0:00 Hello, and welcome to Drivechain Twitter Spaces. 0:04 We are thrilled to have another conversation 0:07 on this very important Bitcoin improvement proposal today. 0:11 Welcome to those in the audience. 0:13 All are welcome to raise your hand and come on up 0:16 and chat about this monumentally important 0:20 Bitcoin improvement proposal. 0:22 I'm Henry of LayerTwo Labs, and today is March 30th, 2023. 0:28 Every day brings us closer to Bitcoinization 0:31 facilitated by powerfully valuable sidechains, 0:37 which are peer-to-peer in nature 0:40 and consistent with the vision of Satoshi 0:44 of a multi-chain blockchain ecosystem 0:48 merged mind with Bitcoin, 0:51 enabling a wide variety of applications 0:55 to use blockchain in a manner that accrues value 0:59 to Bitcoin's block space. 1:02 In the Drivechain view, 1:04 these blockchains, other than Bitcoin, are sidechains, 1:07 and they accrue value not only to Bitcoin's block space, 1:11 but also Bitcoin's native token, BTC, 1:17 thus facilitating number-go-up technology 1:21 and a harmonious arrangement of development 1:25 on multiple blockchains in a way 1:28 that accrues value to Bitcoin and its block space. 1:32 That's so important. 1:34 Either Bitcoin will or won't adopt this proposal, 1:38 which would enable it to internalize the value 1:41 of innovations outside of Bitcoin. 1:47 Eventually, there'll be one Layer 1, 1:50 and on top of that Layer 1, everything else will exist. 1:54 This is the result of network effects. 1:57 There'll be one protocol, which is the Layer 1, 2:01 and everything else will be built on top of it. 2:05 So it's important, in order for Bitcoin to be that Layer 1, 2:10 that it have great extensibility, 2:15 meaning a lot of potential 2:19 for value creation, innovation, 2:21 and customization on top of Bitcoin. 2:28 Well, as always, people in the audience 2:31 are welcome to come on up. 2:33 Don't be shy. 2:35 Ask a question, share a comment, do a little rant, 2:39 sing a song about Drivechain, whatever you'd like to do. 2:44 All are welcome. 2:49 Maybe we should put something in the nest for conversation. 2:55 A recent tweet of importance. 3:08 Ah, we have a speaker. 3:15 Dr. Bailey, welcome to the stage. 3:20 Hey, Henry. 3:21 How's it going? 3:21 It's going well, as always. 3:23 How you doing? 3:26 Life is good. 3:27 It's been a while since I dropped in on one of these. 3:29 I do have a question for you. 3:31 This is part business, part personal. 3:34 You've thrown your lot in with Drivechain 3:37 for a couple of months now. 3:39 I wonder how you measure success there, 3:42 and whether you believe you've seen success 3:45 on the metrics that matter to you 3:46 since you've been so active in promoting Drivechain 3:49 for, what, about three or four months now, something like that? 3:53 Yeah, that's a great question. 3:55 So I've actually been promoting Drivechain 3:57 long before I even took this job. 3:59 I was running Twitter spaces, 4:01 and the titles of those Twitter spaces were, 4:05 I would either title it Drivechain, 4:07 or I would title it Paul Sztorc Fan Club. 4:10 And I was doing that for almost a year 4:13 before I joined LayerTwo Labs. 4:16 And if my position at LayerTwo Labs were to come to an end, 4:20 I would continue to advocate for Drivechain as a volunteer. 4:25 So for me, this is a topic of fascination and enthusiasm, 4:33 separate from my professional life, to some extent. 4:39 Now, I do monitor the metrics of how many people 4:43 are in our Drivechain Telegram group, 4:46 and how many people are following LayerTwo Labs, 4:50 how many people are following the Drivechain Reddit community 4:55 and a few other metrics. 4:58 So I do think it's good to keep track of those things 5:01 and try to grow them. 5:03 I also view Drivechain as a project of persuasion 5:09 in terms of persuading key people. 5:12 So if we have, let's say, 5:15 10,000 people join the Telegram group, 5:19 but then we have some very influential Bitcoiner 5:24 announce that he's in favor of Drivechain, 5:28 it'd be hard to say which one was more valuable. 5:33 It's possible that if we get masses of people, 5:37 if we get thousands of people interested in Drivechain 5:40 and discussing it for Bitcoin, 5:42 for Bitcoin's survival and success, 5:46 then the key thinkers, the leading influencers in Bitcoin, 5:51 like researchers at Blockstream and others like that, 5:57 developers, they'll be more comfortable 6:00 in talking about the benefits of Drivechain. 6:03 So as it stands right now, 6:05 a lot of Bitcoiners aren't familiar with Drivechain, 6:08 and they might've heard some people criticize it, 6:12 like Shinobi, 6:13 or they might've heard some people advocate for it, 6:16 like Adam Back, Fiatjaf, Mike Tidwell, and others. 6:22 So there are some supporters and some detractors, 6:26 but I would like to see more of the influencers 6:29 become supporters. 6:31 And at the same time, 6:32 I think that broad support among the plebs is valuable 6:37 and makes it, it just advances the discussion, 6:41 because ultimately you have to have both. 6:44 You have to have kind of the grassroots 6:46 as well as the influencers. 6:49 They have to all be convinced it's a good idea. 6:53 So those are some of the ways that I see it. 6:59 Obviously, total success would mean 7:01 like Bitcoin activating the Drivechain BIPs. 7:05 So there's a lot of stuff going on behind the scenes 7:08 that is good. 7:11 I think we're gonna see this year as a huge year 7:17 for Drivechain success and understanding. 7:20 LayerTwo Labs is endeavoring to make Bitcoiners 7:26 more informed and educated and interested 7:30 in this very valuable and important view, 7:33 where a multitude of applications can be built on Bitcoin. 7:38 Bitcoin would become more technologically interesting. 7:41 It would be very exciting for the Bitcoin community 7:45 if there's a peer-to-peer sidechain 7:48 that does Zcash privacy technology, 7:52 if there's a peer-to-peer sidechain 7:54 that does Hivemind oracles, 7:57 where you can make a bet on anything about the future. 8:01 It would also be interesting to have a big block, 8:03 one gigabyte block scaling sidechain and others. 8:11 It would be really great. 8:12 Bitcoin would be a lot more interesting and exciting. 8:17 And if just 1% or 2% or 5% of Bitcoiners 8:21 send their assets to those sidechains, 8:24 those sidechains will have billions of dollars of value 8:27 and their fee revenue probably will be significant 8:31 and adequate. 8:32 Because if there's, let's say there's a Thunder sidechain 8:35 with $10 billion of market cap, 8:37 that'd be a pretty serious blockchain. 8:40 And we would find out, we would find out over the years 8:44 whether it's something which is a great design or not. 8:48 But I think it's definitely worth doing at this point. 8:51 We have to have Bitcoin be on track to be the blockchain 8:55 on which everything else is built. 8:57 Like either that will be achieved or not. 8:59 So I subscribe to the Fiatjaf view, 9:02 which is either Bitcoin is the complete winner 9:05 or it'll be a complete loser. 9:07 There isn't some happy middle ground where it's, 9:11 you know, where like hypothetically, 9:13 let's say in 10 years from now, 9:14 Ethereum is the largest by market cap 9:17 and Bitcoin is one fifth the market cap of that. 9:20 And it's still somehow viable. 9:22 That probably wouldn't work out 9:24 because of the nature of price. 9:26 Nature of protocol network effects. 9:29 It's important that Bitcoin be that digital gold layer one 9:32 on which everything else is built. 9:34 So we've already, we've got that ossified layer one, 9:36 but we've got to just make a tweak 9:38 to enable the extensibility 9:42 so that there can be this thriving variable layer 9:46 of innovation and experimentation 9:48 on top of that digital gold substrate. 9:51 Henry, I have another question for you. 9:53 This is about strategy. 9:55 I believe you've correctly identified the campaign here 9:59 as a political and social one. 10:01 Your goal is to persuade. 10:03 The technology is settled. 10:04 We know what this does and does not do technically. 10:07 So it's a matter of persuading people. 10:09 And I also like that you've identified influencers, 10:12 people with extraordinary reach on social media 10:15 as key points to persuade. 10:17 And I'm wondering if you could talk a little bit 10:19 about that. 10:20 So you've identified influencers, people with extraordinary reach 10:23 on social media as key points to persuade. 10:26 But it seems to me there's a trade-off here 10:28 that makes that difficult 10:29 because one job of a Bitcoin influencer 10:32 is to persuade people that all is well, 10:34 that number will go up, 10:36 and that you should keep on buying Bitcoin. 10:38 This is just a fact. 10:39 This is what influencers do. 10:40 And yet one of the important steps 10:42 to understanding drivechain is to see that, 10:45 wait a minute, there's this issue with fees 10:49 because of the exponentially declining block subsidy. 10:52 And this, once you put these two against each other, 10:55 it looks to me like they kind of cut against each other. 10:58 So there's an inherent challenge 11:00 to actually capturing the minds of the people 11:03 who matter the most 11:04 when it comes to affecting Bitcoin's social layer. 11:09 Well said. 11:12 I think that low fees forever on layer one 11:15 is not the best justification for drivechain. 11:20 You didn't say otherwise. 11:23 But just to elaborate on your point, 11:26 low fees for layer one is a threat to Bitcoin 11:31 in the long run if it persists. 11:35 And to the extent that anyone thinks 11:39 that it is going to be a long run threat, 11:41 then it threatens Bitcoin right now. 11:44 So that's one thing that's very important 11:46 is people say within Bitcoin's community, 11:50 there's no problem. 11:51 Bitcoin is working fine. 11:53 TikTok next block. 11:55 But every time someone comes to the opinion 11:58 that Bitcoin likely will have a problem in the future, 12:01 that person doesn't buy Bitcoin today 12:04 because economic actors are future oriented. 12:09 So they manifest their expectations in the present 12:13 with respect to the future. 12:15 So there are people on Twitter every day 12:18 with over 100,000 followers who are tweeting 12:21 in favor of Ethereum like Evan Van Ness 12:24 writes every day that Bitcoin's gonna have inflation 12:27 and that people aren't admitting it. 12:30 And Justin Bonds is writing this every day. 12:32 I think they're convincing probably thousands of people 12:35 that Bitcoin's going to do inflation. 12:38 And whether they're right or wrong, in my opinion, 12:42 may depend on whether drivechain is adopted. 12:48 It might be in the future that people will look back 12:52 and the narrative that drive chainers have will be correct. 12:57 However, it's just important to note 12:59 in order to not overstate our claims, 13:02 it's important to note that the security budget problem 13:05 isn't one that drive chainers should characterize 13:09 as an inevitability. 13:11 That is, we shouldn't say that without merged mining, 13:15 there'll be no solution. 13:17 There's always a possibility that the optimists 13:20 will be proven right. 13:21 That there's a logical possibility 13:23 that the whole world will demand Bitcoin layer one 13:26 block space for their ordinals 13:28 and for their digital gold movements 13:30 and their luxury ordinals. 13:32 And then there'll be high fees forever. 13:35 We might see next year, $20 Bitcoin transactions 13:41 all year, it's possible. 13:44 So we shouldn't say that we must do drivechain 13:47 specifically because we will have low fees without it. 13:53 The justification for drivechain, as you know, 13:56 originally had nothing to do with the low fee problem. 13:59 Nobody knew about low fees as a problem in the future 14:04 in the way that we do now until 2018, when Jordan McKinney, 14:09 and this is my understanding personally, 14:11 that he was the first person to ever talk 14:14 about the security budget. 14:16 No one had ever used the words security budget 14:19 before 2018 in Bitcoin's context. 14:23 So Jordan McKinney invented that, he coined it. 14:27 He also coined security factor, which is more important. 14:31 People really should talk about security factor more 14:34 because he explained in that blog post 14:37 on his website, on his blog, 14:39 security budget is the Coinbase plus the fees. 14:43 And as the Coinbase declines, the fees don't go up. 14:47 And then we have security budget failure, 14:49 but security factor is most important 14:52 because that's the ratio between the security budget 14:54 and the market cap. 14:56 So if you have a declining security budget, 14:59 you're gonna have a worsening security factor ratio. 15:02 And then eventually people will just devalue the token 15:08 because of the declining security budget 15:11 to bring the security factor back into alignment. 15:14 So it's not good. 15:19 Lynn Alden talks about these concepts in her blog post, 15:22 in her essay on her website in 2021 in March, 15:27 the Bitcoin fee modeling one. 15:29 She doesn't say security budget and security factor, 15:30 she just says that there's a percent. 15:33 She'd like to see what, 15:35 she doesn't call it security factor, 15:36 but she says some phrase. 15:37 And then she says she'd like to see that percentage 15:39 be about 1.5% to 0.5%. 15:46 So like roughly 1% of Bitcoin every year 15:50 being spent on security. 15:51 So if we have a $100 trillion Bitcoin market cap, 15:55 she would like to see annual miner revenue 15:59 of one trillion. 16:02 If it's $100 trillion market cap, 16:04 then one trillion per year in miner revenue. 16:07 So that's what she would like to see. 16:09 It's not something to laugh about really, 16:11 because if you have $100 trillion of value secured, 16:14 then annual spending of one trillion on transaction fees 16:18 is where she feels there would be a healthy equilibrium 16:21 of not overspending on security, which is inefficient 16:25 because then society is supporting 16:27 a oversecured payment system. 16:30 But if it's undersecured, then that's not good. 16:33 So it's very tricky because there's no oracle system 16:37 that regulates the amount of security spending. 16:41 But my view, which is I think Paul's view, 16:44 is that fees are not the only reason to do drivechain. 16:49 And in fact, fees weren't even part 16:51 of the original discussion. 16:52 Back in 2015, when drivechain was conceived, 16:55 it was all about this question of isn't it terrible 16:59 for Bitcoin economically as a movement 17:03 to lose the resources of the value, the fees, 17:08 and not the fees, but the value 17:09 and the intellectual resources 17:12 of having people split off and do their own thing. 17:16 Like whenever someone splits off from Bitcoin 17:18 doing a fork or doing an altcoin, 17:20 then it diminishes the resources that the community has. 17:28 So it's ideal for the community to always be very cohesive 17:32 and to be together. 17:33 But of course, if there's too much ossification prematurely 17:39 and if Bitcoin isn't enabling extensibility, 17:42 and if we're on track in a way that's not healthy, 17:48 then the pressure from people leaving the community 17:51 could be good. 17:54 So what are your thoughts? 17:57 Do you completely agree that the reason to do drivechain 18:01 shouldn't be seen as primarily about the security budget? 18:10 The best justification is, as Mike Tidwell would say, 18:12 the love of innovation. 18:14 Simply enabling more innovation and creativity 18:16 for Bitcoiners on Bitcoin, 18:18 that is the reason to do drivechain. 18:21 I think that's the out of back reason. 18:22 He talks about innovation, 18:24 that he would like to do Zcash stuff on Bitcoin 18:28 as a sidechain. 18:30 And that way it's, you're a Bitcoiner when you're doing it, 18:34 but it's innovative. 18:38 I would agree with that, 18:39 but I would actually use slightly different language. 18:41 I think the language of innovation and cool technology 18:44 is a bit abstract. 18:45 For most Bitcoiners, the way to reach them 18:47 is to say that Bitcoin will become more useful, 18:50 and when something's more useful, it's more valuable. 18:53 And drivechain makes Bitcoin more useful. 18:56 Now, maybe that's the same thing as saying innovation 18:58 and better technology, 19:00 but at least it feels more concrete to me 19:02 to talk about usefulness, 19:03 that you can do more stuff with it, 19:05 and that makes it more precious. 19:07 Right. 19:08 I always worry though, when people talk about use, 19:11 because they often say that holding isn't using, 19:15 but if you're transacting, you're using, 19:17 when really the truth is slightly different. 19:20 But holding is a form of using, 19:21 because saving is using. 19:24 Saving is an activity. 19:26 But if there's a peer-to-peer Oracle network 19:28 where you can make bets on the future, 19:31 or if there's a large block sidechain 19:33 where you can transact very cheaply, 19:38 that's another kind of use. 19:39 So it does make it more useful. 19:42 I agree with you. 19:43 I think that the builders like Adam Back and Mike Tidwell 19:46 like those words about innovation 19:48 because they're innovators, right? 19:49 They're building tech. 19:51 They're not just consumers like me. 19:53 So I guess different people enjoy different advertisements. 19:59 Hi, Alex. Welcome. 20:01 Hi, Henry. I have a question. How does Lyn Alden justify the idea that roughly 1% of market cap should be spent on security? 20:12 I'll look it up now. 20:15 I remember reading that blog post, and I think it's just like a heuristic. There's no real... 20:25 As Bitcoin's market capitalization has grown, the absolute amount spent on security has 20:36 grown as well, but the percentage of the market capitalization spent on security has diminished. 20:42 Indeed, that's what we should expect to occur over time. 20:45 Paying a huge percentage of the market cap in security each year made sense in the beginning 20:51 when the protocol was small, vulnerable, and highly inefficient. 20:53 inflationary, but in the long run from a large market size and small issuance rate, something 21:03 more like 0.5% to 1.5% of market capitalization spent on security would probably be appropriate. 21:11 I like how she uses probably be appropriate. 21:16 Yeah, it's like, what about one tenth of 1% or one hundredth of 1%? Why is that less appropriate? I mean, it depends on the market cap, right? 21:25 If the market cap is $10 trillion, the size of gold, then one tenth of 1% is still a very large number. Why is it the whole percent? 21:35 I like the reasoning Paul Sztorc provides in his blog posts at truthcoin.info, where he argues that we want to see Bitcoin's security spending on track to rival the spending of the US government in terms of its growth rate. 21:55 So he points out that the US government spends like 600 or 700 million or billion dollars on defense, and it grows at 6% a year. 22:05 So I think he would say that if Bitcoin were to get to 100 trillion, which is a number he often gives as the target, then the annual security spending should be around a trillion a year, if I'm not mistaken. 22:22 So that's 1%, same as Lyn Alden. 22:28 Is that to outspend the US military? That's the idea? 22:32 I don't know. I guess it's to say that if it were a trillion dollars a year, the US government couldn't easily do it. 22:41 There was another idea, which is that the moment Bitcoin consumes more than 50% of all electricity on earth, then it's safe, because it will be hard to bring more electricity online in order to provide it. 22:55 Yeah, that's the Shinobi sophistry. That it's all about the energy, and it's not about the money. 23:04 Recently, Michael Saylor confused everyone by saying that only the good guys will have the ASICs. And then everyone disagreed with that, but for different reasons. 23:20 Yeah, but it's like Michael Saylor might be saying that as part of a political manipulation to introduce the idea into the political class that we should be the good guys with the ASICs and we should promote Bitcoin mining, etc. 23:34 You might realize that from a game theoretic perspective, it's the budget that matters, not the energy efficiency of the latest ASIC box. 23:46 That's a very charitable reading that you have. Very charitable. 23:50 Well, it's either that or he doesn't understand this issue, and now the question is will he repent publicly once he realizes he's wrong or not. 24:07 I agree. I mean, Eric Wall has been making fun of it a lot. Rightly so. I mean, I don't like making fun of people. I think it could have been more gentle, the correction. 24:18 But the truth is that Saylor said a bunch of incorrect stuff there. 24:24 I just want to say it's all about the fees and the Coinbase. It's all about money. Imagine two different militaries. If one has a higher budget than the other, presumably it's going to be the superior military. 24:44 The idea that the good guys will win with a lower budget is no good, especially when we're talking about how Satoshi from the very beginning made it very clear it's all about a majority. 24:56 Who has the majority of hash rate? And we can just presume that the more hash rate you have, the more you're consuming to produce that hash rate. 25:06 So it's a financial thing. Bitcoin security is financial. Now obviously security, life isn't all financial. People are doing things. There could be ideological mining. There are sources of mining. 25:21 Yeah, those are negligible. I mean, you're right. I agree with you there. But earlier you were talking about doing education and explaining to people that innovation would be enabled using Bitcoin, the asset, etc. 25:39 So even though all these things are true, that message is not connecting because it's drowned out by all these fear-mongering influencers who, in order to get the clicks and the impressions, they always need to scare you about yet another attack on Bitcoin. 25:56 So basically the whole podcasting elite, all these Twitter personalities, they just farm engagement by fear-mongering. 26:07 Right. I agree with a lot of that. I agree. I mean, what can we say? It's unfortunate many people are interested in... 26:22 What we can learn is because the same situation, well, not the same, but similar situation existed in the Ethereum world for a few years when Ethereum barely functioned. 26:36 It was like a minimally viable sort of pre-alpha stage network that was launched and it was clearly unscalable with the single-threaded execution of complex contracts and stuff. 26:48 And the fees skyrocketed and stayed high. And it has to be some kind of a crisis for the network in order to concentrate the minds. 26:59 So basically, in the case of Bitcoin, it will either be an apocalypse, is what I call it, when the fees go high and stay high, or it will be a flippening by Ethereum or maybe even lappening by Ethereum. 27:11 Fascinating. 27:12 2x or 3x flippening. It has to be a crisis to concentrate the minds, basically. So it's very similar to the situation during World War II when Churchill said that Americans can be counted upon to do the right thing after they've exhausted all the other possibilities. 27:29 So it's going to take a crisis with fees rising and staying high for months. And by high, I mean like $20 fees or higher, which basically eliminates ability by the global self-plebs to move their savings. 27:46 And then you'll have this great outcry in the force that we need to scale Bitcoin. 27:52 So your view is that the security budget problem will be eliminated and, in fact, the opposite thing will occur, which is that you, as we've discussed, I know you have this view and you may well be right. 28:05 I'm hoping for the easiest way to catalyze a crisis, basically. Because I know that all this talk about let's unleash innovation, they always have rationalizations like, oh, go ahead and innovate on Lightning Network, even though people who created Lightning Network and who truly understand it will tell you that Lightning Network is inappropriate for plebs because no protocol that requires you to run an online server has ever succeeded in mass adoption on the internet. 28:33 And that will not be the case for Lightning Network either, although Lightning Network is very useful for institutions to do instant final settlement over private channels that you will never see. 28:44 But the point is that I'm looking for the – like the ordinals was like a God-given – I'm still hoping the ordinals will – luxury ordinals specifically – will create a fee crisis. 28:55 And the fee crisis will force a scaling, and the scaling will mean that you need either sidechains or rolloffs. 29:01 So I have a couple of questions for you. 29:05 So to be clear, you would say that every time any drivechainer has ever said fees might stay too low unless we get drivechain, unless we get merged mining, you would say to them, that's completely wrong. 29:22 If we ever get merged – you know, merged mines, sidechains, you know, drivechains, if we ever get more of that, it's going to be because fees are too high on Layer 1. 29:34 What I'm saying is that trying to argue has failed, right? 29:41 Like arguing for sidechains has failed. 29:44 You know, people in the core, they're not saying anything that the engagement farmers would disapprove of. 29:53 Otherwise, other developers in the core stop reviewing their pull requests. 29:57 So there is like a wall of silence in there, right? 30:01 So everybody tries to avoid any controversy. 30:04 And all of these talks and all this education has failed. 30:08 And what will not fail is the real need to scale the network, which can come about either because the fees go high and stay high, which we all know that they must, right? 30:21 Because Bitcoin is a settlement network. 30:23 You know, I will not be surprised if the average transfer fee is $100 forever, right? 30:29 But $100 fees basically means that tens of millions of plebs in Nigeria and Vietnam and the global south cannot move their savings, period, right? 30:39 Because the savings are small in dollar terms, right? 30:42 And the Lightning Network goes disabled too. 30:46 So like what I'm saying is that there has to be a scaling crisis or there has to be a crisis where Ethereum temporarily hopefully flippens or lappens Bitcoin. 30:56 And then that will concentrate the minds that you cannot just sit back and expect Bitcoin to take all the monetary value from all the other assets and become $100 trillion large. 31:07 Can you talk about which of those do you think is more – can you just elaborate on those two interesting possibilities? 31:19 The first is, if I understand you correctly, you're saying that low fees forever on Bitcoin is not likely in your view. 31:27 So you in fact think that Bitcoin will – with the ordinals and inscriptions, there is actually going to be more fee pressure and that once the fee pressure is high enough for long enough, then people will talk about things like drivechains. 31:46 Like scaling Bitcoin, right? 31:48 Scaling. 31:49 So you think that people will see the high fees and then they'll say Lightning isn't enough. 31:53 Let's have sidechains, like big block sidechains, for example. 31:57 You think that's going to happen? 31:59 Well, I mean, imagine the fees go to $20 or $30 and stay there for months. 32:05 Then engagement farming by fudding all changes to Bitcoin and claiming that everything is an attack on Bitcoin becomes less profitable than fudding the idea that, hey, those guys in Nigeria that have been saving in Bitcoin now need to spend 10% of their savings to move their coins one time. 32:28 So you will now have this kind of pleb uprising, basically, where the plebs are no longer interested and don't change Bitcoin no matter what. 32:38 So you think that the people who advocate for Lightning as the scaling layer will say, we've changed our minds. 32:44 You think some of them will say that and actually embrace the idea of a big block sidechain? 32:48 It's not the big block, right? 32:52 From my perspective, Lightning has failed to become adopted by retail or plebs, right? 33:01 Because, I mean, there will be custodial Lightning. 33:04 Sure, there will be 20 companies like Strike that have tens of millions of people. 33:09 And honestly, those people in the global south don't know and don't care if they're using custodial or non-custodial Lightning, right? 33:17 If they create a payment standard that allows you to do payments using SATs that fly around the world and there's no credit involved, 33:25 these payments will be 100 times cheaper than existing payments that have this credit risk and counterparty risk and all these middlemen along the way. 33:35 So Lightning can succeed without onboarding millions of users, right? 33:39 Because it basically just needs a thousand well-funded private channels between giant custodial Lightning providers. 33:46 But you cannot say to plebs, to millions of plebs that have unchained Bitcoin, 33:52 you cannot say just use Lightning when their Bitcoin is now trapped and immovable because of high fees, right? 33:59 I have a question. If the fees go up a lot, everyone will have to pay a fee at least one time to get into some other spending paradigm of Lightning or sidechains, right? 34:13 They'll have to be... 34:14 Yeah, yeah. And people don't want to pay 10% of their savings as a one-time fee, right? 34:19 There's no solution to that, right? 34:21 Well, the solution is for them to sit and wait for a week while the fees dip low because the fees will be volatile and then maybe transfer part of their savings to a roll-up or to a drivechain. 34:35 What is your thought on the idea that drivechain is low-tech, roll-ups are high-tech, and roll-ups are many years away from getting a soft fork because they're so complicated, right? 34:49 I think it's the wrong approach. I think once there's a real crisis, I mean, all bets are off. 34:55 I think this whole idea that we cannot get any soft fork in and, you know, the truth is that roll-ups are not a dangerous soft fork, right? 35:04 Because roll-ups only require like a Boolean function that returns true or false to check a proof on another... 35:11 So you don't accept what I hear from, I think, Paul Sztorc and maybe some others, which is that, in fact, John Light said something to this effect, you know, like a few months ago in this space where it's a recorded space, I can find a tweet. 35:26 But he says that, you know, he likes roll-ups and drivechains and that drivechains can probably be ready earlier and therefore could be... 35:35 Yeah, I mean, drivechains are less controversial and they're completely sort of... 35:41 Are you sure? It sounds like drivechain is more controversial, but it's more low-tech and therefore it's more available readily. 35:50 Like if the Bitcoin community wanted to do drivechain, we could do it in a year from now. It would take just 12 months. 35:56 We can do it in a week from now. Listen, when there is a real crisis and the fees go high and stay high, like, for example, I'm, you know, forget ordinals. 36:05 What if, like, the government of China decides to create a trillion UTXOs while the fees are low, right, as a way to flood Bitcoin forever? 36:14 Like, what if they create a trillion dusty UTXOs, right, which is, like, the most dangerous attack on Bitcoin would be just to create dusty UTXOs and, you know, spend a few million dollars doing that. 36:25 And you will essentially blow out memory usage on every node, right? 36:28 There's, like, it basically has to be a crisis because if there is no crisis, there will be no... there is no desire to make any changes. 36:42 Can I ask a follow-up question about that? So, I was under the impression that the primary driver of data accrual to the blockchain is the block size. 36:52 But the metric you just pointed to, which is the number of UTXOs, that would be totally separate, right? Totally... 37:00 It's a separate thing, but it's an easier attack vector. 37:05 Why hasn't it already been done? Why hasn't someone done this where they increase the... 37:10 There was an attack by Roger Ver when it was the 2017, you know, block size war where he created, like, 10 million dusty UTXOs and he tried to, you know, flood the network with transactions and create the millions of UTXOs. 37:25 But, again, this is just some lunatic guy with his own agenda, right? 37:30 Like, I mean, if you have the government of China or, you know, the government of some other dictatorship or whatever, Nigeria, you know, the government of Nigeria could be attacking Bitcoin for pennies, right? 37:42 Once again, regarding this thing about roll-ups versus drivechains, it sounds like you're saying that you kind of prefer the roll-ups in general, but... 37:51 I think it's... We don't need to choose. We should have them both, right? 37:55 And drivechains are easier to deploy simply because there's no need to obsess over minute details of what proof system, you know, is going to be supported by roll-ups, right? 38:09 Because drivechains just do the counting of the number of... 38:12 You think that we would get roll-ups on a drivechain and that would facilitate roll-ups coming faster to layer one? 38:19 I don't know. I can tell you that roll-ups are more secure than drivechains. 38:24 And that's why, like, in the Ethereum world, they've considered everything. 38:27 They considered sidechains, drivechains, plasma, you know, state channels and 50 other scaling things. 38:34 In the end, they settled on ZK, AVM roll-ups and, you know, everything else will be thrown away for a good reason, right? 38:42 Because they do have sort of unconstrained innovation going on there. 38:45 They have a lot of funding from VCs and all other scaling techniques and technologies are falling by the wayside. 38:52 And they're just going full steam towards the ZK, AVM roll-ups, which, you know, is the right thing for them to do. 39:01 And the thing is that because they can do hard forks and they have Pope Vitalik that can basically have final say on what goes in or not into Ethereum, right? 39:13 So, he basically, the Ethereum foundation and Pope Vitalik, you have a final say and they can just say, well, these EIPs go into the next release. 39:20 And, you know, it's like five hard forks every six months, right? 39:25 That's why Ethereum can never be money, right? 39:27 But Ethereum is like a big tech stock, which has a lot of income and fees. 39:31 So, the fees that Ethereum is accruing, they're like a stream of income accruing to like a Google stock, right? 39:38 But like a big tech stock. 39:40 So, you know, Ethereum has value because it's a utility token with incoming fees, right? 39:47 It doesn't need to be money. 39:49 But like again, for example, if one Bitcoin startup used, you know, $10 million of its budget to create a fee crisis, you know, that might actually be an easier way to do a soft fork. 40:04 Then, you know, advocating endlessly on Twitter and going against the flow of this ossification mob, 40:12 you know, that's like fear mongering and engagement farming on Twitter, you know, 40:21 by claiming that everything is an attack on Bitcoin, you know, it's all a CIA conspiracy. 40:26 You know, and the Ordinals thing is actually kind of a double-edged sword, right? Like on one hand, 40:32 it broke the taboo against using Bitcoin for non-monetary uses. But on the other hand, 40:38 it was like an outcome of the Staproot soft fork. So, now there's this kind of like this 40:44 consensus, quote-unquote, that, you know, any changes can create unforeseen consequences like 40:50 Ordinals. So, we should just do no changes whatsoever to Bitcoin, right? But that position 40:57 becomes unsustainable once there's a real crisis, like once there's a pleb uprising or once 41:02 Ethereum passes Bitcoin, hopefully temporarily, market cap, then there's like a real crisis, 41:09 right? Then you have to do something. You know, doing nothing is no longer an option. 41:15 I see. Well, I think you're right that the way we think about culture is that things are 41:21 deliberative in the long run, but in fact, things happen quickly and then all of a sudden there's 41:26 like a sort of tumultuous moment and then a new direction is chosen by the high priests. 41:35 Well, it's not that Bitcoin culture is like that. It's just that everybody's short attention span, 41:42 it's basically a mob looking for entertainment, right? So, it's not like, you know, five people 41:49 in the world understood what actually Taproot soft fork was doing, right? And none of them 41:55 understood that they just enabled ordinals, for example, right? And Taproot soft fork was more 42:02 complicated than the roll-ups and the drivechains put together times 10, right? But by the amount of 42:10 new code that you had to add to Bitcoin, right? Taproot was like incredibly Baroque and complicated 42:16 and SegWit was even more complicated and Baroque. Drivechains are like 10 lines of code or whatever. 42:25 I've heard something different said. Gabriel Keltman, I think his last name is Keltman 42:34 or Kerman. He was the co-founder of Rootstock. He spoke in here a few weeks ago and he said that 42:39 drivechains code is substantial in size and that he thinks that could be an impediment to 42:44 its adoption in the future. He said he's an advocate for it, but he thinks that's one 42:49 detraction that it would be ideal if drivechain could have less code. 42:56 Well, you know, like I suspect that somebody will figure out a way to enable drivechains using 43:02 possibly upcoming OP_VAULT, you know, opcodes or some other covenant opcode, right? Like, 43:10 you don't need to do the drivechains the way Paul does them in his BIP300. You can get them 43:15 permissionlessly, you know, like if there is covenants, then you can get drivechains out of 43:20 that, for example. They're going to be slightly less efficient. There'll be another 10 bytes 43:25 or whatever used in each block or something like that or one extra transaction, but it doesn't 43:31 matter much. I mean, conceptually, a drivechain is just a counting device, right? Like when the 43:38 count goes to 13,600 or whatever, then certain transaction becomes valid, right? Otherwise, 43:43 it's not valid. So it's not much. It's not much code, and it could be very well isolated from 43:50 the other code. That's not the case for Taproot or SegWit. That was like all in the middle of 43:56 the existing code with, you know, script interpreter, and, you know, there was just like huge 44:02 amounts of code for both of those, and it wasn't code that's isolated from the rest of the code, 44:07 right? I think drivechains could be, even if drivechains are 100 lines of code, 44:12 you could isolate them into like separate functions that do not depend or 44:18 neither are depended upon by the rest of the code. You know, it would be a fairly safe change. 44:25 Understood. Well, you've mentioned a whole bunch of different interesting topics. 44:30 So they include drivechains and rollups and how we can, like both of them, and which one 44:38 could be available sooner, and also how a crisis in Bitcoin, such as high fees, not low fees, 44:46 or either, would perhaps lead to interest in them. So I guess one major difference is that you see 44:56 high fees as possible, whereas... I see them as possible and even likely soon, 45:05 fairly soon, like within a year maybe. For example, in this boom whole market that has started, 45:11 right, like you can have high fees for months. People have said there'll be high fees on Bitcoin 45:15 for a long time. I suspect that Paul Sztorc will be vindicated, which may be a bias of mine, which 45:20 is why I went to work for him, but I suspect he'll be vindicated that people think that Bitcoin 45:26 adoption and demand is like unidimensional, like people just demand Bitcoin, but actually 45:35 the token and the block space, their demand curves are unmoored. They're separate. 45:43 So we could have... Yes, I mean, I agree with you there. It's just that, you know, there is like a 45:48 limited resource, which is number of payments per day. I like to think about block space as how many 45:53 payments per day you can make. And as adoption, you know, doubles the number of users every three 45:59 to four years, there will be this intersection point where there's enough adoption to fill up 46:04 all payments every day and keep the mempool, you know, thousands of blocks to clear, right? 46:11 Like, for example, recently we saw 300 blocks to clear mempool with Ordinals, and Ordinals are 46:18 just terribly not user-friendly to create and manage and look at, and no wallets support them yet. 46:25 But you can imagine that like one year from now when your, you know, iPhone wallets can display 46:31 your Ordinals and you can move them around without worrying about, you know, whether you're going to 46:36 send an Ordinal to a wrong address. And, you know, when this whole Ordinal ecosystem matures 46:44 in Bitcoin, you might have these, you know, like there's evidence for luxury Ordinals, these apes, 46:50 right, where creators are paying $300 in fees to create an ape on Bitcoin. 46:57 There's, you know, in the recent week when there was this huge backlog of Ordinals, 47:02 there was lots of transactions where these Bored8YachtClub creators were paying $300 in fees 47:09 to put an image of a Bored ape on Bitcoin, right? So, that tells you that there is 47:16 a market for luxury Ordinals, and it's just like, it just needs to have support in wallets. 47:24 And there will be, and Ordinals are just, I mean, like, you think about the images, 47:28 but the images are just the beginning. Like, I think Bitcoin Ordinals and inscriptions are a 47:32 great place to store encrypted data, like, in a reliable way, right? Not just images, 47:38 like, you can encrypt your will, your medical history, and store the encrypted copies in there 47:43 with keys being offline, for example. You know, that's like, so there's only 200 billion gigabytes 47:51 per year of block space, right? And I think there's going to be high fees, and fairly soon, 47:58 like, I anticipate them in this ongoing bull market that we're in, right? So, maybe a year 48:04 from now, maybe 18 months from now, there will be a period of months when the fees are high and 48:10 staying high. Interesting. Well, we haven't had that yet, but maybe we will. In the past, 48:21 that same thing happened on Ethereum, and they were desperate to scale, and they created side 48:26 chains, like Original Polygon, for example, was a sidechain, and they created all kinds of, 48:32 you know, 50 different startups got funded to scale Ethereum, and now it's scaling, right? Now 48:39 you have this l2b.com site that shows that, you know, they have 4x scaling of layer 2s, processing 48:46 4x the transactions of Ethereum itself, and that ratio is just going up and up and up, right? That 48:52 will be eventually, like, a thousand x scaling, or a million x scaling, where Ethereum L2s will 48:58 process a million more transactions than Ethereum itself, you know? But they only did it when they 49:04 had to, right? That's my point, is that when they had a fee crisis, which priced out everybody except, 49:10 you know, hedge funds and DoQuans, you know, in Wales, those would be the only people who 49:16 could pay $100 fees on Ethereum. I see. So, your main view is that, I understand correctly, 49:22 that there'll be high fees perhaps, and when those high fees come, people will say, 49:26 how do we scale Bitcoin and give the masses something to use that has lower fees? And you 49:31 think that the use of Lightning will, at that time in the future, not be chosen in popular discourse 49:38 as the path forward, primarily? Well, Lightning will not lower the fees, right? Because Lightning, 49:47 you know, Lightning will not help with Ordinal-induced fees. Why not? 49:52 Like, if someone is using Lightning, aren't they getting lower fees than if they're using Layer 1? 49:59 No, because you cannot put Ordinals in, you know, those board 8 pictures will not go on Lightning, 50:04 they will stay on Chain, for example, right? And encrypted data will go on Chain, too. 50:08 But nothing, but the... 50:12 That stuff cannot go on Lightning. 50:15 I thought you were saying that the crisis will be, how will the people, you know, who, 50:20 at the Global South, as you said, would use Bitcoin, couldn't the discourse be that 50:26 they'll use Lightning when fees are high on Layer 1? 50:28 Well, I mean, they will rationalize it at first by saying, just use Lightning, right? But that's 50:33 just like saying, it's just like, you know, Luke Jr. saying, just use, you know, hand-assembled 50:39 hardware with, like, crazy security protocols to stash your Bitcoin offline. You know, he was doing 50:45 that and he lost all of his Bitcoin, right? So, basically, the point is that the mantra of just 50:53 use Lightning when the fees are high and staying high will not work simply because, like, Lightning 50:58 gets disabled if fees are high. Because most Lightning channels, you know, the penalty 51:03 transaction needs to be cheap. And, you know, opening new channels and closing channels, 51:08 all these transactions need to be cheap, right? And if the fees are $10, $20 and staying there, 51:13 then Lightning becomes disabled, too. 51:16 Okay. 51:17 I mean, at least retail Lightning, right? Not institutional Lightning. 51:24 All right. Well, it's very interesting that this fee topic, I think, gets a lot of attention, 51:28 and it should. Will fees be too high or will they be too low? It's very interesting to reflect on 51:34 how either of those creates motivation for scaling Bitcoin with drivechain and roll-ups. 51:41 Actually, you know, my real motivation for scaling Bitcoin is not the fees because I'm 51:47 a fee optimist. I think fees will go high anyway. But my motivation is, you know, 51:52 permissionless innovation, like you said. And specifically, having trust minimized or trust 51:59 less Bitcoin as collateral and having US dollar stable coins based on that Bitcoin as collateral. 52:07 Because, you know, however much Global South wants Lightning and Bitcoin, what they actually want 52:14 is a decentralized US dollar. They want it a thousand times more, right? So there's clear 52:20 demand for a truly decentralized US dollar. But in order for that to exist, it needs to use Bitcoin, 52:26 which is the only decentralized asset as collateral. And that cannot happen until you 52:30 either have drivechains or roll-ups. And drivechains are not as secure as roll-ups for this 52:35 kind of, let's create 10 trillion dollars in decentralized US dollar stable coins, right? 52:40 Because drivechains are not, you know, they're not cryptographically secure, 52:45 they're just crypto-economically secure. Right. Crypto-economically secure. 52:57 In other words, it's in the miner's interest not to mess with a sidechain that produces a lot of 53:04 fees. Right. Just like it's in the miner's interest not to attack Bitcoin itself with double 53:10 spending, for example. But it's not the same level of security as the miners being unable to steal 53:16 your Bitcoin because they don't know the private key, right? Which is the roll-ups, they have this 53:21 that level of security, right? They have the security of the bridge that's as secure as layer 53:27 one Bitcoin. Have you read Paul's rewritten version of the FAQ? 53:34 No, I glanced at it, but I didn't really read it. Well, there's a section on roll-ups, 53:38 so that might interest you. Okay. What does he say? I had an argument with him about roll-ups, 53:45 and he gives me these game-theoretic reasons why drivechains are better. Like, for example, 53:51 drive miners should be able to kill a drivechain. And, you know, maybe theoretically that's true, 53:58 but in practice, I don't know if it's a good thing that miners can kill a drivechain or, 54:07 I mean, like, miners cannot kill a roll-up. So there will be a lot of stale roll-ups that 54:12 don't pay much fees, but they can't die. You know, just like there's a lot of shitcoins that can't 54:18 either. So for anyone listening who's interested, we're talking about drivechain.info. If you go 54:32 to drivechain.info and click on FAQ, you'll see Paul Sztorc's article, his FAQ on drivechain, 54:43 including a discussion of roll-ups, and he compares and contrasts roll-ups to drivechains. 54:59 Alex, one of Paul's views on this security budget topic is that, as I was trying to say earlier, 55:07 it's not a total certainty, but he thinks it's very likely that we won't see 55:10 sustained high fees because he thinks that the way blockchains tend to work is that 55:19 the token of a blockchain, which can be scarce, like Bitcoin, that is a certain 55:28 kind of economic good called a proportional good, where the creation of more of it 55:35 and increase in its supply doesn't produce value for anyone. The whole point of Bitcoin is that 55:42 it's limited in supply. If we were to double the supply and airdrop everyone 100% of what they 55:50 already have, nobody would have gotten richer. But the nature of Bitcoin's block space is that 55:56 people do want more of it to bring down its cost, but there's a trade-off there with decentralization. 56:04 The drivechain solution is to make lower levels of decentralization available on an opt-in basis, 56:11 so people can go into a sidechain, which has larger blocks, get lower fees, but it's opt-in. 56:19 His view is kind of harmonious a little bit with the big blocker view, which is that the big 56:26 blockers think nobody wants to pay high fees, you shouldn't rely on high fees, 56:33 you should try to get a ton of transactions all at a low fee, and the total will be high. 56:40 So what drivechain aims to do is have a bunch of sidechains, which are large block, and the 56:46 whole world will be using those. And every time someone sends a transaction, it'll cost them like 56:51 a penny or less. But if you do tons of transactions, it'll add up to a large number. So that's the way 56:58 you get high fees on Layer 1, is when Layer 1 is like the settlement layer for all of the 57:04 compacted fees from the sidechains. Whereas your view is that because Layer 1 is special, 57:11 people will want to inscribe on it, and there'll be enough luxury ordinals 57:17 that people will want to pay a lot for each one on Layer 1. 57:22 Well, I mean, I agree with Paul. Okay, so like, if you guys, Bitcoiners stopped reading the echo 57:31 chamber of the religious Bitcoin Twitter, and they looked at what's going on in the Ethereum 57:36 world occasionally, they would see that what's happening there is that they're about to create 57:41 like unlimited amount of block space altogether, just like, they're gonna create like terabytes 57:47 per second of block space, you know. So basically, you know, there's these proposals on Ethereum, 57:54 like this eigenlayer data availability thing, which basically simply uses Ethereum as a way 58:01 to stake Ether, and have that stake Ether protect other networks that you would run other nodes for. 58:09 But some of these networks would just provide like a highly secure crypto network, 58:15 like a highly secure, crypto economically secure, because people are staking Ether, 58:20 a layer where you could store not just megabytes, you know, megabytes as blocks, 58:25 terabytes as blocks. I mean, they're not even blocks, they're just basically just unlimited 58:30 block space suppliers, right? So and then people would put movies in there, and people put, 58:37 you know, their whole file systems in there and everything, right? So that, so they are 58:44 kind of manifesting the big blocker vision. But it's not just about payments, it's about, 58:49 you know, this, you know, they're building this world computer, right? They were actually 58:54 serious about it when they, I mean, it was all bullshit when they talked about it five years ago. 58:59 But because there's, you know, hundreds of these Ethereum well funded startups, and they're all, 59:05 you know, coordinating on using Ether as an asset, they are actually building all this crazy stuff. 59:12 And it's working, right? Like, you know, Ethereum switched the proof of stake in a few weeks, 59:17 they will enable withdrawal, there will be a lot more staking of Ether, because withdrawals are 59:23 now credible. And you can now stake and unstake and, you know, the price of Ether will skyrocket 59:29 in a few months, probably, and there will be a flippening. So I don't know what will happen first, 59:33 the flippening, or the pleb uprising in Bitcoin because of permanently high fees. But one of those 59:39 two crises is guaranteed to happen if nothing is done. That's for sure. Like, I'm pretty convinced 59:45 of that. How could there be a high fees and flippening? If I mean, you weren't saying there 59:50 would be both, but suppose there were, I think it'd be unlikely because wouldn't wouldn't Ethereum's 59:56 high fees be kind of a sign of its utilization, same for Bitcoin? No, no, no. Ethereum fees have 1:00:03 been moderated now, right? Like Ethereum is overflowing into these L2s. 1:00:09 And it will eventually overflow into like, a million times larger decentralized systems. So 1:00:15 the whole sort of L1 Ethereum will just remain as a staking mechanism for Ether, 1:00:21 right? It will not even like provide data availability, it will not even provide block 1:00:25 space in the future, there will be all these other networks that just use Ether and they stake on 1:00:30 Ethereum. And people who want to secure those networks will stake on Ethereum. And they will 1:00:36 be slashed if the nodes that they're running don't perform. So there will be this kind of sort 1:00:41 of unbounded sort of reuse of trust, right? So basically, you have this trust on Ethereum 1:00:47 that's like currently $20 billion large, but it will be like, you know, if 50% of Ether gets 1:00:53 staked, it might get to like $100 billion large. And then if Ether market cap goes up 10x, 1:00:58 there'll be this huge amount of crypto economic trust that all these other networks will reuse. 1:01:03 But it doesn't mean that the fees on Ethereum itself will go high, right? It basically what 1:01:08 we've seen there is that once the fees go high enough, there's a crisis. And then the fee pressure 1:01:14 overflows into these L2s. And then you know, it will overflow into L3s or will overflow into other 1:01:21 L2s that provide data availability and other services. So there's this sort of like a cascading 1:01:27 fountain effect, right? Where there's like enough fee pressure just overflows, overflows, overflows, 1:01:33 but in the end, you know, if you have Ethereum and Metamask, you'll be able to store your movie 1:01:40 libraries in there somewhere in the cloud. And, you know, like people will be uploading their 1:01:44 file systems and, you know, it'll be like a competitor to Amazon eventually. 1:01:50 I have a quick question. Since you were such an expert on both Bitcoin and Ethereum, Alex, 1:01:56 to what extent would you say that the strategy of Ethereum is similar to drivechain in that 1:02:02 there is an attempt to have the base layer token and the base layer block space 1:02:11 increase in proportion to the demand on the higher layers? 1:02:19 For example, just as an elaboration, suppose you had a merged mind altcoin, 1:02:25 that is merged mind with Bitcoin. So demand for the altcoin token would not increase the value 1:02:33 of Bitcoin, but the transaction fees on the merged mind altcoin would pay money to Bitcoin miners. 1:02:42 Now, okay. And see, this is also, this is just one more difference between Bitcoin and Ethereum. 1:02:48 One more elaboration. So the reason why I like drivechain is that unlike merged mind altcoins, 1:02:55 which is what Satoshi had in mind with BitDNS, unlike merged mind altcoins, where in merged mind 1:03:00 altcoins, the transaction fees are paid to Bitcoin miners, but the value of the altcoin doesn't cause 1:03:05 value accrual to Bitcoin. With a drivechain, the native token is a synthetic Bitcoin. All demand 1:03:13 for that native synthetic Bitcoin on the drivechain causes value accrual to Bitcoin layer one. 1:03:19 So it's more harmonious with Bitcoin because in a drivechain, Bitcoin's token and block space 1:03:26 appreciate when... Henry, I totally get what you're saying, but I got bad news for you because 1:03:32 Ethereum is even more harmonious. And the way it's more harmonious is as follows. Like you said, 1:03:38 let's say you have 50 merged mind drivechains and they all pay fees and these fees go to Bitcoin 1:03:44 miners, right? The Bitcoin mining complex will become big and rich and Bitcoin will become 1:03:50 secure. But in the world of Ethereum, a fraction of these fees, a large fraction of these fees 1:03:57 is going to be burned. So it gets paid to the existing Ethereum holders. You can think of this 1:04:03 as essentially like a corporation buying back its stock, right? So the Ethereum network 1:04:10 is buying back fractions of its own shares every time the fees go above a certain level. They call 1:04:16 this the burn barrier, like 16 Guay per level of fees. Is that more harmonious? I think that the 1:04:23 burning of the fees and the issuance, the whole point of that is to have a lower variance of 1:04:29 block rewards for the miners or stakers. Because when you have their security budget paid by 1:04:39 perpetual issuance, tail issuance... But they don't have perpetual issuance, right? 1:04:44 They do. They no longer have. 1:04:45 They do. They're issuing. 1:04:49 In theory, they are issuing some ETH, but more ETH is burned than they issue. 1:04:53 There's a guarantee of that. Aren't they issuing forever? And the question is whether net issuance 1:04:58 is positive or negative, but they're still issuing forever. 1:05:01 Yes, but they are issuing a little bit. But like I said, they have this burn barrier thing, 1:05:06 which is that if the Ethereum fee pressure moves the price of block space above 16 Guay, 1:05:12 and by the way, it hasn't been below that for months. So if the fee pressure moves the price 1:05:18 of block space above the 16 Guay, then there's more burn than issuance. 1:05:25 Right. 1:05:26 So basically, even in this bear market, you see Ethereum is so useful and powerful that 1:05:32 even in the bear market, all the NFTs, all of those DeFi stuff that's happening 1:05:37 is actually buying back Ethereum in the bear market. Now in the bull market, they will burn 1:05:42 10 or 20% of Ethereum in the next bull market. 1:05:44 I understand the basics, but I think that what they're doing there is simply 1:05:49 having the security budget paid by transactors to a greater extent than holders. 1:05:58 Yes, but the difference is that the payments go to holders of Ethereum as opposed to miners 1:06:03 and Bitcoin. If you're a holder of Bitcoin, the fact that miners have paid huge fees 1:06:09 doesn't really benefit you except that you can say that security budget is high 1:06:14 and maybe Nigeria can no longer afford to attack Bitcoin. 1:06:19 Whereas in the case of Ethereum, the security budget is essentially 1:06:25 bought back as a stock by the company, reducing the supply of Ether. 1:06:30 Now, what they don't anticipate is that this reduction in supply of Ether is going to have 1:06:34 some unanticipated effects. For example, Ethereum might end up with a lot more volatility 1:06:39 in the future because as its supply decreases, there will be these crazy booms and busts 1:06:46 in price of Ether, and Ethereum volatility might end up staying much higher forever than 1:06:52 the volatility of Bitcoin, and that makes Ethereum maybe bad collateral. 1:06:56 So there's all these unanticipated effects. 1:07:01 There is an interesting point I can make there. 1:07:05 One interesting comparison of gold to Bitcoin is that gold was monetized in the past possibly 1:07:12 because it had a stable purchasing power, because it has a price responsive issuance. 1:07:21 In other words, when the value of gold goes up, there's more mining and that brings down 1:07:26 the value. So gold has a elastic supply. In other words, it has, you could say, 1:07:34 demand responsive supply, whereas Bitcoin, because of difficulty adjustment and hard cap, 1:07:40 there is no elasticity, almost none, and therefore Bitcoin will be, in the view of 1:07:46 the Austrian economist like Lawrence White at George Mason, there's going to be higher volatility 1:07:52 for Bitcoin if it becomes money than gold if gold were to become money again. 1:07:57 And your point is that because of the issuance of Ether being at times highly contractionary, 1:08:05 like you could have high growing demand with falling supply, it could be very volatile. 1:08:11 And I agree with it. What they really need is an oracle that can somehow 1:08:19 stabilize and regulate the issuance in accordance with the... 1:08:22 Well, no, but they don't need that because as soon as you have... I'm not saying Ethereum 1:08:29 is decentralized. It's not. It's essentially like a religion run by Pope Vitalik and the 1:08:34 Ethereum Foundation is like the Vatican. But basically, it's not money and it's not trying 1:08:39 to be money. It's essentially a big tech stock, right? But as long as they have revenues accruing 1:08:45 to the shares, the share price will rise and the company, quote unquote, is the Ethereum network, 1:08:51 is buying back shares all the time. So, you know, you might have the situation where 1:08:56 price of Ether goes really high, but the market cap doesn't go that high because the 10 or 20 1:09:01 million ETH were burnt in the next bull market, for example. That's also possible. But my point 1:09:07 is that even though you have this potentially very volatile asset on the network like Ethereum 1:09:14 or Bitcoin, both of them will have terminal volatility that's probably too high to be 1:09:19 like a unit of account. But that's OK, right? As long as Bitcoin can be used as a reserve asset. 1:09:24 And now we're back to what I really want, which is ability to use Bitcoin as collateral, 1:09:28 because that's what a reserve asset is for. So all these dumb asses on Twitter that say 1:09:35 it never changed Bitcoin again, they don't understand that the primary use of Bitcoin 1:09:39 is a store of value. It's not a dead store of value like gold. It has to be used as collateral, 1:09:43 right? So once you can use it as collateral in a trust minimized way where you don't trust anybody 1:09:49 and it's secured by cryptography, which would require roll ups, or I will even settle for a 1:09:55 drivechain early on. But once you have it as collateral, then you can build any kind of 1:10:02 stable coin on it you want, where the volatility is transferred to the people who mint the stable 1:10:09 coin and get yield, while the stable coin itself is very stable. It doesn't have to be stable 1:10:15 relative to the dollar, although that's what the world wants. It could be stable relative to any 1:10:19 metric, right? It could be stable relative to a commodity index or to CPI or whatever the hell 1:10:24 you want. But the point is that you can then build other assets on top of it, you know, 1:10:30 using programmatic smart contracts. Do you agree that when Ethereum is burning fees 1:10:42 in order to make holders not bear the burden of inflation as the source of economic security, 1:10:55 Ethereum is basically putting more burden on transactors than on holders? Whereas in Bitcoin, 1:11:04 right now, with low fees and high inflation, there's a burden on holders from the inflation. 1:11:13 So it's not more harmonious, like you said. It's simply a decision that burdens 1:11:19 transactors more and encourages holding. Well, yes, but in other words, 1:11:28 despite what some rabid ETH maxes will say, they're not trying to be a store of value money, 1:11:35 right? They're trying to have a lot of fees and these fees go directly, they benefit the existing 1:11:41 Ethereum holders. And there is no miners in the loop, right? They cut out, they fired the miners, 1:11:48 right? So basically, I mean, Ethereum has other problems, like the rich will get richer in 1:11:52 Ethereum, right? In Bitcoin, there was going to be distribution of Bitcoin into ever smaller, 1:11:57 like, units and, you know, another hundred million plebs will come online in a year or two. 1:12:02 But in Ethereum, it's a fiat system where the existing whales will become bigger. 1:12:07 Wait, I have to ask you about that. I mean, surely you're familiar with Paul's argument 1:12:13 that there is work being done in proof of stake. It's just obfuscated. So when you're 1:12:19 staking capital, you're burning your liquidity. And therefore, yes, it's not like, yes, 1:12:27 they solve that problem. They solve that problem with liquid staking derivatives. You see, 1:12:31 there is like, liquid staking derivatives for a small fee will let you stake and be liquid for 1:12:39 like 1% kickback to the liquid staking derivative. It's not true. In my opinion, in my understanding, 1:12:46 the invention of liquid staking derivatives does not diminish at all Paul's argument that 1:12:54 the value, here it is, this is how I say it, the value of the liquidity consumed in proof of stake 1:13:02 is equal to the value of the energy and other inputs consumed in proof of work. 1:13:09 I don't disagree with that. I just, I don't see how it's relevant. 1:13:12 Because to the extent... I don't disagree with that. 1:13:14 Okay. So then, therefore, to the extent that people who stake receive a token or a sandwich 1:13:20 or anything, to the extent that that occurs, more people will pursue staking. And therefore, 1:13:29 it'll bring down the real return of staking. And therefore, more capital will be locked up 1:13:35 and get people get a smaller yield. So it's not the case that it's like, this is how I feel like 1:13:42 some early Ethereum writers, like in 2018, 2019, were saying, like, proof of stake is free, 1:13:48 because we fired the miners. And now we're just gonna like, we don't have any more costs. 1:13:55 It's like, no, there is a cost. Tons of people are locking up tons of capital. 1:13:59 There's a loss of liquidity. Every... 1:14:02 Right. I agree. I mean, it's... 1:14:04 When you say we fired the miners, we actually hired a whole group of equally large people, right? 1:14:11 Well, right now, it's like only like 15% of ETH is staked, because precisely because you've been 1:14:16 unable to unstake it. But once this unstaking goes live on April 12, there will be like another 30-40% 1:14:23 of ETH will go in and get staked. And that will lower the yield. You're right. Like the yield 1:14:28 might fall from like 7% down to 3% or 2%. But what I told you earlier, this eigenlayer stuff, 1:14:34 which is that they want to rehypothecate Ethereum that's being staked. Essentially, 1:14:39 you can now take your 32 ETH, and rather than just staking it to secure Ethereum, 1:14:45 the same 32 ETH can be staked to secure 10 other networks. And there could be an NFT network with 1:14:51 terabytes, you know, for video. There could be YouTube running there, right? Which you're securing 1:14:56 by the same 32 ETH. Now, there is a downside to that, of course, which is you can now be slashed 1:15:02 for two different kinds of violations, right? So if your validator doesn't obey the Ethereum 1:15:10 protocol, you will be slashed by Ethereum. And if your other node running this YouTube network 1:15:16 doesn't obey its rules, the same 32 ETH will be slashed by the other network's smart contracts 1:15:22 on Ethereum. But my point is that they're basically reinventing traditional finance, 1:15:27 right, where capital is rehypothecated. So you will have a situation where, you know, 1:15:33 like in traditional finance, if somebody has, you know, $100 million worth of treasuries, 1:15:38 they use that collateral 20 different times. You know, this is what Genesis was doing, for example, 1:15:44 where you would give them Bitcoin as collateral, they would give you a USD loan, and then they 1:15:49 would take that Bitcoin that you gave them, and then they would use it somewhere else as collateral. 1:15:54 They would rehypothecate collateral. And so Ethereum is essentially reinventing modern finance. 1:16:00 So there will be additional yield for those who want to take on more risk. 1:16:05 This is what the eigenlayer stuff is doing in Ethereum. And of course, like, only five people 1:16:11 in Bitcoin universe are aware of this stuff. Like Eric Wall is one of them, maybe I'm the second one, 1:16:16 whatever, because it's like an echo chamber, and nobody's paying any attention to what's going on 1:16:21 in the world, right? Yeah, I agree with you that there's an echo chamber phenomenon in Bitcoin, 1:16:27 where it's not so malicious. It's like, if you start out with 1000 people, and then 1:16:34 half of them want to do new cool stuff, the other half don't. And then almost everyone in the first 1:16:42 half leaves and does Ethereum. And then you're left with like, that other half who doesn't like 1:16:48 doing new stuff. Well, right. So it's an ongoing process where Vitalik left because he couldn't 1:16:54 do what he wanted to do on Bitcoin, right? Vitalik left in 2014, precisely because of that. 1:17:01 I remember Vitalik, I saw Vitalik when he was still writing articles for Bitcoin magazine in 2013. 1:17:07 He didn't want to leave Bitcoin, he left it because he actually tried to implement this 1:17:10 stuff on MasterCoin first. But then he realized that Bitcoin will not allow any changes. So he 1:17:15 just went off and created his own altcoin, right, which is Turing complete, blah, blah, blah. And 1:17:20 this stuff, this process has been continuing, right? There's like lots of college professors 1:17:26 and smart college kids writing papers about cryptography. And they just bypass Bitcoin, 1:17:32 because it's essentially become like boomer coin, right? It's like, it's like this conservative 1:17:38 moralizing cult that, you know, that basically, you know, all these engagement farmers are 1:17:47 agitating, you know, the mob to always scream that they're morally right about everything, 1:17:53 and Bitcoin never needs to change. 1:17:58 Understood. 1:18:02 But listen, what you said about Ethereum, you know, having, you know, 1:18:06 the proof of stake having a cost, that is true, but that's not, that doesn't change the big 1:18:12 picture. Like, basically, there is simpler security model with proof of stake slashing, 1:18:22 for example, that enables something like eigenlayer, you know, and I asked Paul, 1:18:27 you know, a few months ago, I said, if you really want to use your, you know, your big brain to 1:18:32 solve something, figure out how to do eigenlayer on Bitcoin with proof of work. I haven't heard 1:18:37 from him since. But the point is that the fact that they can do slashing and impose a known 1:18:44 calculable cost on you for misbehaving, you know, that that thing doesn't exist in proof of work, 1:18:50 and proof of work, the closest you come to it is, you know, the miners have spent 100 million 1:18:55 dollars building data centers, so there'll be some cost, but there is no sort of calculable 1:19:03 penalty for the miner to misbehave in the same way, right, in proof of work systems like Bitcoin. 1:19:11 Very cool. Alex, it's always great to have you here. And I always enjoy hearing your takes on 1:19:24 Ethereum and Bitcoin. I think we completely agree, you and I, on almost everything. At least, 1:19:32 you know, my ability to understand what you're saying is as far as I can agree. 1:19:37 Well, we disagree on the fees, because you think the fees will stay low, and I think the fees will 1:19:41 explode and stay high within a year or two, you know. Actually, didn't you say to me that it 1:19:49 would be by mid-year this year? Well, I mean, there was a period, right, like first of all... 1:19:54 Wait a minute, are you moving the goalposts a little bit? 1:19:59 No, I mean, I still don't... Okay, so what's holding back the ordinals 1:20:04 is that basically like 10 guys in the world can figure out how to do them right now. It's 1:20:08 a lot of command line fussing with them, and no wallets support them yet. 1:20:13 So maybe, you know, like what has happened already is I've been proven right about luxury ordinals, right? 1:20:19 So we've seen hundreds of ape pictures paying $300 in Bitcoin fees to get into the next block, and they don't care, 1:20:28 because these apes will be selling for, you know, $50,000 or $100,000 worth of Bitcoin later. 1:20:34 So their creators don't mind paying $300 in fees, and that's real fee pressure, right? 1:20:40 Because, you know, these are big 30-kilobyte, 50-kilobyte transactions, and they're paying 25 sats per V-byte, right, 1:20:48 or 30 sats per V-byte to get in. They don't even bother waiting, right? 1:20:53 And we have seen, you know, 300-block backlog in the mempool that, you know, hasn't existed like ever in Bitcoin history, 1:21:02 maybe once during 2017 or something for a few hours or a few days. 1:21:07 And now we see this ongoing backlog over 100 blocks to clear the mempool. 1:21:12 So my thesis about luxury ordinals has already come true. 1:21:15 It's just that their number is not high enough to permanently move the fees high enough. 1:21:22 But when, you know, it's like how fast is the ordinal ecosystem developing? 1:21:27 When will you see or will you be able to observe your ordinal collection in common Bitcoin wallets? 1:21:32 That's the question. That's when the plebs will start, you know, spending $50 to buy pictures on Bitcoin. 1:21:40 And, you know, then you'll see a real fee pressure. 1:21:44 Understood. Well, where we agree is that a flippeting would be bullish for drivechain and rollups. 1:21:53 And you also think that high fees might come. So we'll have to wait and see. 1:21:59 One of those two crises will come. 1:22:02 What about one thing we haven't discussed today is low fees. 1:22:06 Is there a scenario of Bitcoin having fees that are too low? 1:22:09 And how do you think about that? Do you think? Here's my question in a more detailed way. 1:22:15 Do you think there would be a increase in non-catastrophic problems in mining, like double spending, fork withholding, selfish mining? 1:22:26 Those kinds of, you know, things, malfeasance mining of different sorts, incentive non-compatible mining. 1:22:33 Do you think that would increase in a non-catastrophic fashion if there are low fees in the future? 1:22:39 Or do you think the only way that low fees manifest is in a catastrophic hostile attack by, you know, a terrorist or sovereign that wants to just make Bitcoin unusable permanently by reorging and mining in a way that centers everyone? 1:22:56 Do you think that kind of catastrophe is the way that low fees would play out? 1:23:03 Well, I mean, if the fees stay low, then it enables such a scenario, right? 1:23:09 And I'm telling you that another scenario that nobody talks about is ballooning of UTXO set, which is not that expensive. 1:23:16 It would be cheaper than a double spending attack or continuous ongoing attack on the tip of the chain, right? 1:23:22 Like right now, it would be cheaper to, the cheapest way to attack Bitcoin is to balloon its UTXO set right now, right? 1:23:29 So basically create millions of transactions that create dust UTXOs and just burn the money, right? 1:23:35 And then you'll have the situation where you'll have, you know, a hundred times more memory requirement to run a Bitcoin node forever, right? 1:23:46 So that kind of attack could be done by, you know, government of Nigeria, some other desperate third world country that's losing control of their currency to Bitcoin or whatever. 1:23:56 They're just not competent enough to realize they can do this, right? 1:24:01 Now, I don't see the fees staying low even without ordinals. 1:24:05 I don't see the fees staying low for the long run precisely because there's a limited number of payments per day. 1:24:11 It's roughly a million payments per day that are possible and there's ongoing adoption. 1:24:15 So, you know, there's just that cascading waterfall fountain thing. 1:24:22 You know, once the top part fills up to the brim, right, you know, it has to go somewhere, right? 1:24:30 So in another four years of adoption, the fees will be high without ordinals. 1:24:35 And, you know, there's now talk of deploying roll-ups on Bitcoin, right? 1:24:39 Like, I don't know if you saw this roll kit business where sovereign roll-ups that can use the same block space as ordinals. 1:24:45 They're basically altcoins that steal Bitcoin security, right? 1:24:51 So, you know, those could do 10 times more fee pressure than ordinals. 1:24:56 So I don't see low fees in the future as a foregone conclusion. 1:25:02 I cannot rule them out either, right? 1:25:06 I mean, but I would give it a low probability, like 10% or less, you know. 1:25:14 Interesting. 1:25:17 Well, well, if anybody wanted to, for example, if anybody wanted to launch an altcoin today, which maybe not many people do, 1:25:27 the best way to do it would be to launch a roll-up on Bitcoin that doesn't have the secure bridge from Bitcoin to the roll-up. 1:25:33 It's called, you know, they call it sovereign roll-ups in Ethereum world. 1:25:36 But you could, in theory, launch a network and that network will have all the security of Bitcoin. 1:25:43 It just will not have Bitcoin in it, but it will be just as resistant to double spending, just as resistant to, you know, 1:25:51 it will have cryptographic security for its assets, which is like the highest level of security possible. 1:25:57 It will be just as secure as Bitcoin. 1:25:59 It'll just use the same data that the ordinals are using, right? 1:26:04 So if that network becomes, you know, useful or used by, you know, like you could see the additional fee pressure coming from that. 1:26:23 Very interesting. 1:26:25 Well, we're reaching the top of the hour. 1:26:27 We've been going for about 90 minutes. 1:26:30 Everyone is welcome to join the stage. 1:26:34 And contribute to this discussion. 1:26:38 We've been talking about whether fees will go up or stay low. 1:26:46 Let's take a look at how the fees are looking. 1:26:49 One reason why so few Bitcoiners understand the fee market is that unfortunately the website mempool.space doesn't provide the fees. 1:27:00 You have to go to another one like blockchain.com. 1:27:04 That's where I always go. 1:27:06 Glassnode has it, but Glassnode doesn't give you the most recent fee information unless you pay. 1:27:11 If you go to blockchain.com and then click on charts, Explorer charts, and then total transaction fees USD, you can see the fee market. 1:27:23 Let's check out where they are now. 1:27:25 So as of March 28th, we had $774,000 in fees. 1:27:33 And the high point was a few days ago on March 23rd, over a million dollars in fees per day. 1:27:40 Which was the high of the year. 1:27:42 So the high of the last 12 months was just a few days ago. 1:27:47 So Alex, your theory of higher fees coming soon might be right because on March 23rd, we had $1.2 million of fees in a day. 1:28:00 Right. 1:28:00 So what's holding back the fees from Ordinals is essentially this release for the Ordinal software that is supposed to come real soon now, as they say in Silicon Valley, 1:28:09 which allows you to have your own identity as an Ordinal and then have your creations as multiple collections, all cryptographically linked to that Ordinal in a kind of a file system thing, which is what the artists really want. 1:28:25 And then there will be like this, you know, 10x demand for block space from Ordinals once that releases because that will essentially enable you to upload your whole file system, hopefully encrypted into Bitcoin, right? 1:28:39 And, you know, hundreds of images, whole collections of stuff, you know, once that releases out, maybe in a month or so, I don't know what their release schedule is like on this Ord server. 1:28:52 It essentially extends the Ordinal protocol to enable, you know, mass uploads of thousands of images automatically, you know, and then wallets need to show them as your Ordinal collection, right? 1:29:03 Because that creates a demand from people other than the people who can use command line to look at their Ordinal. 1:29:11 You know, people can go to this ordiscan.com and look at Ordinals, but then, you know, it's very sort of like ancient, bare bones user experience, you know. 1:29:22 So my idea about Ordinals has been proven right in that we now know that there are luxury Ordinals that will pay $300 or even $500 in fees, you know, to be included one time. 1:29:35 So we've established the existence of luxury Ordinal market. 1:29:39 Now, how big this market will become, we don't know yet. 1:29:52 Cool. 1:29:57 Well. 1:29:59 The metric I like to observe is the percentage of total subsidy comprised of fees. 1:30:08 Like before Ordinals, it was like 1.5%, and I think it's been like 4 to 5% lately. 1:30:17 But, you know, some of it is because price of Bitcoin is going up, right? 1:30:22 So there's more willingness to move coins between exchanges. 1:30:24 I don't think it's good to look at the percentage of the total miner income that is of fees. 1:30:32 I think it's more important to look at the total amount of fees per unit of time. 1:30:39 All right. 1:30:40 Yeah, no, I agree with you. 1:30:41 Like in the US dollars, yes. 1:30:43 If the fees, if Ethereum, like if you go to the fee website that shows all the networks with fees, and Bitcoin used to be number five or seven or something. 1:30:54 And now it went up to like number three on that list, where Ethereum is like 5 million per day in fees. 1:31:00 And Uniswap is like a million and a half or something like in fees. 1:31:06 And then Bitcoin is like number three or number four now. 1:31:09 So Bitcoin moved up a few places in that list. 1:31:10 I think you're looking at cryptofees.info. Is that right? 1:31:14 Yes, yes. 1:31:15 Okay, cryptofees.info. I'm there now. 1:31:18 Ethereum has six and a half million dollars of fees. 1:31:23 And Bitcoin has 772. 1:31:27 But look at the seven day averages there. 1:31:32 That's better. 1:31:35 It's almost the same. 1:31:37 Okay. 1:31:39 But you see, Bitcoin used to be like number eight or nine on that list, like six months ago. 1:31:46 And now it's like number three or four. 1:31:48 Yeah, because six months ago, we had fees that were around $200,000 a day. 1:31:53 And now we're like four times that. 1:31:56 I would say 80% of that is due to ordinals. 1:32:00 And this is just the beginning, right? 1:32:01 Because the ordinals will go up exponentially once you can see your apes on your phone. 1:32:08 But nobody can see that right now. 1:32:10 Why would people pay for apes if they can't see them on their phone and they can't put them into their Twitter? 1:32:16 I mean, it's basically just like a tiny priesthood that can deal with ordinals right now. 1:32:21 But it's exploding, right? 1:32:23 It's going to be a mass phenomenon. 1:32:25 I think the metric that people... 1:32:27 Let's discuss which metric do you think is most important with respect to economic security? 1:32:34 So which chain has the digital gold characteristic of being very hard to attack through brute force? 1:32:42 I think that the following metric is most important. 1:32:48 It would be the ratio of the security spending to the value secured. 1:32:54 The security factor. 1:32:59 Well, I mean, you could have that ratio be very high on Ethereum and it would still be very easy to attack. 1:33:05 Right? 1:33:07 Because Ethereum is... 1:33:09 When they had their hard fork... 1:33:10 Yeah. 1:33:21 So when Ethereum had their hard fork and there was talk of proof-of-work Ethereum continuing, right? 1:33:29 Like miners didn't want to switch to proof-of-stake. 1:33:32 Everybody shut up very quickly once stablecoin issuers, namely Circle, USDC and Tether said that they're only going to redeem on a proof-of-stake fork. 1:33:42 That immediately nuked the other fork. 1:33:45 So you could, in theory, have two companies that decide what the rules of Ethereum are. 1:33:51 And both of those companies are controlled by US authorities now. 1:33:54 So you could have essentially stablecoin people say, hey, new release of Ethereum must have this code in it. 1:34:01 And if it doesn't, then we will not redeem the stablecoins on the fork that doesn't do that. 1:34:06 Right? 1:34:08 So, I mean, unless you want the total wipeout of the Ethereum ecosystem, you'd have to do with Circle and Tethered Sake. 1:34:14 So it doesn't apply. 1:34:17 Is there a point that an economic majority of Ethereum is commanded by these trusted parties involved in the stablecoins? 1:34:29 That's today. That's already today. 1:34:32 It's basically a de facto agency of the US government. 1:34:37 Aren't the stablecoins, don't they have like a market cap that's lower than Ethereum? 1:34:42 Yeah, but they do. 1:34:45 But the thing is, Ethereum derives all of its value from NFTs and DeFi. 1:34:50 And the stablecoins are key in the DeFi world, right? 1:34:54 So, you know, once they say that we want Ethereum rules to change like this, and we're not going to redeem on the other fork, 1:35:03 they essentially decide the rule change in Ethereum. 1:35:06 Otherwise, if you stay on the other fork, it's a total wipeout of the whole DeFi ecosystem. 1:35:13 Like all the protocols go bankrupt in a second. 1:35:17 Right? 1:35:19 So you can think of Ethereum as kind of like Facebook, right? 1:35:23 Like Facebook would take orders from FBI about what to censor. 1:35:27 And Ethereum is just basically a de facto agency of the US government now. 1:35:33 So it's never going to be neutral money. 1:35:36 But if you think of it as a big stock that takes orders from the US government, it could be a very profitable stock to hold, right? 1:35:43 Like, you know, Google and Facebook were very profitable, and they essentially completely controlled by the US government. 1:35:50 Snowden told you that in 2013. 1:35:59 Good point. 1:36:01 So it doesn't apply, right? 1:36:04 Like in the case of Ethereum, there is no decentralization. 1:36:08 There is only, you know, kind of a religion of people who are trying to, quote unquote, make the world a better place. 1:36:16 And that includes taking orders from the US government. 1:36:21 It's basically like a corporation, right? 1:36:31 But like, Ethereum doesn't need to exist as long as Bitcoin can be used as trust-minimized collateral, right? 1:36:38 It's just so obvious to me and to like David Ciro, I think the guy's name is, who wrote this big article in Bitcoin magazine about the vision of the future where it's Bitcoin backed stablecoins and DeFi on top of them. 1:36:53 That would be what the world actually wants. 1:36:56 The world does not want Tether or USDC. 1:36:58 The world wants a fully decentralized dollar that nobody can control. 1:37:03 And that dollar requires Bitcoin, the only decentralized collateral, as collateral, right? 1:37:10 That's what the world really wants. 1:37:12 Ethereum is like a testnet. 1:37:14 But, you know, they'll stumble upon it. 1:37:16 If Bitcoin doesn't change, Ethereum will eventually, you know, develop this capability. 1:37:22 Arguably, it already has that, like LUSD, for example, is the example of that. 1:37:44 Interesting. 1:37:46 Once again, this is Drivechain Twitter Spaces hosted by LayerTwo Labs. 1:37:52 We meet every Monday and Thursday. 1:37:57 And all are welcome to come up to the stage and ask questions about Drivechain. 1:38:01 We have some familiar faces in the audience. 1:38:03 Drivechain is probably the most important thing ever in the history of the world. 1:38:09 That's my personal opinion. 1:38:11 I'm sure reasonable people can disagree on that. 1:38:13 And I'm very optimistic that it'll strengthen and secure Bitcoin in a transformative way. 1:38:23 Hopefully, in the not-too-distant future, we'll get merged-mind, peer-to-peer sidechains 1:38:29 that fulfill the cypherpunk vision of Bitcoin as an ecosystem of tremendous privacy, scalability, 1:38:39 and decentralization and technological innovation. 1:38:46 Rather than merely a digital gold Austrian economics project that is anti-inflation, 1:38:55 Drivechain envisions Bitcoin as a technology platform for permissionless innovation, 1:39:03 both monetary and otherwise. 1:39:06 So, I wouldn't say that it's like making Bitcoin more like Ethereum, 1:39:12 because it is unique to Bitcoin to have a very simple and time-tested conservative Layer 1 1:39:23 with a lot of growth and development on top. 1:39:27 So, I think Drivechain is a unique project that'll make Bitcoin even better 1:39:34 and secure it in the future. 1:39:45 Alex, it seems like you agree with half of that. 1:39:51 You like that Bitcoin is doing what it's doing, 1:39:55 but you also appreciate the kind of innovation going on in Ethereum. 1:39:59 Well, it originally used to go on in Bitcoin before 2015 or so. 1:40:08 There was all this crazy fun happening in Bitcoin as well. 1:40:14 Ethereum is just a bunch of frustrated kids who left. 1:40:18 When they were told, you know, shut up, you know, no, you know, it's digital gold and that's it. 1:40:24 But, I mean, original Bitcoin maximalism was about using Bitcoin as digital scarcity in unknown, unknown applications, right? Unlimited contexts. 1:40:37 What do you think of this Jason Lowery guy? Is he at all a candidate for Drivechain? 1:40:42 I don't know. I think, I mean, he's talking about some kind of philosophical stuff for, you know, some kind of U.S. government insider lobbying other U.S. government people to start, you know, supporting Bitcoin as an antidote to authoritarian regimes. 1:41:05 You know, eventually they'll start. I mean, the U.S. government consists of hundreds of agencies with conflicting agendas and interests, and some of them will start doing it. 1:41:16 You know, maybe the deep state is already doing it, you know. 1:41:19 Do you think there's any chance that the higher hash rate we're witnessing now could be part of some nefarious operation? 1:41:40 I think it's unlikely. I think it's older ASICs being put back online and, you know, more electricity being available because the price made them profitable. 1:41:53 If there were, right now, a party mining in secret building a 51% reorg, do you think that that activity would necessarily cause higher hash rate to be observed? 1:42:14 Not if they're mining in secret, right? They wouldn't observe it until they dump a new chain on the network. 1:42:19 Of course. 1:42:20 If they're mining in secret, then it's not visible. But, you know, given how well-spoken all the ASICs and all the power sources, like, people in the mining industry would know if somebody was building a lot of capacity in secret, even if that somebody was some kind of government actor. 1:42:41 Like, all this stuff would leak, basically. I don't expect any of this. Governments are incapable of doing this kind of Manhattan Project type thing. 1:42:50 Well, they certainly are capable of Manhattan Projects, right? 1:42:54 Well, they used to be, right? Like, the US government is not capable of that since the 60s. And, you know, you could have, like, who else would be? I mean, the others are too preoccupied with their internal chaos and survival to think about this. I don't know. 1:43:13 And, you know, at the end of the day, you would have, you know, core devs saying things like, oh, we can invalidate any fork once it gets dumped on the network by declaring its block, its original block invalid, for example. Think of it as a user-activated soft fork. 1:43:31 So you could kill off a fork if you, you know, if the Bitcoin Core priesthood all unanimously proclaim that, you know, what happened yesterday with this big reorg is an attack on Bitcoin, please download a new version in order to, or better yet, just restart your Bitcoin Core with this additional option that declares a particular block as invalid, which kills off that other branch, you know. 1:43:59 Like, there could be these social layer counterattacks. Think of it as a—and it would not even require, I think it would not even require a distribution of the new Bitcoin Core. You can now tell Bitcoin Core, I mean, it's been the case for years, that a certain block hash is just invalid and whatever fork originates with that block can just be killed off. 1:44:23 So the recent tweets where people were saying there's higher hash rate without higher miner income, is someone— 1:44:34 It's all scaremongering clickbait farming. 1:44:37 Because if someone were mining in secret, which would be the largest possible attack, right, it would not produce visibly higher hash rate. 1:44:48 Yeah, right. You would see no difference in the hash rate. You would just see this, like, hundred blocks reorg being dumped on the network or a thousand block reorg that just says, hey, there's a new version of history here. 1:45:00 Do you agree with Paul's reasoning in the FAQ that when people say, oh, the miners can steal from a drivechain, what they're missing is that it takes half a year. 1:45:11 And if the same miners were to do a half a year attack on non-drivechain Bitcoin, but just regular Bitcoin, they could double spend, like, all of the circulating supply for half a year and therefore basically steal almost all of the Bitcoin in existence. 1:45:33 And therefore drivechains with hash rate escrow are actually more secure, arguably, under one analysis, under one scenario, which is that if you compare those two circumstances that I just described, the one where you steal from the drivechain is immediately visible because of the nature of drivechain. 1:45:51 You can see immediately when the attack begins, whereas the double spending attack on non-hash rate escrow Bitcoin can be done in secret. 1:45:59 So actually, drivechains are more secure under one analysis. Do you agree with that at all? I'm sure Moonsettler wouldn't, but what do you think of that? 1:46:10 What's the scenario where drivechain escrow coins are more secure than ZK Rollups? 1:46:15 Well, they're more secure just in the sense, not ZK Rollups, I'm talking about ordinary Bitcoin, not in a hash rate escrow, just Bitcoin that's in your treasure, coming to my treasure. 1:46:28 The drivechain is more secure because the theft from the hash rate escrow is by nature public. It begins in a manner that is observable immediately. 1:46:43 Whereas the double spending 51% attack occurs in secret while it's going on. The development of that attack is in secret, whereas the progress on a hash rate escrow theft is visible publicly. 1:47:03 All right. But the only viable, profitable double spend attack, and I'm not talking about a government just wanting to kill Bitcoin and therefore just burning some money for it. 1:47:17 The only viable double spend attack that's profitable is for miners to send Bitcoins to an exchange and then sell them for Ether, withdraw Ether and then reorg the chain. 1:47:29 And that's basically, it's up to the exchange today, what the security policy is. Binance allows you to withdraw your deposits after two confirmations, basically, because they figure that the miners are incapable of coordinating and unwilling to attack them or something. 1:47:55 So you would need a reorg of two blocks only in order to steal a large deposit from Binance today, for example. But on the other hand, nation state attackers, if they wanted to burn $100 million trying to kill Bitcoin, they would be much better off ballooning the UTXO set than doing a double spend attack. It's a lot cheaper. 1:48:19 You could essentially knock out 99% of all Bitcoin nodes today by simply ballooning the UTXO set over a few weeks. 1:48:28 So, can you hear me? Because I knew I'd never used it before. Hi guys. So, I wanted to inject just one thing. You have the same data availability problem that you have with ZK proofs. 1:48:44 If you think you know that a hash represents something, you can't actually prove it. If miners just include a hash, you don't know if that's a legit or not a legit withdrawal, basically. 1:49:00 Yeah, I think you're referring to Paul Sztorc's comparison to validity rollups in his FAQ, where he analyzes drivechains versus validity rollups. 1:49:20 No, I just meant in general. So, a single hash does not tell you anything about the intent or the content. So, we don't necessarily know that something is wrong. 1:49:37 But in the case of validity rollups, we know when something is right. 1:49:41 Yes. 1:49:42 When the proof is checked, yeah. 1:49:45 So, I mean, I think, Henry, I was just reading, as I was listening, I was just reading Paul's updated section on drivechains versus validity rollups. 1:49:57 And I think Paul is doing a lot of cherry picking and rationalizations there to show that drivechains have advantages. 1:50:06 They do have advantages, right? But they're not, I mean, they are not the final say, the final word in L2 extension protocols, right? 1:50:19 They are technologically inferior to validity rollups, but for social reasons, I would rather have them both, drivechains and rollups. Let the market decide, right? 1:50:31 Like, for example, drivechains have a problem that if the drivechain is not popular enough, it will still be easy to attack on the drivechain, right? 1:50:42 It doesn't inherit the security of the main chain. 1:50:45 Yeah. 1:50:46 Yeah. 1:50:49 So, like, do you really want to do, like, a decentralized dollar with billions of dollars of issuance on a drivechain? 1:50:56 Well, I mean, Paul would say that if it's really useful for the market, the fees will be there and therefore it will be secure. 1:51:02 But you can inherit security for free if you use a validity rollup. 1:51:07 So, I think, basically, drivechains are superior to space chains. So, I would absolutely prefer drivechains instead of space chains. I don't know how you are with this. 1:51:21 No, no, it's clear to everyone. I mean, that one is easy, yeah. But drivechains versus validity rollups, that's a different story. 1:51:30 Yeah. So, I mean, we pretty much suspect that space chains would be used for utility mainly. 1:51:38 All this prototyping and utility. So, it's not a store of value sidechain, most likely. 1:51:47 And even there, I think, or especially there, I think drivechains don't have any major downsides, basically, in that scene. 1:51:59 My problem, like, I agree with you that drivechains are very easy to add and they should not be controversial and whatever the engagement farmers try to scare people with about drivechains, it's all basically nonsense. 1:52:21 And, you know, they should be enabled as well as, you know, validity rollups, as well as simplicity, as well as, you know, recursive covenants, too, because, you know, like OP_VAULT, for example, and stuff like that. 1:52:37 But my point, like, on the meta level, I don't see any of this happening until there is, like, a real crisis. 1:52:44 Like, Bitcoin doesn't scale, right? You know, they had this real crisis in Ethereum and it was this pleb uprising, right? 1:52:51 The outcry of millions of people saying, you guys created this system, you promised, you know, decentralized finance for the world and now you can only have these whales using Ethereum because the fees are $100 or $200 to call a contract. 1:53:05 And, you know, that concentrated their minds and they did a lot of thinking by a lot of smart people, by hundreds of funded startups, and what they came to is essentially validity rollups. 1:53:17 Not only validity rollups, but validity rollups with EVM as a system so that all the protocols can be copy-pasted over there, too. 1:53:28 Yeah. 1:53:31 So, validity rollups have this hostage situation problem, right? 1:53:38 So, if I understand correctly, miners can create a situation where it's a valid state, everyone can check that it's a valid state, but no one can actually withdraw unilaterally because they don't have the rollup state. 1:53:57 So, that creates this weird situation where, you know, maybe the users can be taken for ransom, I don't know. 1:54:05 No, I think that's not true. Like, if you're talking about miners of the rollup or miners of L1? 1:54:12 L1. 1:54:13 Yeah. So, the miners of L1 just, you know, they wouldn't even know, for example, that a withdrawal is attempted on a rollup because it could be hidden inside taproot. 1:54:25 But as far as the state, because all the state is embedded into L1, into Bitcoin, you can just run your own node, replay all the transactions, get the state, and then issue another transaction to withdraw that will also be embedded into L1 Bitcoin. 1:54:44 That's not a problem. If you read Bitcoinrollups.org report, you know, it's all in there. It's just a lot of reading and it's, you know, but there is no hostage problem. 1:54:56 Like, there's no inherent hostage problem. All the existing rollups, like if you'll go to l2b.com, they're not fully decentralized, but they're decentralizable in theory completely. 1:55:09 But none of them is fully decentralized because, you know, they're run by these VC funded teams that want to retain control until they dump their tokens on the plebs and all this other stuff. 1:55:22 So, you are saying that if volatility rollups are implemented correctly, then the users basically have the same sovereignty that they have on L1? 1:55:33 Correct. They have the same security of their assets. They're just as secure sitting on the rollup as sitting on L1. 1:55:41 Like, so for example, if there was a Bitcoin bridge that moved Bitcoin to the rollup, there would be no difference in security between holding your Bitcoin on a bridge, I mean, on a rollup or on L1. 1:55:52 And they would have the same double spend resistance and they would have the same censorship resistance. 1:55:58 There was essentially, the only thing you could do, I mean, but the thing is these rollups, they require like provers, they call them sequencers, right? 1:56:09 And these sequencers could be a point of centralization, but you could also implement them in a decentralized way. 1:56:15 So, it's just that, you know, it basically, the rollup solved the ancient problem in Bitcoin, which they called, you know, trust minimized two-way peg, right? 1:56:29 They solved that problem. 1:56:31 In fact, like Greg Maxwell posted on Bitcoin Talk in 2013, the proposed solution that Ethereum will eventually rediscover, which is just do ZK proof checks of the other chain and, you know, supply true or false to Bitcoin to allow withdrawals or not, right? 1:56:51 Like you can go back to this Greg Maxwell post in 2013 on Bitcoin Talk Forum, where he essentially proposed a solution to two-way peg, but, you know, it's one thing to propose a solution, the other thing is to be incentivized enough to implement it. 1:57:06 But, you know, nothing can be done in Bitcoin because it's like a moralizing cult, you know, nowadays. 1:57:12 So, I understand that you can embed the rollup state into whatever form, into witness data, whatever. You can have it available on L1. 1:57:31 Not the state, the transactions, right? Not the state, right? 1:57:35 It's the sequence of transactions, but then if you play them on your own rollup node, you will get the current state if you replay them. 1:57:42 Yeah, yeah, I mean, and so, but what is the mechanism to guarantee that the rollup UTXO state update is related to this published, I don't know, basically I think of them as inscriptions of sort and how does it work? 1:58:06 It works by rollup nodes looking at Bitcoin as a source of truth. 1:58:12 Right, because rollup embeds this transaction history inside another chain. 1:58:18 So, if you launch your own UTXO node, sorry, rollup node, right, the rollups don't have to use UTXOs, but they could. 1:58:28 And you just replay the transaction history that's embedded in Bitcoin, you will essentially, you know, perform the protocol like every protocol compliant rollup node should be doing. 1:58:40 Yes, but you can, in theory, so you have a UTXO that represents the rollup state in a way, you know, the balance of it, I don't know how to call it. 1:58:56 And so, when that updates to a new state, there has to be a zero knowledge proof, right? 1:59:04 That every node validates after the fork. 1:59:07 Right, and Bitcoin validates too, right? 1:59:11 Yeah, but the one thing I don't actually get is what makes the relation between the two, whatever is published, that nodes don't validate, it's just there for data availability. 1:59:25 And these state updates, because as I understand, we try to make it so that normal nodes, normal Bitcoin nodes don't have to actually build the rollup state and validate those transactions, they just validate the ZK proof. 1:59:40 But what's the relation between them? 1:59:44 There doesn't need to be a relation between them. 1:59:46 You can think of rollup blocks as being just inscriptions, right? 1:59:51 And I wouldn't use the word validate, I would use the word check, because there's no validation, there's just one-time top-to-bottom proof scanning to check the proof, which is infinitely cheaper than, you know, executing the program, right? 2:00:10 So they just, it's like a predicate that returns true or false, that's it. 2:00:16 Yeah, and it controls withdrawals from a UTXO that stores the bridge funds, right? So you have a UTXO that people deposit into, and then with every block or every attempted withdrawal, it has to be rolled over with a covenant, right? 2:00:32 That was the design in BitcoinRollups.org, where you basically have to roll over the funds in the covenant, and you only allow withdrawals if the proof checks to be true, right? 2:00:49 Yes, this is my understanding. The one thing I'm missing really is, you have the data availability is there, in theory, if everyone does their job correctly, but the validity of the data that is available is, as I understand, not checked by all nodes, they only check the ZK proof and the covenant, and they don't actually play those other transactions that only rollup nodes. 2:01:15 And what makes it impossible to basically embed bullshit that is not true for the rollup state, which, by the way, is a perfectly valid state update, the miner or whoever just withheld the real transaction data, you know, and now nobody can build the correct state, and they are, as I said, hostage. I don't understand this part of the whole thing. 2:01:41 What miner is attacking the system? Is it the rollup miner or the... 2:01:46 Elbow miners that also know the rollup state and can update. The rollup state, these are centralized because that's what guarantees basically that only trusted people can update the state, or it's just a coincidence? 2:02:04 It's a coincidence because it's like, today these sequencers or provers are very expensive computationally, so they use graphics cards, so they basically like these very big nodes that build, you know, one proof every 30 minutes or every hour, and then they submit it to Ethereum, for example, right? 2:02:26 But as they optimize the way this functions, like, you will be able to have multiple nodes building proofs in competition with each other, you know, it's kind of like mining and Bitcoin, you know, you could do it that way. 2:02:40 Now, as far as, like, rollup data being invalid, Bitcoin miners don't care. For them, it will be just like images, right? They will just ignore it. It will sit in the same space as inscriptions. 2:02:51 Yes, but basically you can... 2:02:54 But the nodes of the rollup network will reject invalid blocks, so even if it gets merged into, even if it gets saved in Bitcoin, it doesn't mean that it will be accepted by the nodes of the rollup network. 2:03:09 But what makes the... Yes, I understand this. This is basically like any other blind merge mine chain. They behave the same. You can include bullshit into mainchain and they don't progress their state if it's bullshit. That's clear. 2:03:22 Right. They can just ignore it, right? 2:03:24 You can actually, with the ZK proof, make all nodes out there that are not aware of the rollup chain, you can make them accept the state update that is perfectly valid by the rollup chain, right? And I don't see the connection, the break that stops these two from diverging. 2:03:43 Well, it's like when you say two, you mean the transactions embedded inside Bitcoin and the blocks accepted by rollup? 2:03:54 The transactions embedded in Bitcoin and the blocks accepted by rollup and the state of the UTXO, the rollup UTXO, ESCO, whatever you want to call it on-chain. 2:04:06 That state is just the number of SATs held inside the bridge, right? It doesn't have any other meaning. It's just number of SATs held inside that bridge UTXO. 2:04:19 Yeah, but you can actually take money out from there in a way that no one else knows, right? 2:04:27 No, you cannot, because in order to take the money out, you need to present a proof that proves the whole computation of playing all the blocks on the rollup. 2:04:39 Yes, you just don't tell anyone else. Let's say it's a valid transaction, but you don't tell anyone else. 2:04:45 Like you don't publish it? 2:04:48 Yes, you don't publish it, you just update the UTXO. 2:04:52 Oh, you're saying it will not be published into L1 Bitcoin or something like that? 2:04:57 Yeah, I mean, L1 nodes that are not rollup-aware would just accept it, right? 2:05:03 Yeah, for them it's just like image data. They don't even look at it at all. 2:05:10 Like from the point of view of Bitcoin nodes, they only see like some junky data coming in ordinals, 2:05:16 and then they see this one kilobyte of data being fed into OPStackVerify that returns true or false. That's all they see. 2:05:27 So, I was just wondering if I'm missing something crucial here, because it kind of seems to me that if someone with sufficient hash power on Bitcoin 2:05:39 and aware of these rollups could actually, and have money in there, could actually get this stock for everyone else, 2:05:49 as I said, he could basically hold the remaining coins in the... 2:05:54 But that would be invalid execution of the rollup, wouldn't it? 2:05:58 I don't know. That's what I meant. So, basically, he can uphold the rules or the rules of the rollup. 2:06:06 He takes out his own coins, but he doesn't tell everyone else how he did it. 2:06:14 Yeah, I think you're not seeing how powerful the ZKStarks are. 2:06:20 To tell you the truth, I'm not 100% intuitively on top of this myself, but if you go and read into BitcoinRollups.org, 2:06:28 they talk about it there. 2:06:30 All right. 2:06:32 Yeah. 2:06:34 But I'm willing to trust that the whole Ethereum ecosystem with all these funded startups and Mr. Light with his report and everybody, 2:06:45 and the people behind StarkNet, right? 2:06:47 So, it's just like either rollup execution is correct, which means that all the correct blocks have been played, 2:06:53 and all the computation has been proven to be correct, or not. 2:06:57 There is no alternative there. 2:06:59 So, if it is correct, then the withdrawal is released. 2:07:03 I don't know what shape the bridge takes on the rollup side. 2:07:12 Sorry, I didn't want to take up so much time. 2:07:14 No, it's okay. 2:07:16 This is just something that has been bothering me. 2:07:18 There's nobody in this... 2:07:20 There's very few people in this... 2:07:22 What is it called? 2:07:24 This room here. 2:07:26 Space, right? 2:07:28 There's very few people, and mostly they're lurking. 2:07:30 So, it's not like we're preventing other people from speaking if they want to. 2:07:36 Yeah, I love it when you guys are here chatting. 2:07:39 Very high-level conversation. 2:07:41 Please continue. 2:07:43 It's actually low-level, right? 2:07:45 It's low-level nitty-gritty stuff. 2:07:47 It's the stuff that techies should keep down in their minds, 2:07:55 where they mine low-level stuff. 2:07:59 It's not high-level economic security of rollups, or Bitcoin, or drivechains. 2:08:08 I feel like Moon Settler, his attitude, 2:08:10 it expresses what Shakespeare wrote about things falling apart. 2:08:16 He wrote, 2:08:18 The best lack all conviction, 2:08:20 While the worst are full of passionate intensity. 2:08:24 I feel like Moon Settler is the best, 2:08:26 and he lacks conviction. 2:08:28 And I am the worst. 2:08:30 Well, he has the right defensive mindset of a cypherpunk. 2:08:37 Anything that can go wrong will inevitably go wrong, 2:08:39 and anything that can't be attacked will inevitably be attacked. 2:08:43 So, it's the right mindset to have for Bitcoin. 2:08:47 I agree. 2:08:49 But at some point, 2:08:51 it's like Arthur C. Clarke said that 2:08:53 any sufficiently advanced technology is indistinguishable from magic. 2:08:57 Well, those ZK proofs, ZK Stark proofs, or Snark proofs, 2:09:01 they are sufficiently advanced to appear magical. 2:09:06 Unless you really grok them all the way down, 2:09:08 which is complicated math, etc. 2:09:10 Right now, all of them are run with a backdoor, right? 2:09:14 There's no decentralized... 2:09:16 It's not so much backdoor, 2:09:18 it's kind of like, 2:09:20 if you go to that L2B.com 2:09:22 and you see there's like 16 networks 2:09:24 that are L2s of Ethereum, 2:09:26 and half of them are ZK, 2:09:28 and some of them are optimistic. 2:09:30 There's like a little wheel column in there 2:09:34 that shows the decentralization. 2:09:36 And you want all the categories, 2:09:40 all the risks to be black. 2:09:42 Yes. 2:09:44 And the best ones have one or two yellow and orange there. 2:09:46 You know. 2:09:48 But in theory, right, 2:09:50 the big thing that happened in Ethereum 2:09:52 is that you had three teams 2:09:54 releasing ZK EVM as open source. 2:09:56 You had like Scroll, 2:09:58 you had Consensus, 2:10:00 and you had Polygon. 2:10:02 And now you have like three code bases 2:10:04 of ZK EVM using... 2:10:06 So basically, 2:10:08 they're commoditizing this technology 2:10:10 so anybody can go grab it 2:10:12 and launch a roll-up that's fully decentralized. 2:10:14 You don't even need to code much. 2:10:16 So... 2:10:20 This stuff is no longer magical 2:10:22 inside Ethereum. 2:10:24 It's just magical to Bitcoiners 2:10:26 because Bitcoiners are still sitting 2:10:28 in the Plato's cave 2:10:30 to see reality. 2:10:38 All right. 2:10:44 By the way, I did read through 2:10:46 the polls 2:10:48 comparing roll-ups 2:10:50 to drivechain. 2:10:52 There's an allegedly updated FAQ on that. 2:10:54 Just like 10 minutes ago 2:10:56 I was reading that stuff. 2:10:58 There's lots of places 2:11:00 where Paul is cherry-picking 2:11:02 the evidence and 2:11:04 rationalizing. Just presenting 2:11:06 the benefits but not the downsides 2:11:08 of 2:11:10 drivechains versus roll-ups. 2:11:14 Like, for example, he says 2:11:16 roll-ups do nothing to solve 2:11:18 the data availability problem. That's just false. 2:11:20 The whole point of 2:11:22 roll-ups is data availability using L1. 2:11:28 I mean, it's... 2:11:30 He needs to steel-man 2:11:32 the argument against roll-ups. 2:11:34 He should collaborate with Mr. Light 2:11:36 on steel-manning that section 2:11:38 of the FAQ. 2:11:40 I mean, for 99% 2:11:42 of Bitcoiners and for the whole 2:11:44 you know, 2:11:46 ossification mob, they never 2:11:48 read these blog posts anyways. 2:11:50 So all of that pulls on deaf ears 2:11:52 anyways. 2:11:54 To what extent is the 2:11:56 roll-up-on-Bitcoin idea 2:12:00 chasing Ethereum's narratives? 2:12:02 And that drivechains 2:12:04 is different 2:12:06 because of its technology? 2:12:10 Well, you know, 2:12:12 if you live in the universe of Ethereum 2:12:14 then drivechains and actually all kinds 2:12:16 of sign-chains are just technologically 2:12:18 obsolete. 2:12:20 Including drivechains, right? 2:12:22 Because they tried them all. 2:12:24 They tried state channels. 2:12:26 They tried drivechains. 2:12:28 All of those things are obsolete. 2:12:30 Technologically obsolete. 2:12:32 What is Paul's response to the idea that 2:12:34 something like 2:12:36 drivechains was tried and found 2:12:38 to be suboptimal 2:12:40 in Ethereum? 2:12:42 Paul keeps silent 2:12:44 when he can't win an argument. 2:12:46 You know? 2:12:48 So... 2:12:50 His silence speaks volumes, right? 2:12:52 For example, 2:12:54 when I alerted him to this eigen-layer 2:12:56 stuff where, you know, 2:12:58 here comes restaking of 2:13:00 Ethereum, right? 2:13:02 His whole argument against proof-of-stake, for example, 2:13:04 was based on this collateral being 2:13:06 locked up, and that's more work 2:13:08 than burning electricity. 2:13:10 Well, that's only true until that collateral 2:13:12 becomes reusable in a hundred 2:13:14 different places at the same time. 2:13:16 That's what I was trying to explain to you earlier. 2:13:18 I don't believe that the existence 2:13:20 of 2:13:22 the staking derivatives 2:13:24 confounds... 2:13:26 No, no, it's not the staking derivatives. 2:13:28 That part is... 2:13:30 Staking derivatives is the market response 2:13:32 to Ethereum being 2:13:34 a liquid. 2:13:36 People who want to have a liquid version of Ethereum 2:13:38 will use staking derivatives 2:13:40 in exchange for paying some fees. 2:13:42 Some people are willing to wait, 2:13:44 and other people are not willing to wait. 2:13:46 So the specialists who are willing to wait 2:13:48 will collect fees by giving 2:13:50 liquidity in exchange for fees. 2:13:52 So, you know, like, from your point 2:13:54 of view, you can collect lower yield 2:13:56 but have liquidity, or you can have 2:13:58 higher yield and 2:14:00 it will take you a week or two to unstake. 2:14:02 That's just liquid staking 2:14:04 derivatives. I mean, there's a bigger issue 2:14:06 there, which is this eigenlayer stuff 2:14:08 where they do a rehypothecation 2:14:10 of Ethereum collateral, right? 2:14:12 This is when you stake 2:14:14 the same 10 ETH or 32 ETH 2:14:16 or whatever, but instead of 2:14:18 getting yield from one source, you now get 2:14:20 yield from 20 different networks 2:14:22 for the same staked Ethereum. 2:14:24 So your 2:14:26 combined yield might be 20%, 2:14:28 even if Ethereum's own yield is 2:14:30 3%. My point is that every 2:14:32 time someone who stakes their Ether 2:14:34 gets a yield on it, 2:14:36 it's just like someone who's mining 2:14:38 gets, you know, the sound 2:14:40 and heat monetized somehow, 2:14:42 like mining at a cold place. 2:14:44 No, no, I agree with you that 2:14:46 there is no free lunch there. 2:14:48 That part is true, but what's not true 2:14:50 is that in Bitcoin, fees 2:14:52 go to miners, whereas in 2:14:54 Ethereum, fees go to stakers. 2:14:56 Stakers 2:14:58 happen to overlap with holders to a large 2:15:00 extent, right? When you say the 2:15:02 fees, you mean the value of 2:15:04 the burnt fees accrues to 2:15:06 the holders of Ethereum 2:15:08 because of the purchasing power 2:15:10 gain that results 2:15:12 relative to what 2:15:14 the purchase... 2:15:16 Okay, so the value of the 2:15:18 burnt fees accrues to all holders, 2:15:20 but the new issuance goes to 2:15:22 stakers too. It goes only to stakers. 2:15:24 Correct. 2:15:26 But stakers 2:15:28 being holders benefit from both, 2:15:30 right? They get the new 2:15:32 issuance and the 2:15:34 company's buying back its stock. 2:15:36 They get the new issuance 2:15:38 and they get the new 2:15:40 issuance, so they dilute those 2:15:42 who aren't staking, and then they 2:15:44 get the burnt 2:15:46 fees 2:15:48 along with everyone else. 2:15:50 Everybody gets the 2:15:52 burnt fees, but it's like an equilibrium. 2:15:54 Will there be more burning or 2:15:56 more issuance? 2:15:58 I don't know how this equilibrium 2:16:00 plays out. I saw the charts that 2:16:02 they say in the long run, Ethereum will 2:16:04 settle down at 50 million ETH 2:16:06 outstanding, down from 120 2:16:08 million today. 2:16:10 They expect that kind of equilibrium to 2:16:12 emerge, but basically 2:16:14 the more popular Ethereum is, the more 2:16:16 fees are. The burning 2:16:18 will outpace issuing 2:16:20 almost all the time. It's happening right now 2:16:22 in the bear market. 2:16:24 It's no longer a bear market. It's like early 2:16:26 stages of the bull market. 2:16:28 It can't go on forever, because eventually 2:16:30 people are going to want to... 2:16:34 You can't just burn forever. You can't burn to 2:16:36 50 million ETH. 2:16:38 Yeah, you can. You just burn 2:16:40 ever smaller fractions. 2:16:42 You can have 2:16:44 50 million ETH left, and 2:16:46 the price of each ETH will be a million dollars. 2:16:48 They will burn just one 2:16:50 ETH per day on the network for the 2:16:52 next thousand years or whatever. 2:16:58 The thing is, Ethereum is more divisible than 2:17:00 Bitcoin. Ethereum has 18 decimal 2:17:02 points versus Bitcoin's 8. 2:17:06 If 2:17:08 you 2:17:10 go to 2:17:12 ultrasound.money, which is 2:17:14 nonsense, because Ethereum 2:17:16 is not money, it's just a giant 2:17:18 big tech controlled by the US government, 2:17:20 they 2:17:22 have these curves that 2:17:24 predict 2:17:26 terminal supply of Ether 2:17:28 based on burning versus 2:17:30 issuance. 2:17:32 You can see that they have 2:17:34 reasonable arguments for what 2:17:36 will happen with burning and issuance and all 2:17:38 that stuff. They expect 2:17:40 50 million ETH by 2030, for example. 2:17:42 Plus, you know, 2:17:44 they still have that ace up their sleeve, right? 2:17:46 What if Ethereum decides to ossify? 2:17:48 They don't even need to decide 2:17:50 to ossify. They can just become so popular 2:17:52 and so widely used that they become impossible 2:17:54 to change. 2:17:56 It could be like 2:17:58 the internet, right? TCPIP is impossible 2:18:00 to change just because of how widely used 2:18:02 it is. 2:18:06 So the power 2:18:08 of Vitalik's cult 2:18:10 is declining gradually, right? 2:18:12 They may not be able to 2:18:14 do these hard forks 2:18:16 once it's a 10 trillion dollar network. 2:18:18 Yeah. 2:18:20 Well, that's one of the drivechain ideology 2:18:22 ideas, 2:18:24 which is that we need to ossify, 2:18:26 but we don't want to ossify before 2:18:28 we establish extensibility. 2:18:32 Correct, yes. 2:18:34 I would say drivechains 2:18:36 is 2:18:38 necessary but insufficient 2:18:40 to ossify. 2:18:42 I'm all for 2:18:44 drivechains, but I also want 2:18:46 covenants and I want 2:18:48 to let simplicity 2:18:50 be introduced there as well. 2:18:52 Do you agree with the idea that drivechain 2:18:54 is the ultimate way to 2:18:56 speed up the establishment of 2:18:58 the 2:19:00 upgrades to L1 2:19:02 that are not drivechain? 2:19:04 If we have drivechain, then 2:19:06 you can have a drivechain doing roll-ups, 2:19:08 a drivechain doing other things. 2:19:10 No. 2:19:12 The roll-ups that are sitting on top of 2:19:14 the drivechain would not be more secure than 2:19:16 the drivechain itself. 2:19:18 But as a testing ground with live money. 2:19:24 The thing is, what you guys are doing 2:19:26 at LayerTwo Labs, you kind of have 2:19:28 a failure of imagination going on. 2:19:30 You're not, like I told this to Paul, 2:19:32 you're not ambitious enough 2:19:34 with your visions of drivechains. 2:19:36 Rather than having 2:19:38 technological 2:19:40 geeky proposals about 2:19:42 let's do Zcash or whatever, 2:19:44 if you figure out how to give 2:19:46 5 billion plebs out there 2:19:48 in the world decentralized dollar 2:19:50 using a drivechain, that's valuable. 2:19:52 I think that 2:19:54 the only way to do that 2:19:56 would be to have the Hivemind 2:19:58 oracles 2:20:00 regulate the value 2:20:02 of the decentralized dollar. 2:20:04 So there would be no collateral, 2:20:06 it would just be 2:20:08 the oracles 2:20:10 and a futures market. 2:20:12 But he has said that 2:20:14 the liquidity of Hivemind 2:20:16 might not be enough to... 2:20:18 Well, that's why 2:20:20 I wouldn't say it's the only way to do it. 2:20:22 It's probably a way to do it. 2:20:24 I haven't read about Hivemind 2:20:26 in the last god knows how many years. 2:20:28 Maybe there's been some new stuff. 2:20:30 I don't really remember reading 2:20:32 what I read the first time. 2:20:34 Don't say it's the only way to do it. 2:20:36 There's proven ways to do it 2:20:38 and they're doing it on Ethereum without 2:20:40 any crazy oracle markets. 2:20:42 It's just, 2:20:44 you do need an oracle price feed 2:20:46 for a price of Bitcoin. 2:20:48 That price feed should be decentralized. 2:20:50 But anytime you launch 2:20:52 a blockchain system, 2:20:54 be it a drivechain or a rollup, 2:20:56 you could add a decentralized 2:20:58 Bitcoin price oracle to it. 2:21:00 I mean truly decentralized. 2:21:02 Not chainlink decentralized. 2:21:08 Not Hivemind decentralized. 2:21:10 I'm assuming Hivemind decentralized 2:21:12 is game theoretically 2:21:14 decentralized somehow 2:21:16 where it's like 2:21:18 the price of an oracle 2:21:20 could be trusted because 2:21:22 if it's wrong, people will lose money somehow. 2:21:26 The idea of Hivemind, 2:21:28 in my very simple understanding, 2:21:30 is that you have a group of people 2:21:32 like the Bitcoin miners 2:21:34 where anyone can participate, 2:21:36 anyone can get involved. It's peer-to-peer. 2:21:38 You don't have to have permission 2:21:40 to become part of the oracle network. 2:21:42 And then when you're part of the oracle network, 2:21:44 you have some of this thing called votecoin. 2:21:46 So there is a token 2:21:48 that only the people who want to be an oracle 2:21:50 would have. And I think probably 2:21:52 there's some mechanism for 2:21:54 the better job. When they do a better job, 2:21:56 they make more money 2:21:58 and therefore it's 2:22:00 incentive-compatible like 2:22:02 mining where no one has to be 2:22:04 trusted but it still works. There's emergent order. 2:22:06 Similarly, the people 2:22:08 who want to be oracles, it'll be like hedge funds 2:22:10 predicting things. So they would predict 2:22:12 the value, the purchasing power of 2:22:14 a US dollar, like how many Bitcoin 2:22:16 is one US dollar 2:22:18 tomorrow. And they would predict that 2:22:20 as accurately as they could. 2:22:22 Look, Henry, I 2:22:24 get it. I get all that. 2:22:26 It might even work. 2:22:28 There is another way. 2:22:30 Simpler ways. 2:22:32 There is another way I heard. 2:22:34 Maybe 2:22:36 you should talk to Jbin. 2:22:38 I will send you 2:22:40 the handling DMs. 2:22:42 His idea is all 2:22:44 about getting the real price 2:22:46 of Bitcoin. So it's a decentralized 2:22:48 exchange kind 2:22:50 of idea but it's not for 2:22:52 end users necessarily. 2:22:54 It's for the market makers. 2:22:56 The idea is that 2:22:58 it should give you the real 2:23:00 price of Bitcoin against 2:23:02 other assets. 2:23:04 And it's 2:23:06 it's 2:23:08 the way 2:23:10 it works is 2:23:12 people play with their actual money. 2:23:14 So you don't 2:23:16 just 2:23:18 stake something or 2:23:20 stake some tokens or 2:23:22 vote or whatever. You actually 2:23:24 are putting the money on 2:23:26 the table. 2:23:28 That's another 2:23:30 crypto economically secure 2:23:32 setup where you build a game 2:23:34 and then the 2:23:36 equilibrium of that game presumably 2:23:38 is that the price is right and 2:23:40 people who don't want to play by the rules 2:23:42 lose money. But it's 2:23:44 complicated and has issues of liquidity 2:23:46 whether there will be enough trading in there 2:23:48 whether those markets are easy to 2:23:50 manipulate or not. I'm telling you there's 2:23:52 radically simpler way to do Bitcoin 2:23:54 price oracle. 2:23:56 Radically simpler. 2:23:58 That is perfectly decentralized. 2:24:00 You know 2:24:02 just imagine. 2:24:04 So Jay's idea is 2:24:06 that you don't see, you don't know 2:24:08 the real price of Bitcoin. 2:24:10 Because the whole thing is just 2:24:12 basically manipulation 2:24:14 and 2:24:16 pump and dumps 2:24:18 and whatever games. 2:24:20 That sounds like a rationalization to 2:24:22 justify his system existing. 2:24:24 You know 2:24:26 if 2:24:28 you can know the real price of Bitcoin 2:24:30 you can just have a list of 100 2:24:32 biggest exchanges that 2:24:34 you do your volume weighted or 2:24:36 time weighted 2:24:38 VWAP 2:24:40 WAP whatever they call this stuff 2:24:42 exponential moving average 2:24:44 by querying 100 largest 2:24:46 exchanges. 2:24:48 And that number doesn't need to be 2:24:50 exact. It could just be within 5% 2:24:52 of the real price of Bitcoin. 2:24:54 And if every block 2:24:56 on this site 2:24:58 drivechain or roll up 2:25:00 in its header has to include 2:25:02 let's say Moscow time 2:25:04 how many satoshis per dollar 2:25:06 in the block header 2:25:08 and every node 2:25:10 locally checks that 2:25:12 disclosed value in the block header 2:25:14 against its own view of the exchanges 2:25:16 then you essentially 2:25:18 have the same oracle as the time 2:25:20 oracle that exists in Bitcoin. 2:25:22 Right. 2:25:24 Bitcoin 2:25:26 time oracle works this way 2:25:28 Bitcoin blocks have a timestamp 2:25:30 in them and the timestamp 2:25:32 must be greater than 2:25:34 median of the 11 blocks in the past 2:25:36 and less than 2 2:25:38 hours ahead in the future 2:25:40 given network time 2:25:42 where network time is the median 2:25:44 time of all your connected nodes 2:25:46 that communicate time to you or something like that. 2:25:48 But basically Bitcoin price 2:25:50 is another ambient variable 2:25:52 just like widely available in the world right now 2:25:54 24-7 2:25:56 So if a node checks the price disclosed 2:25:58 in the block header 2:26:00 and makes sure that it's within 2 or 3% 2:26:02 of what the exchanges 2:26:04 currently show 2:26:06 then the block 2:26:08 is valid or invalid 2:26:10 so if the block is invalid it's thrown away 2:26:12 if the block is valid 2:26:14 then the chain 2:26:16 can consider the price of Bitcoin to be 2:26:18 like an exponential moving average 2:26:20 of the last 256 blocks 2:26:22 or something like that 2:26:24 and this would be 2:26:26 trust minimized price 2:26:28 oracle because 2:26:30 every price disclosed into the system 2:26:32 would be validated by all 2:26:34 right 2:26:36 you don't need a market 2:26:38 that's what I'm saying 2:26:42 I see 2:26:44 it's exactly like timestamps in Bitcoin 2:26:46 block headers right 2:26:48 now there's one downside 2:26:50 to this setup which is also true about 2:26:52 timestamps in Bitcoin block headers 2:26:54 which is when you're doing initial block 2:26:56 download right 2:26:58 one of the consensus rules is that the timestamp 2:27:00 in the block header has to be 2:27:02 greater than 11 blocks in the past 2:27:04 median of those and less than 2 hours 2:27:06 in the future but you cannot check 2:27:08 the second condition when you're doing initial 2:27:10 block download right 2:27:12 you can only check that it's 2:27:14 greater than 11 blocks in the past right 2:27:16 so 2:27:18 in this kind of system that 2:27:20 I'm talking about when somebody in the future 2:27:22 does the download of the historical data 2:27:24 they cannot necessarily check that 2:27:26 the price of Bitcoin was 2:27:28 what the block header 2:27:30 disclosed at the time they just have to trust 2:27:32 that the network as a whole 2:27:34 validated that block 2:27:36 make sense 2:27:46 well said 2:27:52 well said 2:28:00 but like this kind of Oracle 2:28:02 which you can find it you know 2:28:04 Ruben Somsen documented 2:28:06 on this page after talking 2:28:08 to me and Fernando 2:28:10 we were talking about how to do decentralized 2:28:12 price Oracle but 2:28:14 basically this is decentralization 2:28:16 by unanimous validation 2:28:18 it's the same thing as timestamps 2:28:20 in Bitcoin block 2:28:22 this only works for 2:28:24 values that are widely available 2:28:26 24x7 around the world 2:28:28 right like it wouldn't work 2:28:30 for a price of some obscure 2:28:32 company in Taiwan 2:28:34 or something like that 2:28:36 price of their stock it only works like price of Bitcoin 2:28:38 or current time 2:28:41 this kind of 2:28:43 trustless 2:28:45 validation of every 2:28:47 like Vitalik Buterin could be disclosing 2:28:49 the price of Bitcoin into every block header 2:28:51 and it would be okay 2:28:53 like if Vitalik himself put the price of 2:28:55 Moscow time into every block 2:28:57 of this roll up or the drivechain 2:28:59 that would be fine because if Vitalik 2:29:01 misbehaves his blocks will be tossed away 2:29:03 right 2:29:17 all right 2:29:19 shall we continue or 2:29:21 should we call it a day 2:29:33 Henry 2:29:43 Henry why does this 2:29:45 space have like 2:29:47 8 people in it while 2:29:49 another space about toxic 2:29:51 change and coin joints has 2:29:53 150 people in it 165 2:29:55 well obviously the reason 2:29:57 is that I'm not 2:29:59 as talented 2:30:01 as a 2:30:03 Twitter spaces host is some 2:30:07 no no it's not that I think it's 2:30:09 part of the cult it's part of the Bitcoin 2:30:11 echo chamber because 2:30:13 people think that coin joints is how 2:30:15 you get anonymity on Bitcoin 2:30:17 but you know like it's ironic 2:30:19 that Paul found a better way to do it 2:30:21 using deniability and stuff 2:30:23 but you know the 2:30:25 the Borg doesn't 2:30:27 know about it the Maxi Borg I call 2:30:29 it the Maxi Borg 2:30:49 well maybe now's a good time to 2:30:53 to break until next time 2:30:55 so this has been drivechain Twitter spaces 2:30:57 we meet every Monday and Thursday 2:30:59 next week we might meet 2:31:01 at unusual times 2:31:03 or not at all so there may be a break 2:31:05 next week where we don't meet on 2:31:07 Monday and Thursday but the 2:31:09 following week we will resume 2:31:11 as usual next week is special 2:31:13 so 2:31:15 it might be 2:31:17 missed or there might be an opportunity to 2:31:19 have 2:31:21 it at an unusual time 2:31:23 but there might be one week so for those of you who 2:31:25 enjoy talking about drivechain every 2:31:27 Monday and Thursday my 2:31:29 apologies thanks for your patience 2:31:31 we'll have to pick up 2:31:33 one week from now probably 2:31:35 a little bit more than that 2:31:39 alright 2:31:41 thanks for setting it up Henry 2:31:43 thank you Alex see you next time 2:31:45 thank you Moon Settler and others 2:31:47 ciao
