0:00 Good spacetime everyone and welcome to a new episode of the Citizen Web3 podcast, 0:04 your source for educational insights into the Web3 universe and your connection hub 0:09 to discovering those that contribute to building the decentralized world. 0:13 Today we are joined by Paul Sztorc from LayerTwo Labs. We touch upon the fiat currencies, 0:18 the winning coin, East versus West, and North versus South. We discuss competitiveness, 0:23 freedom, and moral progress. Finally, we talk about prediction markets, printing press, 0:28 and the Titanic. If you enjoy our podcast, please share this episode onto your favorite 0:32 social platform and help us spread Web3 values into the universe. 0:58 Hey everyone, welcome to a new episode of the Citizen Web3 podcast. Today I have 1:10 Paul from LayerTwo Labs with me and I'm really glad and excited to hear what Paul has to share 1:14 with us. So Paul, hi, welcome to the show. Hey, thanks for having me. Yeah, very glad. 1:21 Well, I'm personally glad to have you on and ask you some questions that are probably related to 1:27 your work, to Bitcoin and such, but apart from that, you know, you were already recommended by 1:32 a couple of guests I had on, so can't wait to... Wow, really? Who recommended me? Ah, you see, 1:38 well, at least Vlad, at least Vlad, at least Vlad. Okay. And I had a couple of more guests 1:44 in the past year or so that have mentioned your name with regard to Bitcoin, so we're 1:48 going to put the spotlight on you, Paul. Sorry, I'm joking, I'm joking. Paul, before I kick off 1:55 and start to annoy you with all my questions, could you, for me, for the listeners, do like a 1:59 brief intro of yourself, your work and how did you get into Web3? Well, I've been in Bitcoin for a 2:04 long time. I started this company LayerTwo Labs. The idea behind LayerTwo Labs is that eventually 2:10 one coin will be able to do everything and that coin is going to win. And so I am a sort of a 2:16 Bitcoin maximalist in a way, in the sense that I think only one coin will win. I mean, I certainly 2:22 hope it's Bitcoin. I think if Bitcoin drops the ball on features and on competitiveness, 2:28 it will be something else. But whatever that is, I think it will eventually displace all the other 2:33 crypto coins and it will then start taking over the worst fiat currencies and then eventually 2:40 it will just take everything over. So I do believe in that maximalist logic. That was the old 2:44 maximalist logic. So I come from like kind of an even an earlier era and I championed this idea, 2:50 the sidechain, or now I call it the Drivechain. And that is basically the idea that you have one 2:55 coin, but it can travel to completely different pieces of software. And so now the software can 2:59 be any shape or size, just like you can have any app on your phone or on your desktop computer. 3:07 And so these would be like altcoins in that they are completely different software, but they're 3:13 unlike altcoins in that there's no coin for each thing. They're all managing the same 21 million 3:19 Bitcoin in this. So that's what the company is about. That's sort of what I'm about. 3:27 The company, LayerTwo Labs, we started it basically December. We're almost like at the end of the 3:33 second year. So we've been a year and a little and we have produced, you know, we have a test 3:43 network with fake Bitcoin, but it's exactly resembles the real Bitcoin network. And on that 3:49 network, you can send the coins to like a clone of Zcash and you can get privacy there, or you can 3:54 send them to a clone of Ethereum and do EVM, smart contracts there. And you can send them to, you 4:02 know, a large block version is, of course, this famous block size dispute in Bitcoin. So I see 4:08 myself as kind of almost transcending Web3 or maybe just zoomed out a little where I think people 4:13 should be able to do whatever they want, you know, Web3 or large blocks or whatever Zk-SNARK 4:19 privacy. So that's kind of what the sidechain, Drivechain, LayerTwo Labs, Paul Sztorc's idea is 4:26 about this idea of tolerance among all these different pieces of software to unite everyone 4:32 behind, you know, the winning coin. And that's sort of, so that should probably be enough of 4:38 an introductory. I mean, I have all these websites, drivechain.info, LayerTwoLabs.com, 4:43 Truthcoin.info. I'm going to dig a little bit because, you know, you spoke about, 4:50 I have some questions for you with regards to, you know, the beeps that you authored and 4:55 the Bitcoin improvement protocols, of course. And I have some questions with regards. 4:59 300 and 301. But if you don't mind, before we go there, because like I said to you, you know, 5:05 before I hit the record button, the show is mostly about, you know, the person rather than 5:10 what they do. And, you know, we all are humans that choose, you know, some path in our life. 5:16 You know, somebody chooses, you know, to go fight for the army, you know, go be religious, 5:21 you know, go rebuild blockchains, you know, whatever, you know, fight the banks. It doesn't 5:26 matter. We all should choose. And I want to talk a little bit about Paul, you know, before, like, 5:30 not to get deep private, of course, but whatever, like you can share about what you did before 42 5:37 Labs. What did you do before blockchain? Why did you get drawn to working with Bitcoin or trying 5:43 to unite people over the idea that you just told me about? What was, what's driving you? 5:48 One thing that is pretty clear is you can look at like, you know, East Germany versus West Germany, 5:54 North Korea versus South Korea. And you can just read about, you can read like Gulag Archipelago 5:59 versus like, you know, the Great Gatsby or something, you know, you can compare these worlds 6:03 that where the worlds are nothing, they're nothing like at all. And one world is like hell on earth. 6:11 And the other world is not so bad. And you can think like every problem that anyone has ever 6:16 faced, like some people struggle so much with some problem. And if they just had, you know, 6:21 penicillin, or if they just had toothpaste, or if they just knew, they just knew a little bit more 6:26 about, you know, maybe psychology, or, you know, like, people get defensive, we have certain 6:36 phrases that do a lot of work, you know, just because our culture has accumulated all this 6:40 knowledge, we know how to deal with when people feel shy or something, but, but for a long time, 6:48 people didn't have any of this knowledge, they didn't have knowledge about how to build roads, 6:52 or get food. And so I think like, that's the number one thing. And you think, well, okay, 6:57 if people cooperate, people can work together, that is a huge upgrade. And that's what things 7:03 like money do. And things like law, things like culture. And so I just think, you know, the 7:09 internet, the computer, it can give us knowledge, it can protect our rights, it's very, you know, 7:16 the idea that you could just have all of your money in a 12 word seed phrase, 7:19 memorize it, and then just walk, walk across the border, we want to increase the competitiveness of, 7:25 you know, governments and corporations, whatever to be competing for us. So that that's big. 7:30 For me, I'm also very interested in this idea of the prediction market that I championed 7:36 for a really long time. But even in terms of blockchain prediction markets, like Polymarket, 7:40 I was writing about doing that on Bitcoin in 2012 and 2013. And I produced software for that. And I 7:48 produced, you know, research papers about that. So I'm very interested in that. And that is what 7:54 drew me into this Blockstream sidechain idea back in 2014. And then they sort of, they dropped the 8:00 ball on that and didn't do it and never released anything useful for that. So I had to do it 8:04 myself. So those that maybe gives you some idea of like, I just think, just imagine any problem 8:10 you've ever had everyone who's ever, you know, weeped for a dying loved one or been confused 8:16 about how to handle like a relationship problem or a health problem or just bored or annoyed. And 8:24 all those problems would be solved if we just had more knowledge, more human capital, more 8:30 resources. And that's, you know, it's like Hong Kong versus mainland China. It's like, 8:34 we know the formula is freedom, consent, innovation. You think it would help to solve 8:42 all the world's problem? I'm going to be a bit devil's advocate here. I'm going to be a lot 8:46 devil's advocate in this question. I have to warn you in advance. You think that it would help to 8:50 solve the world's problem if America stopped spending 1 trillion US dollars on the defense 8:56 budget and the army budget every year? I don't know why you would single that one out. I mean, 9:02 you think that's too low or too high? I think it's way too fucking high. It is pretty high, 9:09 but it's very low compared to other things. It's not, you know, isn't it like one quarter 9:13 or something of the federal budget to say nothing of the state and local? 9:16 Fuck the federal budget. It's the fact that, you know, what I see, you know, when I got to be, 9:22 I'm going to try, like I said, I'm going to be devil's advocate. So I'm pretty much the same 9:26 length as you in this industry since 2011, 2012, roughly when I came in. And, you know, I've been 9:34 long through all of this, you know, like, okay, we struggle. What I came to realize and what I'm 9:40 kind of like want to ask you is that, you know, no matter how and what we do, there is a problem 9:51 with humans. That's what I came to realize. It's not the problem with technology. It's not a 9:55 problem with, I don't know, anything else, money. Well, there is a problem with money. There is a 10:02 problem with technology. There's a problem with a lot of things, problem with government. 10:05 But at the end of the day, there is a problem with greed and lack of responsibility. 10:09 And, you know, at the end of the day, when humans care, well, we're going to solve all the world's 10:14 problem by fixing one, two, three. Why not start with the simple things? Why not start with the 10:18 simple things like we know that wasting a trillion dollars on the state budget, you know, will 10:23 probably, if it was directed somewhere else, like towards space exploration, probably would have 10:29 helped a lot already. But it's not. So what I'm trying to ask you is, do you think that, you know, 10:34 by fixing technology or fixing the unbanked system or bank system, whatever you believe in, 10:42 we will manage to solve human greed and the lack of responsibility that humans take? 10:47 But that's not really the criterion, is it? I mean, we will never reach a state where we have 10:52 solved every problem. But that doesn't mean that we like we're climbing the ladder. You know what 10:57 I mean? Like we start where we're all ignorant subsistence farmers. You know, on day one, the 11:05 species was in a horrible state. And in fact, I think a lot of people think that the human race 11:10 almost went extinct several times and even went down to like maybe 400 people or something at one 11:15 point because there's just not enough genetic variation in some. I'm not sure if that's true, 11:20 but something like almost every and all of the cousin and sister species of homo sapiens 11:28 all went extinct, you know. So that was a pretty bleak outlook on day one. 11:37 And now people have different problems. They have like the first world problems, like what do I 11:40 watch on Netflix or people, someone somewhere is being greedy, like what you're saying, or that 11:45 the defense budget is, you know, one trillion, like, it's a first world problem. And in the 11:51 future, we can only hope that the problems they solve are different than maybe more about like 11:55 art or like what planet, what color a certain planet should be when they create it out of 12:01 space matter, they dig out of the sun or something. So 12:04 people always disagree about what to do next. I think that is also just normal. And that fact, 12:17 I think we should all accept that we will always disagree. But again, that doesn't mean that we're 12:22 not, that doesn't mean that we should go back to the Aztecs and say, we need more rain. So we should 12:28 what they would do is they would chain a bunch of children together, they would smash like iron 12:34 hooks into their faces and chain them all together and then drag them up the pyramid and then and got 12:41 them all. And that's what they would do to bring rain to the farmers, whereas today we have pipes. 12:51 Well, the Nazis, you know, we're doing like what I'm trying to say is that, you know, 12:54 we didn't change as a society much because, you know, if slavery, Holocaust, those things were 12:58 legal, you know, so like what I'm trying to say here... But you wouldn't say that we haven't, 13:03 I mean, people's attitude towards, for example, the, I mean, I was about to say the Jews, but 13:14 distressingly, there has been a bizarre rise of anti-Semitism recently, which is distressing and 13:21 bizarre. But I do think what's unusual is that it is met if you, I mean, certainly if you go back 13:28 200 years, this type of thing would happen all the time and everyone would just look the other 13:32 way and just be like, well, whatever, they're probably up to something. 13:34 What's happening today? 13:35 Today, more people do. I know it is. I was very surprised by that. But I don't think that 13:42 actually when push comes to shove, normal people in America and even people who are going to vote 13:47 based on this issue, I don't think those people look at the students protesting for Hamas and say, 13:54 oh, I'm going to vote for that. I think they will just quietly ignore that and then they 13:57 will vote against it. And so there will be no actual change in the official policy of the 14:02 one trillion defense budget that to uphold basic Western values and like anti-terrorism and anti, 14:10 like, just like complaining about a country existing and just like... So I don't think that 14:15 that, but, but yeah, that is, that is a weird thing for mostly the, I, we have made enormous 14:24 moral progress, I think, you know, and people don't put up with things that would have been 14:29 common, even things like bullying or like parents beating their children. 14:33 The, a lot, many of these things, the opposite positions were taken for granted. 14:37 You know, the idea that you could just kill all the Jewish people was, that was 14:40 normal part of life in Europe for a very long time. Now that is, that would be considered grotesque. 14:48 It is true that some, I don't, I don't understand why there is a subculture that has moved 14:54 extremely in the other direction, but my guess is that it's because that subculture is so 14:58 defective and irrational that people have just stopped trying to, to reason with it. 15:03 And so actually that's their own problem. And I think when push comes to shove, 15:12 they will have wished that they were more open-minded, let's say. 15:16 I guess, I guess that, you know, what I was referring to wasn't so much, even though the, 15:20 the anti-Semitism, of course, you know, I haven't served once upon a time in Israeli army 15:26 long, many years ago, you know, it is kind of close to me, but I'm not, I'm not that kind of person. 15:31 I think it was a mistake what I did, but what I was referring to more was, you know, that 15:35 for the last hundred or so years, for example, I forget the word all the time, it's on Wikipedia, 15:41 it's a German word, a very long one, one of those like 30 letters words, a phenomenon, 15:46 yes, which means, what is it? Yeah, I'm going to explain what it is. I cannot remember the word, 15:51 basically what it means that, you know, as for the last hundred years, we are aware as, as a first, 15:56 you know, as a, let's say, white dominant society, we are aware of roughly one billion people, 16:02 one billion, that's roughly today, still 15 or so, 17 percent of the world population dying 16:08 yearly of five illnesses, that is, hepatitis B, hepatitis C, malaria, tuberculosis and something 16:14 else. The cure to each one of those per person is roughly two dollars per year per person, 16:20 now per illness, so let's say ten dollars per person per year, so that is a lot less than a 16:25 fucking trillion dollars. What I'm trying to say, the problems that we are having in the world are 16:29 not the problems of the first world countries, those are the problems that we choose as first 16:34 world countries to close our eyes to whatever the fuck is happening around us, single out a few 16:39 problems and say, well, those are all big issues, but let's not look at the big things like that's 16:44 happening, like 15 percent of the world population dying per year, because we decide to build a tank 16:50 or a plane, you know, so. Let me go back to your earlier, like, because you asked like a big question 16:55 about, I say I'm going to solve all these problems, what I don't say is I'm going to solve all the 17:01 problems, I'm just trying to say, listen, I'm alive right now, I look around, what problems do I think, 17:06 here's a list of the problems I think I can solve, sort that list by importance, okay, this is the 17:12 most important problem I think I could maybe help solve, okay, I'll do that, that's pretty 17:16 reasonable, I think that we were talking about like, we're never going to solve all the problems, 17:23 the list will keep going, you know, and that's sort of a good thing, because I'm not sure what 17:30 would exactly happen, like what it would mean if we had reached a perfectible state, I don't know, 17:35 like that would be, that would almost be its own problem, because then it would be like confusing 17:40 as to like, we would, that would have its own mysteries, which you could call problems, so. 17:45 For sure, I agree. Now, you have this assertion that the trillion dollars 17:51 we spend on defense is spent mistakenly, but I think no one really knows if that is correct, 17:59 neither you or I really know, we don't know, like maybe things would be way, way worse, you 18:04 know what I mean, if we, maybe the US, let's say that number was zero instead, and then we could have 18:09 many authoritarian, you know, regimes around the world taking over their neighbors, you know, 18:16 they are inherently, the authoritarians cannot grow as quickly as the free countries, so their 18:22 only option to stay where they are is to expand and sort of coerce people. I do agree, I do agree 18:29 with you that, you know, that, you know, solving all the world's issues is definitely not on the 18:34 agenda here, I agree with you, so I'm going to go a little bit back and then. One reason I'm 18:40 interested in prediction markets is because we could make these contracts, so we could improve 18:45 the rational discourse on whether or not the one trillion is the right number, and you can make a 18:51 special type of contract that I have tried to popularize, it was invented by Robin Hanson, but 18:57 I tried to popularize it with, and I think I succeeded somewhat in Vitalik bought it, 19:03 Hookline and Sinker and the Ethereum community knows a little bit about it, these multi-dimensional 19:08 prediction markets, you say, okay, if we increase defense spending, what will happen to something 19:12 else, like the value of all the land or the life expectancy of the earth or something, so you can 19:18 then maybe start to get a handle on what you might think when it's like a thermostat, you think 19:26 maybe we've gone too far, this, we're hitting diminishing returns, we're hitting negative 19:30 returns, things are getting worse, we spend more on this, things get worse, and more, even more to 19:35 the point, the prediction market gives everyone the same set of prices, so this is at least the 19:39 beginnings of how to convince everyone else, you've learned the truth, oh, we're spending too 19:44 much on X, Y, Z, but now you have to convince everyone else, but prediction markets solve both 19:49 problems, they also have a superior ability to scale, conversation scales, oh, and squared, it 19:57 doesn't scale very well, you have to have a conversation with each person has to talk to 20:00 everyone else, that doesn't work, and then you have things like this show, which is like a 20:06 podcast type show, where you have media elites get a reputation like Joe Rogan, but even that 20:13 scale is what you might call like log N times N or something, you have a few competing elites, and 20:18 then they choose who to interview, and they choose who to believe, the prediction market, the more 20:23 people involved, the more liquidity the market has, the more accurate it is, and the more people who 20:29 are convinced ultimately by that, so it has, it's a superior idea that, well, it actually works 20:34 better the more people are involved, so in a world of eight billion people, so you may be right about 20:41 the defense budget being wrong, and maybe it should be spent on hepatitis B, 20:47 one thing to think about is, it's true that, it's probably true that everything you've said 20:53 about a lot of people die of hepatitis B, hepatitis B cure is very cheap, less than two dollars, 20:58 but that doesn't necessarily mean that we could save those people's lives for two dollars, there's 21:04 a lot of other missing pieces of like distributing and administering the medicine, and maybe if you 21:10 give them that, they die from hunger four weeks later, I don't know the facts, but I do think it's 21:15 kind of implausible, right, because people prefer being alive, you know, every, the parents prefer 21:20 having their children be alive, and if it were really the case, you would think that there would 21:25 be some kind of, you know, some kind of deal that people could cut, if it was just this one two 21:30 dollar thing, a single time, you would think that it would, but then oftentimes you investigate 21:36 these matters, and it is a different story, for example, we already produce enough food 21:41 to feed everyone, many people die of starvation, but this is because of the logistics of the last 21:47 mile problem, it's very easy to get the food almost anywhere, but to get it the very last 21:53 mile, if there's no roads, and there's no police, and there's no safety, and there's no, you know, 22:00 like electricity, there's no gas stations, it just can't get there, and 22:08 so I think it's not always obvious how, what's best for everyone, that's 22:13 certainly something people disagree about. I am definitely going to move to prediction markets, 22:17 because we seem, I definitely disagree with what you say here, so let me move a little bit to 22:22 prediction markets there, but it's good to disagree, and I think that, you know, trying to, 22:29 I think alternatives is definitely why, for example, this industry attracts a lot of smart 22:35 people, in my opinion, is being able to see the amount of alternatives, and hear them, 22:41 and then make your own decision for whatever information you think is right. Now about 22:44 prediction markets, I, like for all the listeners, definitely guys, please check the show notes, 22:51 if you haven't familiar with the BIP300 or BIP301, you will find links and read about them, 22:58 and some of them happened a while ago, so we're talking 17, 19, if I'm not mistaken, 23:03 but it's interesting, I mean, well, prediction markets, because in my opinion, oracles and 23:08 prediction markets, I myself wrote a piece about the same time, roughly 2017, 18, on that, 23:15 on the fact that, in my opinion, prediction markets are actually the sort of cleanest example 23:22 of a P2P communication, without having, you know, anybody else in between, because technically 23:28 anything can be a prediction market. Now, has, what can you, for the listeners and for myself, 23:35 in your own two words, like, just, I mean, you talked about a prediction market and what, 23:40 how it can be beneficial, how is that idea currently, since you have came up with it, 23:47 implemented or not implemented into the Bitcoin protocol, and what is happening with it? 23:51 These are very different issues of, like, I champion this idea of the prediction market 23:56 in abstract, and I think it's the best thing since, you know, basically, I think, to me, 24:01 it's like the printing press, it's like writing, it's like spoken language writing, the printing 24:06 press, the internet, like prediction markets, so I think, like, this is, like, the next big 24:11 media thing. That's a very different conversation from how is it actually implemented in our current 24:17 industry and, like, what changes would I make? What I've decided to do, I have made lots of 24:24 presentations about this topic, and a lot of people have had some success doing something that I 24:32 advocated. I'm not saying that they got the idea from me, but in the past, I said we should have 24:36 completely decentralized blockchain prediction markets on Bitcoin. I said that, like, 2012, 24:42 2013, but I also said we should have, like, someone can kind of cut the corner of the Oracle and just 24:49 do it, and they can create, I actually told many times we should have, like, oracle.bitcoin.com 24:54 or something like that. There was this project Reality Keys by Edmund Egger and some other 24:58 things. So, 24:59 I think you could cut the corners and just start doing it, to just get the word out there about this institution, and some people have done that, including, I guess, Polymarket would now be the, sort of, the bigger one. I have a different conception of how to make this idea work, having seen countless ideas fail, and I even wrote, like, a little paper, like, the graveyard of prediction markets, like, how to make this idea work. 25:26 The way most people emails me is 25:27 they say, like, it failed because the resulting market failed because the underlying market, like that, 25:31 it's got like oracles or rockets, or something, because this idea is trying very often, 25:35 and then it fails, and I have just a huge, like, 25:43 amount of, like, background knowledge and, like, notes about that. 25:49 You can go to bitcoinhivemind.com, just like my side and I have, like, other papers there, 25:54 and look, and operate, and then try that, because I have had mixed results in explaining what to do to other people, 26:02 but I realize it's not a great answer for anyone who's listening who'll just be kind of confused by that. 26:07 But some things that are under-emphasized are the multidimensional markets are, they are confusing, 26:13 but I think people will figure them out, and when they do figure them out, they will like them a lot. 26:17 For example, they allow you to bet in U.S. dollar terms or in ETH terms or in BTC terms. 26:24 You can just switch by adding that as a dimension to the markets, so that would be big. 26:30 But the other thing is with the market scoring rules that people have started to use, again, after I sort of suggested this, 26:38 Robin Hanson invented this thing, logarithmic market scoring rule, and then it sort of passed into the Ethereum community. 26:46 These allow you to just stack all these dimensions together without losing any liquidity, 26:50 so the user experience can be made to not even notice that these are there, and now you can bet on all kinds of combinations of events. 26:57 So the idea of this is, like, is one event related to another event? 27:02 You say, well, actually, in America, if Donald Trump is elected or if the red team, if the Republican Party is elected, 27:11 will the price of Bitcoin go up relative to the Democratic Party? 27:15 And you just see at a glance, you can just see, there's no longer a need to debate or you just say, OK, well, if I vote this way, 27:23 that would be better for the Bitcoin investment. What will be better for the stock market? 27:27 What will be better for the, you know, anything else that you can measure? 27:31 It doesn't have to be financial. So that's the key. 27:35 Another thing that is related to that is the idea of liquidity. 27:39 This is always killing the prediction markets, but it's actually easy to convert the liquidity problem into just something of just lacking money. 27:48 And then it's very easy to solve with a different thing. 27:52 I realize this is kind of not a great explanation, but that's part of why I think I just need to make the software as a demonstration. 28:00 It's good. It's good. It's good. I think that, you know, for people who are not familiar with it, what you're explaining will help. 28:06 And of course, if anybody wants to check it out, they just go and follow the links, like I said, and read the story. 28:12 Because, I mean, there is a lot of implementations of oracles and prediction markets and not just on Ethereum, 28:21 but on various ecosystems and outside of blockchain as well. 28:25 So I definitely highly suggest for people who are listening to this and curious, please go and check it out. 28:31 I have a different question for you about L2s now. 28:35 Being sort of a champion in, you know, one of the initial ideas of L2, I guess, or I can see how from what you have been saying a long time ago, 28:48 some of those L2 ideas could have came up today. 28:51 Like, I'm going to again, once again, be a devil's advocate here, but I want to hear your opinion. 28:56 Like, you know, L2s have been around around Bitcoin, especially for a long time, with Lightning Network is the most famous one. 29:02 And now I don't know how whoever is listening to this thing, what they think about Adam Buck, unfortunately. 29:10 Well, you know, facts in the eyes. 29:12 It's a centralized piece of shit software today, at least semi-centralized, you know, that hasn't really done what it set out to do. 29:23 And the same goes for, you know, Ethereum. 29:26 They have like, you know, we have, they, we, whatever you want to say, there is about 70 L2s now on Ethereum or something like this. 29:32 It's ridiculous as fuck. 29:34 So the question is, like, the whole L2, like, thing, how do users choose? 29:43 Do they just follow the same rules as with L1s? 29:45 Or do they just, like, go by the longest chain and see which L2 generates more, I don't know, revenue or more volume or whatever? 29:54 How do users understand that L2 is good to use? 29:58 And if there is many, how do they, you know, decide which one is better for them or will be, will keep their money safe sort of? 30:08 Yes, well, of course, the idea of the L2 goes back to this, this model of the internet where there's like the, the data that like the, there's like layers where there's like physical layer, like a wire is plugged in, like the ethernet cables are connecting the two computers. 30:23 And then there's like, eventually, so these layers, it's like, you start electricity flowing, it's their data going back and forth. 30:28 Then there's like, connection, like, so like, to compute, like you and I, our computers are connected, not directly, we're connected very indirectly. 30:37 But the whole, the whole premise of the internet, of the packet switching is that you and I have a connection that will survive even if many of the routes along the way get interrupted, someone shuts the computer off. 30:49 We don't even notice because the packets are streaming across. 30:51 So the idea is that the internet scales in these layers, and that, you know, Bitcoin can only do seven transactions per second, everyone needs to have all the blocks and the entire history. 31:04 So that's not ideal at all. 31:08 That is, will only be one layer, and then we'll have a layer above, it's called layer two. 31:14 But really, of course, it would be like layer, like whatever, like 18, or something in the whole, the whole scheme of just everything in the world is built with layer. 31:22 So that's just the layers story. 31:26 If in the abstract, but specifically, many of the layer twos are today are, they're just not very good. 31:35 So just because something's layer two doesn't mean it's good. 31:37 Like, if you go to a bar, and you order a drink, you order a few drinks, you have a bar tab, they keep track, and then they don't charge you, don't charge your card until the end. 31:47 That's kind of a layer two. 31:49 But you can see that that is something of sort of a cheating, you know, it's like, it's just assuming that it sort of spoils the problem in a way it says, well, how do we well, we just we'll just have one guy do it. 32:04 You know, have one guy just keep track of it all. 32:06 And then whatever he says goes, right? 32:08 Or if you just run out the door and call the credit card company and say that my card was stolen, then they'll so many of these L two's or something like that, where it's just the money all goes to one person or a small desig, which is a fancy way of saying one person in practice, because it's just like one organization of people. 32:29 So they'd say that this matters, but in reality, it makes no no real difference. 32:35 Since the regular the average person has no idea how these keys got to the people they don't know to ski ceremony, no one knows, no one cares. 32:43 So 32:45 just because something's an L two doesn't mean that it is a good design. 32:49 The idea, my view is actually that almost all the L two's designs will also be will also fail and be deleted, and only one or two will actually remain in use. 33:01 And this is actually kind of similar to how in the internet stack, you know, you could have you we have different things like we have Wi Fi, in addition to Ethernet cable, and it is possible to have other cables, you know, coaxial cable type of a thing. 33:19 But really, there are only so many, you know, there's really it's not like there's like 50 different Ethernet cables, you know, at different types of different shapes, and they have different plugs. 33:29 Really, it's like one idea is just the best for that layer, and it will win, and the others will lose. 33:36 And I think, in particular, any idea that does not pass its fees down faithfully to the L one miners will probably lose. 33:44 So that would include all the centralized ones, unless they have some kind of way of tallying, you know, and reporting faithfully, and guaranteeing that they will report. 33:55 You know, it's like, is it as if the bartender is going to keep track and say to visa, listen, this was actually eight purchases, not one, so I'm going to pay you eight times as much fees, you know, and it's just on the honor system, like, so I don't think that's going to work. 34:11 And 34:13 the things like lightning, liquid liquid, the fees actually go to a wallet controlled by Blockstream. 34:19 So they, as it's currently set up, they pay 0% of the fees is lightning network, as it's currently set up a 0% of the fees, when people join and leave the L two, and they lift or fall, they sometimes call peg in peg out, but that's awkward. 34:32 So I think lifts to the L two, or fall from withdraw from the L two back to the L one. 34:40 That they pay the L one fee, but that's because those events happen on L one. 34:45 So I think what we need is the L two that pays is incentive compatible, because then the miners will be cheering it on, they'll make more, they know that they make more money when the L two is more successful. 34:54 I think that's the those are the ones that are viable, including the Drivechain at 300 301. 35:01 So that's what I think actually will win. And I think all these other L two designs will probably not survive now label, they're not including the lightning network, I think the lightning network has we've seen, it always had a lot of theoretical questions, but now we have seen 35:20 like, 35:21 like, 35:23 the many of these problems have come to light. And then many of the centralized the fake custodial lightning, which is fake lightning, it's not real light, it's not, it doesn't have Bitcoin, actually, or lightning at all. It's just 35:36 a front end interface for like a server. It's like the bar tab and extremists. 35:41 And some of those like Walter Satoshi got pulled from the App Store. So they those have just been killed. So I think I think that there will be more death in the L two space. I'll just be Yeah. 35:54 So yes, I think those will be gone. I think they'll just be one that one model that survives. Eventually, I saw, I saw yesterday, I think on Twitter, I'm sure it was yesterday. So today, just as again, for the listeners, like it was 1615 of the same December, sorry, 36:09 September, when I saw this on Twitter. And what do you think about what I saw was the first at least, okay, this is the advertisement, I have to say, I didn't go and check like, you know, the documents or the website, even I just saw this tweet of 36:22 a big account, the first layer three for Bitcoin, and they were deadly serious, these guys were like, you know, we are but what do you think of that? Do you think it's viable in the future? Or do you think those ideas of layer 3427 is already like, you know, 36:38 of course, there will be it's, it's trivial to add the layers, actually, but they have to be good. So that's sort of sort of what I was trying to emphasize with the bar tab example is that you can imagine a situation where I'd like two different people open a bar tab. They go to the same bar. And then one person, this often happens with friends, one person says, Oh, I'll get this round. And then says, I'll get the next round of drinks. That's like a layer three, really. Because you're saying we will put what we will put 37:08 on the tab is, so it's trivial to actually add more layers. But the problem is, are the layers any good? Now, when you're interacting with a friend that you've known for a long time that you plan on interacting with for years afterwards, there is this is called the folk theorem in game theory about the repeated interactions impose discipline, because you have so much to lose. By betraying the person, you have a friend that you like, and then that you'll lose if you betray them. And so this 37:38 induces people to act with your best interests in mind. And it does folds the field of game theory out, it says like you're no longer in an adversarial situation, you and the other person are on a team now, because you'll interact with them. 37:51 So in that case, the trust is warranted. And similarly, for the bar tab, it's just since you're physically there, and everyone sees you and you have like a reputation in the town, and they don't want to call police, and it's not worth it for such small amounts. So when you have the trust, you can use trust you cheat. But you will you cheat, you don't need to solve the problem. But it's when so there's no such thing as the first layer three, there would have been many, you know, many such instances of people saying, Oh, I'll get this round of drinks. 38:21 And agreeing that they have lightning channels open, and they're debugging the software. And they say, Oh, can you send me some testnet, like coin light lightning coins or something. So the, there is no such thing as having the first layer three or layer four, or whatever, that is not a good criterion. The only criterion is, does the design solve a problem that is unsolved? 38:45 And I guess like, you know, you spoke in, well, you spoke, you wrote BIP301, you know, and you mentioned, merged mining, which is, of course, a logical economical incentive. Now, today, I want to ask you a question today. And again, once in your feeling or so in your opinion, I mean, you know, your surroundings, 39:14 what role, because merge mining, I'm not talking about, of course, merge mining for layer two is like merge mining, in general, the whole idea of merge mining has existed, at least since I don't know, 2010, 15, since I remember it, but 39:27 it's how she invented merge mining before he left, and he even co developed the first okay, altcoin, which was Namecoin, and Namecoin has been merged mind on the Bitcoin network. Yes, continuously since 2011. Miners can still get an extra, you know, extra little bit. I don't know what it is. Now used to be like five, the big, the Bitcoin block used to be worth like $7,000. And the Namecoin block was worth like $5. So now the Bitcoin block is worth who knows, you know, it's like, 39:58 I guess it'd be worth like, you know, basically like 200 $300,000, something like that. And the Namecoin block is worth I don't know how much probably like a similar proportion. I don't know. 40:08 That was actually the question, though. It was like, what role today is very small, but in the future, it will be life or death, and it will be much more than 99% of minor revenues will come from merge mining is my prediction. 40:21 So my prediction is just that we haven't reached the point where the merge mine chains generate the fees. This is just I think this is all I think this is inevitable. And in fact, it's the hours is nigh. 40:37 But this is a so far fringe point of view. But I think it's I don't see there's no reason why I would not I mean, miners get more money in return for doing nothing. 40:50 Users get the ability to transact more at a lower fee. 40:55 They did the exchange rate risk is insulated from them, they get to unite under one project that will win thus reducing the risk of the whole thing failing. 41:06 These are just obvious, like good ideas to me the fact that we had more than 60% 41:14 mining participation with merge mining back when it was only $5 of like a $7,000 package. 41:23 That suggests that when it will eventually be more than 100% of the L1 total fee revenue or total block reward as the subsidy halves, there will be only fees so 41:34 then there will be enormous adoption of merge mining and once people figure it out once the miners are very 41:41 you know, no offense, they're very inept as far as the what happens with the software, they're very skilled when it comes to finding cheap power, you know, working hard, they have their own arena that they fight in and they fight 41:57 they compete against other miners to mine so they're very good at that, but they don't really realize that these things are possible that will grow the pie enormously for the whole industry, they just don't I from firsthand experience I've spoken to many of the mining 42:14 pools and their CEOs and their CTOs and they just don't understand it yet. Some of them do, of course, but I think this is just in the process of changing. It's just on the cutting edge. 42:31 I would tend to agree. I mean, as much as the developers listening to this will hate me, but you know, it's kind of like developers in trading, you have your own arena, but when it comes to trading, unfortunately, most developers tend to 42:43 there is a lot of funny stories, I know, anyways, very sad, but funny stories, but we will not go into them, you know, but about, you know, merge mining and about I want to ask about security and about the consensus. 42:54 And so, because in proof of stake, for example, there is similar, slightly similar to merged mining, which shared security, I guess, and is the concept where validators, you know, can be hired by smaller networks from bigger networks. 43:12 And, you know, sort of, but it hasn't also code owned that much. Now I'm wondering, now I am actually a self-hosted bare metal validator for we have our own equipment. We don't go by a data center. 43:26 So I kind of understand the game, but, well, it doesn't like to think so. But, you know, the question is, why do you think still, because what you say has every single sense to it, right? Merged mining, more profit, shared security, more profit, less work, more profit. Why doesn't it catch up until now? Neither. And we talk about merged mining, of course, you know, stick with that. 43:47 I didn't understand exactly what you meant. You mean the idea of a version of proof of stake that what specifically are you asking about? 43:56 So basically, what I'm asking about is why you think it doesn't catch on the idea of merge mining until now or shared security, because I was just saying that shared security in proof of stake is very similar. 44:08 But there is also a lack of adoption, so to speak. I mean, it's quite a recent thing still in proof of stake. But what I'm trying to say, in my opinion, merge mining is the first logical step. If I was a miner or if I'm a validator, those are logical steps. Now, why they don't catch up until now? 44:27 Yeah, I don't know. But I do have some guesses. I mean, I certainly spent a lot of time in the Bitcoin community, and I am very familiar with Bitcoin culture. Bitcoin culture, as you probably know, it just, at this point, presumes that Bitcoin will be the winning coin. And it doesn't need anything else. It doesn't even need adoption. Like those people come crawling back, you know, and they want to get into the Citadel or something. 44:53 So there's an enormous amount of overconfidence and complacency and just total obsession with the idea that Bitcoin is perfect the way that it is, and it's just the price is going to keep going up. 45:05 And most people have bought into that, or at least they, I think it's even worse where most people subconsciously believe it, where they actually, they don't even really realize that this is what they're doing, which I think is truthfully the case, including many large miners, you know, mining pools. 45:27 I think they wake up in the morning and they just think, okay, I hope, what's the latest, you know, Michael Saylor presentation or what's the latest meme that will pump the coin? They don't even realize, I think they don't even realize that they're doing it. And it would never even occur to them to say, like, how can we get more adoption? Because more adoption means more transaction fees, which means more revenue. It means more notoriety for the coin. They just don't think that way. 45:54 So the culture, as is usually the case, the culture is operating on a subconscious level for many people. They don't even realize, you know, why are they going to church? Why are they going to the NFL? Why is it important that their kids go to school? They don't even really realize why they're doing it. 46:12 You know, there could be really good reasons. But I do think the Bitcoin culture is not set up to reward merge mine transaction fees, because that would involve a different chain. And they think that the chain they have is perfect. So that's my guess, I would say, is the current headwind. 46:27 It's a very interesting, like, I think it probably has a lot to, I mean, you saw me agreeing there. So I definitely think that it's growing from there. Because I can tell you that I know at least one very, like, person who introduced me to crypto. This was many years ago, so 2011, roughly. And the person, you know, went in cycles of like, Bitcoin altcoins, Bitcoin altcoins. 46:56 But today, what you said describes, I think, that person perfectly. They are not aware of the fact that they believe in that. They and they live their life. But everything they say when you talk to this person, just keeps on, you know, kind of pile up on this idea. It's perfect. It doesn't need any improvement. It will finish like that. And yeah, it's a weird thing. 47:17 And this is actually, I guess, kind of like my last question. We're coming up to an hour here. But to ask you a little bit about that, again, in your own words, you mentioned it at the very beginning of the conversation, the Bitcoin maxi attitude. And at least from my perspective, somebody, you know, who, at least I like to think I've been here long enough to see different behaviors. In my opinion, I see a shift. I see a change, a small change. 47:44 There is, of course, the traditional Bitcoiners, you know, like, OK, guys, we are here and nothing will move. We are a wall, you know, like between East and West Berlin and nothing will break us. No Soviet Union will collapse here. And then, you know, you see now on Twitter, especially, unfortunately, Twitter is still being, you know, number one kind of platform to get our unusable crypto until 2024. 48:06 But, you know, you see that you kind of feel that there are people, for example, you know, I'm having you on, I've had Vlad on, I've had a couple of more people who are proclaimed Bitcoiners on the show who don't speak solely about Bitcoin. They're starting to sort of like expand, you know, whatever they think can be beneficial to the Bitcoin network itself and for crypto in general. 48:28 Now, the question, in short, do you think that that attitude of the maxi logic, is it changing? And if it is or if it's not, what do you think can, where is it going or what's going to happen with it in five years? I don't know, like a general. 48:42 I think it has gone wrong and I think it will be fixed before. I don't think even five, I think three, I think, I don't think it can go the way it's going for another three years. So maybe I'm wrong about that, but I don't think so. 48:54 The world of software is just too competitive. The original maximalist view that, I mean, I would have proudly adopted and sort of still adopt, you know, it's like 2014, 2015 and earlier, because, of course, it starts to shift. 49:08 This is like the block size war sort of shifted it, I think, is the issue. But basically, the old view was something like, there's nothing wrong with like, it's like we were all in different plots of land or something. It was like, here we are in Bitcoin. 49:23 We have a lot of work to do to make Bitcoin a success, but there's nothing inherently wrong with this plot of land. It's not like we should move to somewhere else. We just have to start over there. You know, we have to start over, build the power plant. It's like we're playing Sim City or something. We have to build the power plant. We have to build the roads. We have to build the skyscrapers. We have to build the universities. We have this big project here. 49:48 So, but it's not like if we just move to Litecoin, it'll be better because of the faster block time. That everyone rightly called that view out as just being, 50:00 a flimsy pretext for pumping the Litecoin price and it had nothing to do, and of course, it raised far more questions than it answered, like, if we move to Litecoin, why not move to something else? 50:08 And if the shorter block time is good, why not make it like one second block times? And there were people who did this. It was like Litecoin, Fabricoin, et cetera, on and on and on, Dustcoin, on and on, exactly as you'd expect. 50:21 Similarly with Bitcoin Cash, it was like, okay, the block size limit is raised, but then why not raise it again? And then as Bitcoin SV, it was like, why not just completely remove it? And, you know, why not hard fork more times? 50:35 So this was the old critique that all of that stuff was just nonsense, which I really kind of think it was, but that never meant like that the city on day one is already perfect. 50:47 And that, because no one would believe that because back then it was so small that you couldn't, it was again, subconscious. Everyone, when you showed up, you looked around and you saw, okay, this place has potential. 51:01 But right now it's, no one has heard of us, CNBC is laughing at every, they ever mentioned, there were sites, I think it was called like bitcoincharts.com or something. 51:13 It had a little news panel. And if anyone mentioned Bitcoin anywhere in any kind of like internet article or whatever, they would show up there and you would like refresh the page hoping for like maybe one a week, one a day. 51:28 You know, and you'd refresh the page and you'd say, is anyone out there going to mention Bitcoin? So it was so small back then that no one would say, oh, it's, it's, it's, we take it for granted that this is, it's going to be hyper-Bitcoinization and there's going to be the Citadel. 51:43 Everyone was worried all the time that it would just go to zero or that they would just like, no one would care or that something else. 51:50 So again, it was subconscious that the idea that we're going to have to fight to make this a success and then it achieved more success. 51:56 And then a bunch of people who joined, you know, in the last three years who don't know anything, they kind of just think, okay, the, the, the, the pitch to them was just buy this coin and you'll make a lot of money. 52:08 So that's, that's kind of like why the Maxie idea has completely shifted to that. 52:15 And that won't work. That, that is the unsinkable Titanic, so to speak. 52:20 You know, that is the hubris that is, you know, I compared to Star Wars episode one or whatever, everyone thought it, you know, they thought the Titanic, they thought Rome would never fall. 52:29 They thought the Titanic would never sink. 52:31 And they thought everyone thought Star Wars episode one would be like a huge success because George Lucas was personally involved, et cetera, et cetera. 52:38 He had on the CGI that he could want. 52:40 And of course it's, you know, it's basically terrible. 52:43 So this overconfidence and complacency is exactly what will, exactly what doesn't work. 52:49 And it is inevitable that it will produce mistakes that will either kill the project or just have the culture be defeated. 53:00 You already see it to some extent where the Ordinal stuff was an attempt to break away from the death cult of like, this is already perfect complacency and just do something fun, something that was new and fun. 53:13 And that actually involved using the software because related to the L2 point is, is that the more things that the good model can do, if there's good software out there that does certain things, then the fewer scams people can get away with shilling. 53:26 Because they say, here's the thing that already works. 53:28 You can't sell someone like a word processing scam if they have Microsoft Word and Google Docs. 53:33 Those stuff's already out there for free. 53:36 So the Ordinal's people were just saying, OK, we want to use the software and have fun. 53:41 And this was initially met with hatred and revulsion by many of the loud cultural people. 53:48 But since it had real users and it paid fees, the miners were just like, OK, we're collecting the fees. 53:53 And also it was like it would sell tickets to the conferences. 53:58 So the conference people realigned to promote this type of thing, to promote actual users with actual customers. 54:05 A lot of people, for example, I mean maybe I shouldn't list the examples, but a lot of people have said like one example was that like Safety and Amuse pulled out of the Bitcoin conference saying that he didn't want because it was shilling junk. 54:21 Which was what he meant like the Ordinal's and it's no longer consistent with his brand or whatever. 54:27 But the conference ended up doing very well and eventually attracted Donald J. Trump as the speaker. 54:34 So it became enormously prestigious. 54:37 And then all those people had to kind of come crawling back and say, oh, that they wanted to bury the hatchet. 54:42 I don't think Mr. Amuse was one of them, but I know a lot of people. 54:47 I just know from talking to the organizers of the conference, I've been involved with that conference ever since it was created. 54:53 And so I just know some of the people there and they told me all about how these people angrily left before over this Ordinal's drama. 55:00 Remember, this was like some big issue like two years ago. 55:03 The fact that Eric Wall was allowed on stage in a wizard costume. 55:07 This is like the guy was foaming at the mouth swearing on Spaces saying this is ruining the generational wealth of Bitcoin. 55:14 And Bitcoin is something for his kids to save them from dying in poverty. 55:19 And how can they disrespect him by allowing him up in a wizard costume and like just crazy people. 55:25 And then that's revealed for how absurd it is. 55:31 And then normal people don't want to interface with that. 55:35 And so then nature sort of heals itself when the conference is a big success. 55:40 More of a success because people are actually doing things they like and having fun. 55:43 Then those people come crawling back and they say, oh, you know, I don't know what came over me. 55:48 So we're going to hear a lot of that, I think. 55:51 Well, I hope you're right. 55:54 I hope that, you know, we keep on progressing as an industry, no matter what we do. 55:59 No matter, you know, whether we're talking about, you know, merge mining, shared security, less maximalism, 56:05 more prediction markets and more, you know, more decentralization or whatever. 56:10 I hope that we keep progressing in all directions. 56:13 And I want to thank you very much, Paul, for finding the time for the hour. 56:17 And I hope even the disagreements, you know, we can still see that as an industry, 56:24 our goal is definitely to keep on going, not just to disagree. 56:28 Disagreement is good. Consensus might work great for the blockchain, but for humans, it is the kiss of death. 56:34 So thank you for your polite disagreement. 56:37 Yes, I agree. Thank you, Paul. 56:39 Please don't hang up just yet. This is just a goodbye for the listeners. 56:41 So everybody else, thank you for tuning in and see you next week.