0:10 Thank you. 0:40 Hello, and welcome to Drivechain Twitter Spaces. 0:49 Today is April 13th, and we are delighted to have another conversation about this tremendously 0:58 important project to strengthen Bitcoin. 1:03 Welcome everyone. 1:07 Feel free to raise your hand and come on up to the stage if you'd like. 2:03 Well, who would like to come on up and ask a question or comment? 5:03 Welcome, everyone, into the audience. 5:15 All are welcome to come up on stage and share your thoughts and latest ideas regarding Drivechain. 5:26 We're just getting started here today. 5:34 Don't everyone raise your hands at once. 5:39 We would have a traffic jam. 5:50 Drivechains have been in the news lately. 5:53 There was an article by Jameson Lopp recently, a very excellent one, on the history of Bitcoin 5:58 maximalism, and the article was posted to the Drivechain Reddit so that all of our many 6:08 Reddit-based followers can be aware of it. 6:21 Jameson Lopp said, 6:23 Implementing Drivechains or validity rollups would not only improve overall network speed 6:29 and capacity, but would also allow developers to test out various solutions in a way that 6:35 keeps the underlying base layer safe. 6:39 This should massively speed up development time and thus fight against the looming ossification 6:45 threat. 6:53 So Lopp is doing a great job there of talking about Drivechain. 8:12 All right. 8:17 We will patiently wait until people join to ask more questions. 9:05 Maybe he will join and share the very latest on his exciting activities in the realm of 9:14 ordinals and blocking of inscriptions. 9:19 He's always up to something fascinating. 10:19 Hello, SuperTestNet. 10:46 Welcome to our Drivechain Talk Twitter space. 10:54 If you would like to come on up and chat about your latest activities in the fascinating 11:00 realm of sidechain development, you are welcome to. 11:06 We'll send you an invite. 11:17 Welcome to the stage, Mr. TestNet. 11:21 Thank you. 11:24 What's up? 11:27 How's it going? 11:29 Things are going pretty good. 11:31 I just got back in Austin, Texas after being in Ohio for Easter and looking forward to 11:39 the Bitcoin++ developer conference on the 28th. 11:46 Cool. 11:49 Recently, you were chatting in the Drivechain Talk Twitter telegram group about different 11:55 sidechains and Paul's recent tweets about a contest. 12:01 Can you say a little bit about the difference, in your view, between the nature of working 12:08 on a drivechain versus the nature of working on a spacechain? 12:17 As you know, I've worked on both quite a bit. 12:23 One thing that's nice about working on spacechains is that you don't have to wait for anything. 12:28 They work right now. 12:31 Of course, the negative thing is that they don't work very well. 12:35 They're kind of bad. 12:38 I've been playing around with them. 12:40 I made one spacechain launcher so that anyone can make their own. 12:45 Then I started preparing a presentation for Bitcoin++ about it. 12:51 As I was making it, it occurred to me that it would be cool to do what Paul's doing. 12:57 Paul's making all these sidechains that work on testnet. 13:03 He made one for Ethereum. 13:05 He made one for Zcash. 13:06 I've certainly thought those are really cool. 13:08 I've wanted to see more stuff in that direction. 13:11 I thought, why don't I make a spacechain for these things? 13:17 That would work on mainnet because spacechains work right now. 13:22 I thought of that. 13:25 Actually, you told me there was a contest for making sidechains. 13:29 I was like, oh, that's even better. 13:32 If there's a contest for making these things, I could make one and maybe even earn a prize for it. 13:36 I asked for more details, and it turns out it only qualifies if you make a drivechain. 13:42 I don't have the coding prowess to probably do that. 13:47 That's kind of where the state of it was. 13:50 I was just thinking of making one of these things because it would work right now. 13:55 Even though it works very poorly right now, it would still work. 13:58 That was the whole genesis of the idea. 14:08 Cool. 14:10 Welcome, everyone, to the stage. 14:12 To the room, rather. 14:14 Porkchop, HeroGamer, all of the usual suspects have gathered for our twice-weekly drivechain chat. 14:28 Super, I am confident that you will do well in the contest, that you will be unable to resist the urge to participate and submit your best possible work, and I hope that you succeed. 14:42 I'm not involved in any of the judging, and I'm not sure it's even begun yet, but I think that when it does, you will prevail. 14:49 I'm optimistic. 14:52 It seems to me like you really understand the values and virtues of the drivechain project, which are about innovation and scientific experimentation and progress, building on Bitcoin and creating value for Bitcoiners through innovation. 15:15 It's not about hodling and number-go-up and pump-it-up music. 15:22 It's about technology. 15:25 Now, of course, the two are related. 15:27 And the people who want to talk about the investment angle of things all the time, the trading, stock-to-flow model, all the silly stuff that's obsessing over the price, those people actually benefit a lot from drivechain, potentially. 15:48 There's two ways they could. 15:50 First, by increasing the actual economic demand to hold Bitcoin. 15:57 If more people want to hold Bitcoin, the value will go up because of the inelastic supply. 16:05 But there's also the narrative around Bitcoin, and that narrative is so important. 16:11 If the world thinks that it's hard to build on Bitcoin or impossible, then that creates a rationale for the launching of altcoins. 16:22 And we see that in the white paper for Ethereum. 16:26 The first few pages are about the limitations of Bitcoin as a platform for applications other than payments. 16:37 And at this point in the crypto movement, there are people like Eric Wall, who spoke very well recently on the What Bitcoin Did podcast. 16:47 I listened to it yesterday, and it's like two hours long. 16:52 He's talking with Peter McCormack, and Eric speaks many sentences about drivechain. 16:57 It starts at about 50 minutes into the interview, and he's completely in favor of drivechain. 17:05 But at this point, I feel that there are actually some people who have one foot in Bitcoin and one foot in Ethereum. 17:12 People like that. 17:13 And they actually would like to see Bitcoin—well, I mean, Eric is explicitly in favor of drivechain. 17:21 But also at this point, I think that for people who aren't partial to Bitcoin, 17:26 they feel that it would almost be good from a kind of diversification standpoint for the crypto community to not favor changes to Bitcoin, 17:36 and that Bitcoin should remain this conservative system. 17:40 And that way, nothing is upset internally. 17:45 However, of course, for the Bitcoin maximalists, those who are only in favor of Bitcoin, 17:51 they benefit from not being excessively conservative, but instead growing Bitcoin to be able to internalize the value of innovation, 18:05 rather than have that innovation occur outside of Bitcoin in a way that would, in the very long run, 18:10 because of network effects, cause Bitcoin to be disadopted. 18:18 In terms of the monetary network effects, if a thousand other projects are built outside of Bitcoin, 18:25 eventually they would all unify onto one platform that has a drivechain-like design, 18:30 and the base layer of that platform would be then ossified and become the world's money. 18:36 So to the extent that the Bitcoin project is about succeeding in terms of being adopted and used and having value, 18:44 then it has to be the big winner. 18:46 There can't be more than one big winner. 18:49 In economics, especially in the market for money, network effects are extremely important. 18:54 They're more important in money than anything else in economics. 18:58 There can only be one money in a society that is the dominant one. 19:04 Some have two, and there's probably some regulatory reason for that. 19:08 But in the long run, kind of like the language, in the very long run, a thousand years from now, 19:13 there'll probably just be one language. 19:16 Or in 10,000 years, one language across the globe, not many. 19:22 Yeah, jump in, please. 19:25 Yeah, I sympathize with the folks who don't want any more soft forks. 19:31 Because the last two that we did, SegWit and Taproot, 19:36 they've brought us some of the worst things from Ethereum have jumped over to Bitcoin because of those two soft forks. 19:44 Now we regularly have 3.7, 3.8 megabyte blocks, which was like when SegWit went active, 19:51 it was like, that'll never happen. 19:53 It's only going to be maybe two. 19:55 We might get two sometimes. 19:57 And now it's regularly almost four. 20:00 Now we've got monkey JPEGs all over the place and miners extracting MEV and stuff. 20:09 Very bad things have come to Bitcoin due to the last two soft forks, which weren't possible before. 20:14 So I can sympathize with people being like, you know what, these were touted as necessary changes to Bitcoin, and now Bitcoin's worse. 20:21 So no more. No more soft forks. They're just going to screw everything up. 20:26 I don't believe that. I don't think they did make things worse. I think Bitcoin's better due to SegWit and Taproot. 20:34 But yeah, I can see why people think otherwise and then worry that if we do any more soft forks, it's just going to get worse. 20:41 If they have the opinion that Bitcoin's worse now than it was before. 20:49 Well said. 21:04 Have you had a chance to look at Jameson Lobb's History of Bitcoin Maximalism article recently that he published on his blog? 21:13 Or is that lengthy, non-technical kind of content too much of the popular discourse for a techie person like you? 21:29 No, I read it and enjoyed it. Sometimes we techie people get in a mood. 21:38 Yeah, I liked it. I thought it was kind of funny that he gives like six or seven different definitions of maximalism in that article 21:47 and can't seem to really pin down one that he thinks is, he's just like, it's not well defined. 21:53 Here's seven different definitions and he doesn't seem to be able to pick one to say that's his personal favorite. 22:05 Where do you bring it up? 22:08 I feel that for me personally, the Lobb article recently, along with Eric Wall's appearance on what Bitcoin did, 22:15 are two recent examples of thinkers in the Bitcoin space grappling with what has been going on for the last few years, 22:26 which in my humble understanding is the gradual kind of split of the whole crypto community into two groups 22:37 where one group thinks that Bitcoin is cool, but there is a ton of interesting stuff going on on Ethereum. 22:45 And then the other group are Bitcoin, like the Bitcoin only crowd, which says that if something isn't Bitcoin and it uses a blockchain, 22:58 then it is illegitimate and it's just a money grab. 23:05 So to me personally, as best as I can tell, there is a very dramatic, interesting phenomenon going on 23:13 where at some point in the future, one of these two groups will be vindicated and the other group will drift away into a quiet and irrelevant status. 23:26 What were the two opinions again? 23:28 One is that there is a ton of interesting, legitimate work going on in Ethereum. 23:35 And the other is that Bitcoin only, quote unquote, is the only productive and ethical path forward with regard to blockchain technology. 23:51 Yeah, if you got rid of the word legitimate, those would be compatible. 23:54 If you could just say that there's a ton of interesting stuff happening on Ethereum, but it's all illegitimate and immoral, 24:00 that would be compatible with saying Bitcoin is the only legitimate and ethical whatever. 24:09 Well, what I mean is that someone like Eric Wall would say that there's absolutely nothing wrong in any sense with owning and building Ethereum or Ethereum related assets and technologies. 24:24 And then Lopp recently, if I understand correctly, and I haven't followed this very closely at all, but he's at this company Casa and they used to be purportedly Bitcoin only. 24:38 And then they were, in more recent times, publicly acknowledging that they support custody of non-Bitcoin blockchain tokens. 24:49 So I think his article is part of that, explaining and exploring the fact that there is an economy out there, a demand for non-Bitcoin assets at this time. 25:05 And that's why he wrote all about it and how we got to this place. 25:10 It used to be that Bitcoin was the only one, like back in 2013, Bitcoin was at 100% dominance. 25:19 And then it used to be around 2020, something like 80% maybe, and then now it's like 40%. 25:28 I agree with the statement that there's nothing morally wrong with owning and building on Ethereum. 25:34 I personally choose not to do either of those things because I don't think Ethereum is a well-designed system and I think it functions poorly as money. 25:45 Or at least it would if I projected the future the way it's currently been going. 25:51 But if someone disagrees with that, I don't think that they're doing anything morally wrong. 25:54 If they say, yeah, I think it's well-designed or I do think it's worth owning some, they just disagree with me. 26:03 That doesn't make them a sinner or anything. 26:25 End of a slow conversation today. 26:29 Yes. It's a bit quiet. Sometimes we have quite the active exchange, other times it's a little bit calm. 26:40 Maybe everyone's in an equanimous mood reflecting on all these things. 26:48 Equanimous, that's a cool word. Is that a word? Equanimous? 26:52 Yeah. Equanimity. If you're a person of equanimity. 26:59 Oh, I like that one. That's a good word. 27:02 Yes. Well, it's good to have a vocabulary for being calm and relaxed. That way you can explore that mental space. 27:13 Super, do you have thoughts on the economics of the sidechains a lot? 27:27 Do you think about things like when you're building a sidechain, do you reflect on the fact that people would say the fees on a sidechain are the upper bound of the economic security from reorders? 27:43 So, for example, if a sidechain has low fees, then it can't have a lot of value moving around because the incentive against a reorder would be low because of the lack of the coinbase and other factors. 28:03 Well, I think it sort of depends on the model of the sidechain. On something like Liquid, that's true because the Liquid Foundation produces blocks in return for the fees they get from people who use their sidechain. 28:30 And if you wanted to double spend on Liquid, you could do something like pay someone with a low fee, wait for it to get confirmed, and then offer the block producers a bigger transaction, a double spend. 28:42 If they'll undo that block and create a new one, they can get a bigger fee because you're respending that input with a higher fee. So you could incentivize the block producers over at Liquid to do a reorg by offering a higher fee on a double spend. 29:00 But I don't think you can do that on the model that drivechain uses or that spacechains use of blind merge mining because as long as the Layer 1 blockchain is offering high fees to the miners, then you on a sidechain trying to do the same thing, you'd have to overcome the economic incentive that they have to keep going with the regular L1 chain because all of the sidechain's blocks are committed to on there. 29:30 So in order to reorg the sidechain, you have to reorg the L1, which is hopefully much more difficult to do. So does that make sense? 29:39 Yes, that's interesting. 29:40 Yeah, I think that's kind of the whole point of making drivechains and of using blind merge mining. Well, it's not the whole point. A large part of the reason why they do that is so that they inherit the un-reorgability of Bitcoin or at least the hope for un-reorgability. 30:08 Let me just clarify because I see Moonsettler gave a thumbs down. I might have missed what you said, so I don't want to say that I agreed with it entirely. I mean, I tend to agree with everything you say. However, let me just clarify in my simple… 30:26 Well, don't do that. That's dangerous. 30:28 I mean, I have tended in the past upon careful listening, but what you just said I might have misheard or maybe you misspoke because the security against a reorg attack of a drivechain is the fees, right? 30:52 So if the fees are low, then someone could do double spending on a drivechain, correct? Without… 31:04 I didn't think so, but you say that with enough confidence that perhaps I misunderstand how they work. My thought was that on a drivechain you have a bunch of block producers and they propose blocks to the mainchain for inclusion there or very often I think the expectation is that miners would mine both at once. 31:26 And if that's happening, then you can follow the progression of the sidechain by just looking at the mainchain, finding the hashes that go into the coinbases and then saying, okay, here's the next block of the sidechain supposed to have this hash because that's what it is on the mainchain. 31:47 That's what the mainchain says. And then you request that block on the sidechain. So if you do that, if you keep operating that way, then you can't reorg the sidechain because the order of blocks is committed to on the base layer. 32:01 And so if you try to reorg the sidechain, the only way you can do it is by changing the order of hashes on the mainchain on the base layer, which is really difficult to do because miners are economically incentivized on Bitcoin not to reorg. 32:19 That's my understanding, but perhaps I'm wrong. Perhaps they don't work like that. Can you not identify the order of blocks on the sidechain based on the hashes on the mainchain or is that not the standard way to do it? 32:35 Well, what I know for a fact is that the security budget of the drivechain is its fees, whereas the security budget of Bitcoin mainchain is its fees plus the fees of the drivechains plus the coinbase on the mainchain. 32:52 So we know that the security of a certain kind is much greater on the mainchain necessarily than on the drivechain, unless the drivechain had astronomical fees that were greater than... 33:10 Well, no, even so, the drivechain is always going to have less security budget than the mainchain. Do you agree with those statements? 33:24 I need you to repeat the first ones. How did you define the security budget? 33:29 I think Luke Settler could do it better than me. 33:32 Hello, guys. 33:35 Hello, Luke Settler. 33:36 So the thing is, and this is according to Paul as well, so you can basically commit to any kind of hash really, even hashes that make absolutely no sense on the mainchain. 33:53 So a miner can actually just include zeros or someone can actually pay because the miners don't even need to actively be involved in this. 34:03 Someone can just basically deal with a sidechain, a drivechain, any managed mine sidechain really by including invalid hashes. 34:15 And that means that the sidechain is stored. And if someone includes hashes that basically create an alternative history. 34:25 So he keeps paying, he keeps outpaying the aggregate fees from the sidechain, he keeps paying over the sidechain security budget. 34:34 He can basically create a reorg on the mainchain without reorging the mainchain. 34:39 So I think Paul has a very good chart. 34:44 Yeah, you're right. I see it now. 34:47 Yeah, that makes sense. 34:50 Okay, cool. So you switched me. 34:54 Yeah, you can. 34:56 Yeah, they are much more vulnerable to reorgs than Bitcoin is. 35:02 I like to say that what they are not vulnerable to is having an unlimited number of alternate histories just showing up out of nowhere. 35:15 So if you have proof of work or any other kind of consensus that is much, much, much weaker than Bitcoin, 35:25 then basically you can find that millions of alternate histories can show up out of the blue. 35:32 Someone can actually produce those. 35:34 And your node is basically crashed. 35:37 And this is a type of denial-of-service attack or just simply creating chaos and stuff. 35:45 So by anchoring to Bitcoin blockchain, the drivechains basically only have a very limited number of alternate histories that they have to deal with. 35:57 They can be denied, so they can be stalled or they can be reorged, but it doesn't come out of the blue. 36:05 So it's telegraphed. 36:07 You see, if someone is trying to do a 10-day preorg on a drivechain, then he can't just do it, you know, like a snap of a finger. 36:15 He has to start working on it. 36:17 And actually others can outbid him. 36:20 So that is also a possibility that he will just fail. 36:23 And this is what anchoring to Bitcoin actually gives you. 36:28 But technically, I don't believe that drivechains have the same finality as mainchain. 36:38 Yeah, yeah. 36:40 I suppose another factor is that if the drivechain stalled, like everyone lost interest in using it. 36:47 And so there was like a 20-block period, let's say, where no one was mining any sidechain blocks because no one was using it. 36:55 Then it would be a lot easier to come along and reorg it because you could just start building up a bunch of blocks while no one's mining it to get higher than its currency. 37:08 It would be just, you would just have to pay for block space basically on mainchain. 37:13 That's your minimal entry. 37:14 If the sidechain does not have an economic activity in the period, then that's your entry point. 37:21 So you are competing with JPEGs and stuff. 37:26 Yeah. 37:28 I think it would be a lot harder to do it on an actively used sidechain. 37:34 If every Bitcoin block has another sidechain block in it, then even if you pay a lot, you're going to have a hard time reorging it. 37:40 Because you just have to wait until they stop mining blocks in order to overcome their chain tip. 37:48 So this is the thing that makes me question the smartness or the logic of uber large blocks on a sidechain. 37:59 Because we kind of see that when the block space is too abundant, then it has no price, it has no cost. 38:06 And so the fees are actually low, the aggregate fees are low and the individual fees are extremely low. 38:13 And you actually want a situation where everyone is paying for the maximum security that they can afford. 38:21 So everyone is participating on the sidechain that gives them the best security for the blocks that they can afford. 38:28 And if they are very rich, then they would just be on mainchain and have the best security ever. 38:33 And this is why I kind of think sidechains don't actually need giga meg blocks. 38:41 They actually may have smaller blocks, especially in the beginning, than Bitcoin. 38:48 And they can grow organically and they can have a fairly healthy fee market. 38:55 And that just makes it much more difficult to fight this economic activity. 39:03 But if you are presented with a situation where reorging the sidechain comes with an additional economic benefit 39:13 that is not expressible in fees so readily. 39:17 So let's say there is an atomic swap between sidechain and mainchain. 39:22 And someone is basically bidding for a reorg because mainchain can't be as cheaply reorgged as the sidechain. 39:33 So he can screw his counterparty that is on the weaker consensus. 39:38 And this may have arbitrarily large motivation behind it because it all depends on the size of the transaction and the finality assumptions. 39:48 Right. 39:49 So that is why I also said to people before that we really don't want a situation where there is a decentralized exchange between Bitcoin and an other asset that has better finality than Bitcoin, because then it's Bitcoin that is on the screwy end of things. 40:08 If all the alternative assets and all the other chains are subordinate to Bitcoin, they are all sidechains, then this threat basically cannot threaten Bitcoin. 40:19 So in this case, if you are a Bitcoin maximalist and you want mainchain to be immutable as much as possible, then you probably want that everything is subordinate to Bitcoin because then it would always be a home field advantage to mainchain. 40:39 May I just say, you've got a very rich and deep, beautiful baritone voice, and I don't know if you've ever taken up singing, but I would love to hear you sing some Eastern European songs with your deep, beautiful voice and then record them and make them available so I can purchase them, because you sound awesome. 41:04 Have you ever sung Moon Settler? 41:08 Excuse me? 41:10 Have you ever sung? Have you ever thought about singing? 41:13 No, I can't, and it's probably because of the headset I'm using, because with other microphones I have a pretty horrible voice, so I don't know. 41:24 Oh, okay. Yeah, well, thank you for clarifying that for me. I didn't realize that you need to keep on – if you stop the sidechain from being active, then it really loses its un-reorgability. 41:45 Yeah, it really does depend on activity being large. Although, I wonder, though, you said that having small blocks on a sidechain helps this, but I don't know if you have one sidechain that has 10 megabyte blocks, or you have 10 sidechains that have 1 megabyte blocks, I doubt there'd be much difference. 42:06 I imagine people would go to move to the one that's cheapest. 42:10 My theory about this is that people will go to the fees that they can afford, because basically your finality in blockheads will be much better on a high-aggregate fee sidechain. 42:31 So my theory is that everyone will organically find – so if fees get too high on a sidechain, let's say we are doing small sidechains and one sidechain is getting crowded, richer, better situated people move there, then basically those that can't afford those transaction fees will either start a new sidechain or look for another sidechain that has lower fees, more block space. 43:00 And this will, I imagine, organically give birth to sidechains as needed, and those that don't have very much economic activity will not be very secure, so there will be motivation for people to leave them, actually, and consolidate the state in low-activity environments. 43:21 Or when a sidechain was created but it's not really doing anything worthwhile or does not have serial demand, then only people who are fine with waiting a very long time for finality or only doing microtransactions would stay there, I imagine. 43:41 So earlier in the drivechain group, me and a guy named Deleted Account were discussing one-way pegs versus two-way pegs. 44:02 And I don't know if Deleted Account is in this group, but I'd love to talk to you more about this if you're in here. 44:12 chains have this thing called a one -way peg, where you burn Bitcoins on the base layer 44:18 and you get a corresponding amount on the space chain, and those are 44:24 what you pay fees with. 44:25 You pay fees with these burned Bitcoins, 44:32 I think it would prevent them from having any speculative value because they can never be worth more than the Bitcoin that you can create them with. 44:42 But according to Deleted Account, if I'm understanding him correctly, he thinks that any asset like that is only going to have one of two values. 44:52 It's either going to be worth one full Bitcoin or it's going to be worth zero, in which case you can't use it for paying for fees. 45:00 I think it would be neither. So I would bet on that they would trade more like GBTC. 45:10 GBTC is a one-way street. So the only difference is you can just enter immediately into GBTC so it can trade at a premium. 45:20 A sidechain space chain like this could never trade at a premium because you have immediate arbitrage opportunity. 45:29 You can just lock in Bitcoin and immediately exchange it. So it will never trade above parity with Bitcoin for any amount of time. 45:37 But it can trade below because you can't get out. And it's very likely that when the demand for the space chain asset actually is dropping, 45:48 then immediately you will see a price drop. But it will never be probably truly zero until people actually start believing that it can have future use and future demand and future voice. 46:00 So it's probably a safe bet that most of the time it would trade around 30-40% of Bitcoin when there is any demand for it and maybe a few percent when there is no demand for it. 46:17 Yeah, that's my take too. It would float between zero and probably never approach, well it would only approach one if there was seriously high demand for using it, which seems unlikely to me. 46:30 One way to fix this, which is interesting, is if you could construct a mechanism that constantly leaks the logged in escrow to mainchain a space for the miners so it gets back into circulation. 46:45 So the escrow or the base, the monetary base, has a constant shrinkage, like 2% a year or something like that, some percent. 46:58 And basically you would need to burn the corresponding amounts on the sidechain, the space chain, to make a new block. 47:05 So you are keeping things in balance, you are not debasing the currency. You have a shrinking supply and if it has any utility, it would probably mean that this utility will incentivize people to actually value it and for it to have a price close to Bitcoin's price. 47:28 And when demand drops, basically it gets shoveled out to mainchain miners who mine these blind merge mining transactions. They basically would get it as fee if you could make up a covenant or other construct for this. 47:45 And it's not the same as a drivechain escrow, right? So miners can't just do anything about it. 47:55 Yeah, it's much worse. 47:57 It's a fixed rate of release, but it creates a scarcity. So if people want to use it, they need to put in more and the more it is, the more it leaks. 48:08 So basically it would have a long-term self-regulating property that might, this is the theory, that might make it trade closer to Bitcoin parity. 48:21 Because people would know that if someone has a demand for it, then he has a choice. Either he brings in new Bitcoin, at which point he immediately loses X percent, right? 48:31 Or he can just buy it from them. So if they bought it at 30 percent and they can sell it at 60 percent, then they do a profitable trade. 48:43 So you get speculators and arbitrage traders and they will just basically keep this asset in theory close to parity. 48:54 I don't know how well it would work. I'm just saying that this is basically one way to do... 49:02 Make it something more like a two-way peg. 49:05 Yeah, you make something like an economic two-way peg, but it's not a real two-way peg or not a two-way peg that allows for explicit withdrawals. 49:15 Yeah, it's an elastic, very elastic one that gradually approaches a two-way peg, even if demand for it shrinks. 49:25 So the theory goes, yeah, I don't know how it would work. 49:29 I don't know how it would work either, but it would certainly be a fun experiment to try it out. 49:34 So one of the reasons I wanted to talk to Deleted Account about this is that if it's true that the space chain coins or space coins would have some value, less than one Bitcoin, 49:48 then you could still use them to pay for fees on the space chain. 49:54 And that would actually bring to truth what a lot of altcoins started out as. 50:00 When Ethereum started, they said Ethereum won't compete with Bitcoin as money because it's only going to be used as fee payments, which should be very low. 50:10 Very low usage. You only have a few ETHs to pay for fees, and then the rest of your money is in Bitcoin. 50:18 But that's not how it panned out because, of course, that's a money use case. 50:22 It's paying for transaction fees, and you need to have a certain amount on hand. 50:26 And that number grows and shrinks, and then people start putting speculative value in it because they say everyone's going to want to use this thing. 50:33 And then it just competes with Bitcoin on that level. 50:36 But space chains couldn't, or at least they could do it much less. 50:40 There'd be much more limited range within which they could compete. 50:43 They actually would only be useful for paying for fees. 50:46 And if you tried to speculate on them, there's a cap on how much they can increase in value. 50:52 So you're incentivized not to have very many of them because they can't perform that well. 51:01 So that's one of the reasons I wanted to make a space chain. 51:05 It occurred to me that you could use this to make all those things that people used to say about Ethereum true. 51:11 They used to say it would not compete with Bitcoin as money, and on a space chain, that would be accurate, or at least it would be more accurate. 51:18 So that's my thinking on it. 51:22 But his opinion is that there's a binary value. 51:26 It's either worth the full Bitcoin or it's worth nothing. 51:29 And I'd like to hear a justification for that more. 51:32 It would obviously move around. 51:35 It wouldn't be one or zero. 51:37 I don't see how anyone could say that the price would be the maximum or the minimum all the time. 51:44 What Paul has said is that the price would crash to zero because of the one-way peg. 51:53 And that struck me as correct. 51:56 If you imagine a market where there is a one-way peg for something, then on the side that has the stable value, you convert it through the one-way peg. 52:09 And now that thing is never going to be worth more. 52:13 So Moon Settler said it would be like GBTC, where it would fluctuate and go above and have a premium. 52:20 No, I said it can't have a premium. 52:24 A sidechain can't have. 52:26 To the downside, when GBTC trades at a discount, that sounds more similar. 52:31 So it's different than GBTC, since GBTC can have a premium, and did. 52:38 It had a premium of 800% at one point. 52:42 Because it was difficult to enter. 52:44 Whereas with space chains, it's very easy for anyone to arbitrage their value. 52:49 Right. I don't know why it had that premium, but GBTC was... I'm looking it up now. 53:01 One of the reasons it had a premium was because you could buy it through regular trading software. 53:10 And for a lot of firms who used that software, that was their only way to get exposure. 53:19 Because they couldn't buy Bitcoin directly using their stuff. 53:22 I remember going to companies and recommending they buy Bitcoin. 53:27 And they opened up E-Trade or whatever thing they used, and they're like, I can't find it. 53:31 And then they're like, oh wait, I found it. There's this thing called GBTC. I can buy that. 53:34 And so then they would. 53:35 And it was like, but if that's your only way to buy Bitcoin, because that's the software you use, 53:40 and it's the only thing it offers, you might have to pay a premium. 53:44 Because it doesn't trade at the spot. 53:49 Right. I agree. 53:51 So I was wrong. It's not 800%. It maxed out at 80%, approximately. 53:56 So it was 80% above, and then the highest discount was about 50%. 54:03 Half a year ago. 54:07 And now it's at a discount of about 36%. 54:12 Meaning it's worth 74% of the Bitcoin? 54:18 Right. Of the underlying Bitcoin. 54:22 So yeah, there's different markets. 54:24 There's the market of people who are able to directly interact with GBTC. 54:28 And they would bring down the premium. 54:34 But when it's at a discount, the redemption mechanism isn't there to force the price back up towards the underlying value. 54:46 By the way, that's not entirely the case. 54:50 As far as I know and heard, it is a choice. 54:55 Because GBTC actually has a leakage. 54:59 So there is a 2% fee. 55:02 And it's a special 2%, I think, because when it trades at a discount, it's actually much higher. 55:09 So it's a huge cash cow for the, I don't know... 55:17 Whoever's operating it. 55:18 Genesis? I don't know who's operating it, but it's a huge cash cow. 55:23 And basically, you have this possibility to actually allow withdrawals. 55:32 But that would basically kill this business. 55:35 Kill this fee business, if they let withdrawals. 55:39 And that would be very good for the investors, because probably the discount would disappear overnight. 55:45 If they announced that they allowed withdrawals or started processing withdrawals. 55:52 Even if just one person can get these out, it would immediately create an arbitrage, right? 55:58 So even if not everyone can exit, if just one person can exit, then it's... 56:03 Yes, they've made some changes to their documentation. 56:07 To make it harder for the shareholders to get together and, through a majority vote, dissolve the trust. 56:14 To return the underlying asset, which would effectively force up the price, if they were to dissolve it. 56:22 Because then the mechanisms of unwinding the whole thing would eliminate the discount in the process. 56:30 So I agree with you that it seems like Grayscale has wanted to pursue the continuation of a receipt of a lot of fees. 56:45 Rather than do what is in the best interests, arguably, of the shareholders. 56:51 But if in a few months from now they could convert it to an ETF, then that would be the thing that would make everyone happy, I suppose. 57:00 So it would have been worth the wait. 57:03 Of course, ETF fees are much lower than the kind of fee that it's getting now. 57:14 Right now they're charging 2% and the fee on an ETF would tend to be much lower. 57:19 So if there's competition... 57:23 So I think this highlights what is happening with GBTC. 57:28 It actually highlights perfectly that if you have any withdrawal mechanism whatsoever, anything, then it will probably trade very close to parity. 57:43 And if you have immediate fast entry and fast arbitrage, then it will never trade above parity. 57:51 So I think the assumptions about drivechain in this regard are pretty much validated by just what we see there. 58:07 Well, I got to get going, but it's been nice talking to you guys. 58:09 Thank you for hosting this space. 58:12 Thank you for joining. 58:16 You're welcome. 58:18 Everyone's welcome to come on up to the stage and chat. 58:22 This is Drivechain Twitter Spaces. 58:24 We meet every Monday and Thursday to discuss the state of the world with respect to drivechain, the most important idea of all time, in my personal opinion. 58:34 Not everyone agrees with that, but that's fine. 58:39 We're trying to achieve an upgrade for Bitcoin, which would increase its extensibility, enabling every altcoin to be deployed as a Bitcoin sidechain, enabling the whole crypto economy to use a single unit of account, one Bitcoin. 58:58 So the idea here is that every sidechain will have a unit of account, which is one Bitcoin, because the native token of the sidechain will be redeemable for Bitcoin. 59:10 And all of the fees on all of the sidechains will be paid to Bitcoin's layer one miners through blind merge mining, making sure that Bitcoin has a high security budget in the future from collecting all the fees from all of these big block thunderside chains. 59:29 They'll pay a trillion pennies every day to Bitcoin's layer one miners, securing Bitcoin far into the future as the coinbase is halved towards zero every four years. 59:47 It's a great mystery. 59:49 Which will be the impetus for Drivechain? 59:53 Will it be low security? 59:54 Will there be a problem with the halving coming up where there's not enough miner funding in 2024? 1:00:00 Or will the impetus for Drivechain be flippening, the risk that Ethereum accrues so much value that Bitcoin is at risk for losing its market cap crown status? 1:00:15 The best justification for Drivechain is not security budget and flippening risk. 1:00:22 The best justification in the view of Michael Tidwell, as he wrote in a tweet, is love of innovation. 1:00:31 So the desire to see Bitcoin flourish with new innovation, that, in his view, is the best reasons to support Drivechain, not the desire to get Bitcoin's price up or to get more fees for miners. 1:00:52 Can I say something? 1:00:53 Please. 1:00:55 So a lot of people like to rant about how blockchain is such a stupid thing and it's wasteful and inefficient and it's not good for anything at all. 1:01:10 And it's a funny thing because, you know, when someone gets into data availability and public auditing, publicly proving sequences of events and data availability, then it suddenly becomes very hard to do anything without the blockchain. 1:01:34 So it's an interesting narrative that is lately very widespread that we don't need any blockchains besides Bitcoin mainchain whatsoever. 1:01:45 And the other interesting thing is I'm lately more involved in the thinking about Chaumian eCash, especially with KalaBTC in Cashu. 1:02:01 And we are in the thinking of preventing and proving fraud, get to a point when we basically almost invented the blockchain and the peer-to-peer network that is Bitcoin all over again. 1:02:16 So it's quite funny. I just want to note that there is clearly a use case for chains. 1:02:31 I'm glad you feel that way. 1:02:35 Paul has said that if a person thinks that there has never been and will never be an altcoin that has any legitimate purpose, then that person would have no reason to support Drivechain. 1:02:51 Of course, only the most ideological person would say that no altcoin has any legitimate purpose because, of course, the privacy altcoins, the big block altcoins, the expressive altcoins all have interesting applications for low fee scaling, peer-to-peer oracles. 1:03:18 The DNS and other applications and protocols. 1:03:25 So it would be great if Bitcoin had on its blockchain a bunch of interesting sidechains that are innovative and experimental, enabling those kinds of building projects to happen on Bitcoin. 1:03:47 Thank you. 1:04:18 All are welcome to come on up to the stage. 1:04:22 We have about 20 minutes left in our scheduled programming. 1:04:34 I see some familiar faces in the audience. Hello, Lalo and Porkchop. 1:04:43 Hello, Lalo and Porkchop. 1:05:02 All right. 1:05:06 Maybe now's a good time to break. 1:05:08 Oh, OK. 1:05:11 Maybe now's a good time to break and we can reconvene on Monday. 1:05:17 I look forward to seeing you all then. 1:05:21 Bring your questions and comments. 1:05:25 OK. 1:05:27 Thank you to our speakers. Thank you, Moon Settler and others. 1:05:31 See you next time. 1:05:33 I look forward to it. 1:05:34 Ciao. 1:05:38 Bye-bye.
