will either be a lot of transactions or basically zero. 29:12 He says it's basically, you know, it's win or lose. 29:15 Clearly designed it to take advantage of the case where it had achieved network effects and it was being used like by everyone. 29:23 And I think what people don't consider is like I said, 29:28 the current way Bitcoin works is pushing the settlement transactions to larger and larger sizes. 29:35 So that the higher and higher fees, it would be still economically the higher and higher fees. 29:41 So Satoshi had in mind probably was that as Bitcoin appreciates in price, 29:47 the average value of the transactions will go down. 29:51 And so it's fine for the subsidy to decline with that. 29:54 I get this feeling when I read that line, you know, that he did not expect transactions to go super large. 30:02 And this diminishing amount of revenue would have to secure that magically somehow, you know. 30:13 Yeah, Michael Saylor, he still doesn't grasp, I think, the difference between, 30:18 the all important difference between coins and layer one block space, 30:25 where there's 21 million coins and then there's 10, there's, you know, a certain amount, 30:30 certain number of bytes of layer one block space produced every 10 minutes. 30:33 So they're completely different goods. 30:35 They're as different as chalk and cheese. 30:38 But it's very, for some reason, it's very difficult. 30:42 I don't know exactly why this is the case, 30:44 but it's very difficult for people to actually separate them in their mind. 30:48 And they just do not understand that the dollar value of coins could go up or down. 30:56 The dollar value of block space could independently go up, down, or remain unchanged. 31:03 And Michael Saylor, I've heard him several times say something like, 31:06 well, the transaction fees would be 1% of, it'll be, you know, 31:11 there'd be like $100 million transaction, it'll be $3 trillion transaction, 31:15 and it'll be 1% of 1% of that. 31:18 And that will be all the security budget you need. 31:21 But, you know, there's a value lower than 1%. 31:27 It could be 0.000001%. 31:32 I'm pretty sure that if Bitcoin is going to have a percentile fee on the transactions, 31:41 then it would have to be enforced by a consensus rule. 31:45 Otherwise, it will simply not happen. 31:47 It doesn't make any sense. 31:49 And I don't know why people assume that central banks are settling between each other. 31:57 Some have this hyper-Bitcoinization idea that banks and central banks will just settle, 32:03 and they will pay enormous fees, 32:05 and they think the shims are going to get the transactions in between those 32:09 and we'll be secured by these fees. 32:11 It doesn't make any sense. 32:13 There would be altruism if they did. 32:16 So, like, if they paid the fees, it would just be them giving donations, basically. 32:22 The example I gave in my second article is I say, 32:25 I talk about people paying to read the New York Times as a joke, 32:30 and then I say, talking about people paying to listen to music. 32:32 And I say, well, people love music. 32:34 You know, Elon Musk, he loves music. 32:38 But he doesn't have to pay 1% of YouTube's net worth or whatever it would be. 32:45 I don't even know what the analogy would be. 32:47 But he can go on YouTube and listen to music for free, basically the same as the rest of us. 32:53 So there's no inherent reason why it would be 1% of the value of music or whatever that would even mean. 33:00 There is no rationale to it either. 33:04 So they don't actually get good finality by paying a 1% fee on the transactions. 33:12 It's a complete free rider problem. 33:16 Paul, I have a quick question for you about the security budget. 33:22 I understand your expectation is that these spikes that we have every few years, 33:27 like in 2017, 2021, and this year, these spikes in fees will tend to be sporadic, unpredictable, and short-lived, 33:36 and that a return to low fees will unfortunately be the case for Bitcoin in its current form. 33:43 So without drivechain, we'll have low fees in the far future, possibly. 33:48 And if that is vindicated, if that pessimistic view is vindicated, 33:53 and that Bitcoin will eventually have a security budget problem, 33:56 do you believe or think that it will materialize as an immediate acute problem, such as a hostile 51% attack, 34:07 or will a variety of problems arise that aren't so acute, 34:12 such as some kind of degraded network performance that isn't catastrophic and acute? 34:18 What do you think will be the way that security budget problem in the future arises? 34:22 Will it be acute or will it grow over time in some way that's noticeable? 34:29 Well, that's a good question. 34:31 I think it will be a combination of those things. 34:34 So like one of the things that will grow over time is that more and more people will comment about it and complain about it. 34:43 So I think that that is the case. 34:46 I think that people will just see that the thesis is a pretty simple one. 34:54 That doesn't necessarily mean it's correct. 34:57 But the thesis, like I was saying, is just that people prefer having more money to having less money. 35:02 So like Elon Musk, he could pay a billion dollars a year to listen to music, 35:10 but he just prefers having the billion dollars a year. 35:12 Like why pay it if you don't have to? 35:14 For the same reason, we can be very, very rich, but we don't pay. 35:18 I go on YouTube and I just listen to whatever music I want, and I prefer not paying. 35:26 Yes, I understand that end users prefer very low fees, 35:31 and therefore the world would do well to have a thunderside chain, a drivechain with large blocks on Bitcoin. 35:38 But my question is, if we have low fees on main chain forever, 35:42 there has yet to be an acute, noticeable problem that's perceived by everyone. 35:48 And do you think that when a problem materializes, will it take an acute form, 35:53 or will it take a form that is gradual but apparent, 35:57 such as some kind of measurable problem of degraded performance on the network 36:02 because miners are doing something that they can do that's profitable but is not incentive compatible? 36:09 That's a good question. 36:13 I don't think it will actually reach a point where someone attacks the network and destroys it. 36:21 I think it will instead be that there is a frustration with the lack of solution, 36:30 and then Bitcoin will be replaced by some other coin, 36:35 or Bitcoin will become very niche and then die off, would be the eventual thing. 36:39 And that would be kind of acute, I think, because a lot of people would be... 36:43 But I don't know how long that would take until more people recognize the problem, 36:48 because right now we're kind of coasting on the fact that the security budget, 36:52 the block subsidy is still high, there is still no good competitor to BTC at all, 36:58 and so few people understand this problem still. 37:03 So it's still not even at the point where people would recognize it. 37:06 But I think it's a good question, because the question is kind of like, 37:11 so what, the security budget, whatever, who cares? 37:15 What would actually happen? 37:17 Right. For example, some people, I felt lately in recent weeks with fees very high, 37:24 the argument for drivechain, instead of being about security budget, 37:28 can be about the need for scaling Bitcoin. 37:32 And scaling Bitcoin as a rallying cry for innovation and sidechains and drivechain 37:37 is an easier case to make, because there's a tangible materialized problem 37:41 where ordinary people can't do a layer one transaction affordably. 37:46 If it's $50, it's hard for many people to do it. 37:49 So Bitcoin needs to be scaled, and with the high fees, if they were permanent, 37:53 if they were sustained, we'd have a tangible thing to point to 37:57 as a solution that a sidechain can fix. 38:00 Whereas with low fees and no hostile attacker, the case for sidechains, 38:06 to the extent that it pertains to the security budget, 38:10 that case is harder to make because it involves a theoretical problem 38:14 that has never materialized before. 38:16 Bitcoin has never had a hostile attacker. 38:19 So that's 51% of mining. 38:22 So it's a hard case to make. 38:25 Yeah, I completely agree. 38:26 With the fees are high, there's a clear victim. 38:29 Yes, right. 38:30 So when the fees are high, it's easy to say, hey, let's do drivechain. 38:34 Let's try a large block sidechain on Bitcoin. 38:37 Let's opt in. 38:38 But when fees are low, it's a much more difficult problem 38:41 because some Bitcoiners will say, hey, there's never been an attacker. 38:44 Maybe there never will be. 38:45 Why do we need to care about fees at all? 38:50 Yeah. 38:51 So it's very weird because if you just listen in on the vibe, 38:57 on what is going on, say Bitcoin Twitter, 39:00 and what the collective consciousness of the Bitcoiners is spitting out, 39:09 they actually somehow convince themselves 39:12 that Bitcoin is this ultimate form of security. 39:16 And just by its own virtue of existing, 39:20 it will be able to secure arbitrary amount of wealth 39:24 and arbitrary large transactions somehow. 39:29 And that to me kind of suggests that none of them actually understands 39:35 how proof of work and Bitcoin works. 39:40 And it's pretty weird. 39:43 So I don't know if you can actually explain the security budget problem to them. 39:54 But the fees is something that everyone feels right away, right? 39:58 That pain. 39:59 If you want to transact, if you want to open a lightning channel 40:02 and 500 sorts per byte is the lowest, 40:06 you can get into a block that people understand. 40:09 Moon Settler, could you walk us through? 40:13 What you think the security budget problem, if it materializes, what will that look like? 40:20 Because you just explained how high fees are easy to point to as a problem, right? 40:24 We know high fees are they're painful to people who want to transact on layer one if they're poor. 40:29 But can you tell us when the security budget problem, if it ever materializes, what will that feel like? 40:36 What will that look like? Do you think it'll be, you know, one day everything's fine. 40:39 The next day there's a hostile perpetual attack there where no one ever transacts again. 40:44 Or will it be something that grows over time in a noticeable way? 40:50 Which is it? 40:51 I think the base assumption that you have to make to talk about this in a clear way is that miners will be profit oriented. 41:05 So they will want to maximize their profit. 41:08 And either of two things is true. 41:11 One is either there is a very liquid futures market that allows them to hedge their moves. 41:19 So they can actually profit from Bitcoin going down in value or at least be hedged in that case. 41:28 Or the other is that Bitcoin is basically taken over everything. 41:32 It is the only real money that matters, the reserve currency of sort, and it can't really devalue against anything. 41:42 And, you know, the Nakamoto consensus does act as the source of truth for this world, right? 41:50 So a lot of Bitcoiners think that somehow this proof of work, sacred time chain thing is the ultimate source of truth. 41:59 And whatever it shows us is the truth, even if it experiences a reorg, right? 42:05 So humans have this subjective time where they think they saw a block before, you know. 42:11 But if the Bitcoin time chain decides that block never happened, right, that is not part of the network going forward because a reorg happened, 42:21 then it is no longer the truth. 42:24 So that is the sanctity and primacy of the Nakamoto consensus and proof of work results that you just accept reorgs as if the losing chain was the attack and not the winning chain. 42:44 I don't think humans work like that. 42:46 So this is a pretty wild assumption. 42:48 I don't think humans would find this particularly useful. 42:53 But if people do accept this and if Bitcoin cannot really, you know, go down in value against anything because it has already consumed everything, 43:04 then basically attacking Bitcoin does not have a serious cost. 43:10 And the same is true if they can just simply hedge their bets on futures markets. 43:17 They might actually make an attack that is not successful, profitable, if they do it right. 43:23 And these are externalities to the Bitcoin protocol, right? 43:26 So the way it is defined in the client software and the consensus rules, these are external factors that developers and people who run those don't really control. 43:39 And people just don't seem to understand that these factors completely influence or decide the outcome of these hypothetical events like an attack, which is not really an attack, right? 43:53 So if you accept the sanctity of proof of work and its absoluteness as a source of truth, then it's not really an attack to do a reorg. 44:02 It's perfectly normal by the protocol to just rewrite history and double spend on transactions, right? 44:09 So it's pretty interesting. 44:12 But what I wanted to go with this is there is always going to be a size of transaction where if the counter value of the transaction has better finality, 44:24 then it might be very, very, very profitable for the miners to accept the bribe and just reorganize the chain and make the Bitcoin side never happen. 44:35 So I think the key to understand the security budget is this, that there is always going to be a size of transaction that just cannot be secured by proof of work, given how much revenue the miners have. 44:48 So the miner revenue pretty much puts a maximum to the practical amount and your finality assumptions on what proof of work can secure. 44:58 And that is why I said it's entirely possible that we will find an equilibrium on the size of transactions that are rational to be secured by proof of work. 45:09 And other transactions may not actually be secured by proof of work. 45:15 So you can just make a giant multisig pool for the central banks of the world and these central banks would internally settle with an N of N multisig. 45:30 We can, I think, assume that central banks will be able to maintain an online presence 24-7, so it's not a problem for them to sign state updates. 45:40 They can actually defer these state updates as we've seen with the Lightning Network, right? 45:44 So Lightning Network channels are relatively rarely writing state updates on the Bitcoin blockchain and they are just keeping this offline tab. 45:58 And I'm pretty sure that if we go that way, then these large financial entities will figure out how to solve the Byzantine General problem outside of Bitcoin's proof of work. 46:11 Because it is simply not suitable at securing transactions at that size, at that scale. It's just not. 46:19 And also, like I said, of course, microtransactions would be extremely secure because you just can't dream up an economic motivation to redo even a single block. 46:36 But for other technical reasons, they might not be feasible on Bitcoin. 46:44 And that's why I said we will probably find the size of transactions that make sense on Bitcoin. 46:50 The only problem is if something comes along that is just cheaper and has better finality than Bitcoin. 46:57 Let me ask you, I understand what you're saying about a theoretical limit, but my question is about a tangible negative experience that would arise as a result of low fees. 47:09 So it sounds to me like you're saying the answer to the question we've discussed, the question of whether a security budget problem in the future because of low fees on main chain Bitcoin would be acute or not acute, but instead incrementally increasing. 47:27 You're saying, maybe you're saying that it would be not acute because the way that the security budget problem would materialize is an increase in the severity and frequency of reorgs, which would tarnish Bitcoin's... 47:46 I think there's an interesting, more interesting angle to it, which is that like, so like some people say that you can just wait for more confirmations, which I normally reply that that's not the case. 48:01 But I think what you're talking about, the equilibrium size thing, that is a case where you could have a heterogeneity and you could blend large value transactions with small value transactions with the large value people just waiting for more confirmations, even though I normally dismiss that argument. 48:21 But I like your equilibrium idea of just like the network can only do so much. 48:27 See, another interesting twist on that is that people have often, so for example, extremely smart people, such as Peter Weil, have said stuff like, they'll say, we don't want assets on Bitcoin because the assets will have a great, such a high value that the value transacted will be enormous compared to the miner bribe amount, the security budget, and then that would be bad. 48:57 But you're just sort of saying, well, they wouldn't do that, foreseeing the risk of the miner bribe, they would just, they would just not do that. 49:04 Yeah, I think the main problem with putting exogenous assets on Bitcoin is that if these assets are not like Bitcoin, the token itself, they are actually someone's liability, someone is actually backing them, someone is putting the USD on Bitcoin as a token. 49:23 Then when it comes to consensus forks, they have a huge undue influence, especially if most of the value settled on Bitcoin and held on Bitcoin would be such stablecoins or whatever, then the issuers of those stablecoins would basically tell us which fork is going to be. 49:40 So that's one big problem with them putting them on Bitcoin. On the other hand, if you make alternative assets consensus subservient to Bitcoin, then you will never get to a situation where the alternative asset has better finality than Bitcoin. 49:55 So what I was talking about, that something, the other side of a transaction, like say I buy a yacht for 10,000 Bitcoins, a super yacht, and I just sail away with that yacht in a hypothetical universe where I can just, you know, in a balkanized world I can just say hello to everyone and somehow slip away. 50:22 And I can bribe the miners into reorganizing the blockchain. At the very minimum, the guy that I gave the 10,000 Bitcoins is going to get shafted, because either the miners will have the 10,000 Bitcoin, and if I happen to be like a 30% miner, then I will at least get a 30% of it back. 50:47 So I'm going to get that yacht 30% cheaper than what was the asking price for it, at the very minimum. 50:54 Or maybe I am going to be able to outbid him, and maybe he will not be able to fight very hard or very effectively, it all depends if he even realizes what is happening. 51:09 But if he just assumes like a 100 block finality or something like that, and the miner revenue is so small that it's going to be economic to make that reorg, then I don't think it's a good idea to trade Bitcoin against anything that has this faster finality effect. 51:31 And this can also be true of proof-of-stake chains. So if you have a proof-of-stake chain where the expected cost of an attack is maybe magnitudes higher than on Bitcoin, then you can have this discrepancy in certain cases. 51:48 Because on Bitcoin the cost of the attack is basically always going to be upper bound by the miner revenue, alternative cost of that period that you are trying to reorg. 52:01 If you fail, you can't really lose more than that. And on a proof-of-stake chain, if you have a supermajority recruited, that supermajority worst case could lose their stake, and that is a huge deflationary effect, so the users are actually incentivized to go along with this lynching. 52:21 And the expected cost of the attack is enormous. And when you have these two chains doing some peer-to-peer or atomic swap or whatever, decentralized exchange transaction between them that is large enough, then it opens Bitcoin up for a reorg. 52:38 And like I said, I think people will find the value that is rational to settle on Bitcoin. The problem with this is if this value keeps dropping and going slower and slower, then I think more and more of the economic activity will just root around this problem and will find other means. 52:56 And this will eventually mean that Bitcoin is abandoned, right? 53:02 Yes. I think we could summarize because a lot of the stuff is very nuanced and it's sort of complicated, but I think a good summary is if the security budget is too low, then the whole network is just dead. 53:16 Nothing matters. Confirmations don't matter. When you have a blend of – well, like if it's sort of limping along, then the larger transactions can wait for more confirmations. The small confirmations get more finality, the equilibrium. 53:38 I think that people's willingness to pay for block space is low and it will plummet over time because new stuff will be invented for a start. 53:52 There were no credit cards 100 years ago. There were no wire transfers, and now we have Venmo. Venmo is free. People love Venmo. They actually enjoy posting to Venmo because of the social aspect. 54:08 So there's positive utility to just use Venmo for free. You get to FOMO. You FOMO your friends. They can see that you show everyone that you're having a good time. 54:21 And so I think all that will plummet, I think. So yeah, that's just the situation. We would want to align everything with the situation where willingness to pay for block space per byte is very low. 54:41 It's like my summary. I really like your equilibrium idea, though, which is that as the security budget falls, people will just be less willing to make enormous transactions on the network. 54:56 The reason why they'll be less willing is not just for theoretical concerns about a reorg. It would be because the data that appears publicly in people's actual experience will be that there will be an increasing number of reorgs in terms of their severity and frequency. 55:15 Well, not necessarily. I don't think so. It could just be anticipated. The market cap can just never grow. So for starters, it will justify altcoins, legitimize the altcoins. 55:28 And this is exactly what we have been seeing, is that we've moved from a world where it would be unthinkable to leave the Bitcoin tribe, 99% Bitcoin dominance, to a world where this is just becoming very normal now. 55:45 Yes, understood. So that's the tricky nuance thing, is that this problem can materialize in a way that never is apparent in terms of data where people actually suffer a reorg. But instead, the lower security leads to a perceived need, correctly, to use another blockchain that has higher security, higher fees, higher economic security, higher transaction finality. 56:11 Well, just higher security budget and lower fees. 56:14 Right, because of a multi-layer design. 56:17 Well, and there's more lower fee rates. Like they use Litecoin now. Because they'll still have the block subsidy. So it's just turning over, it's basically just justifying an endless block subsidy in the form of an altcoin that still has a block subsidy. 56:37 Right, right. 56:41 Yeah, because basically, as others have said, block subsidies is like a VAT tax. So you are putting some of the burden of securing the chain on the hodlers. 56:55 And the hodlers are, at least currently, the primary benefactors of Bitcoin's appreciation and its perceived status. So a lot of people don't like subsidy and they can't wait for it to go away for various reasons. 57:12 But it's not necessarily an evil thing, as others have pointed out. And I'm not advocating for adding tail emission to Bitcoin, by the way. I'm just saying I don't find it unreasonable that some people hold the position that this is not necessarily a bad setup, that those that hold the asset are paying this way for the security. 57:41 I think the drivechain view is that if the tail emission is needed, then that is a symptom of an already existing larger problem where Bitcoin fails to have the multilayered, multifaceted design of drivechain. 57:58 So do you think we should ask if anyone else wants to speak? 58:02 Yeah, certainly. Everyone is welcome to come on up to the stage, raise your hand and ask your question or share a comment about the things we've been talking about today. We're talking about drivechain, sidechains, Bitcoin security budget, the fee rates. 58:18 If you'd like to come on up and share a thought, please do raise your hand and we'll let you up to ask your question. Don't be shy. If you're not sure what we're talking about, come on up if you're not sure what we're talking about so we can answer questions that others might be having. 58:45 So don't be afraid to ask a question. Others might be thinking the same kind of question. 58:57 Okay, cool. I have to go actually. Unless there's a really great question. But there doesn't seem to be any. 59:07 Well, we love it when you pop in, Paul. 59:10 Okay, great. 59:11 Take care. 59:12 See you later. Bye. 59:15 So this is drivechain discussion. Bitcoin proposal 300 and 301 is why we're here to chat about making Bitcoin stronger and more exciting. And it's all about innovation. It's all about enabling more features that are desired by more people to exist on top of Bitcoin in a safe way where it's on a sidechain, where if the sidechain fails, it doesn't harm people who didn't opt into it. 59:43 And even if you're not using the sidechains, it's benefiting you as a Bitcoiner because all of the fees on the sidechain, approximately 100% of them almost, will be paid to layer one through a process that Satoshi invented called merged mining and which drivechain enhances through blind merge mining. 1:00:05 Welcome to the stage, Michael. 1:00:09 Once you're connected, please share your question or comment. 1:00:15 This was a very interesting conversation, Moon Settler. 1:00:17 I've been wondering about this for a long time. 1:00:19 How will the security budget problem materialize? 1:00:22 People have often asked to me and others 1:00:26 who are interested in topic of Bitcoin's fees 1:00:28 and the need for them to be high. 1:00:30 People say, well, what's the problem? 1:00:32 Like, why do we need high fees? 1:00:34 Bitcoin hasn't had high fees for most of its history. 1:00:37 There's never been any kind of problem. 1:00:39 What if the fees are low forever? 1:00:41 Wouldn't that be okay? 1:00:43 But unfortunately, we want to see high fees. 1:00:48 The higher, the better. 1:00:50 And this discussion has been about that 1:00:52 and what it would look like if the fees aren't high. 1:00:56 What form would the problem take? 1:00:58 How would it materialize? 1:01:00 So I appreciate you articulating how the reorg frequency 1:01:04 and severity could be high, 1:01:06 but I also sympathize with what Paul said, 1:01:08 which is that people could perceive the threat, 1:01:11 theoretically, of the reorg due to the low fees 1:01:15 and simply not transact large amounts. 1:01:19 And therefore, Bitcoin would suffer from less use, 1:01:23 even though there isn't a noticeable, 1:01:25 detectable reorg frequency occurring. 1:01:30 So it's a tricky topic. 1:01:32 Hi, Michael, thanks for joining. 1:01:35 Yeah, no worries. 1:01:36 Sorry about the connectivity problems, 1:01:38 but can you guys hear me okay? 1:01:40 Yeah, perfectly. 1:01:41 What's up? 1:01:42 So I've been following along with Drivechains 1:01:44 for a little over a month now. 1:01:50 What I really like about Drivechain 1:01:52 is the permissionless innovation 1:01:54 and being able to issue other coins 1:01:59 for the technical aspects on top of Bitcoin 1:02:02 without affecting the entire network as a whole, 1:02:05 if it's a bad idea. 1:02:07 In the time that I've taken to learn Drivechains, 1:02:10 there's been so much happening on Bitcoin 1:02:12 with, obviously, ordinals and even BRC20 tokens. 1:02:16 So if I was to speak to somebody at a high level, 1:02:19 not super technical, and I said, 1:02:22 no, the thing about Drivechains 1:02:23 and why it should be implemented 1:02:24 is we can issue other sidechains 1:02:28 with tokens, whatever, attached, 1:02:31 and it doesn't affect the overall network, 1:02:32 and their response would be, 1:02:35 well, can't we do that with BRC20 tokens? 1:02:39 What would your response to that be? 1:02:44 Well, I think that gambling is perfectly acceptable 1:02:48 from a capitalist standpoint. 1:02:50 So for starters, I would say that 1:02:54 people who frown upon gambling 1:02:58 are deviating from Satoshi's own personal take, 1:03:03 which was that poker on blockchain might be interesting 1:03:07 and that people can do things like gamble 1:03:09 or have fun or entertainment, 1:03:12 especially in a private manner, 1:03:14 anonymously or pseudonymously, 1:03:16 and that's acceptable. 1:03:17 So from a libertarian standpoint, 1:03:19 if people wanna have fun doing something 1:03:21 like playing poker or playing a game 1:03:23 kind of like Dogecoin, it's almost like a game, right? 1:03:26 No one really knows where it's headed. 1:03:28 It's totally speculative. 1:03:30 I don't own any Doge, never have, probably never will, 1:03:32 but some people just are into that kind of thing. 1:03:34 So it's okay. 1:03:36 So the idea that it's contemptible, I think, is wrong, 1:03:40 or at least is so puritan in nature 1:03:42 that it's quite different from what Satoshi himself felt, 1:03:46 not that he was perfect, of course, 1:03:48 but it's just notable that Bitcoin has never been about 1:03:51 that kind of puritanical contempt 1:03:53 for entertainment and speculation. 1:03:56 And in fact, having all of that done 1:03:58 in a totally blockchain-based, 1:04:02 peer-to-peer, anonymous, cypherpunky way 1:04:07 is cool and exciting, 1:04:09 and there might be good innovations 1:04:10 that come out of this effort. 1:04:12 But I also wanna say that you mentioned 1:04:14 that enabling new tokens on top of Bitcoin 1:04:19 is something that could be aligned well 1:04:22 with the sidechain or drivechain movement. 1:04:24 I feel that eliminating altcoins 1:04:27 and eliminating speculative tokens 1:04:30 is actually at the core of the drivechain mission. 1:04:33 And in fact, much of the speculation 1:04:36 on all these tokens out there 1:04:38 is because Bitcoin doesn't have the ability 1:04:42 to platform all kinds of technology. 1:04:45 And if Bitcoin had more extensibility, 1:04:47 if more could be built on top of Bitcoin, 1:04:50 then the entire narrative that, 1:04:52 oh, there's gonna be another Bitcoin, 1:04:53 let's invest when it's small, then it will grow, 1:04:56 that whole speculative craze 1:04:58 might have been much diminished. 1:05:01 There might have been much less speculation 1:05:04 on meme coins and tokens 1:05:07 and ponzinomics and tokenomics over the last eight years 1:05:10 had drivechain been adopted in the past 1:05:13 when it was first conceived in 2015. 1:05:16 If it had been built up and adopted, 1:05:18 then maybe there would have been a lot less 1:05:21 of this sort of unnecessary and frivolous speculation 1:05:25 because there would be perhaps 1:05:27 a higher market cap for Bitcoin, 1:05:29 a much higher dominance, 1:05:31 and therefore much less of a perceived opportunity 1:05:33 for people to launch a competing blockchain 1:05:36 that might one day supplant Bitcoin. 1:05:39 So if Bitcoin were bigger and larger, 1:05:42 and if it were the unparalleled L1 with no competition, 1:05:46 like if Ethereum were 1,000th the size of Bitcoin 1:05:50 instead of one half the size of Bitcoin, 1:05:52 then if Bitcoin had virtually no substantial competition, 1:05:58 then there might be much less speculation on tokens 1:06:04 because the overall narrative of all this speculation 1:06:07 is that maybe one day some new project that today is tiny 1:06:11 will become the big world leading blockchain 1:06:14 like Bitcoin is now. 1:06:16 So I think that it'd be great for Bitcoin 1:06:19 to be having no serious competition economically. 1:06:23 If it were the only L1, 1:06:24 and if everything were built on top of it, 1:06:27 including these entertaining little projects 1:06:29 and Ponzi games of tokenomics 1:06:33 that are just PepeCoin, things like that, 1:06:35 if all of that were built on Bitcoin, 1:06:36 it'd be good for Bitcoin 1:06:37 because even where there's a speculative altcoin, 1:06:41 it's better if it exists on top of Bitcoin 1:06:43 in a way that pays the transaction fees 1:06:45 to Bitcoin's miners. 1:06:46 So as Paul and Moonsettler were discussing earlier, 1:06:49 there are two goods in the Bitcoin network, 1:06:51 the token and the block space. 1:06:53 So as Satoshi discussed in 2010, 1:06:58 altcoins that are merged mined 1:07:00 pay transaction fees to Bitcoin's blocks, 1:07:04 to Bitcoin's miners, 1:07:05 and it'd be ideal if all the technologies 1:07:10 were sidechains of Bitcoin 1:07:11 using synthetic Bitcoin as the native token. 1:07:14 Synthetic Bitcoin has the native token of the sidechain 1:07:17 to eliminate the money printing aspect 1:07:20 of the use of the new technology. 1:07:23 Does that make sense? 1:07:26 Oh, I see you're a listener. 1:07:27 Maybe you lost connection, 1:07:29 but thanks for your question. 1:07:30 The two things I wanted to touch on are first, 1:07:32 in summary, the speculative altcoin craze. 1:07:35 It's not to be condemned. 1:07:37 Instead, we want it on Bitcoin. 1:07:39 We want there to be no other layer ones in the whole world. 1:07:42 We want Bitcoin to be the one-stop shop 1:07:44 where everyone is building on top of Bitcoin. 1:07:47 They're experimenting on Bitcoin. 1:07:49 They're getting their entertainment on Bitcoin. 1:07:51 Even if they're going to trade 1:07:53 some silly little altcoin meme, 1:07:55 they're going to do it on Bitcoin, 1:07:57 and at least then the transaction fees 1:08:00 are paid to Bitcoin. 1:08:00 Now, in the case of something like Monero or Zcash, 1:08:04 where unlike Pepe, it's an actual technology 1:08:06 with legitimate use, 1:08:08 such as a privacy technology 1:08:11 that is stronger or more experimental 1:08:14 than the privacy tech available on Bitcoin's layer one, 1:08:18 like CoinJoin, right? 1:08:19 The Zcash technology is more innovative. 1:08:21 It's more next-generation, 1:08:23 but also less auditable and less time-tested. 1:08:27 So we want that kind of thing. 1:08:29 As Adam Bach has said, 1:08:30 we would like that to be on a drivechain, sidechain. 1:08:34 So it's existing on Bitcoin, 1:08:36 and the unit of account is Bitcoin, 1:08:39 something which is redeemable for Bitcoin, 1:08:41 something which trades one-for-one with Bitcoin. 1:08:43 That's a synthetic Bitcoin. 1:08:45 So there's no money printing 1:08:47 when you have a Zcash technology drivechain on Bitcoin. 1:08:51 So as Adam Bach has written, 1:08:54 this is innovation maximalism, 1:08:56 but altcoin seniorage minimalism. 1:09:00 In other words, we want to have the privacy tech 1:09:02 of Bitcoin and Monero without the altcoin token. 1:09:08 So that's the goal of drivechain, 1:09:09 is to use the Bitcoin token, 1:09:13 but at the same time use the technology 1:09:16 that right now is only available on altcoins, 1:09:19 if you want to do it in a peer-to-peer way. 1:09:22 Because Bitcoin sidechains today are federated. 1:09:25 The drivechain sidechains, as Dr. Bach says, 1:09:28 are more peer-to-peer. 1:09:29 So that's the drivechain vision, 1:09:31 is to have advanced sidechains 1:09:34 and hopefully a lot of use of them. 1:09:37 And therefore the communities like Monero and Zcash, 1:09:40 for example, might abandon their altcoin 1:09:44 and use the exact same technology on top of Bitcoin 1:09:48 in a Bitcoin sidechain. 1:09:49 And that way they have the benefit of, it's a win-win. 1:09:53 That's another thing Adam Bach has tweeted about drivechain. 1:09:55 It provides win-win solutions 1:09:57 because you get the privacy potentially 1:10:00 of Zcash and Monero, 1:10:02 but you're using Bitcoin's unit of account, 1:10:04 which is the best unit of account 1:10:06 in all of monetary economics. 1:10:07 It's the most reliable monetary policy. 1:10:11 21 million, no more. 1:10:13 So you get that. 1:10:14 People want the monetary policy of Bitcoin 1:10:16 with the privacy technology of Zcash or Monero. 1:10:21 So that's what drivechain aspires to offer, 1:10:24 is the latest technology, 1:10:26 the most experimental cool technology, 1:10:28 but also the monetary policy of Bitcoin. 1:10:31 So there's no altcoin involved. 1:10:32 There's no money printing. 1:10:33 There's no altcoin senior rich profits 1:10:36 to token founders. 1:10:38 Instead, everyone buys into Bitcoin's monetary policy, 1:10:42 the monetary policy of the main chain, 1:10:44 but gets the technology of the altcoins in the sidechain. 1:10:50 So that's the vision there. 1:10:52 And if we had that design, 1:10:55 if Bitcoin were a system 1:10:58 where there's a multi-layered architecture 1:11:00 of main chain with high fees 1:11:01 and then sidechains with low fees, 1:11:03 sidechains for privacy scaling, 1:11:06 peer-to-peer oracles in the hive mind sidechain 1:11:10 and ETH side for smart contracts, 1:11:12 then Bitcoin would have a narrative, 1:11:15 which is that there's all kinds of experimentation 1:11:18 and innovation going on on top of Bitcoin. 1:11:20 And that would tend to greatly diminish 1:11:23 the amount of altcoin creation and speculation 1:11:29 because there would be a sort of consensus 1:11:33 among the entire crypto community 1:11:36 that everything is being built on top of Bitcoin 1:11:38 and therefore nobody would launch a speculative altcoin, 1:11:41 or at least there would be somewhat less of that 1:11:46 because of the strengthening of Bitcoin's narrative. 1:11:48 It would be like Bitcoin in 2011 1:11:50 where people weren't thinking about launching competitors. 1:11:54 Instead, they were focused on just understanding 1:11:57 and investigating and experiencing 1:12:00 and experimenting on Bitcoin. 1:12:03 So when Bitcoin was young 1:12:05 and people didn't fully understand it 1:12:07 and they were exploring its potential, 1:12:10 Bitcoin didn't have people launching alternatives. 1:12:14 So what Drivechain aspires to do 1:12:17 is open the door to a virtually unlimited 1:12:22 amount of innovation and experimentation 1:12:24 on Bitcoin's sidechains, 1:12:27 sidechains that are more peer-to-peer 1:12:29 than the ones we have today, 1:12:30 all of which use a 15-party federated multisig 1:12:35 or 15-party multisig federation. 1:12:38 And that's a limiting factor 1:12:40 in the path towards innovation on sidechains 1:12:44 because people have to acknowledge 1:12:47 and deal with the fact that there's this federation 1:12:51 that is controlling all of the Bitcoin 1:12:52 locked in the sidechain. 1:12:53 So if you're using RBTC or LBTC, 1:12:58 you're benefiting from Bitcoin's monetary policy, 1:13:01 but the security model is one in which, 1:13:03 instead of trusting the Bitcoin network, 1:13:06 you're trusting also the 15 people 1:13:10 or 15 parties involved in that multisig federation, 1:13:15 which isn't a cyber-punky thing so much, 1:13:19 to be trusting specific people, 1:13:21 15 people to not get arrested or not to collude. 1:13:25 It would be better if Bitcoiners had the option 1:13:28 to, instead of use a federated sidechain, 1:13:30 experiment with a drivechain model, 1:13:33 which involves the miners in an important way 1:13:37 with regard to the security model. 1:13:40 And the miners are a dynamic global set of parties, 1:13:47 and they're constantly changing. 1:13:48 That's why we say dynamic. 1:13:50 People are constantly joining and leaving 1:13:52 the set of parties who are miners. 1:13:54 So in that way, it's more Bitcoin-y. 1:13:57 It's more peer-to-peer, one could argue. 1:14:01 And there's no absolute guarantee it'll work. 1:14:03 So drivechain involves the courage 1:14:06 and excitement of experimentation and innovation. 1:14:11 No one can be totally sure it'll work. 1:14:13 It's like going to the moon. 1:14:15 No one had absolute certainty 1:14:17 that the effort to go to the moon 1:14:19 in the 1960s would succeed. 1:14:21 Some people thought it would fail. 1:14:24 Some people thought it would work. 1:14:25 But it requires optimism and experimentation. 1:14:29 And for Bitcoin, that's the path towards success, 1:14:32 we believe, as drive chainers. 1:14:37 There's a lot people can learn 1:14:38 about drivechain on the internet. 1:14:40 So check out in the Nest. 1:14:42 We've posted some useful links. 1:14:45 There's the GitHub where you can see 1:14:46 a lot of important code related to drivechain, 1:14:49 and you can read the BIPs 1:14:50 for Bitcoin Improvement Proposal 300 and 301. 1:14:53 That's what drivechain is. 1:14:56 Drivechain refers to those two BIPs. 1:14:59 And there's also a whole bunch of videos, 1:15:02 and there's a Telegram group with over 700 people. 1:15:07 Everyone's welcome to come on up to the stage 1:15:09 and ask a question or share a comment, share a criticism. 1:15:15 Any thought you have? 1:15:16 Oh, Moon Settler, please jump in. 1:15:22 Yes, Moon, what's up? 1:15:26 I'm sorry, I assume I have to go as well. 1:15:29 I just wanted to say that one thing 1:15:31 that seems to be a hot topic coming around again 1:15:36 is the various ways that Bitcoin could take to scale 1:15:44 and the consequences of these parts 1:15:47 in regards to potential debasement of Bitcoin itself, right? 1:15:52 So yes, Bitcoin can lose market cap to altcoins, 1:15:55 but it's also a possibility 1:15:57 if we go down the custodial scaling part 1:16:00 and say these big banks like JP Morgan 1:16:03 start to play with Bitcoin 1:16:05 and maybe start to issue Bitcoin-denominated credit. 1:16:10 So we can go down an interesting path 1:16:13 that basically in effect breaks the 21 million 1:16:16 without changing a line of consensus code. 1:16:20 And the interesting thing is that people see sidechains 1:16:27 as the lesser evil in this regard 1:16:28 because they can actually help scale Bitcoin 1:16:33 and help provide the users with the needed block space 1:16:36 to say, expand the Lightning Network further 1:16:39 and stuff like that. 1:16:40 So allow people to transact and hold Bitcoin. 1:16:43 And in a way that actually does not allow 1:16:46 really for debasement in general. 1:16:49 So I just wanted to throw in that, 1:16:50 but I have to step down. 1:16:53 Thank you guys and have a nice day. 1:16:55 Thank you. 1:16:56 As always, please come back. 1:16:57 It's always great to have you chat. 1:16:59 It's always cool when you're able to talk with Paul. 1:17:02 We get to hear a pretty high level, 1:17:04 pretty detailed technical discussion. 1:17:11 It sounded like you were comparing debasement 1:17:14 by a central bank to the existence 1:17:19 of fractional reserve banking. 1:17:22 And there's an important distinction to be made there. 1:17:26 When a central bank, when the issuer of the money 1:17:32 increases the quantity of fiat units, 1:17:36 that would be debasement, that would be inflation. 1:17:39 But when the broad money supply, as opposed to the base, 1:17:44 when the broad money supply increases 1:17:46 because of private banks running fractional reserves, 1:17:50 that isn't the same thing as debasement. 1:17:54 The fractional reserving does lower 1:17:56 the purchasing power of money 1:17:59 because there is more demandable claims on Bitcoin 1:18:04 if a private bank is running a fractional reserve. 1:18:07 So they do tend to increase the number of claims on Bitcoin 1:18:11 and therefore lower the purchasing power of Bitcoin. 1:18:14 But there is a tether in that situation 1:18:18 where the private banks aren't able to issue forever. 1:18:25 At infinitum, they're not able to issue more and more 1:18:30 because eventually they would have insolvency. 1:18:33 So there's a longstanding debate 1:18:36 within the Austrian School of Economics 1:18:38 over whether or not the fractional reserving is legitimate. 1:18:42 And I think the emerging consensus 1:18:44 that we're creeping towards this decade 1:18:47 is that it's part of the free market 1:18:50 that some parties will engage in fractional reserve 1:18:54 and unsecured credit. 1:18:56 People will put their Bitcoin in a bank 1:18:59 and then want that bank to loan it out 1:19:01 and then try to have it be available 1:19:03 at the same time for the depositor. 1:19:06 And that way the bank can pay yield. 1:19:08 Some people will prefer that. 1:19:10 And that's part of the free market. 1:19:12 It's kind of like people gambling on Dogecoin. 1:19:14 It's part of the free market 1:19:15 that some people will choose a yield-bearing deposit account 1:19:19 and assume the risk. 1:19:21 The important thing is that the government 1:19:22 doesn't bail out the failed banks when they fail. 1:19:24 That's the important thing. 1:19:26 It needs to be completely opt-in. 1:19:28 But the fact that fractional reserving 1:19:31 lowers the purchasing power of the monetary unit 1:19:34 is something which is not a problem. 1:19:37 No one is entitled, 1:19:39 no one is entitled to a certain purchasing power of Bitcoin. 1:19:43 So if someone in the world decides to put money in a bank 1:19:49 and allow that bank to lend it out, 1:19:52 then that would increase the broad money supply 1:19:57 because it increases the total demandable claims on Bitcoin. 1:20:01 And therefore it lowers the purchasing power of Bitcoin. 1:20:04 But that's not harming anyone. 1:20:05 That's just the free market operating. 1:20:10 I would make a careful distinction between debasement by the central authority, which could be likened to a decision by the Bitcoin community to adopt tail emission, which we, of course, oppose as drive-chainers. 1:20:23 We're totally opposed to inflation. 1:20:25 A hundred percent. The advocacy for drivechain, in fact, is probably, one could say, exactly the opposite of advocating for inflation on Bitcoin because drivechain can, you know, the main reason why anyone would call for inflation on Bitcoin is because fees are going to be too low in the future. 1:20:48 They might believe that they might believe fees will stay low and therefore they want to see the tail emissions begin. 1:20:54 But drivechain advocates understand that merged mining can be a solution to low fees. 1:21:00 We can collect fees from every blockchain. 1:21:02 And if Bitcoin were doing that, the fees would be 10 or 20 times higher than they are today. 1:21:07 Because the fees across all blockchains is roughly 10 to 20 times more than the fees paid on Bitcoin's blockchain. 1:21:17 So the drivechain aspiration is to collect the fees from every single blockchain in the world because they would all become sidechains of Bitcoin. 1:21:28 That's the goal. 1:21:29 Everyone is welcome to raise your hand and come on up, debate me. 1:21:34 I'm sure I make mistakes, you know, no one's perfect. 1:21:37 I welcome you to come on up and discuss drivechain, share your question, ask your question, share your comment. 1:21:47 We're here every Monday and Thursday. 1:21:49 Now, this is a special week because we are headed to Miami. 1:21:54 The employees of LayerTwo Labs, most or all of us, are going to head to Miami for the Miami Bitcoin Conference. 1:22:00 So I, Henry, will be standing in a booth ready to answer in real life your drivechain questions if you're lucky enough to be able to go to the Miami Bitcoin Conference this week. 1:22:12 So this is it, the biggest conference of all in Bitcoin history. 1:22:16 As far as I know, is this week and we're excited to be there. 1:22:21 Many companies that are very friendly to drivechain will be there and we look forward to meeting and mingling with all of the people in the Bitcoin community who currently support drivechain or might support it in the future, which is really almost everyone. 1:22:39 There's very few people who are avowedly against it. 1:22:41 Probably most Bitcoiners have never heard of it and haven't really formed an opinion. 1:22:45 But we believe that this is an idea, the time of which has come now that there is more attention on the Bitcoin fees being too low and then more recently the Bitcoin fees being too high. 1:23:06 There's more attention on the need for sidechains to make sure Bitcoin's fees are high forever and also to enable more innovation and experimentation on top of Bitcoin. 1:23:18 Enabling more people to be Bitcoiners rather than leave and go to Ethereum or go to some other project. 1:23:24 We want to enable them to stay and build their new ideas on Bitcoin. 1:23:28 So the whole idea of drivechain is you get many blockchains to exist. 1:23:32 There should be lots of blockchains, but we want all of them to be sidechains of Bitcoin, meaning that they don't have a native token other than Bitcoin. 1:23:45 So the way that you send tokens is you send Bitcoin to the sidechain and you receive the sidechain token. 1:23:55 So for each Bitcoin you send to the sidechain, you get one sidechain token. 1:23:59 And then when you're done, you go through the two-way peg to get back to the main-chain to get hard Bitcoin, the layer one Bitcoin. 1:24:09 So the idea is that we would have a multitude of sidechains, but only 21 million units throughout all of them. 1:24:17 So that's the idea. We're using the Bitcoin monetary policy on layer one for all the sidechains. 1:24:26 Hello, Moth. Welcome. 1:24:34 Welcome. Welcome to drivechain talk. What is up? 1:24:46 I don't think we can hear you, unfortunately. You are as quiet as a moth. 1:24:56 He's gone. 1:25:02 He was as ephemeral as a moth might have been. 1:25:08 Well, it's almost 11 o'clock here on the West Coast, so we've been running for about 90 minutes. We usually run for 90 minutes. 1:25:16 What we're asking you to do as Bitcoiners in the audience is... Oh, he's back. 1:25:20 Okay. Welcome. 1:25:24 Hey, I had a question. I haven't looked at the entire proposal, but it looks like something I read in the bib said that it's limited to 256 drivechains. Is that true? 1:25:36 Yes, that's right. 1:25:38 So if any new drivechain gets formed, it said that it could replace it. My question then is, with each replacement, would that require a soft fork? 1:25:49 No, it would not. To my understanding. 1:25:53 Okay. So these six additional ops will go in for the witness script? Is that it's like each sidechain will be a new transaction? Is that how it works? 1:26:08 Yes. However, to make sure you get the most accurate information, I would send you to the technical discussion available in the drivechain telegram group. 1:26:18 People who know a lot more about it than I do are there to give you more details on exactly how that would work. 1:26:26 But you're totally right that there is 256 drivechains slots available at the start. So there could be more in the future in different ways. 1:26:40 You could have drivechains on drivechains. So let's say we wanted to do that. Then there would be a multi-layer design. 1:26:49 It would be sort of like L2, and then the L2 would have L3s, like Layer 3, Layer 2. And that's one approach. 1:26:57 Another approach is there could be in the very distant future a soft fork to enable another higher number of drivechains. 1:27:05 But the reason why 256 was chosen is that it would involve an even lower amount of data to burden the Bitcoin network. 1:27:15 If the number had been 10,000 potential sidechains at the start, then that would have an ongoing burden to the nodes. 1:27:25 So to simplify things, 256 was chosen. 1:27:29 Paul Sztorc, who is the leading designer of the drivechain BIPs, he reflected for years on how many sidechains there might ever be. 1:27:40 He couldn't think of there being more than maybe 20. And he thinks that 10 of them, in fact, will be the same kind. 1:27:48 So he thinks that there might be, for example, one privacy-focused sidechain, or we can call it a drivechain with a lowercase d. 1:27:56 Like one privacy-focused drivechain, one drivechain focused on providing smart contracts like Ethereum. 1:28:04 And then there might be more like BitAssets, BitNames, and others. 1:28:10 And then he hypothesizes that maybe there would be 5 or 10 drivechains that have the large block approach. 1:28:16 So they're like Bitcoin, but they have large blocks, 1 gigabyte blocks, called Thunder sidechain. 1:28:22 So he thinks that there would be maybe like 10 Thunder sidechains to serve the world's needs for global peer-to-peer cash with large blocks. 1:28:31 So the number of different types of drivechains might only be like 10. 1:28:35 But then maybe there'd be a number of identical drivechains that have the large block design, bringing the total number of drivechains to perhaps 15 or 20. 1:28:47 So that's far fewer than 256. 1:28:52 So even the most optimistic and bullish of those in the drivechain community do not perceive any substantial likelihood of a need for more slots. 1:29:04 So there are like hundreds of thousands of altcoins in existence, but the vast majority of them, as we all know, don't actually offer any legitimate, interesting, valuable technology, probably. 1:29:16 So the number of different blockchains that will be needed in the future will be probably just like 10 or 20 sidechains on Bitcoin. 1:29:28 That set of sidechains will provide every potential need and variation. 1:29:36 So that's why there's only 256. 1:29:38 But it's a great question. People sometimes wonder about that. 1:29:40 Why is it so low? 1:29:42 Why isn't it 256,000? 1:29:45 So those are great questions. 1:29:47 But yeah, check out our Telegram group because there's people in there like Moonsettler who have a lot of technical knowledge who can help answer. 1:29:55 Actually, he's not there. 1:29:57 But many people are there and they can answer technical questions about how that works, how the drivechain can be terminated if it's a problem. 1:30:05 So there's a mechanism by which the community can express its will to terminate a drivechain if it's problematic. 1:30:13 In fact, the entire drivechain BIP could be forked out if it's a problem. 1:30:17 So we can always go backwards and just get rid of it. 1:30:19 If that were desired, it would be possible. 1:30:25 Sounds good. And all of this depends on the passing of BIP-119, correct? The check template one? 1:30:33 Drivechain is BIP300 and BIP301. 1:30:38 Yeah. Is it dependent on the implementation of CTVs and Bitcoin? 1:30:46 It's not dependent on that. 1:30:48 However, I believe Paul Sztorc was and is a supporter of BIP-119. 1:30:58 And Jeremy Rubin has tweeted favorably, I think, about drivechain once or twice, but I'm not positive. 1:31:07 So I think there's like a friendly sort of attitude among the communities that are interested in those various proposals. 1:31:17 Which is not surprising because people who are interested in innovation and developing Bitcoin in exciting new directions tend to have some sympathy for the idea in general that Bitcoin may need to change. 1:31:33 Some people think that Bitcoin should just be as it is forever with no changes. 1:31:37 Of course, it's been changing every few years forever. 1:31:43 So some people just have this attitude of no changes of any kind. 1:31:47 But among the developers and thinkers who are interested in potential changes, there's some level of harmony in terms of a common understanding that some change might be needed. 1:31:58 There might just be miner differences about what exactly that change should be. 1:32:05 Yeah, I think from the point of view of Justin and others that have spoken to, our main concern right now is just kind of like we know that Taproot is great, right? 1:32:18 But the lifting of the size limit of the witness script just caused new things to be built that weren't as cost-effective before that. 1:32:30 It was possible, but it didn't. 1:32:32 So our main concern is with the addition of six more flags, like what else creative way, I'm not going to say a hack, but what other creative ways could other people come up with to put other stuff on the blockchain? 1:32:48 And I guess a big part of that was Taproot's deployment activation. 1:32:52 It was fast-tracked, and even the testing, I believe. 1:32:55 So I'm guessing that won't happen again. 1:32:58 Maybe there would be a lot of resistance to doing that. 1:33:01 But still, I guess just as an FYI, I think a lot of people share this concern. 1:33:06 You're scared right now. 1:33:11 Well said. 1:33:12 That was very interesting. 1:33:14 I agree with everything you're saying, I think. 1:33:22 Those are great questions. 1:33:24 Yeah, I think over time, it would be nice if I think more people would now pay attention during the testing phase and implementation phase that, hey, how can we use this in a not-so-intuitive way? 1:33:37 And I guess it's going to be better, I'm hopeful. 1:33:42 Moth, what are your thoughts on the recent episode of high fees on Bitcoin's mainchain? 1:33:48 What do you think about that? 1:33:49 Will the fees come down as they have or will they ascend higher? 1:33:54 And what will the narratives and developments be as a result of high or low fees in the future? 1:34:01 I like to think of myself as a Bitcoin purist, like let Bitcoin be the money protocol. 1:34:06 I understand that high fees is eventually not avoidable. 1:34:11 That is the plan by design, right? 1:34:13 To keep rewarding the miners, to keep running their miners. 1:34:17 My only problem right now is what exactly is taking up the block space. 1:34:22 It's not the high fees that I or others that I've spoken to have a problem with. 1:34:28 It's the why, the high fees, the why. 1:34:31 The fact that there is inscriptions and there are 546 transactions happening just to get something on the blockchain. 1:34:41 And that is why a lot of this fee issue is happening. 1:34:44 And I understand that BRC20 is at the end of the day, it's just like a small JSON file, 1:34:49 which could be converted to binary or other base64 and be put on the operator instead. 1:34:56 But still, it's something that wasn't done before. 1:35:00 And it's just, it's a difficult place. 1:35:03 It's kind of like fear of the unknown, I understand that. 1:35:07 It's not the high fees, it's the what is causing the high fees, that's the problem. 1:35:12 And so with new implementations and proposals for new flags, 1:35:16 it's like what else could people come up with that would increase the fees? 1:35:20 I don't consider this a natural adoption-based increase in high fees, 1:35:26 because I would consider natural adoption as adoption by people to use Bitcoin as money, 1:35:32 not to use it as a JPEG sharing mechanism. 1:35:37 Well said. 1:35:39 I don't agree with just one part of what you said, which is that high fees are inevitable. 1:35:46 High fees are not inevitable on Bitcoin. 1:35:49 The result of capitalism, competition and innovation is to continuously suppress 1:35:58 the growth of fees for every product and service. 1:36:03 So people will use the block space more efficiently. 1:36:07 And over time, there's always that downward pressure on the fees. 1:36:13 So the ability for the block space to accrue value, 1:36:17 that is to say the ability for high fees to sustainably appear on Bitcoin's main chain, 1:36:24 isn't guaranteed. 1:36:26 In fact, the whole narrative that's been around since about 2018, 1:36:31 which is the so-called Bitcoin security budget problem, 1:36:36 that line of reasoning is a concern that Bitcoin might not have high fees in the future. 1:36:44 And if that's the case, then there will be not enough transaction finality assurance. 1:36:53 So I don't agree that it's inevitable we'll have high fees. 1:36:57 Could you elaborate on your thoughts regarding what would be the consequence 1:37:02 of low fees in the future if that were to appear? 1:37:09 Are you familiar with the notion that low fees, 1:37:12 in combination with successive halvings of the coinbase, 1:37:16 results in a low amount of value flowing to miners, 1:37:21 which then would mean that the economic barrier to become a majority of the hash rate would be low, 1:37:30 and therefore the protection that Bitcoin would have from a hostile majority miner would be low, 1:37:39 and therefore Bitcoin wouldn't be perceived as secure. 1:37:42 Do you follow that line of reasoning and what do you think about it? 1:37:46 Yeah, I've seen that line of reasoning, especially by Bitcoin critics, 1:37:51 but even Bitcoin proponents, and I wouldn't say I disagree. 1:37:58 I would just say that maybe I'm too biased. 1:38:00 I don't see that as happening unless Bitcoin adoption fails to happen. 1:38:05 Because if Bitcoin is heading where most of us see that it is heading to, 1:38:10 which is the base monetary layer of the whole world, 1:38:15 then the fees are going to be, yes, they could not be astronomically high, 1:38:21 but basically the more layer 2 solutions there are, the more settlements there's going to be. 1:38:27 And if there's not enough settlements happening on the base layer, 1:38:31 people owning Bitcoin on the base layer are going to prefer to transact on the base layer itself. 1:38:37 So I see that where we are heading with more number of layer 2 solutions, 1:38:42 and the need for layer 2 solutions, as is evident for the last couple of weeks, 1:38:46 I see that in a way it is inevitable that the base layer transfer of value is going to be cheap for long. 1:38:57 I'm not saying that it's now never going back to 1 sat, it might, 1:39:01 but several years from now where lightning has matured and other layer 2 solutions, 1:39:07 maybe drivechains get implemented, 1:39:10 I see that at the base layer they're all going to need to be settled. 1:39:14 And if adoption continues the way it is, it is going to be a tough fight for block space, 1:39:24 because that block space is intentionally so small so that it remains precious and coveted. 1:39:31 It's small not to cause fees to be high. 1:39:35 It is small not for that reason. 1:39:38 The block space is small because that lowers the economic burden of directly validating the blockchain state. 1:39:50 Right, yeah. But it is, won't you say, it is an effect, an intended effect. It wasn't like nobody expected it. 1:39:58 People were fine when they decided that, hey, we're going to keep the block space down, and because we need the validators to be able to run their nodes irrespective of where in the world they are. 1:40:11 And hey, by the way, there's this thing that, you know, as people are going to use it more and more, the fees is going to get higher because naturally everybody wants their transactions on the blockchain. 1:40:22 And I think layer two, the need for layer two solutions arose from that, as well as the need for like fast payments, is because it is going to be difficult for most people to move money around on the base layer itself. 1:40:41 Yes, I agree. So when the Bitcoin community resolved to maintain the small block size that Satoshi himself established, then there was an understanding that this would lead to higher fees in the future, assuming demand for block space grows and the block space remains the size that it is. 1:41:08 So we have to then confront the reality that fees are low right now. I checked earlier today and it looked like on thenpool.space the fees were under $2, which is where they've been for most of the last five years, with a few periods where they were higher because of a spike. 1:41:29 So we had a spike in 2017 in December. We had a spike in 2021. And then in the last few weeks, we had a spike with, you know, gambling and entertainment activity happening on top of Bitcoin. 1:41:42 But now we're back to the usual level of under $2 a transaction. And we have to confront, like, on the one hand, the inevitability you described. And on the other hand, the reality that over 200 million people, arguably, own Bitcoin in some form and were, you know, 11 or 12 or 13 years into the project. 1:42:09 And yet the block space is still cheap in the sense that it doesn't cost a whole lot to send a Bitcoin transaction. The majority of the miner revenue is coming almost all the time from the subsidy and not the fees. 1:42:22 So I think that it's legitimate for theoreticians to wonder if in the far future, Bitcoin might not have a sustained high level of fees. Because as I said earlier, capitalism tends to push down the prices of everything. 1:42:47 So people are expecting high fees, but they've been expecting that every day for a decade. And most of the time the fees have been low. So the vision for Drivechain with regard to the security budget is that it'll increase the security budget, it'll increase the fees paid to miners by collecting fees from a multitude of merged mined blockchains. 1:43:11 That's exactly what Satoshi envisioned. He wrote in August of 2010 in the BitDNS thread that we've all read, he wrote, every blockchain in the world will be merge-mined with Bitcoin, increasing total strength. 1:43:25 So he explicitly contemplated the idea that every blockchain would be built on Bitcoin. Now, he was thinking of merged mined altcoins, but Drivechain improves upon his vision, because Drivechain envisions not merged mined altcoins, instead, merged mined sidechains, in which the native token of the sidechain is a token that's only created when Bitcoin is locked in the hash rate escrow of the sidechain. 1:43:54 In other words, as Adam Back says, we preserve the 21 million limit of Bitcoin across all the sidechains. So we're innovating with technology on the sidechains without creating any more units ever than 21 million total. 1:44:11 So it preserves Bitcoin's monetary policy while allowing the Bitcoin community to copy and absorb all of the technological innovation on altcoins, hopefully sort of rugging the altcoins value and bringing that value to Bitcoin. Are you familiar with that narrative and do you think it's just a dream or do you think it might make sense, Moth? 1:44:36 No, yeah. In my vision for the constant high fees being enough for the miners to keep mining. Yeah. I mean, layer two. I don't know if I'm guessing you're considering sidechain as a type of layer two, correct? So yeah, that definitely is part of how I'm seeing that there is very low probability that Bitcoin fees remains low and including the sidechains. 1:45:02 Yeah, I think that sooner or later, even if we are scared of like adding the op flags, I think it will become clearer and clearer that we need something. We need more layer two solutions and more mature layer two solutions. 1:45:18 And I think the notion that, oh, you got to have layer two, which is more centralized or it's not Bitcoin. I think more people need to understand that like payment system is not the same as monetary layer and that building a payment system over the base monetary layer that's like that's Bitcoin is better than having a payment system like Visa and MasterCard built over central banking and fiat. 1:45:47 And I think that message needs to be propagated more clearly and more loudly. 1:45:54 Exactly right. So what we're discussing here is, on the one hand, Hal Finney's idea, which we don't hold, which is that it would be great if we have Bitcoin as the monetary layer. 1:46:07 And on top of that, governments or companies issue Bitcoin backed payment units so that people are using a fiat layer, a layer of trust on top of a layer of Bitcoin monetary policy. 1:46:27 We don't want that. Instead, we want things that are built on Bitcoin so that the peer to peer blockchain features and experience of Bitcoin can exist in an optional in an opt in format at a higher layer with more scalability. 1:46:42 So a large block sidechain on Bitcoin is the vision here for the world's cash. 1:46:47 That's the drivechain vision, which is said to be, I think, superior than if Bitcoin is the base layer and then there's a fiat layer on top of trusted parties. 1:46:58 So right now, all of Bitcoin's sidechains, every single one, involves a 15 party multi-sig federation controlling the Bitcoin locked in the sidechain. 1:47:09 And that's a good first step. 1:47:11 But a better step would be a miner controlled two way peg. 1:47:15 So that's what BIP300 delivers is the miner controlled two way peg so that Bitcoiners can consider, do I want to use a federated sidechain or a miner controlled two way peg sidechain? 1:47:26 I believe that overnight, if drivechains adopted, we'll see the understanding that, as Adam Back would say, this is making sidechains more peer to peer. 1:47:37 So that's what drivechain does is it develops and enhances. 1:47:41 It delivers a more advanced version of the sidechains we have today. 1:47:45 Sidechains today can have two way pegs, but they involve a federation allowing the peg outs back to the main chain. 1:47:52 So we want to remove that. 1:47:54 Now, currently, the sidechains are quite small. 1:47:57 There's only about 100 million or 200 million total in all the sidechains on Bitcoin. 1:48:02 The largest two, I think, are Liquid, which is a great development by Blockstream and Rootstock, which is a great development by the Rootstock founders. 1:48:11 One cool thing about Rootstock is it's merged mined. 1:48:14 So every month, a total of about three Bitcoin are paid to Bitcoin miners that are merged mining RSK. 1:48:23 And it would be great if that was like 3000 Bitcoin a month, you know, billions of dollars. 1:48:29 So it would be great if more and more funds were flowing from merged mining to Bitcoin miners. 1:48:36 And Liquid isn't merged mined. 1:48:39 They chose a different approach. 1:48:42 And in the far future, if drivechains adopted, maybe all the sidechains will be merged mined and there'll be some that are very, very large. 1:48:50 Paying maybe even the majority of Bitcoin miner revenue could come from these sidechains. 1:48:57 You were one of the best commenters we've really ever had in this space. 1:49:01 I hope you'll come back more and chat more. 1:49:04 For more information about drivechain, everyone can check out drivechain.info. 1:49:10 And there's also a bunch of information posted in the nest for people to grapple more with it. 1:49:17 If you're technically minded, please read the BIPs. 1:49:20 And if you like to watch videos, check out our YouTube channel, where at LayerTwo Labs, we've collected a bunch of lectures and discussions on drivechain. 1:49:29 They're mostly Paul Sztorc, you know, delivering lectures on drivechain. 1:49:34 Some of them feature Paul alongside Adam, like last year at Bitcoin Amsterdam. 1:49:39 And then again at Baltic Honey Badger, Paul was on stage with Adam talking about drivechain and sidechains. 1:49:46 And how the next generation of sidechains could be a momentous leap forward for Bitcoin in many ways. 1:49:52 There's so many interesting facets to the drivechain story. 1:49:56 Like it came out at one point, 2015, it was a new idea. 1:50:00 Now it's a familiar idea to some people who've been thinking about it for years. 1:50:04 So it's almost become like the conservative development option. 1:50:08 Whereas in the far past, it was, you know, cutting edge and brand new. 1:50:13 And the people who have been talking about it for years, like Adam Back and others, view it now as more of a familiar thing than something that's totally experimental. 1:50:24 So there's been quite a bit of testing of sidechains. 1:50:26 And it's an idea which is gaining traction every day. 1:50:29 It's so interesting to witness how with low fees, there's concern about the security budget. 1:50:35 But with high fees on Bitcoin, which comes from time to time, generally only for a little while, like a few days, we have a fee spike, as we recently did. 1:50:45 With high fees, then the rationale for drivechain involves scaling Bitcoin. 1:50:51 But of course, we're not opportunistic. 1:50:54 We're not going to pick arguments that only work in the moment. 1:50:59 The proof is online. 1:51:01 It has been for years. 1:51:03 The idea for a large block sidechain has been around for a long time, for many years. 1:51:08 And the idea, as Adam Back tweeted, he tweeted about three months ago to Roger Ver about how it would have been great if the large block Bitcoin community had developed the drivechain years ago for large block Bitcoin. 1:51:24 And then they would have been remaining in the Bitcoin community. 1:51:27 So that's what drivechain is all about. 1:51:29 Ultimately, it's never been about just the security budget. 1:51:32 It's never been about just scaling. 1:51:35 It's never been about just privacy. 1:51:37 Rather, drivechain ultimately is about enabling the Bitcoin community to handle disagreements about what the blockchain should be. 1:51:48 Should it be for JPEGs? 1:51:50 Should it be for privacy? 1:51:51 Should it be for anything else? 1:51:55 The answer is allow people to do sidechains. 1:51:58 If they do sidechains, they don't have to leave the community. 1:52:01 They can do their variation of the blockchain as a sidechain. 1:52:05 And then they're happy and everyone's happy. 1:52:08 And we're all paying fees to the same set of miners, enabling that set of miners to be very large and powerful. 1:52:15 So it's all about innovation and resolving disagreements amicably instead of having people who disagree leave the community, start an altcoin. 1:52:28 And then that altcoin, its monetary unit, competes existentially against Bitcoin for monetary premium. 1:52:35 That's no good. 1:52:37 Right now, Bitcoin has a large competitor, Ethereum, which every day is growing more and more users and value, more and more transaction fee revenue. 1:52:47 It's gaining economic traction. 1:52:50 And it would be great for Bitcoin to devalue that altcoin by copying all of its technology into a sidechain. 1:52:58 And then there would be perhaps no reason for anyone to use the altcoin. 1:53:04 They could instead use the most powerful monetary policy and architecture, Bitcoin. 1:53:11 So that's the drivechain vision. 1:53:15 It has a bunch of interesting consequences. 1:53:18 It increases the ability for Bitcoin to have innovation. 1:53:21 It increases the ability for Bitcoin to have scalability. 1:53:25 It potentially boosts the fees a lot on the main chain. 1:53:29 And it strengthens Bitcoin's narratives around technology, innovation, experimentation and variety and extensibility. 1:53:37 That's the word Adam Back uses is extensibility. 1:53:41 So sidechains increase Bitcoin's extensibility, meaning enabling people to build innovative new features that aren't possible on layer one. 1:53:50 To conduct research and development in a live environment on Bitcoin in a manner that's more peer to peer than a federated sidechain. 1:53:58 So that's all the cool stuff that drivechain can bring. 1:54:01 And it's very interesting to watch this project evolve and wonder what will be the impetus for greater understanding and adoption of it. 1:54:10 Will it be that fees are too high and then people will want the scaling solution of a thunder large block sidechain with one gigabyte blocks? 1:54:18 Or will it be that fees are too low for too long and there is an increase in the frequency and severity of reorgs? 1:54:26 And then people will want more fees and they'll turn to merge mining as a better solution than tail emission. 1:54:36 Because, of course, tail emission would disrupt Bitcoin's monetary policy, one of its most important features. 1:54:45 And ultimately, the original case for drivechain might be the one that leads to its adoption, which is that it's all about reducing these disagreements within the community. 1:54:55 When people disagree about what Bitcoin should be, the ability to launch a sidechain that has the features that are desired helps resolve that disagreement and preserve harmony within the community. 1:55:07 Rather than seeing it fracture with civil wars and disagreements about what should be on the Bitcoin blockchain or what should the configuration of the blockchain be? 1:55:17 So we meet here twice a week, Mondays and Thursdays, 930 a.m. Pacific. 1:55:26 However, this Thursday, probably there'll be no event because we'll be live at Bitcoin Miami at the LayerTwo Labs booth. 1:55:35 So if you're going to be there, come on over and chat, pick up some T-shirts. 1:55:40 We're going to have tons of cool stuff to hand out. 1:55:43 So if you want some really great sunglasses and some other swag, we're going to have it for you. 1:55:50 And if you want, you can also just chat about drivechain. 1:55:55 So hope to see you all there. 1:55:57 And then later, just follow LayerTwo Labs here on Twitter to catch our spaces twice a week, Mondays and Thursdays. 1:56:05 Thanks to all of our really fantastic speakers today, Moon Settler and Moth. 1:56:12 See you next time.
