0:00 All right, guys, I'm glad to introduce Paul Sztorc. Is that the proper way to pronounce it? Paul Sztorc? 0:08 No, but I'm used to it. 0:10 So let's hear how the proper way to pronounce it. 0:13 It's Sztorc. In Polish, C is a different letter. It's pronounced T-S. Paul Sztorc. 0:19 Okay, yeah. Okay, so Paul Sztorc is joining us. He's been active in the Bitcoin project since late 2010, 2011-ish. 0:33 He's helped produce great technology for Bitcoin, such as the Truthcoin protocol. 0:40 Truthcoin is not an altcoin. It's a prediction market protocol, which has been then called Bitcoin Hivemind as the implementation. 0:49 And his latest project and his current focus is on Drivechains. Drivechains is not actually new. 0:57 It's something he proposed a couple of years ago, and it's sort of this version of sidechains, 1:04 which represents some of the earlier efforts of what sidechains were meant to be. 1:10 And now they've got some testnet Drivechain things going on, and so there's a lot of interesting development going on there. 1:18 So welcome, Paul. Thanks for joining us to discuss your work. 1:24 Thanks for having me. 1:26 Okay, so a lot of people don't necessarily know who you are, so let's provide a bit of background to them. 1:32 So tell us then when you got into Bitcoin and why, and what motivates you to stay on the project in 2018? 1:42 Well, really, it's funny because I have a kind of a vulgar origin, because it's the... 1:50 I'm sorry, how do I shut off this user-joined-your-channel thing here? 1:54 Go to the sound pack in self. If you go to the self menu, sound pack, and turn off. 2:00 So either sound's deactivated, and that should make it so that... 2:05 Oh, okay, there we go. Sound's deactivated. 2:08 Yeah. 2:11 Oh, someone says I have to restart TeamSpeak. Is that true? 2:14 If it pops up again, I guess maybe you can do that, but let's see if it works otherwise. 2:19 All right, so far so good. All right, classic whatever, AV issues. 2:27 Okay, so we're good? We're still doing this? Are we doing it all? 2:33 No, no, just keep going. 2:35 All right, we're going. Great, I love it. We're doing it live. 2:38 Yes, so the vulgar origin story is just the Wired Silk Road article, and I read this article and I just thought... 2:49 Well, that article is, of course, about the anonymous drug market where you can buy anything. 2:54 I think that was the subtitle, and the article was they are addicted to drugs or something. 3:00 They would figure out a way to cheat it if they could cheat it. 3:05 And I was like, so it must be pretty solid actually. It's living in the real world. 3:09 And then I was like, this seems really complicated to use. 3:12 Why don't they use other things like credit cards? 3:15 And I learned about why, because your credit card is attached to your identity, which is something that had never even occurred to me until then. 3:22 And so, yeah, I kind of just read this article, and I just thought, wow, that's really interesting that commerce has kind of sprouted up despite this immense transaction cost, this immense friction. 3:35 And then I just did a little bit more research, and Satoshi had solved the problem of how to distribute the initial coins, which is something that I kind of thought would be impossible, 3:45 like how are you going to get people to switch from their money to your money in a gradual sense, because not everyone's going to hear about it at the same time. 3:52 And then that would be a headache, but the mining solved that issue. 3:56 And then I realized that it could – there was a plan for it to actually be cheaper and at a grander scale than like all the rest of the payment systems of the world. 4:09 And I just thought, well, this thing will work in the black markets, and it will work in the regular markets. 4:13 And I just thought, well, then it's only a matter – that's kind of it. 4:17 And then the more reading you do, the more into it you get. 4:20 I got some coins from Gavin's faucet. 4:22 I bought some coins using BitInstant, and then you have to use the stupid – 4:29 Thought it was a scam and everything, and then suddenly when Wikileaks accepted it, I was like, holy shit, that's the value, right? 4:34 And similar to Silk Road being able to – it's not that you enjoy that it's being used for these kind of purposes necessarily. 4:40 It's just that it's a solid proof of concept, a demonstration of that feature of non-censurability and such. 4:48 Exactly. 4:49 Okay, so let's hear about – so right now Bitcoin is quite tribal, right? 4:55 There's the big blockers. There's the core supporters and stuff. 4:58 So give us an idea of where your head is on this. 5:01 Are you a big blocker? 5:03 How are you with all these politics these days of Bitcoin? 5:08 Well, I think politics is often something you do when you aren't clever enough to figure out how to have it both ways. 5:16 There are tradeoffs. I'm a diehard economist and I have a lot of training and background in economics. 5:23 So we do live in a world that has tradeoffs, but we also live in a world that has technological progress 5:30 and in a world that has a growth, an unbounded growth of knowledge over time. 5:37 So we get better and better and better at – sometimes there's a tradeoff between X and Y, 5:44 but then someone will invent something and the tradeoff is meaningless. 5:48 If you have – sometimes we have to work together to solve problems, 5:52 but someone will invent something that makes it so it doesn't matter as much. 5:56 So like on an airplane, you can get noise-canceling headphones and a sleeping mask, 6:00 and then what you do doesn't affect other people. 6:03 So you can have this kind of – these tradeoffs and this interconnectedness, 6:07 but I really subscribe to the philosophy that you should be able to find something that works for everyone eventually. 6:14 And in that, can you talk a bit then about how that – so for example, when Bitcoin Cash split off, 6:23 there was a lot of discussion in the years before about extension blocks and different solutions of, like you say, being able to have it both ways. 6:32 Could you talk a bit about this? 6:34 Yes. There was – I think – I don't remember. I think it was Johnson Lau. 6:40 I don't exactly remember who got it going in 2013, but Adam Back kind of explained this in detail in Bitcoin Dev mailing list 6:51 that you could have kind of a soft fork where some people got larger blocks and other people stayed with the smaller blocks, 6:59 and that is an example of what I'm talking about where everyone can get what they want and there's no conflict. 7:05 And so I thought that was great. That was a pretty good idea. 7:09 I mean it had issues that were later discovered, and I think also there was immense peer pressure that Dr. Back fell under, 7:18 and I think he kind of withdrew the idea and also the philosophy of optimistic technological progress. 7:25 I think that was also withdrawn, that it was – from then on out, it was going to be us versus them. 7:31 Right, and we'll get more into that as we focus more specifically on the technical side of sidechains, 7:39 but let's talk a bit more then about – so you mentioned you're – I trained as an economist, 7:45 so a lot of guys in crypto, like it's this great intersection of computer science and finance, 7:50 and so you get a lot of guys who are sort of finance guys that are attracted to the project. 7:55 You get purely crypto guys who are just in it for the cypherpunk aspects. 7:59 So you're actually – even though you say you're a trained economist and you're from Yale and such doing statistical economics type work, 8:10 you're also a C++ developer, so you're actually like – as well as designing protocols, 8:16 you've also even written the code to implement some of this. 8:19 So did you self-teach C and C++, or did you sort of like – were you one of these guys who already was great at coding, 8:26 so you wanted to have your formal education in something non-computer science so you wouldn't waste your time? 8:32 Yeah, I have no formal training in programming, and I don't think I'm that good at it. 8:39 My favorite languages would be like Python and R. R is like a research language, 8:45 but yeah, what I will do is I'll usually write something in one of those and then translate it over to C++, 8:53 and I'm not very confident in my C++ at all, but it gets done. 8:58 Right. Okay, so in terms of Bitcoin development in general, a lot of people – 9:05 Yeah, I should mention there's a great – Cryptex is an associate of mine. 9:12 He does all the really good C++ for Drivechain. 9:15 He's done all that, so he's done all the real coding work, so he's an awesome guy. 9:22 Yeah, I was actually running the – and it's very easy. 9:25 For everyone who's curious, go to drivechain.info, and there's a very simple guide. 9:30 If you're running Linux, just download the binaries, and you can get the sidechain one running. 9:36 You can get the DriveNet stuff running, and you can really see the things in action on a little testnet right now. 9:43 It's very, very simple, and so I presume most of this work is from this Cryptex colleague 9:49 who's actually been around the Bitcoin for a very long time, and also yourself. 9:53 So between you two, you're doing most of the work currently, yeah? 9:57 Yeah, on the actual Drivechain project, I think actually Patrick has probably written every line of code that is there now, 10:05 and no one else has, I think. 10:08 But people will contribute in various other ways, review documentation, et cetera, trying stuff out. 10:15 We have people who have made add-ons already. 10:18 So in the design, the design calls for a number of things to happen in code, 10:24 but it also calls for one thing to happen in the world of business, 10:27 which is for people to compete on offering services to quickly move coins from the sidechain back to the mainchain. 10:34 We have someone who, Andreas Brecken, the guy who did that Lightning Network review, 10:39 the guy who runs ShiftCoin.com, and he did the Lightning Network review where he connected to, 10:44 he controlled like more than half of the Lightning Network with like a 50 Bitcoin Lightning Network node or something. 10:50 That guy has made a cool website. 10:52 It's something like, I think it's something like HerokuApp.Sideshift.io or something. 10:57 We'll have to get the link for everyone in particular, but if you go to drivechain.info, 11:01 I'd link to it in the first couple of sentences. 11:04 So we have other things like that. It's very interesting stuff. 11:07 Yeah. Andreas has actually been on the TeamSpeak since 2014, 2015. 11:14 So we know him from a long time ago when he was working at Drivechain. 11:17 Yeah, very funny guy. Very clever. 11:19 Yeah, he's great. I thought the review of Lightning was actually brilliant. 11:22 And a lot of people got, for whatever reason, triggered by it, 11:24 but I thought it was very thorough, technically focused. 11:26 I thought it was a great approach. 11:29 I actually used his faucet to get started when I was playing around with the Drivechain. 11:33 Oh, yes. He also made a faucet. It's great. 11:35 Yeah, unfortunately, we live in a very polarized time, which makes it very difficult. 11:39 Anyone who's interested in like discourse, it's very hard to say anything 11:43 and just have it be a piece of knowledge or information. 11:48 It has to immediately be polarized into a kind of emblem of support for one side or another. 11:54 And actually discussing ideas is very difficult. 11:59 Yeah, and I find that whenever you're discussing like a single topic with someone 12:03 and you might be representing some kind of opinion, 12:06 then they try to associate you with the tribe that is most commonly expressing this opinion. 12:10 So then they'll suddenly start attributing all kinds of other opinions on other topics to you, 12:14 even though it's really some tribe that they're really referring to. 12:18 Yes, those people are victims as well as not only are they making a mistake 12:23 and misinterpreting what's being said and misrepresenting someone's views, which is wrong, 12:28 but also they are sort of victims of this polarization because they feel a deep insecurity, 12:36 which is such that whenever they encounter anything that is deviant or threatening to their camp, 12:44 they feel the need to advertise very loudly to everyone around that they don't associate with it. 12:50 So it's really their own kind of fear that people will think that they're associating with you. 13:03 So that sounds probably like a little psychological babble or something, 13:07 but really these people are kind of – you have to feel sorry for them, I think, more than anything else. 13:12 Yes, it's like their virtue signaling to their tribe members that, 13:15 hey, don't worry, I'm not related to this guy. 13:18 That's just a virtue signaling exercise. 13:20 So it has nothing to do with you or your ideas, which is, again, 13:24 it's just disappointing for anyone who's actually interested in real discourse because it's very difficult. 13:29 Exactly, yes. 13:30 So last month in Riga, at the same time that this conference, 13:37 this sort of Bitcoin-focused development conference in Riga by Honeybadger, 13:40 there was this big bug that was discovered. 13:43 And not many people have really discussed it, 13:47 and I was kind of vocal in the conference of trying to get that on the agenda 13:51 and discussing the implications and all these things. 13:53 Can you sort of tell us what you think about the bug in general, 13:57 how it was disclosed, whether it was an appropriate process that it was done in? 14:02 And if you think that, in general, the community has reacted properly to the significance of this. 14:10 You know, actually, I don't think I know a lot. 14:13 I'd rather talk about something where I'm much more of an expert relative to other people. 14:20 I mean, all I know is that it's very rare a bug appeared that was sort of where it was 14:26 kind of a very high level of catastrophe because it required people to update. 14:31 What's more interesting to me is the fact that many people just ignored the request 14:37 from senior developers to upgrade their software. 14:40 So this idea that this thing came out, it's really important that everyone upgrade immediately, 14:45 big problem, but actually no problems really happened, 14:49 and also like very few people upgraded, which I find to be more interesting. 14:55 I've always wondered, the SegWit2x project failed, 14:59 and you can either look at that as just a rejection of change 15:04 and say, like, we just like the status quo and we don't want anyone messing with this, 15:08 or you can kind of look at it as an endorsement of the small block view and the kind of pro dev view. 15:16 And I think a lot of people look at it as an endorsement. 15:18 They say, like, our side won, talking about the small blocker side. 15:23 But, you know, it's also possible that just no one cares about anything. 15:26 And so no one won and that no one, you know, there's no—there's just apathy is the big winner. 15:33 So that I think—I think that is kind of an interesting data point along that. 15:38 But one of the things that the big blockers at least will say is that, well, 15:44 this code that led to the bug was not properly— 15:48 there wasn't enough checks and balances in terms of the review process 15:52 because all these Blockstream employees are involved and they all love each other 15:56 and just sort of give the thumbs up on everything. 15:59 How much validity do you think there is to this argument? 16:01 And do you feel like Bitcoin's development process is open enough currently? 16:06 Well, I've heard actually a lot of people complain that the quality of the code has been declining 16:11 and that a lot of changes are just kind of being made for frivolous reasons 16:15 and that there's a kind of—that no one kind of really knows even what's going on anymore. 16:23 Like originally Satoshi wrote the code in a big block, 16:26 which anyone who's familiar with software development knows that that is kind of like— 16:30 that is kind of like an easy way to just get something to work. 16:33 And then when you work on a big team, of course, they split it out. 16:37 Or when the project is very large, you're supposed to split it out into like little modular pieces. 16:43 And I don't know, like it's hard to say. 16:46 I think it's not even really relevant. 16:49 The important thing is just can we recover from mistakes in the code. 16:52 And so when people point out like, oh, there was a bug, 16:55 like I didn't really think it was that interesting when it happened in BCH 17:00 and I don't think it's necessarily that interesting when it happens in BTC. 17:03 Although, of course, it was interesting for different reasons. 17:05 There's kind of an exception that proves the rule. 17:07 When the bugs started appearing in BCH, it was important because it may have indicated something else, 17:13 which is that these people are kind of very reckless and they have no idea what they're doing. 17:18 And these are just a few bugs of a giant bug storm that's coming down the road in the BCH side. 17:25 So that was why that was kind of relevant. 17:28 And then in BTC, I think it is relevant because this is really like the first like big screw up. 17:34 And then it's kind of relevant because it may indicate, well, why weren't there screw ups before? 17:38 Of course, there were screw ups before, but this is the first screw up that was like, you know, it was like not first. 17:46 First of all, it's the first screw up that was found from outside. 17:49 So it was the first like potentially exploitable screw up. 17:52 Everything else before was someone inside noticed something and it was fixed long before. 17:57 You know, there was kind of never any risk of damage. 18:01 So they are kind of interesting because, but in general, I don't think like a bug is only important if like no one could ever fix it. 18:08 But something where the bug is very fixable is fine. 18:11 Like, well, the DAO hacker is an example. 18:13 That's the bug was sort of an unfixable one because it involved the guy withdrawing a bunch of money. 18:19 And then now it's like that's his money. 18:21 So we can't roll back the chain. 18:23 Of course, that's exactly what they did. 18:24 So they did fix it. 18:25 So it's ironically, they kind of adopted my framework there. 18:28 But they can't. 18:30 You really want, we live in a world where, you know, humans are imperfect and fallible and our knowledge is incomplete. 18:39 And, you know, we live in a world where everything is imperfect. 18:42 And the only thing we can do is try to correct mistakes when we discover them and try to continue correcting and get better and better and better each time. 18:51 That's just the way everything works in all fields of human progress and knowledge. 18:55 And it's just like everywhere. 18:57 And so there's no exception in Bitcoin development. 19:00 You just want to make sure that the errors don't do a lot of damage and that they're fixed quickly. 19:05 And the institution of the soft fork protects us in many ways because if a version is, it has to be a bug in like basically all the versions in order to significantly affect users. 19:16 So the constant tightening of the rules hardens the protocol further and further. 19:21 But yeah, and just in general, to answer your question, I think that the protocol probably should stop changing in general. 19:29 Like it should just completely harden at the consensus management layer. 19:34 And I think sidechains are really the big opportunity to do that. 19:39 You harden up this one layer and then you have complete freedom to experiment with new, completely new software applications. 19:48 And I think that's just the ideal. 19:50 That's almost like a sign from fate that this is around the time to kind of wrap it up, I think. 19:59 Yeah, and I think that social consensus aspect, like the fact that we have a strong community that can respond to bugs and get it fixed within a matter of hours and get it properly implemented and stuff. 20:12 I think that's probably the strongest feature of Bitcoin is that we do have this strong community. 20:17 But that's a great segue into the meat of what we wanted to get to. 20:20 So we've got some nice sort of context of where you're coming from. 20:23 And so sidechains. 20:25 So I've been a fan of sidechains since back in like 2014, 15, when there was a lot of hype around them. 20:33 And the Bitcoin maximalists back then used to be essentially, I mean, I've been essentially a maximalist since the start and always thought shit coins were shit and all that. 20:46 Yeah, I think I have as well. 20:48 But the whole thing back then was, listen, if you want to have all of these experiments, then do it on a sidechain. 20:54 So we're going to facilitate. 20:56 Bitcoin is the king and I'm all about Bitcoin. 20:59 But obviously, we should have the flexibility to experiment. 21:02 And obviously, it should be with Bitcoin in the form of sidechains. 21:05 It was never just like Bitcoin is the best and everything that it does, it covers everything. 21:10 And we don't need any of these alternative technologies. 21:13 But somehow it's changed the past couple of years, I've noticed. 21:17 Like this, I got less and less about doing trustless sidechains and became more about, you know, Rootstock initially was saying they were going to do things in all this great way. 21:25 And then they got more federated. 21:27 And then Blockstream's proposition on Liquid became more and more about just a trusted federation. 21:32 So maybe you can let's start very, very basic and talk about what really defines a sidechain. 21:39 And how, for example, does a federated trusted system fit into that definition? 21:47 Oh, wow, that was a lot of things. 21:49 Okay, yeah, that was cool. 21:50 First, I want to comment on something, which is that I agree with you that it's kind of ironic that these altcoins started to pop up and they were originally just so boring that they could be easily dismissed. 22:04 But then in 2015, there was this kind of like, well, you can just put them on a sidechain. 22:08 But the sidechains, the altcoin technology was still very boring and kind of ridiculous. 22:14 And now we've had like a complete inversion of that where now actually the altcoin technology is sort of getting somewhat respectable. 22:21 Where you have something like Monero or you have like Sciacoin, you have these other projects. 22:29 Namecoin has been around for a while, but now it's kind of accepted that actually there's a big demand for ERC-20 tokens at the very least. 22:37 There's a very loud and seeming demand for cheaper transaction fee like large block BCH type things. 22:48 So people argue about whether or not this demand is illusory or not. 22:52 But I just think it's ironic that the technology in the modern, in the last few years is now the altcoin technology is much more serious than it was. 23:02 And yet the kind of sidechain neglect has also like the opinion or the kind of reliance on sidechains has kind of fallen kind of at the same time. 23:13 So it's kind of gotten in a very bizarre kind of inversion there. 23:17 But yeah, you asked it. 23:18 I mean, the definition of a sidechain I think is there are, you know, it's like how do you define like a stop sign? 23:25 There's a lot of, you know, it depends on those certain list of attributes. 23:29 And then there's like a context and then there's like infinite levels of description you can reach. 23:34 But definitely the first aspect is that it is a blockchain where there is a token that can move to other blockchains and back. 23:42 So that is the – that's the major feature is that you have something that is a blockchain and then the tokens can travel to different pieces of software. 23:51 And then hopefully maybe change owners and then come back. 23:54 So there's a kind of accounting dependence but otherwise an independence. 24:02 What about the trust dimension though? 24:04 How important is it that these sidechains are along the trustlessness spectrum? 24:09 How important is it that they're actually trustless and not federated, trusted in some form? 24:14 Well, right. That's what – you can keep describing more and more detail. 24:18 So it's like what is a blockchain? 24:20 Like if someone could just say, well, just give all of your Bitcoin to me and my friends and we will take care of it and we'll tell you what we're doing. 24:29 And then when you ask for the Bitcoin, we'll give it back to you. 24:33 And then you just put labels on things. 24:36 You say that, OK, that is a blockchain and then that – therefore that is a sidechain. 24:41 To me, I really think that if someone is going to say that they have invented blockchain technology, what they should really have invented to be slightly more precise but kind of needlessly verbose about it. 24:53 They're really – you're really inventing like a kind of a sidechain factory. 24:56 You're really saying here's this technology. 24:58 You can use it to spin up. 25:00 You can fork it or you can click a button inside of it or something. 25:04 You can spin up your own sidechain whenever you want. 25:06 And so I find the federated model to fail on a number of criteria. 25:14 One is that like you can't reuse it other than in this trivial sense of creating another – 25:21 you have to pick another set of people that you want to trust to hold onto the money, another set of keys. 25:28 But I kind of also feel that it is not – well, there's a lot to say about it. 25:35 So I don't know which direction we should go first. 25:38 But I think it's like – well, let me say one other thing though is that the multisignature account, 25:44 that's kind of like an infinite degrees of freedom situation where you can just kind of say anything you want goes on in there. 25:51 And whether or not something goes on in there or doesn't, it kind of doesn't matter because at the end of the day, 25:56 the only thing that matters is if the keys sign off on something. 25:59 So it's kind of an infinite regress. 26:01 It says we'll solve this trust problem, but it doesn't say – 26:06 there's no relationship between the trust problem that you're solving and the solution. 26:11 So it's kind of the explanation that's not an explanation. 26:14 It just says, well, how are we going to secure this other blockchain? 26:19 And it's like, well, these other guys will do it. 26:21 But it's like, how are those guys going to do it? 26:23 It's kind of just an empty explanation in my opinion. 26:27 Right, yeah. 26:29 So let's talk about sidechains as if Drivechain is the ultimate sidechain just to make things easier. 26:36 Well, that would be easier for me, of course, because I can talk about my own project, 26:40 and I don't want to speak for other people any more than I have to. 26:45 Right, exactly. 26:46 So let's focus, just so everyone listening also understands that now the context is going to be sidechains 26:53 as defined by Drivechain's approach. 26:56 So let's talk about what makes a sidechain. 26:59 So let's say I want to – maybe it's helpful for people, 27:02 because a lot of the traders here aren't necessarily super technical on the development side. 27:06 So let's talk about what it looks like if we were to do Ethereum in a Drivechain. 27:12 Because there's a lot of guys that love the scripting aspects of Ethereum and having that kind of flexibility. 27:16 So how does that look in a Drivechain context where people can have all the experiments and the fun, 27:21 but what are they really doing? 27:22 Like talk about the Bitcoin UTXOs that are required to go into the sidechain 27:27 and how that SPV proofing just breaks this down for people who aren't necessarily super technical. 27:34 Yeah, okay. 27:35 Well, Drivechain is a method for transferring Bitcoin back and forth among different blockchains. 27:42 So that was kind of what we talked about before. 27:45 So the primary goal of Drivechain is to have fully ignorable sidechains. 27:51 So you want the parent chain, the main chain. 27:54 It doesn't need to know what its sort of children are doing specifically. 27:59 So in that sense, you would not be on the hook for the Ethereum rules or any bugs in Ethereum or any weird stuff like that. 28:06 So that's kind of the primary goal. 28:08 The secondary goal is, of course, that you want to have some kind of redeemability. 28:11 You want to be able to guarantee that each sidechain Bitcoin, when you own a Bitcoin on the sidechain, 28:16 you can redeem it for one Bitcoin back on the regular main chain. 28:21 Or if there are sidechains, have sidechains then. 28:25 If you've got a Bitcoin on a child, it can go to the parent chain and then it can go to its grandparent chain or whatever. 28:33 It's difficult to describe. 28:34 It's difficult to describe this technology because I think that those two goals are actually mutually exclusive. 28:39 You cannot have both at once. 28:42 But you try with some clever rearranging to try and get like 100% of the first ignorable sidechains. 28:49 And you try to get like whatever, like 90, 99% of the second. 28:54 But you actually cannot get them both at the same time. 28:56 And so the challenge when explaining sidechain technology is that you bring up something along the first axis 29:03 and then people will criticize it along the second axis. 29:05 And then if you bring something up on the second axis, they will criticize it on the first axis. 29:10 And that is not really the game. 29:13 The game is not to get perfection on both axes. 29:17 The goal is to get perfection on the first axis, which is ignorable sidechains. 29:23 And just to do as well as you can on redeemability. 29:28 So that's something that I think people should keep in mind if they want to study the criticisms of sidechains. 29:36 In particular, the fact that you have... 29:45 Well, so you're asking how an Ethereum sidechain works. 29:47 So what you want about... 29:49 The reason that fully ignorable sidechains are important is because that is what frees you up to just allow the sidechain developers 29:55 to just do whatever crazy, terrible ideas they want. 29:58 So I think that Turing completeness is not a great idea. 30:03 But it shouldn't really be up to me, right? 30:05 When Snapchat came out, I thought it was a terrible idea too, but now I use it like every day. 30:11 I thought Twitter was a dumb idea when it came out. 30:13 So we don't really want it to be up to any person to judge. 30:17 It should be up to the users to decide what's a good idea and what's a bad idea. 30:21 So you need this ignorability criterion so that someone can do their weird Ethereum idea. 30:25 And then what happens is that you would send money from Bitcoin. 30:30 And this is a little bit easier if you actually just do it. 30:32 So as you mentioned, you can go to drivechain.info and download our test software. 30:37 And you can just see there's like a little window. 30:40 You just sort of click a button and you send money to a sidechain address. 30:44 And it's deposited. It goes away in your one window, but then it shows up in the other window. 30:50 So you're just sending Bitcoin to a different software application. 30:53 You can send it to Ethereum, and then once it lands in Ethereum, it can do any crazy thing that it wants. 30:58 Now, of course, the trick is getting it back. 31:00 Yeah, but actually, let's stop there then and explore that more. 31:04 So let's pretend I'm Vitalik. 31:06 And let's rewind back to 2014-15. 31:09 And I'm thinking, oh man, I want to get all these changes into Bitcoin, but they won't allow me. 31:13 And I'm talking to you now, Paul, and I'm saying, Paul, I'm going to go make my own shitcoin. 31:17 I'm going to make a foundation. We're going to do all this shit. 31:19 We're going to sell tokens to the public. We're going to raise this money. 31:21 We're going to maybe break securities laws. Who knows? We're just going to do it. 31:24 Yeah, right. Exactly. 31:26 And you say, Vitalik, stop. Don't do that. I've got this great idea. 31:31 I've got Drivechains. Put your projects in the Drivechain. 31:34 And then I'm Vitalik, and I say, okay, can I still do a token sale? 31:38 Like, how does this look? 31:39 Will I still be able to create X number of Ethereum tokens, and they're backed by the UTXOs that I've put into the sidechain? 31:46 How would Vitalik then go to the next step and say, all right, Paul, you convinced me. 31:51 I'm going to do Ethereum in the sidechain. 31:54 Well, I think it's not so much about – I think there's a misconception that this is about convincing the altcoin developers to switch over. 32:05 It's really kind of more – the relationship is, I think, much more adversarial. 32:10 It basically says, Vitalik, make it a sidechain, or after you do all of the hard work and build it and test it and do all this stuff, 32:22 building out the technology and proving that it works and that some people find it useful, 32:28 as soon as you do that, we will just steal all of your source code and we will make it a sidechain with very, very low effort to ourselves. 32:37 Once it's reached its ultimate form, we'll just take it, and then all the Bitcoin users will have all the benefits of the Ethereum technology. 32:46 So why would you buy one Bitcoin and one ETH when you can instead just buy one Bitcoin that does the exact same thing? 32:52 So it's kind of much more of a threat. 32:55 There's no need – there are a lot of misconceptions. 32:58 I will throw out these little lines about, well, sidechains will destroy altcoins or something, but it doesn't really need to do that. 33:06 It's just like a standing kind of option to do that and a standing kind of threat that if someone wants to build work on new blockchain technology, 33:17 that we will just take it. 33:19 I think there is an element of persuasion in it, though, which is that if you use a sidechain, it kind of proves that you're not out to just make a quick buck, 33:29 whereas if you – in a world where sidechains exist, what's the marginal decision on should I make an altcoin versus should I make a sidechain? 33:40 People will just say, well, why are you making an altcoin? 33:43 And they'll say, well, because I love the technology, and they'll be like, well, okay, but you could do that in a different way without making an altcoin. 33:50 So it completely removes the pretext of a need for altcoin, and I think almost all these markets are very highly pretext-driven. 33:59 They're all just like fake excuses, and it's just like they're hoping that most of the traders and investors involved don't figure out how empty it all is until everyone else has caught and run. 34:12 But aren't Drivechains flexible enough that someone would still be able to – because like you said, the chain has its own token on it, right, as well? 34:21 Oh, well, you can – so this is the thing. 34:23 If you put Bitcoin into the sidechain, then you can only get as many Bitcoin out of it that you put in. 34:28 But on the sidechain, you can do that every one. 34:30 You can make two – you can make extra types of tokens, and they can be over there. 34:36 I would imagine – I've long talked about like a counterparty-like sidechain because the integration between counterparty and Bitcoin is a little awkward technically and somewhat byte inefficient. 34:46 Excuse me? It works just fine for Rare Pepe, as well. 34:51 Yeah, so I think it certainly works, but there's this question of – there's always this tension between like is – like a Luke Jr. type will say that it doesn't belong there. 35:02 And so why not put all the asset stuff where it's in one place, and then anyone who's interested in assets can just download like some supplemental data, and they can play over there. 35:13 And then stuff would be cheaper over there because, of course, Bitcoin transaction fees go up for people who really want to use these unique Bitcoin properties of a small block Bitcoin chain. 35:23 They really want it to be super secure, super durable money that's very censorship-resistant. 35:29 Those people may be willing to pay a premium for that, but that crowds out the Rare Pepe counterparty transactions. 35:36 And so it's better if you have a different chain that doesn't take itself as seriously, that has lower fees, that has all the assets on it. 35:43 And I have specced this out as well as a BitAssets sidechain. 35:46 I have kind of written down how I think that would work in an efficient way. 35:52 So that is – you can have other assets, but you probably wouldn't have Ether specifically because Ether is like – Ether is the competitor to BTC in the Ethereum world. 36:03 So you would move Bitcoin over to the Ethereum sidechain, and you would use BTC over there to pay gas costs and pay whatever, whatever wacky Ethereum costs of the day. 36:14 You'd pay those in BTC, and those BTC that you pay, they would go to the Ethereum sidechain miners, so to speak, and then – but in that world, you could do many other things. 36:25 You could have ERC tokens inside that world though. 36:28 Right, and also wouldn't they – would they still have like – let's say would they have their own proof-of-work algo and stuff? 36:33 Like wouldn't they be able to have their own little economy within that sidechain even so they could still have Ether gas and all that stuff, but then underneath it is these Bitcoin UTXOs that are backing it? 36:43 Yeah, they could. You could have – you could say that what we're going to do is we're going to make a sidechain where you can send BTC, but actually what's going on is that BTC are just going to be poked around by Ethereum smart contracts and then withdrawn. 37:02 So you could do that and you could have Ether be in there. They kind of already did that with BTC relay sort of. Not quite because it doesn't settle back to the Bitcoin chain because the Bitcoin chain doesn't know what is going on in Ethereum at all in any sense, even in a limited sidechain sense. 37:24 But yeah, you could actually do that if you wanted. So you could have a side – you have basically infinite degrees of freedom on the sidechain. You can write anything you want over there. 37:32 I don't think – although you could have your own mining, I have long believed that in practice no one ultimately will because you have a free option to use merge mining or as I have sort of tweaked it into something called Blind Merged Mining. 37:47 That's just – it's just a free option and you get basically all Bitcoin's hash rate, and I just think that's just such an enticing offer that no one will really want to pass it up. 37:57 In particular, the sidechain has to pay transaction fees just like every blockchain, but it has no block subsidy. There's no 12.5 Bitcoin being created every 10 minutes. 38:10 So the problem is if you ever get into a lull where there's just few transaction fees, then there's nothing. There's absolutely no incentive to mine at all. 38:21 So you're really going to have that demand way up and stable, and that would – that's very hard to guarantee, especially if the sidechain is new. 38:28 So I just think it would like starve out and die very early on if it didn't use this option. So it's just – I think in practice everyone will do Blind Merged Mining. 38:39 But yeah, you are free to do other weird things, proof of stake, whatever. You could do any weird thing you want. 38:45 You can even just do something that says your signature is what – this is the authority on what happens in the – you could even do a Corda thing. 38:53 You could do like a really weird – but I don't think in practice anyone will do any of these things because I think first of all, most of them have no value. 39:02 These are just things that – this is a pretext that I mentioned before that just people want to do something different because there's a lot of money for funding blockchain. 39:09 So people can – so people could in principle run ICO scams in a sidechain. 39:15 Oh yeah, definitely. Well, that's why I think you would make the BitAsset sidechain and then from there you just say here's our token. 39:22 And then once you have those ingredients, then I'm sure a bunch of disreputable people will just say – they'll just staple a bunch of scam onto that and go with it. 39:32 But I don't – who knows? You never know how much this stuff depends on context, right? Like maybe 2017 was just a magical year for that. I don't know. 39:39 So we have 21 million coins that will ever be created in our project. That means there's a limited number of UTXOs that could be utilized for various things like sidechains. 39:52 So what are the constraints for – 39:55 Right. Well, you're talking about what is the upgrade. It's like there's an upgrade to support SegWit and there is an upgrade to support this technology. 40:05 That's what you're talking about, right? 40:08 Well, yeah. So the mainchain has to track – it has to track which sidechains exist but only – they're like a ledger entry. It's like a row in Microsoft Excel. 40:21 They need to track which sidechains exist and how much Bitcoin is in them. 40:25 But they have to kind of do that anyway for any user and any key pair that's generated. 40:30 So they have to just track a couple other things too like when someone tries to initiate a withdrawal from the sidechain, they have to track when the withdrawal has first been proposed. 40:41 And then they have to keep track of all the withdrawals of all the sidechains for a while. 40:46 But all that stuff, all that information is published inside the blockchain already. 40:51 So it respects all of the one megabyte block limit or what we now have is a weirder thing, one megabyte, four megabyte block size, weight limit. 41:01 But all that stuff is respected because the Drivechain is just processing data that is – that has to be placed into the blockchain anyway. 41:11 So the main bottleneck is in that direction. 41:15 It's very quite light I think and there are a lot of – I don't know about – people compare like lines of code changed and there's obviously a lot of debate over whether or not the usefulness of that metric. 41:28 I don't – this is a very – this is an optional thing just like SegWit is optional, just like all soft forks are optional. 41:38 You don't actually need to upgrade. 41:39 But there's a lot of debate about that. 41:41 Some people say that software updates are never optional and you should always be running the latest software. 41:47 That's not what I think at all. 41:49 But these things are all debated by lots of people in different directions. 41:54 Yeah, I mean paid-to-script hash was a soft fork, right? 41:58 So that's like – 42:00 Yes, the way all these work, as people probably know now, it's kind of more common knowledge now I think than it was. 42:05 But the way these things work is you take a path where the money would sort of be immediately spendable by anyone and that path already exists. 42:16 A bunch of these paths already exist in Bitcoin and then you attach – you kind of like attach a filter to that that catches everything that you don't want and then what's left is what you want. 42:28 So all the invalid Drivechain withdrawals would hit the filter and then the block would be invalid and that's how these soft forks work in practice most of the time. 42:40 And so let's talk about the security of these sidechains. 42:44 So one of the common criticisms is that miners are in control with these sidechains. 42:52 They can sneak in and do a withdrawal from the sidechain and unless users are actively monitoring for this, then they won't be able to stop it. 43:04 Can you explain what role miners are playing in the sidechain and how does the sidechain security compare to sort of the miner incentives on the mainchain? 43:14 Yes, there's a lot to say there. 43:16 So first I'm going to bring up that this is this issue of the two axes. 43:21 So you want the sidechain to be ignorable, but we also want it to be secure. 43:26 We also want the redeemability idea. 43:28 So this is like you try to respond on the redeemability side and then people will switch axes and they will complain about how it's less ignorable or something as a result. 43:38 But yeah, I think the way that – I think what people have to keep in mind is that the – well, I don't know like how to explain it like in what order. 43:52 But what really happens is that the – I don't know like what were you actually asking about? 44:01 So a lot of people perceive sidechains as being significantly less secure. 44:08 So people are concerned that miners – people are concerned that miners are – 44:13 Yes, I understand. 44:15 Yeah, so I just want to say – 44:17 Sorry, it's just such a broad thing. 44:19 So the first point is to bring up is that it shouldn't really be up to random other people what you do with your own money. 44:26 So the second axis is the less important of the two axes intentionally because if – the first axis affects everyone else. 44:36 So if what you do – if the sidechain isn't ignorable, then the whole network is along for the ride. 44:43 But if you lose your own money by putting it in a dumb sidechain, then that's kind of like your fault and you should be – the sidechain is going to have some benefits. 44:52 It's going to be doing something new. 44:53 So it's going to have some benefits or at the very least some perceived benefits. 44:58 And so each user should be able to decide. 45:01 They should have the option to say, well, these benefits are sort of worth the cost. 45:06 That also – you see, this is why the question is kind of bizarre to answer because it has many kind of layers. 45:14 So the first layer is these two axes. 45:15 The second layer is that the second axis is almost – it's almost a 100% free pass on my part because no matter how irredeemable the coins are, it's still possible that some user would decide that it's in their best interest to hazard the risk. 45:32 So users should be free to choose, like freedom and all of that stuff. 45:37 If the user can send their money to Bitcoin Eater, don't send, and they can destroy their Bitcoin or if they can deposit to a really dumb website or if they can invest it in some dumb scam, they should be able to try anything they want to try. 45:51 And the only way we know that the idea is bad is after the fact for sure. 45:56 But before the fact, we don't know. 45:58 There's always a possibility that the idea actually will be really, really great. 46:01 So that's kind of the second layer. 46:03 First layer is these two axes, which are mutually exclusive. 46:08 But the second layer is that the second axis, there's almost no grounds for criticizing it. 46:13 Other than to say it's so insecure that it's going to be completely useless and that – so whether or not we add it is kind of superfluous, so why are we wasting our time talking about it? 46:21 But other than that, you get kind of a free pass on the second axis. 46:24 But the third answer is – the third layer is to explain exactly why I think the withdrawals that are broadcast from the sidechain will match the withdrawals that are processed by the mainchain, even though there is no connection between the two pieces of software because it's the first criterion that the sidechain be ignorable. 46:46 So why do I think that they will match? 46:49 And the answer is that per sidechain, withdrawals are forced to be very, very robust case scenario. 46:57 There's one withdrawal per sidechain. 47:00 This is all per sidechain. 47:02 One withdrawal every three months, every 13,150 blocks. 47:06 So the withdrawals are very, very infrequent and the withdrawals are proposed first in a phase where – well, it's a continuous operation. 47:16 But when the withdrawals are proposed, only one of them can be advanced at a time. 47:21 So it's kind of as though there's a bunch of trains leaving New York City and they're headed to Los Angeles or I don't know, a bunch of airplanes leaving New York City traveling to – I don't know. 47:34 I don't know what would be a better one for airplanes, but I hate to make it too US-centric. 47:39 But New York City is in the northeast and Los Angeles is in the southwest of the United States. 47:45 So these trains are leaving New York City. 47:47 They're traveling southwest and it's about 3,000 miles or so, which is what is that like – I don't know, 5,000 kilometers or something, whatever it is. 47:59 And the trains are leaving, but the way it's set up is that the trains are proposed. 48:05 We're going to say we're going to take all this money and give it – that's some of the money that's in the sidechain. 48:10 We're going to give it to the owners. 48:12 It's new owners on the main chain and only a few of those – or excuse me, only one of those trains can advance at a time and reach its destination in Los Angeles. 48:21 So the total number of successful withdrawals, possible withdrawals is only one. 48:27 It's a very, very slow rate of one per three months, and you get to see it coming from a mile away, and you see it coming in a very fixed state. 48:36 So you're sitting there in Los Angeles and you say, well, the sidechain has 200 bitcoin in it, and they want to take 13 of those and give it to X and one of those and give it to Y and half of one and give it to Z. 48:49 And there's a train that has that information, and it's slowly, slowly making its way across the country. 48:56 And so you have – it's very, very easy to see. 49:00 You mentioned earlier the responsiveness of the community to bugs and things. 49:03 This is like – people will know immediately when the invalid withdrawal is proposed, all the sidechain users and really the entire internet. 49:11 All humans will know. 49:13 How do they check? 49:15 How would they check it though? 49:16 Oh, of course. In the sidechain, it's literally going to be in the headers. 49:20 So it's going to be in every header, whichever – there will be only like one or two hashes. 49:27 It will be a hash of the actual transaction that you want to put into the mainchain bitcoin. 49:34 So it's not computationally intensive. It's just a simple check of the hash. 49:37 Yes. So when it's introduced on the mainchain, the hash is placed into a coinbase transaction so that everyone can see it. 49:43 So it's just a 256-bit hash. 49:46 This is 32 – it's this thing that you're used to seeing where it's just a kind of relatively short string of alphanumeric characters. 49:56 From a user perspective, it will show up in the mainchain. 49:59 It's not the mainchain full node guys that have to do those checks. It's the sidechain guys, right? 50:05 Yes. Well, the mainchain, it will be valid no matter what it is. So no matter which train reaches, if the train reaches LA and it says pay all the money out of the sidechain to this one address, 50:17 then that will be what is considered valid in the Drivechain rules. 50:21 So another issue in explaining Drivechain – there are many – but another kind of hangup is that there are two – the word validation is kind of like double used. 50:29 So there's the rules of Drivechain, which are this train thing that I'm trying to describe. 50:35 But then there's also is the train that arrived in Los Angeles – is that actually the correct one that all the sidechain nodes know to be the true blockchain history? 50:45 And the mainchain can never know that while the sidechain is ignorable, which is the first criterion. 50:51 But what if a miner says, okay, all these users are saying this is a fake withdrawal, but fuck you, I'm going to include it anyway and put it on the mainchain. What happens next? 50:59 Yeah, well, there is – so there are several lines of defense that the user can attempt to make along the second axis if they so choose to try and make the redeemability better. 51:11 So one is that they can just – it's very easy to just kind of – it's basically going to be like a right-click and then left-click operation to just kind of flag an individual train when it's going through like Kansas City or Arizona or something. 51:25 Those are cities in the middle of the United States. Again, sorry for anyone who is living in Europe and doesn't – not familiar with U.S. geography or something. 51:33 But the train has been moving across. After a few months, you realize that this train really is trying to make it to LA, even though it probably – even though it's wrong and there's a lot of barriers in its path that someone is trying to steal money from the sidechain. 51:51 The wrong train is trying to make it to LA, and you can just say, well, that train – we UASF so that the train can never actually dock in LA. It just has to wait outside the city until it expires, and they expire after six months, after 26,000 blocks. 52:10 But what does that look like for – so let's pretend this is happening. Jihan is sabotaging some kind of SegWit sidechain because he's an evil motherfucker and he generates some fake withdrawal. Someone is trying to scam the sidechain and pull money out, so he includes it anyway. 52:26 So how many of us need to – UASF – how many of us need to actually be running a specific altered node implementation that censors essentially his fake withdrawal? 52:35 Well, it depends on innumerable factors, of course, because it's quite a complicated situation overall. But the important thing to mention is what I was talking about before, which is that what we really want is we just want ways to recover from mistakes. 52:49 And we want low-cost kind of solutions that don't harm users if they fail. So it should be obvious. Actually, I don't think we really explained. 53:00 So what miners can do on the mainchain is they can move the train one space forward each block, and that is the SPV proof in Drivechain. 53:09 In other setups, you're just literally dumping all the sidechain's headers in. That was Blockstream's original idea from Appendix B. 53:19 You're literally putting a bunch of sidechain headers in the block to try to literally prove the work. But in Drivechain, you just allow the mainchain miners to take some train, any train they want. 53:30 They could do it without looking at any trains or none of the trains. They can move it forward one space and then all the other trains of that sidechain type, any other withdrawals that have been attempted, automatically move back a space. 53:44 Or the miners can just abstain and do nothing, or they can actually hit a panic button, which moves all the trains back by one space. 53:51 So the train is not even going to be able to reach LA in time unless 51% of the hash rate is determined to make the withdrawal happen. 54:03 So that's the first line of defense is that it's just kind of difficult to withdraw from the sidechain. 54:07 Sidechain withdrawals are just infrequent and slow, and they can probably fail some of the time. 54:12 So this is kind of a long slog. You're kind of running down a very, very long hallway, and you have to really hope you get to the end of the hallway before someone locks the door on the other side or before the timer runs out and you have to start over. 54:29 But how significant of an issue does that pose for the UX in terms of you need liquidity to move on and off the sidechain, right? 54:35 Yeah, so I'll get to that. So these issues are all related. I'll get to that in a second. Didn't we just bring up Andreas, though? He made that site. 54:42 Yeah, yeah. 54:43 So yeah, the design calls for a lot of things to happen in code, but it calls for one thing to happen in the world of business, which is that it calls for someone to create a kind of website and be a kind of investment banker, like broker type person. 54:58 So you have a bunch of sidechain coins, and if you want them out immediately, you just kind of do basically – Andreas has named it very well. He's naming it SideShift, so it's kind of a pun on ShapeShift. 55:12 But it has to be profitable, right? 55:13 Right. So the guy's going to charge kind of like a 1% cut or whatever it is. But since anyone can do it, anyone who has mainchain funds can do it, it should be very competitive, and it should just be time value of money for three months, which is… 55:27 But there's other risks associated that the investment banker type person has to account for in terms of the risk that they are taking. 55:33 Correct. 55:34 You just said that some withdrawals may fail. Does that include legitimate withdrawals? 55:39 Yes, it does. 55:40 So maybe they're trying to close an ARB. Yeah, exactly. So if they're trying to close an ARB, and then oh shit, the withdrawal failed, but it was totally legit, then they're fucked in terms of the funds that they already expended for the middleman, and suddenly they're wiped out. 55:52 No, no, no. Let me explain. I don't think I maybe explained it right. So what you do is you swap your sidechain. You have 100 sidechain coins. 56:01 You swap them, not using the slow Drivechain process at all, using regular Bitcoin transfers. You swap 100 sidechain coins for 99 mainchain coins. 56:14 So 100 sidechain coins go from you to Andreas, and then 99 of his separately in the mainchain world, but possibly connected by cryptography, the hash time lock contracts, these other things, or possibly just connected to the website and its brand or whatever. 56:31 That's a simpler first version. But 100 of your sidechain coins go to Andreas, 99 of Andreas's mainchain coins go to you. Those are two separate things and two separate networks. They may be connected through cryptography or through the brand or the website or these other things. 56:46 And so then Andreas is going to end up with 100 sidechain coins, and then he's going to collect these from all these different people. He's going to pack them all into one UTXO on the side. This is all happening on the sidechain. This has nothing to do with Drivechain. This could happen with altcoins right now so far. 57:00 He's going to pack all of these up into one package that has like 30,000 sidechain BTC, and then he's going to put that on the next train. So then whatever, like maybe three and a half months, if the next train's leaving in a half a month, he's going to put that stuff on the train, and then he's going to pick it up three months after that in Los Angeles when it shows up. 57:27 So does that make sense? What he's risking is the possibility that it will never ever succeed or that it will succeed so late, like years down the road, that his time value of money has wiped out his capital, his return of capital employed. 57:46 Or he's also risking that there will be some kind of problem with the sidechain that it will just completely fail to operate for some reason, and so he can never prove that the funds are his, even though that's also pretty unlikely and recoverable. 58:17 In that one scenario, I would really not want to be Andreas, because if someone can figure out how to do inflation, they crack that open, and then they send Andreas all this money that they've inflated, and Andreas gives his mainchain money, and then Andreas starts to withdraw. 58:33 But then it's like, oh no, now we've got a big problem because it looks like lots of money is trying to get on this train, but there's only so much can exit on the other side, and then it's realized that something has gone wrong and that it's going to get pennies on the dollar or nothing. 58:51 So that's the one thing where I would really not want to be the guy operating the kind of investment banker liquidity thing. 59:00 See, this is what inevitably happens in this conversation, is that I start talking about security, and then it immediately goes to won't that be too slow to be useful. 59:08 And so I don't know if we want to return – sometimes we forget to return to the security dimension, or we can just go wherever the conversation wants to go. 59:16 Well, so yeah, I mean a lot of – at least I personally, one of my big ideas, use cases with sidechains was privacy aspects. 59:26 So ZK, Starks, sort of now they've done it in Zcash, but – and also like ring signatures, sort of Monero-type sidechain, and Mimblewimble, so like a Grin sidechain type thing. 59:40 Oh, absolutely. There's no problem with like privacy in general, but there's certain types of privacy that risk the inflation thing. 59:48 As you may have – this is discussed recently, and if that is ever possible, then I would be very uneasy. 59:57 But as long as something like ring signatures and Monero, that is an example of enhanced privacy, but where I would think I would still be very comfortable in Andreas' role, I would be like – because I really think that this is done correctly, and they have these proofs too. 1:00:13 Sidechain just doesn't work if there's inflation. 1:00:17 Yeah, and so I think there's a concept here that some people might be now skeptical and all this, but I think people misunderstand. 1:00:24 In crypto in general, everything is a gamble in a way, right? 1:00:28 So you have to always – that's why you require a certain number of confirmations, and we essentially rely upon – smart people are validating their own transactions. 1:00:38 They run in their own node, but there's also miners out there. 1:00:41 A lot of people are just trusting things. 1:00:42 They're running SPV implementations, and they're just trusting that the miners are behaving and their node that they're connected to is behaving and such. 1:00:50 And so a lot of people are concerned that some of the trustlessness or the security is lost because there's this SPV proofing. 1:01:04 Can you kind of discuss what – like – 1:01:09 Yes. 1:01:10 No, I can. 1:01:11 I can very briefly because it's these two axes again. 1:01:13 So the only way you can have it be perfectly secure is to have Bitcoin enforce all of the rules, but then you've just de facto evil forked or hard forked Bitcoin. 1:01:24 It depends on your definition for these words. 1:01:26 Unfortunately, many different people use many different definitions for hard fork, soft fork, et cetera. 1:01:32 But it's generally agreed that an evil fork is something where the user is kind of more or less forced to upgrade against their will in something that is more burdensome computationally for their computer. 1:01:45 So that's kind of one of the more stable definitions. 1:01:48 Unfortunately, the definitions are really messed up, but that's what you don't want sidechains to be. 1:01:54 You want sidechains to be like optional plug-ins, like a Firefox plug-in or something, and it doesn't matter to you if your neighbor downloads some stupid plug-in and blows up his computer. 1:02:04 Then that doesn't really matter for you. 1:02:07 So that's the thing is that it is worse, but all the criterions in that direction – again, as I say, this is that sort of second layer I was talking about, the first layer being those two axes. 1:02:19 The second layer is that you kind of get a free pass on all of that because you have consumer sovereignty. 1:02:23 A consumer gets to decide, you know what? I don't know. 1:02:26 This sidechain looks like not a lot of people use it, and the developers look shady. 1:02:30 Software is buggy. 1:02:32 So okay, it's kind of like you swim at your own risk, no lifeguard on duty or whatever. 1:02:37 But then on the other hand, if you have a sidechain that is very, very, very popular, tons and tons of people are using it. 1:02:44 And this is very similar if you try to choose what other software you run. 1:02:47 What kind of operating system do you want to run? 1:02:49 You really want to run one that lots of people are looking at and lots of people are working on. 1:02:54 This is big network effects and security. 1:02:56 Or maybe you don't. 1:02:58 People used to argue that Apple would never get viruses, macOS, because it was not as popular. 1:03:06 So you have all these different things, and so the security is really a kind of – 1:03:11 Well, let's try to – 1:03:12 Yeah, okay. 1:03:13 So I wanted to sort of poke you into the direction of – because you've used this concept of betting on the profitable mining strategy. 1:03:20 And how this plays into the overall tradeoffs that are going on in the crypto space. 1:03:25 Like in general, miners can do all kinds of horrible things, but you're betting that they're going to be greedy and they're going to act in their own interest. 1:03:31 And that's kind of what holds the whole system together. 1:03:33 And as you go further along that spectrum, maybe you can talk about it in that context. 1:03:38 Yes. 1:03:39 Well, I think this is the security context that we had to depart momentarily to talk about why it wouldn't be totally useless to only allow one withdrawal every three months. 1:03:48 So the reason that – so we just discussed that actually from the user's point of view, it would be more or less instant. 1:03:57 And only specialists will be walking these coins back slowly over the three months. 1:04:02 So now the question is, do you really think that miners will do the wrong thing and have the real hash as reported by the sidechain's headers, real hash won't match the hash that is placed – 1:04:17 that is materialized in New York City and that it is marching towards Los Angeles? 1:04:23 And the answer to that is just that if miners are really willing to do kind of flagrant things just to get some more bitcoin for themselves today at the expense of kind of interfering with the network, they have always had many other opportunities to do that. 1:04:42 And throughout bitcoin's history, they can – the most obvious is just to reorg the chain. 1:04:46 So miner could separate of his 100-block maturity period for the coins that he generates, miner could just buy a bunch of coins from Coinbase. 1:04:56 Jian Wu could take – it's funny. 1:04:58 It's better with names, right, because it's a little bit easier to understand. 1:05:01 It's more fun. 1:05:02 So Jian Wu shows up with like $100 million. 1:05:05 He goes to Coinbase. 1:05:07 He gives $100 million to Brian Armstrong. 1:05:09 Brian Armstrong gives him whatever, bitcoin. 1:05:11 I don't know what it is. 1:05:13 I don't even know, like 5,000 bitcoin, whatever. 1:05:15 And then Jian Wu just – he deposits this bitcoin to his computer. 1:05:20 Then he sends it back to Coinbase and sells them for – he deposits them to Coinbase and waits six confirmations. 1:05:27 And then Brian Armstrong credits him with the thing and then he re-withdraws the $100 million. 1:05:33 And once that's set up, you'd think we're back where we were before. 1:05:37 But of course we're not because Jian Wu now calls up whatever, his conciliary or whatever it is, running all the mining equipment. 1:05:47 And he says, roll back the chain seven blocks ago. 1:05:51 He rolls back the chain seven blocks ago and bang, the deposit to Coinbase now isn't in the longest chain or the heaviest chain. 1:06:01 He uses different terminology. 1:06:03 Again, terminology is ruined in bitcoin. 1:06:05 But the point is he can just do that. 1:06:07 If you've got more than 50% of the hash rate, you can do that. 1:06:11 So SegWit2x showed that you could have a reasonably organized 83% of the hash rate. 1:06:19 And of course it becomes much easier the more hash rate you have and the fewer blocks that you need to re-org. 1:06:25 And so yeah, if you can re-org seven blocks, then you can beat the system and just re-withdraw that money. 1:06:31 Then Jian Wu's got $100 million and he's got his 5,000 bitcoin back. 1:06:36 So he just double-spent basically against Brian Armstrong and emptied Coinbase's bank account. 1:06:43 So that's something that's already possible. 1:06:45 And so this is just to try to expand the scale. 1:06:48 You mentioned earlier that the community is very responsive to bugs, which is true. 1:06:53 And I even have that on drivechain.info and there's little memes there. 1:06:56 I talk about how we had the inflation bug a long time ago that was fixed in a few hours. 1:07:02 We had the March 2013 chain fork, which had very few – that was a very brief time before that resolved itself kind of more or less automatically. 1:07:14 So we had the July 2015 thing that resolved itself completely automatically. 1:07:20 So we've seen that there is some resource here where people will kind of – there's a kind of – people will monitor the network. 1:07:30 You can't exploit this resource in its raw form because it will just be exhausted at scale. 1:07:36 But that's what this technology tries to do is just flattens it so it takes at least three. 1:07:41 And if you only have a minority, if you only have 51 percent – excuse me, not a minority. 1:07:47 I mean a very bare, slim majority. 1:07:50 If you have only 51 percent, then it's really going to take six months actually because you can only move the train forward once every – it will be finding so many blocks. 1:07:59 This train will be moving forward twice as slowly as it otherwise would. 1:08:03 So it will just barely make it to LA in time. 1:08:05 So it will take even longer if you have less hash rate. 1:08:08 But yeah, we have this – so this notion of that the community can fix problems within ten blocks very, very reliably, fix severe problems with no warning. 1:08:19 But then we just set this up so that there's plenty of warning, a huge amount of warning, and there's also no disagreement over what should be done, if anything. 1:08:29 There might be disagreement over what to do, but it would be like do we right click on this and UASF to block it or not. 1:08:36 So that would be very, very, very simple. 1:08:38 So it's an entirely different character in my view because we get – it can only happen – it can't happen like over and over again. 1:08:46 It can only happen once at a time per sidechain I suppose, but it can only happen once at a time. 1:08:51 It can only happen once per three to six months, and you're warned about it in advance, like three to six months in advance. 1:08:58 And you know exactly what to do about it. 1:09:01 or to have a debate over what solution to the problem is. 1:09:05 But it gets even better than that, which is that if you have 50% and you try to do this – you try to ram this thing down. 1:09:14 This is funny because I didn't actually answer your – I have to talk about your point about profitability still. 1:09:18 But if you try to ram this invalid transaction through and the people UASF to block it and they fail, not enough people – you asked this question earlier. 1:09:29 Not enough people UASF, so it's a very weak UASF. 1:09:32 But then nothing happens to those people. 1:09:34 Those people just – they live on a blockchain that's kind of paused and they don't see any new blocks coming in, 1:09:40 or they only see an invalid block and they see other invalid blocks. 1:09:43 So all those people have to do is kind of wait. 1:09:46 They don't have to do this collectively or together, but they just have to wait and try to stick it out. 1:09:50 And then one by one, they'll just decide, oh, I guess the UASF failed, and they right-click and they undo the UASF. 1:09:56 And then they're back on the history where the evil train docked in Los Angeles. 1:10:02 So you kind of lose nothing by attempting a UASF really. 1:10:05 If you fail, you just have to give up. 1:10:07 But then it's not like your money is – it's not like you have any – 1:10:12 But what if you're the one who is getting the money stolen in the same – 1:10:17 Yeah, well, then you're hoping the UASF succeeds, but you – then obviously if it doesn't succeed, then your money is stolen. 1:10:24 But it can, of course, be reversed, like what if legitimate sidechain users – 1:10:27 poor Andreas is trying to just get his money back that he bought for $0.99 on the dollar. 1:10:32 He doesn't want frivolous UASFs to block his trains that are real. 1:10:37 But yeah, so that's a nice thing, but I didn't actually answer your question, which is that I assume there's – 1:10:44 it's a very reliable assumption that – see, as I explained earlier, 1:10:48 I think almost all of these sidechains in practice will have to be merged amounts, 1:10:53 and they may fall unpredictably or may even fall as a result of a self-fulfilling prophecy that could cause each other. 1:10:59 People might be like, oh, this sidechain is going to die. 1:11:01 I'm not going to transact on it because the hash rate is too low. 1:11:04 That could cause the hash rate to fall in the absence of merge mining. 1:11:07 So I just think the merge mining deal is too good, too sweet to pass up. 1:11:11 Everyone is going to take it because they get amazing hash rate all the time, 1:11:14 and it's just easier to just leave it on, set it, and forget it. 1:11:18 The chances that transaction fee volumes fall towards zero probably still have very high hash rate. 1:11:24 So I think everyone will take that deal, which means that the sidechain miners and the mainchain miners will all be the same people. 1:11:30 And you just have to ask yourself – the purchasing power of each Bitcoin, 1:11:36 which is to say the price, the $5,000, what are we, $6,500 today or these days or whatever? 1:11:43 That is the most significant driver of miner profits because they buy all their stuff in US dollars and then they're paid in Bitcoin. 1:11:53 So there's a big multiple reason that they would at least not overtly in such a flagrant way blow up the possibility of sidechains being useful on the Bitcoin network 1:12:04 by just kind of stealing them all in this very flagrant and slow, kind of unforgivable, 1:12:10 and kind of blowing up the whole infrastructure of sidechains. 1:12:16 Because if you steal from one, it kind of makes it calls into question like, 1:12:19 is anything in this infrastructure, in the sidechains infrastructure, 1:12:23 value their existence and enforce the integrity of them in the sense that we need to, 1:12:30 many of us need to then be on the UASF train if a miner like Jihan was trying to pull some kind of shit like that. 1:12:36 Because then if one sidechain is fucked, nobody's going to trust the other ones. 1:12:39 But I wanted to highlight because Stop and Decrypt, our Bitcoin moderator, is making a point on the point regarding the mining. 1:12:49 So he's in the chat. I don't know if you're able to see the chat there. 1:12:53 But he was mentioning on this point about comparing the incentive to cheat for a miner on the mainchain versus on a sidechain. 1:12:59 He's making the point here that the more people that are using the sidechain, the more profitable it is to attack. 1:13:06 So the risk is not the same as the mainchain, because as the liquidity on the sidechain grows, 1:13:11 the incentive might exceed the analog for doing this kind of attack on the mainchain. 1:13:16 Can you comment a bit about more like how this risk is compared versus sidechain? 1:13:22 Yes. Well, that's what you want. You want the benefits and the costs to scale together. 1:13:26 You don't want them to fall out of whack. 1:13:29 So as the sidechain becomes more popular, there's more Bitcoin deposited to it, 1:13:33 which means that there's more Bitcoin that you can steal. 1:13:37 But it also means that the transaction fees on that sidechain will be going up. 1:13:41 And it also means that a theft from that sidechain is much more likely to indicate an end of like the sidechain experiment on Bitcoin. 1:13:51 And I really think that in this world, I don't know exactly how everything will shake out, 1:13:56 but in a world where, like, for example, the Bitcoin dominance index is down into like the 50s, 1:14:03 when it used to be like 95, you know, all the time, and you wouldn't even talk about it because they're so high. 1:14:09 I think that, you know, we have a lot of potential innovation going on, 1:14:16 especially the nature of the consensus software, which is that it mandates total agreement down to the last byte. 1:14:22 So what I'm trying to say is basically that sidechain tech is valuable, 1:14:26 and that a sidechain enabled token is going to be more valuable than a token that cannot travel among different chains. 1:14:35 And so I really think that as the sidechain becomes more popular, 1:14:39 attacking it would be seen as much more of an indicator that the whole sidechains experiment is dead. 1:14:45 I would actually be much more worried about the unpopular sidechains and trying to convince everyone that, you know, 1:14:52 to care about your thing, which you probably would not, and then your redeemability would fall apart. But you still have that first access, the unpopular sidechain. 1:15:00 I think the other thing I would mention is that as the incentive to attack grows, so too does the incentive for users to hold that accountable, right? 1:15:07 Yes, exactly. 1:15:08 So if the pot is so valuable that Jihan's like, holy shit, I'm going to put my head in there and take some money, then there's some guys who have a lot at stake as well on the other side who are playing against him who will say, all right, I need to run UASF, I need to inform people about this and get people in the community to care so that these funds are protected. 1:15:28 Yes, there is another analogy to what I was talking about before where instead of Jihan reorging seven blocks, he can make even more money. It's just mathematical certainty by reorging even more transactions. He can go back 70 blocks or 700 blocks. 1:15:44 At a certain point, he can – so this is a little complicated to explain, but even if he doesn't control the money, he can double spend – a 51% minor coalition can double spend money that they don't have. 1:16:00 So all they have to do is reorg the chain and then not allow the old transactions in unless there is – unless they receive a follow-on transaction that gives most of the money to them, 99.9% or whatever. 1:16:14 They can say either you're giving it to me – well, I don't want to get it too bogged down, but I presented on this in Lisbon. 1:16:22 Long story short is any Bitcoin transaction that the miners can put into the blockchain, they could redirect to themselves if they actually have the muscle to fork it out. 1:16:33 So why not just take all the Bitcoin transactions for seven blocks? Why not just make it 70 blocks or 700 blocks? You can steal more and more Bitcoin that way. 1:16:44 But of course, the more blocks you're reorging, the more you're just kind of saying this whole network is just useless. 1:16:53 Yeah, yeah. Okay, so I want to give you a quote and then you can respond to it however you see fit. It's from Thamos. It was also from r.slicebitcoin. He's not here in the chat. 1:17:04 Yes, I've heard of him. 1:17:06 He's not here in the chat, but I sort of got a response from him on this topic of Drivechains and comparing them to Lightning Network and comparing them to federated chains. 1:17:18 He said, Drivechain is like Bitcoin SPV and it's worse than federated sidechains. So what's your comment? 1:17:27 Oh, well now we have to talk about federated sidechains. 1:17:30 Yeah, it's a broader segue. So we're outside of Drivechain being the definition of sidechains. Let's step out of that for the purpose of being able to discuss. 1:17:40 Because I'm going to segue into Liquid and want to discuss Liquid's implementation. So I want to give this quote sort of as a segue. 1:17:47 So for everyone's sake, mentally detach yourself from Drivechain being the definition for sidechains. 1:17:53 So let's start now. Take it out of that and say, so Thamos has said, Drivechain is like Bitcoin SPV, but it's worse than federated sidechains. 1:18:03 Yes. Well, first of all, I'm going to claim the privilege of that second layer, which is that it shouldn't be up to any of us to decide. 1:18:10 The user should be able to decide what they want to use and they can decide whatever they like. 1:18:16 Like maybe they like sending their money to one website and just leaving it in the control of the website admin and they can do anything they want. 1:18:24 Or they could use Drivechain or they could use a federated sidechain. They can use whatever they want. 1:18:29 So the criticisms of projects are not a grounds for kind of not trying it, which I think people often kind of conflate this to. 1:18:37 But that being said, I really don't understand the federated model at all. 1:18:44 I think I brought up earlier that I find it to be like an empty explanation because you try to say that you're solving this trust problem by trusting a group of people. 1:18:54 Or you try to say, well, this blockchain is going to be managed by 23 other people, but you don't explain how they are going to manage it. 1:19:02 They sort of do because they say, they try to say that, well, they make a bunch of claims that I find to be kind of, not only are they baffling to me, but I think they're almost like insulting to the intelligence of the audience. 1:19:15 Like some of the claims are that all these keys are going to be inside of these thermite machines that will like explode if anyone tampers with them and just like potentially destroy an office building. 1:19:28 Or I don't know exactly how they work, but it just seems like kind of, just seems like not very cypherpunk. 1:19:35 Like if this kind of stuff would work, then we would have done it with Bitcoin, right? 1:19:39 We would have just had Bitcoin set up with, oh, that was the secret all along to just put Liberty Reserve on trusted hardware around the world. 1:19:48 And the more problematic is this claim that the keys are actually on this hardware. 1:19:55 I mean, it's kind of philosophically, it's almost as though part of the pitch for the federated sidechain is a closed source in a kind of philosophical sense, which is that all this stuff is said about the federation softwares on these trusted hardware security things. 1:20:15 And the hardware security things are geographically and jurisdictionally distributed. 1:20:20 But that's kind of like, isn't that also kind of like, I think that's kind of, you know, of course they wouldn't put them all in one room somewhere, right? 1:20:28 Like obviously you could like, you'd spread them out. 1:20:31 These are just kind of like weird, fake kind of explanations for things. 1:20:36 And it's just, this doesn't really, the whole point of Bitcoin is we have this error recovery, even if a meteor strikes all the mining equipment and blows it up. 1:20:46 People would turn on old mining equipment or there'd be some, Bitcoin would be able to survive. 1:20:51 Someone would hard fork the thing to a new proof of work or different ASIC hardware or something. 1:20:58 So there's all this ability to recover in a kind of organic way from mining failures. 1:21:05 But this is like, it's just a static 23 people and you just need 15. 1:21:11 And this involves them, I mean, we need to have their identity or we don't. 1:21:17 Either way, it's problematic. 1:21:19 If we don't have their identity, then we don't know that they aren't all secretly the same person. 1:21:24 We don't, if we do not have their identity, then they can be arrested by some kind of, obviously some kind of banking treaty or something signed with the United States. 1:21:38 Allows all kinds of broad discretion in terms of just like gish galop and just dump a bunch of random complaints. 1:21:45 So I will focus on one, which is that it's really just the same problem that you have with an exchange. 1:21:52 We're talking about the federated, I'm talking about the federated peg in general. 1:21:56 The same problem you have with an exchange, which is a problem of scale at security that I'll explain in a second. 1:22:03 But it's just kind of on a larger scale. 1:22:06 So for Liquid specifically, it's just on a larger scale because it's a bunch of exchanges grouped together into like a big exchange. 1:22:12 So the problem with the exchange is that they get big and then there's a bunch of money there. 1:22:17 And then everyone wants to hack the exchange. 1:22:18 And so at a certain point, it just becomes unmanageable. 1:22:25 Like there are, let's just see in this scheme, there's 15, you need 15 out of 23 signatures, or you need to steal 15 out of 23 boxes, 1:22:37 or you need to go to the people in charge of feeding information into those boxes and compromise 15 of them. 1:22:43 Whatever you need to do, you need to like capture 15 people's families and start cutting off their limbs or something. 1:22:51 Whatever you need to do, you need to compromise 15 out of 23. 1:22:54 Now, if there's something like, if there's only $15,000 on this sidechain, then there's only $1,000 budget per person. 1:23:04 But if there's $15 million on the sidechain, then it's a budget of a million per compromise that you need to hit. 1:23:11 And then of course, like, you know, right now, Bitcoin has what, like hundreds of billions of dollars. 1:23:17 So if you have, eventually the scale just becomes so high. 1:23:21 This is the problem with any centralized thing is the single point of failure. 1:23:24 It just becomes the cost benefit on compromising that single point. 1:23:28 It just starts to just become, I think, completely unmanageable. 1:23:32 And to complicate that even further, you have no way of, when you first enter the system, 1:23:37 you're like the first guy to deposit into the federated sidechain. 1:23:42 You don't know how big it will be like while you're asleep. 1:23:45 Like maybe you go to sleep and then people deposit a trillion dollars. 1:23:48 And then everyone decides, okay, time to compromise the sidechain. 1:23:52 And when they compromise it, they're not going to just steal, they're going to steal all of the money. 1:23:56 So that includes yours. 1:23:58 I just don't think, and so I think it's the same problem with exchanges. 1:24:02 And that's why people don't leave their money on exchanges, which is basically the reason why they have less, much less liquidity. 1:24:07 In the first place. 1:24:09 And I think in turn, we'll see the exact same effect play out where I don't know if people will feel comfortable leaving money on a federated sidechain. 1:24:20 Because they won't know exactly at what point the scale will sort of tip and it will become so large that either bribing or threatening or whatever. 1:24:32 These people will just eventually kind of tip over that line. 1:24:35 But mostly I object to the claim that a multi-signature kind of output plus a bunch of stuff that we don't see. 1:24:45 I object to the claim that that is like an innovation at all. 1:24:49 I think it's not really anything. 1:24:51 Okay, and so that's a segue into this week to add some specifics to Liquid. 1:24:59 So Blockstream's main sort of blockbuster product, the specific sidechain that got a lot of attention in 2014-15. 1:25:11 Because the concept of sidechain is one thing, but then there was this specific thing called Liquid, which was supposed to be like this great thing. 1:25:16 All traders were going to use them to ARB because they'd be able to easily move coin around via the sidechain. 1:25:24 And then exchanges would participate and be able to easily facilitate arbitrage, which would add efficiencies to the market and all these other great things. 1:25:31 So they finally actually released it. 1:25:34 It's production live now this week and there's been a lot of press around it. 1:25:38 And you generated a bit of controversy on Twitter by tweeting that it's not a real sidechain. 1:25:45 Oh yeah, that is kind of funny. 1:25:48 I mean, it's very funny because the person I checked and someone asked me a question and that person has like 35 followers or something. 1:25:56 And I just like replied to them and then it turned out this big thing. 1:26:01 So I thought that was actually very funny that I kind of went back later and checked out some one guy with like 35 followers kind of actually started this giant thing. 1:26:10 I know, it's funny, isn't it? 1:26:11 And so Samson Mao, I don't forget what his title is, something at Blockstream. 1:26:17 Chief Joke Assembler. 1:26:19 Chief Meme Officer. 1:26:21 No, I'm actually quite fond of Samson, I think he's a good guy. 1:26:25 He's a great comedian. 1:26:27 So he took offense to this, right? 1:26:31 And responded to you and said, I don't have the exact text here, but he said something. 1:26:35 It was like chest sort of disciplining you as if you were a child. 1:26:40 Like, come on, enough of this nonsense. 1:26:42 It is a sidechain, stop calling it not a sidechain. 1:26:45 So what is the deal here? 1:26:48 Is it a sidechain or not? 1:26:50 Oh, no, I actually kind of object to the, it's not Liquid specifically, I object to the federated model as being a sidechain. 1:26:57 Of course, as I explained, it can be anything. 1:27:00 If you have a blockchain and you have a token that moves among blockchains, then that's kind of like the first pass definition of a sidechain. 1:27:07 But that kind of just, that punts that question away into like, okay, what exactly is a blockchain? 1:27:12 Is a blockchain something if it's just a bunch of people and their friends say that they'll give you your money back? 1:27:19 Is that a blockchain? 1:27:21 It kind of punts a lot of that stuff around. 1:27:23 Like R3, the R3 private chain, is that a real blockchain? 1:27:27 We don't know, right, no one knows. 1:27:29 Bullshit. 1:27:31 So it, but yeah, I think it's very clear, though, that what, yeah, I was amazed that he went for that. 1:27:40 And even later on in the thread, Adam Back shows up and he sort of, I don't know exactly what word you use, he either confesses or laments or something like that. 1:27:49 He says that, yes, unfortunately, now the word sidechain does apply to two completely different things. 1:27:56 So I don't know if he was agreeing with me or Samson or both of us or just trying to be helpful. 1:28:00 But there, I think anyone who knows the context, and that's what I replied to Samson, I said, go back to 2015 and look at what was really going on. 1:28:11 You see very clearly there was this time period where a lot of altcoins were coming out. 1:28:18 That was the era when, so let's try to set the stage here. 1:28:22 The original sidechain's white paper, that was published in October of 2014. 1:28:27 And 2014 was the year that all this weird stuff was really starting to come out, like BitShares and NXT, Counterparty, all this weird stuff was coming out. 1:28:39 So before then, it had just been Bitcoin, which was a serious project, Namecoin, which was also a serious project. 1:28:46 And that was not as sort of popular, but also like kind of like it had a real justification for existing, like technologically. 1:28:54 And then there was some stuff that was kind of just like a copy and paste thing that was very shallow. 1:29:01 So like Litecoin, etc. 1:29:03 But in 2014, things started to get very different. 1:29:07 And Ethereum was coming out, all this stuff was coming out. 1:29:10 So in October 2014, this idea was published that we can just take all of those features from sidechains and simulate them in Bitcoin. 1:29:21 And you can capture all of the features of the altcoins and keep it within the Bitcoin network. 1:29:26 And so as I say, when someone says that they have come out with a sidechain's technology, when someone like Blockstream, who is very highly technically regarded, 1:29:36 that put out this paper in the past and that has made all these statements, you know, in a context of late 2014, 1:29:45 when they say that they have new sidechain's technology, what I really kind of hear is that, 1:29:52 which is maybe, you know, it might be on me, but what I hear is that they have a kind of new technology that people can use to create sidechains. 1:30:01 But they really have not done that. 1:30:04 That's not really what they have. 1:30:06 They don't have what was originally promised, which was that the mainchain would do some kind of thing to do an SPV proof 1:30:13 and kind of check that the sidechain had burnt its money, the money that is coming back by a train. 1:30:19 That was like part of the design. 1:30:22 And also, as I said, I kind of more generally object to just putting a bunch of stuff, 1:30:29 saying that a bunch of stuff is behind a multi-signature address. 1:30:32 I object to that claim that that is anything. 1:30:37 I think if a different organization did that, that wasn't Blockstream, they would be laughed at. 1:30:42 And in fact, I have to point out that the thermite boxes idea, that was actually literally laughed at for most of 2015. 1:30:50 If anyone brought up sidechain's technology, people would post a GIF of someone's house exploding or something, 1:30:57 and everyone would just laugh at how weird it was. 1:30:59 It took Chris Zeros and Josh Unseth months of questioning to get anyone to even admit that this weird thermite box idea was even going around. 1:31:10 And we have no way of knowing what is on the thermite. 1:31:14 Someone in the audience has no way of knowing what's in the, just as someone in the audience has no way of knowing what's going on, 1:31:20 has no way of knowing what is going on at the Federal Reserve or in the inner workings of the US Congress or something. 1:31:28 You don't know of any of this. 1:31:30 Where's the key that's in this box? 1:31:34 Is it actually in the box or is something else going on? 1:31:36 Was the key before they put it in the box? 1:31:39 Did they publish it to the New York Times? 1:31:42 No one knows anything about really what the setup is. 1:31:45 So it's kind of just like a bunch of shady misdirection in my opinion. 1:31:52 Yeah, and I get this feeling that Adam Peck on some level knows better, 1:32:00 just because I remember how excited I was about Liquid and how excited I was about Psychange back in early 2015-ish. 1:32:08 Yeah, it's a very common comment that people say that. 1:32:12 And Bitfinex was going to implement it. 1:32:14 I remember talking to Phil about it and we were like, oh, it's going to be so easy to R, it's going to be so great, it's going to be trustless. 1:32:20 And I feel like Adam Peck is a brilliant cryptographer. 1:32:25 Even in the current implementation of Liquid, the way that they've managed to handle the peg, 1:32:34 the way they've got IA, issued assets and confidential transactions, that crypto is great. 1:32:41 The tech is great there. 1:32:43 Yeah, I think we should. 1:32:45 I'm sorry to interrupt, but I do want to say I think we should do it. 1:32:49 We should do it. 1:32:51 I think it's a good idea and people should try it. 1:32:52 And I think it's great. 1:32:54 It's very difficult to ship software, so everyone should congratulate them on the software release. 1:33:01 That's different from saying that it is Psychange technology, though, because this just might be on me. 1:33:08 But I really think that if you say that you are coming out with Psychange technology, 1:33:11 what I would have in mind would be something that's open source that someone could use. 1:33:16 The example you used was make a spin up an Ethereum sidechain or something like that. 1:33:23 I designed Drivechain in order to bring my prediction market software that I think we were talking about before. 1:33:29 I don't know if we mentioned it on the air, but I designed Drivechain in order to bring the prediction market software to Bitcoin 1:33:35 to achieve a purpose. 1:33:38 So it's kind of like if I can't achieve that purpose and if you can't decide a coin developer can achieve similar purpose 1:33:47 and if you can't get Roger Ver to put Bitcoin Cash large block sidechain on Bitcoin, then using this technology. 1:33:54 I mean, the way it would work if you had to use this technology would be to find your own functionaries, 1:34:00 find your own group of people to trust. 1:34:02 And I think that is where it starts to really break down. 1:34:05 And you see this for kind of what a shallow contribution it is. 1:34:09 I don't know what to make of it. 1:34:12 Yeah, that was the kicker to what I was saying. 1:34:15 Acknowledging all the great tech that they put together. 1:34:18 And then what I was going to finish saying was, and it feels sort of spoiled by the fact that it's in this fucking shitty federated setup. 1:34:26 And Blockstream, I mean, they've got some of the most brilliant cartographers in the entire world. 1:34:31 Some of the best collection of talent, better than all of the shitcoin shit out there. 1:34:36 They do. 1:34:38 And they decided this was going to be like all that great tech packed into a federated context. 1:34:43 I feel like it's like so close to the finish line, like so close, but so far at the same time. 1:34:49 I mean, I hope that they end up doing some more interesting stuff beyond that. 1:34:53 But let's talk about what's the worst that can happen in this context. 1:34:58 So let's say the most evil federation is completely fucked. 1:35:01 And let's say now, let's imagine that 50% of the volume on spot exchanges now is being done using Liquid, these LBTCs. 1:35:08 So the peg is enforced cryptographically and exchanges in the federation are confirming transactions on their little sidechain. 1:35:15 And people are moving around LBTC and they're redeeming it every now and then into mainchain BTC and all this stuff. 1:35:22 Let's now imagine that it's the evil and corrupted in the worst way. 1:35:27 What can happen to people? 1:35:28 Yes, well, this is an excellent question, because I think we should actually, I would like, we should sort of ask them. 1:35:34 But I, you know, I have some thoughts, which are that it's claimed that there's all this stuff, again, in these like tamper proof machines. 1:35:42 And these machines supposedly, they have like the only copy of the private key. 1:35:47 And they supposedly are running this software that also tracks the block creation. 1:35:55 Although actually, I think actually the latest version, they split that up so that there's a different group of 15 out of 32. 1:36:03 So the way this way things work in Bitcoin is I think there's a lot of rapid technological progress. 1:36:07 So someone will publish a paper or something. 1:36:10 And then you finally get around to reading it two weeks later. 1:36:13 And then as far as you know, the author of the paper has like figured out a bunch more stuff and the design has changed. 1:36:17 So I don't want to speak as really an expert on Liquid because I'm not. 1:36:21 But what I do know for a fact is that by definition, they say that it's not, it doesn't require any modifications to Bitcoin. 1:36:29 Which means the rub there is that ultimately the Bitcoin network is just checking to see if enough keys have signed on withdrawing the money. 1:36:40 So that is the thing is that all this stuff is said about the keys only exist in these certain places that are generated by this weird hardware that, you know, I don't know. 1:36:52 So there are certain kind of like laws of physics and laws of like information processing that you kind of can't break. 1:36:59 So I don't know the specific details. 1:37:01 But what I do know is if you have those keys, you can just withdraw the money from the sidechain, just assign it to yourself. 1:37:06 And if you, it depends on like what other weird compromises are made, like these boxes might all be in secure locations. 1:37:17 But someone has got to feed them like an internet connection, right? 1:37:21 They got to feed them an internet connection to let them know what's happening on the exchanges so that they know which legitimate withdrawals to process. 1:37:29 So there's all these things that must be possible. 1:37:33 You know what I mean? 1:37:34 Like if it's possible for this to be useful, there must be possible to just trick this to get on a different network and withdraw all the money. 1:37:43 So the worst case scenario is, of course, that you compromise enough of the 23 keys or you compromise enough of the whatever it is, you know, whatever dimension they chose to put the weakest link on, you would get 15 of 23 of those. 1:37:58 You trick them onto a different internet or whatever you would do. 1:38:02 Or you threaten their families or the people feeding, whatever it is, you compromise that and then you get all the money. 1:38:08 This is a special case, of course, because it's the biggest and because of other reasons. 1:38:13 In this case, they're hostile. 1:38:15 Of course, right? That's kind of what I, yeah. 1:38:17 But, you know, I don't know how much, is this really high on Kraken's priority list? 1:38:23 Kraken doesn't even allow you to withdraw to base 32 formatted addresses. 1:38:29 Are they really integrating this? 1:38:31 If I were an exchange, I wouldn't touch. 1:38:33 I would make as few changes. 1:38:35 I would be so paranoid. 1:38:37 I would never make changes. 1:38:39 I would have the changes printed out. 1:38:41 I would be handwriting them at home to make sure that they were right. 1:38:44 And I would be super paranoid about making any changes. 1:38:46 The other kind of point of evidence against Liquid specifically, this is Liquid specifically versus federated sidechains more generally, 1:38:56 which is that if this were really an issue, like I did mention that I asked this at a Blockstream party once, 1:39:03 like how it would compete with the Lightning Network, which is that if it were like a huge, 1:39:07 if this were a really big issue, I think the exchanges would have been able to figure something out, 1:39:11 either using regular kind of contracts signed by lawyers, dumb contracts, 1:39:18 but also they could have used something like payment channels, 1:39:22 and I thought there was actually a lot of talk of this, like using like a Tier Nolan channel or whatever it was, 1:39:27 and there was talk of, I thought BitGo, right, was doing something at some point? 1:39:32 Yeah, well, BitGo had – 1:39:34 Of course, and then it exploded. 1:39:36 And then everyone planned to figure out everyone else and we don't really know exactly how that – 1:39:39 I don't know how that shook out. Probably a lot of people do. 1:39:43 Yeah, we have a pretty good idea about how it shook out, but there's a lot of confidentiality and shit around it. 1:39:48 But the issue is that if this were a really big deal, why don't the exchanges just set up payment channels with each other, 1:39:55 or as soon as SegWit was fixed, 1:39:58 why didn't they just connect to a big lightning hub, which would have – if all the exchanges connect to a lightning hub, 1:40:05 I think that has the exact same effect. I think it's actually better. It's basically the same. 1:40:11 It's all the benefits of liquid, but I think even stronger security because if anyone screws you, 1:40:17 you steal all of their money, which that might even be just too harsh. 1:40:20 They might need to do a different version of lightning that's less harsh. I don't know actually about that. 1:40:26 That's kind of an offhand comment, so don't read too much into that. But everyone in one hub, everyone in one lightning – 1:40:33 everyone has a lightning node. As long as they have a hub that they deposit, all of the Bitcoin that they would have deposited 1:40:40 into the liquid network seems that it would be strictly an improvement because they'd be able to do all that stuff 1:40:47 without paying any transaction fees and without having to worry about the functionaries at all, 1:40:52 and it would also be a great excuse. It would be even more private because the confidential transactions 1:40:57 wouldn't even be an issue because they wouldn't appear on any blockchain at all. 1:41:01 So not only would the amounts be hidden, but everything would be hidden because there would just not be anything. 1:41:06 So I think the settlement would be faster. You'd get to try out the real lightning technology 1:41:14 versus this kind of new experimental technology that has never been – to have this new kind of round-robin Paxos thing. 1:41:26 I didn't really look into it myself. It's not my area of expertise, but you don't want to roll your own crypto. 1:41:31 That's a basic principle. So they have this new thing. Why take a chance on the new thing 1:41:36 versus the lightning network that everyone's going to be cheerleading for? 1:41:40 So that's a criticism of just Liquid specifically, that if this were a big need, 1:41:45 then maybe the exchanges would have set up payment channels with each other. 1:41:50 I don't know. Maybe there's some reason why they didn't do that or didn't want to do that. 1:41:54 I don't know. I just don't see why the barriers stopping them from using lightning network. 1:42:02 I don't know. Don't those apply also to Liquid? I don't know. 1:42:05 Yeah, well, exactly. Yeah, yeah. That's the point, right? 1:42:07 Because I think people would be astonished if they understood just how low the knowledge is of crypto developers 1:42:13 and exchanges who are implementing these things. 1:42:15 They're really not geniuses that are totally on the ball with all of the new tech and stuff like that. 1:42:20 They're just developers that are implementing what they're told, right? 1:42:23 Yes, well, a good indicator of that is that Coinbase never went for – they never went for the extension block, the easy win. 1:42:31 And they went for SegWit2x instead and just lost big. 1:42:34 But they could have so easily, if they had 83% hash rate, they could have soft forked the extension block in. 1:42:39 It's always baffled me why they didn't take the easy win. 1:42:42 They insisted on trying and failing big. 1:42:46 I don't even know if there was some kind of four-dimensional chess going on 1:42:50 and they wanted to lose the whole time. I thought it was so baffling. 1:42:52 And Adam Banks supported it. 1:42:54 I mean, everyone was – that would have been – that was the path that I thought was going to happen, 1:42:57 like at least back in 2015-ish. 1:42:59 Yes, 2014, 2015, right? 1:43:01 That was very old and then it kind of got swept under the rug. 1:43:04 Yeah, yeah. And then the whole thing became, okay, fork off. 1:43:07 You really didn't see it. 1:43:09 In the scaling conferences in late 2015, the extension block idea had kind of sort of been – 1:43:16 sort of fizzled out or sort of wasn't considered interesting. 1:43:19 And then right after Hong Kong, it was all about SegWit Lightning. 1:43:25 There was all just a big push to just do that as quick as possible. 1:43:29 Yeah, and I think the narrative from Liquid and Blockstream now is like, 1:43:34 well, use for micropayments Lightning and for high-value payments Liquid, 1:43:38 which to me is a bit strange because, like you said, it's a bit more experimental on Liquid. 1:43:42 So maybe I don't actually want to trust high-value payments just yet. 1:43:45 Maybe I want to see how it goes for a bit, make sure that things are okay. 1:43:49 So I'm not entirely sure either exactly how the use case is going to evolve 1:43:54 and how many exchanges are actually going to use it. 1:43:56 And just to sort of echo what – do this a little bit differently. 1:43:59 So it could be that – and I know that have they made because it's not just, 1:44:03 oh, here's this optimization in terms of faster blocks, faster confirmations. 1:44:08 But there's no risk. Exchanges use Liquid. 1:44:10 We don't have to worry about hacks anymore because the whole federation has to get hacked 1:44:14 instead of this one exchange, which is total nonsense because – 1:44:17 The stuff exploded or something weird. 1:44:20 I don't want to make light of that, but it is very funny. 1:44:22 I'm just remembering all those GIFs that people used to post. 1:44:25 But yeah, I think I would like to know more about like what happens if they don't like one of them. 1:44:31 Do they can like replace one with someone else or double copies of yourself 1:44:35 and then you add up to 15, you plus 14 clones. 1:44:39 And so I don't know. Is it fixed? 1:44:41 If so, that has its own set of 23 great guys. 1:44:45 And even if eight of them screw up, you only need 15. 1:44:49 So I don't know. I'd like to learn. 1:44:52 Sort of doubt about whether this was compromised and whether in the future 1:44:57 it can then be used to unravel the whole thing. 1:44:59 It's the same issue, right? 1:45:01 It was funny you mentioned that. It's kind of – I think it is similar. 1:45:05 I've never really been that worried about it because it actually – 1:45:07 it flows in the other direction, right? 1:45:09 The more people over time, the more people who just forget. 1:45:12 Again, I don't – this is a little macabre. 1:45:15 But over time, people like get hit by a bus or something and they're dead or their apartment burned. 1:45:20 So you're right. It is similar that whenever you're interested with the Drivechain model 1:45:25 or when you switch from thinking about Bitcoin to thinking about Drivechain, it's exactly the same. 1:45:31 Yeah, it's just a calculated risk that we're all taking every day 1:45:35 when we're dealing with any crypto stuff. 1:45:37 There's tradeoffs. 1:45:38 And in the end, I think the way that you put it was pretty succinct. 1:45:42 I don't know if you said it yet or if I had read you saying it before, 1:45:47 but that it's like you're taking a bet on a particular mining profitability strategy. 1:45:52 And I think that's really insightful that in all of these cases, 1:45:55 it's just different gradients of the same bet. 1:46:00 Yeah, whenever you interact with other people, you have this thing that's like a physical – 1:46:06 it's as if it were a physical object in your brain because it is knowledge 1:46:10 that's encoded in your brain in some ways. 1:46:12 You have like a real thing. It's not like a fake subjective thing. 1:46:16 You objectively have real beliefs about what other people do 1:46:20 and they are in the physical reality and they have consequences. 1:46:25 Like if you watch people drive on the freeway, they mostly don't hit each other 1:46:29 even though there's just these little lines of white paint separating all the roads. 1:46:34 It's as if they were something much stronger. 1:46:36 There's a real like law of physics kind of operating there. 1:46:39 So it's not a thing to just be dismissed because it holds everything together and it holds – 1:46:48 Right, and I think just like you say where you need to – 1:46:57 let me think the best way to put this. 1:47:01 Actually, I was going to make a point there but I think I'm not going to bother because I think it'll – 1:47:05 Ah, yes, that's okay. 1:47:07 I think it'll maybe derail things so I don't want to go down that road. 1:47:10 But so let's – I think let's stop talking about Liquid because we need to – 1:47:16 I want to invite some Blockstream guys on so we can discuss exactly what their implementation is currently 1:47:21 and then we can just sort of go based off what they're actually saying 1:47:26 and not what we are assuming that they are doing. 1:47:28 So, yes, I think – 1:47:31 Oh, yes, no, anything like audience questions or whatever, let's do anything. 1:47:35 Yes, perfect. 1:47:36 So, okay, one thing actually I wanted to ask before that I hadn't quite gotten to in the miscellaneous part 1:47:45 was this Bee Foundation. 1:47:46 Have you done anything? 1:47:48 I know that – 1:47:49 Started a different club. 1:47:50 They just started like Satoshi Roundtable but with a different name. 1:47:52 Then it wouldn't have meant anything. 1:47:56 But I think maybe there is actually something to that though, 1:47:59 to the specifically the kind of the audacity of using the word like the foundation 1:48:03 or phrasing it that way. 1:48:05 There might actually be something to that. 1:48:08 Just as a kind of guess, I might say that it might be a good sign. 1:48:14 It might be a good indicator that stuff is going to go really wrong 1:48:18 for all the people who are in that group over the next 6 to 12 months 1:48:22 because that's like the hubris moment. 1:48:25 I don't really have a lot of thoughts about it. 1:48:27 I mean, obviously, if it mattered, then that would be a weird attack vector for Bitcoin. 1:48:32 It would just indicate that Bitcoin is – 1:48:34 Really weak, right? 1:48:35 Is really weak, right? 1:48:36 Yes. 1:48:37 What about – 1:48:40 So, I mean, what do you think about the incentives overall in Bitcoin development? 1:48:45 Do you think that – 1:48:46 Actually, let me ask a different question. 1:48:47 What about code of conduct in open source projects? 1:48:49 So Linux has recently generated some conflict over basically resigning sort of from the Linux project 1:48:59 because there's this code of conduct that has been generating things. 1:49:02 And I know Grin has a code of conduct, 1:49:04 and there's discussions maybe about Bitcoin doing something. 1:49:07 What do you feel about this and how this would impact the project? 1:49:12 The issue is not – 1:49:14 As I said earlier, the issue is not – 1:49:16 People will make mistakes when they write software 1:49:21 and when they create processes that write software, 1:49:25 and everything we do, there will be mistakes. 1:49:27 So the issue is just to make sure that we will survive the mistakes. 1:49:30 Like Karl Popper and his current Bitcoin developers are wrong about something. 1:49:34 You just say, well, as long as that doesn't matter too much, 1:49:36 as long as there's some pathway to correction, then it doesn't matter. 1:49:40 But if there is no way to correct the mistake, 1:49:44 then whether or not there actually currently is a mistake kind of doesn't really matter. 1:49:47 It just means that it's only a matter of time before some mistake shows up 1:49:51 and it just blows up everything. 1:49:53 So the key is to have improvement, error correction over time. 1:49:58 So what you really need in all human endeavors 1:50:03 is to make sure that all of your mistakes will be caught quickly, 1:50:08 which is to start a hard fork or start a spinoff altcoin, 1:50:14 or Bitcoin is often unfortunately a kind of a source of distress 1:50:20 or psychological hangups for people. 1:50:22 But you only need the token to work, and you get paid if you own it. 1:50:25 So you get paid in Bitcoin. 1:50:27 So with Bitcoin, you can trade in these markets. 1:50:30 You can create a market. 1:50:32 You can buy and sell in the market. 1:50:34 And that's also how the people who resolve the outcomes get paid. 1:50:38 So you can do basically everything with Bitcoin if you just want to be a mere user. 1:50:42 But if you want to be an employee, you have to kind of stake up some money. 1:50:46 But it's not quite a stake because this asset has a free-floating exchange rate. 1:50:51 So this corporation will rise in value as the network becomes more valuable, 1:50:55 and it will fall in value as the network becomes less valuable. 1:50:58 And that is a kind of disincentive to do like an exit scam. 1:51:02 That's kind of a similar problem to the exchange problem, except much worse. 1:51:07 The exchange gets big, and then people want to hack the exchange. 1:51:10 But then you have these things like what was it called? 1:51:13 Sheep market or something. 1:51:14 I don't remember. 1:51:15 The other dark market where they get really big, and then the owners just decide, 1:51:20 well, operating this is a lot of work, and it's risky, 1:51:23 and instead I could just cut and run with all this Bitcoin at a certain scale 1:51:27 that becomes an issue. 1:51:28 So with this, it shouldn't become an issue 1:51:30 because if you do a great job and grow the company, 1:51:32 you can just cash out the same way you could with a real company. 1:51:35 You could sell some of your vote coin or what would be called rep in mine. 1:51:42 And so you have that aspect of it. 1:51:44 And then I ask all of the individual people to report on all the outcomes. 1:51:49 So it's actually similar to Drivechain and similar to Bitcoin itself 1:51:53 where a lot of stuff that is happening across a long period of time 1:51:58 in many dimensions, that's crunched up into a few discrete events. 1:52:02 So just like in Bitcoin, you have all these transactions that are crunched up 1:52:06 into little blocks that happen once every 10 minutes, 1:52:09 and Satoshi put the proof of work on the blocks, 1:52:12 on the discrete blocks that just arrive in chumps, big, big lumps at a time, 1:52:17 big drips instead of a continuous stream. 1:52:20 And similarly in Drivechain, the withdrawals, 1:52:24 there's a lot of stuff happening on the sidechain, weird rules, 1:52:27 that you don't see. 1:52:29 Are the rules being followed? You don't know. 1:52:31 Are the blocks like super big over there? You don't know. 1:52:34 But it's compressed into one. 1:52:36 Someone like Andreas can compress all the stuff over there 1:52:39 and then just with one little UTXO request every three months, 1:52:43 he can sync it all across. 1:52:45 So similarly, I guess that's a kind of common theme in design for me, I guess. 1:52:53 In Truthcoin Hivemind, I have lots of different events 1:52:58 that are all resolved at the same time. 1:53:01 And all the people who own this corporation, they submit events. 1:53:05 They report on each event. 1:53:08 So you have a big matrix of everyone's reports. 1:53:11 They throw in a ballot for each thing, or in practice, they do it all at once. 1:53:15 But you have this big matrix, and then I do something kind of interesting 1:53:19 where if your results agree with most other people's results, 1:53:25 well, first of all, if everyone is in complete unanimous agreement, nothing happens. 1:53:29 But if there's any disagreement, the people who disagree the most are penalized. 1:53:34 So there's this intense conformity that is established. 1:53:38 And it's even kind of cleverly done where if people disagree on something 1:53:43 that most other people agreed on, they're penalized more. 1:53:46 And so there's a very big kind of, there's kind of this big multidimensional surface. 1:53:50 This is like a statistical trick that you can read about in the white paper. 1:53:54 And so there's like a big, it's like a big hill, but in many dimensions. 1:53:58 And if you are too deviant, you lose some of your shares of this hypothetical corporation, 1:54:03 and they go to other people. 1:54:06 And then like in Drivechain, there's a kind of, there's a long, 1:54:10 there's just these long delays, these long periods where the thing, 1:54:14 the network can just be on pause instead of the resolution process can be on pause, 1:54:19 not the network itself. 1:54:21 So you have all these people trading. 1:54:22 There's a cool little graphic in the white paper where there's all these people trading, 1:54:26 and then that part is allowed to happen very quickly. 1:54:31 But then as the stuff becomes more and more important, 1:54:36 more integral to the resolution process, it happens more rarely, 1:54:41 and there's much more kind of checking, and there's much more inconvenience. 1:54:45 There's much more kind of clamping down on it. 1:54:47 So there's supposed to be a kind of mix up between those things. 1:54:50 So I don't know. 1:54:51 I don't know if that's going to count as overengineered bullshit, 1:54:54 but I tried to make it as simple as I could while still providing some guarantees. 1:54:58 I gave a talk at QCon that people can find about the Oracle problem, 1:55:03 and the talk is about this issue of how do you get stuff that we know in the real world, 1:55:10 we know that Donald Trump was elected president in the United States, 1:55:13 how do we get that represented in the blockchain? 1:55:16 And that is what the talk is about, and there are many, many challenges to that. 1:55:20 And it's an interesting talk if you're interested in that kind of thing. 1:55:23 I do think that, again, the medium is the message sort of, 1:55:27 so probably, I don't know, you should do more reading on like a PDF 1:55:33 than listening on a podcast, but maybe that's enough to get people interested. 1:55:37 Yeah, I mean, this is an inherently super complex topic, 1:55:41 and so I don't want to necessarily go too much deeper, 1:55:44 but maybe you can tell people who's the bookie in Hivemind? 1:55:50 Are you doing a paramutual bidding structure where you need to have a guy who's on the other end, 1:55:55 and then everything just sort of balances out because you're just going from one person's pocket to someone else's? 1:56:00 Or is there some kind of like bookie incentives going on from a third party or what? 1:56:07 No, there is no. The blockchain is the bookie, and this is quite – 1:56:11 I don't think people appreciate this. This is a complete convenience thing. 1:56:15 This just sort of coincidentally happened, and it just happened to be very lucky, 1:56:21 but there's something invented to address a problem of liquidity in prediction markets 1:56:27 that also happens to double as very, very useful in a UTXO-based blockchain world. 1:56:35 So it's just really good luck. 1:56:37 But what's going on is that the first person, as I said, you buy a slot if you have a question, 1:56:42 and then you also have to front some money if you want to make a market. 1:56:46 But you can – once you have these questions like who is going to be – 1:56:50 will Hillary Clinton be elected president in the 2016 election or something? 1:56:54 Or I guess we should now say – I have to update all my lines. 1:56:58 So I should say will Donald Trump be reelected president in the 2020 election in the United States? 1:57:03 And that would be resolved in like December 2020 after the election happens in November. 1:57:08 But you buy a slot, and then people could reuse this question in many different markets 1:57:14 because it's possible to have really cool markets that interact with each other, 1:57:17 which unfortunately is – we probably can't explain right now, but I assure you it's really, really cool, 1:57:23 and it's the key to like fixing a lot of big things that are broken in society today very easily. 1:57:30 So you got to kind of start small. We can't talk about that right now. 1:57:34 But let's just say you make the slot, and then you make one market that you're just trying to bet on 1:57:39 whether or not Donald Trump will or will not be elected, 1:57:42 and you don't care about these other beautiful features that are very, very awesome. 1:57:45 You have to take my word for it. 1:57:47 Then when you create the market, you front some money in order to create the market in the first place. 1:57:56 So these people who buy the slot and who create the market, they get a cut of the – 1:58:00 they are compensated later, and they get a cut of the trading fees, 1:58:03 and the people who resolve the market get a cut of the trading fees. 1:58:06 So that's 50%, 25%, 25%. 1:58:09 And I only bring this up because I don't want to say like money is coming for free or something. 1:58:13 So I know this explanation kind of sucks, but when the guy fronts the – yeah. 1:58:18 The big problem is that the market making, you have to price it. 1:58:22 It's just like you're market making any commodity, whether you're market making futures. 1:58:25 This isn't that problem. This doesn't have any problems. 1:58:27 This is the greatest, luckiest thing to happen. 1:58:29 For anyone who wanted to put prediction markets on a blockchain, 1:58:32 this is like beautiful luck raining down from the sky solving problems magically. 1:58:36 Okay, good. Well, that's a big – holy shit. 1:58:39 I mean, go on. That's a lot to say. 1:58:41 But so let's say I want to bet $1,000 that Trump – 1:58:45 hopefully to God that he gets reelected. 1:58:48 Then how do I get paid? What's my multiple on this payment? 1:58:52 What's the price that I'm getting filled at? Like how does that even work? 1:58:55 Yeah, I don't know how you feel about Microsoft Excel, 1:58:57 but I made a little Excel spreadsheet with like many examples, 1:59:00 and you can just try it out yourself. 1:59:02 I should probably get some kind of Heroku app for this actually. 1:59:05 That's probably a good idea. I should put that on. I should write that down or something. 1:59:08 So I know Excel is not the best explanation because it's so difficult to see. 1:59:14 Yeah, and I think there's actually a lot of layers. 1:59:17 That's also why I wanted to kind of avoid in general the Hivemind discussion 1:59:20 because I think we could go on another three hours basically. 1:59:23 Yes, we probably could. 1:59:25 But what I want to say is this first guy kind of makes a sacrifice trade, 1:59:29 the guy who makes the market. 1:59:31 He puts a bunch of money and that he's never getting back. 1:59:34 So he's got to hope that he makes it up on the trading fees. 1:59:36 So he wants to make a market. It's a very excellent incentive for him. 1:59:40 He wants to make a market that other people will use. 1:59:43 Now, he also – he fronts his money up. 1:59:46 It depends on how much money he puts up. 1:59:49 He just has to put up some positive amount. 1:59:51 Otherwise, we get division by zero and nothing works. 1:59:54 But if you – let's say the guy puts up $1,000. 1:59:59 This $1,000 is kind of wagered on all sides at once. 2:00:03 And so what you do is when you bet your $1,000, this is a kind of calculus thing. 2:00:09 If people understand calculus, it's probably a lot easier to understand. 2:00:13 Where it's kind of like this guy has started off – the market starts off completely balanced. 2:00:20 So if it just has these two states, you have 50% for yes and 50% for no 2:00:27 because Donald Trump is either going to be reelected or he's not. 2:00:30 Maybe he won't be reelected because he was hit by an asteroid or something. 2:00:34 But whatever it is, no is going to happen unless yes happens. 2:00:38 So if he's elected, it's yes. 2:00:40 If anything else happens, if anything where you would normally say all bets are off happens, they're not off. 2:00:47 It's no. 2:00:49 So no happened. 2:00:51 So either yes or no is happening. 2:00:52 So when it starts off, these would each be available for $0.50. 2:00:57 Let's just say instead of – you just have to imagine that you have to replace – 2:01:02 when I say $0.50, you just have to replace it with like $0.50 or $0.50 or something. 2:01:07 That's not an integral part of the explanation. 2:01:10 So they start off at 0.5 units and when you first start to buy, you want to bet that Donald Trump is elected. 2:01:18 Your first couple of pennies for a while, they will be trickling out and you will buy one share or whatever it is. 2:01:27 You'll buy 150th of a share because it's $0.50. 2:01:30 We're going penny by penny here in a calculus sense. 2:01:34 So you buy 150th of a share at a time at $0.50, the price. 2:01:39 But as you spend more and more pennies, the scales will tilt and you will eventually be betting against yourself. 2:01:45 So if you bet like a million dollars, if the first guy fronts $1,000 – and again, I apologize. 2:01:51 I'm sure this is a really painful explanation for anyone who doesn't know calculus. 2:01:55 Probably even if you do, it's probably just horrible. 2:01:57 But let's imagine Aaron shows up, Alice shows up on day one. 2:02:03 Alice creates the market and spends $1,000. 2:02:06 Bob shows up and Bob bets $10 million that Donald Trump will win. 2:02:11 What Bob is going to end up with is he's going to end up with having spent $10 million mostly at $1 per share. 2:02:21 So he will have bet a lot and slid the scales against himself and then once he's exhausted the $1,000 that he was betting against, 2:02:29 he will be buying one share at a cost of $1 for $1 a share for all of his 100 percentage points. 2:02:36 So basically he'll acquire a bunch of shares that he can at best sell for exactly what he bought them for. 2:02:43 So I'm sure this explanation is terrible. 2:02:45 But what happens is there's just this rule. 2:02:48 There's this formula and when you update the formula, you pay a certain amount and if you pay a certain amount, 2:02:55 you get a certain amount of shares and you just update this over and over and over again. 2:02:59 So it's like one UTXO that just keeps multiple people keep interacting with it and it just moves in a big line. 2:03:06 So you just keep updating it. 2:03:08 So let's say Trump gets caught having sex with the monkey and so now his chances are so much lower. 2:03:15 So there has to be a reaction in the market, right? 2:03:17 The chances are not lower until people either sell their yes shares or they buy the no shares. 2:03:27 And so when they start selling the yes shares, they will immediately get good prices because the default state – 2:03:33 it's kind of like a seesaw in this sense and in a multivariate sense, it's like balancing a tray on a pin. 2:03:37 And yeah, I agree with whoever said that. 2:03:41 Yeah, he would be super popular honestly. 2:03:44 People would love it. 2:03:45 But it's like a seesaw where if a huge pile of money is on one side, you get less favorable pricing. 2:03:53 It's kind of like a seesaw except if you turn the ruler upside down unfortunately. 2:03:56 So this is like the price you're buying would be – if you dumped a ton of money on one side, 2:04:02 then you would be – if you wanted to buy even further, you would be paying a dollar for something 2:04:08 and you'd get a share back that would only be worth a dollar if you were right. 2:04:11 So at a certain point, it becomes very pointless because already so much money is on one side 2:04:16 that the seesaw is giving you this thing that's worth a dollar if Donald Trump wins and zero if he doesn't win 2:04:22 and it's selling you that for one dollar. 2:04:24 So it's actually terrible. 2:04:26 So the first couple of people who take their money out, they will be getting it at great prices. 2:04:31 So you really want to be the first guy to sell. 2:04:33 And then eventually – or buy, exactly. 2:04:35 So the market will react and try to mirror the real world as quickly as it possibly can. 2:04:43 I mean this is how market makers operate in normal markets anyway, right? 2:04:46 So they're going to – 2:04:47 Yeah, so this is great. 2:04:48 So there's always liquidity. 2:04:49 You can always place a trade for some amount. 2:04:52 It may be a small amount, but you can always place a trade. 2:04:56 No matter what. So you can always bet against someone. It's just funny that because of the way the calculus works, you will eventually be betting against yourself at terrible odds. So the magnitude is the hang up now. 2:05:09 But the cool thing is the guy who creates the market, he can choose. He can say, I really want to attract a lot of people to this market. He can front a ton of money when he sets it up and this makes it permanently much more liquid throughout its entire lifetime because there's just a bunch of money like in the middle at the fulcrum, in the middle of the seesaw. 2:05:27 It's kind of like weighing it down that he kind of sacrifices. The other very cool thing is that if the market has independent social value, so for example, if it's a market about whether or not Donald Trump will, if elected, keep unemployment down. 2:05:45 So if Donald Trump would be good for the economy, you could have, or if good for any other thing, you could have people donate at any time. At any time, they can put more money on the fulcrum of the seesaw and make it more and more liquid at higher and higher amounts. 2:06:02 So they can be permanently more liquid. So just you can have a sort of a – what I'm imagining is that kind of like we have these organizations in the United States that are like Annenberg Political Fact Check or stuff that's like Get Out the Vote or something where it's like people who are trying to make democracy work better. 2:06:22 But instead, we could have our own thing where we have like a Frederick Hayek version where we raise a bunch of money and we just donate it to the market. You can donate to a market and the blockchain will enforce all the rules and make sure that it just goes split among all the traders all the time. 2:06:40 But again, the way it works is the traders don't get this money until the trading is over, and in the meanwhile, it makes the seesaw much heavier. So a given dollar on one side won't move it as much. So it's actually very, very cool. 2:06:53 Yeah, and it would be a lot better than this scammy fact check. 2:06:56 It's very, very cool, and it's also really – yeah, I know because it's – the problem with any other thing, anything that's not a prediction market basically, is that you have the who watches the watchman problem. 2:07:08 Exactly. 2:07:09 So it's going to regress. 2:07:11 These scammy fact check fucking people, they just really have an agenda anyway. So they'll say something they disagree with is like partially true or only partially false, and then there's some other thing that's bullshit. 2:07:24 They'll attach some other bias to it. So these fact checkers are just liars anyway. 2:07:30 It's unsustainable. So if someone did very, very well as a fact checker, that would only plant the seeds of the future destruction because it's only a matter of time before – no matter how great it is before the people who made it great quit or die or become bribed or get drunk with power so to speak. 2:07:48 So it's only – the better it is, it just means that it will – just that much earlier before it's ruined. 2:07:54 Exactly, because we need to enforce anarchy. There needs to be no rulers. There needs to always be just a self-correcting sort of sustainable system that's just operating with us, the users, interacting with it. 2:08:04 There shouldn't be authorities that are ruling things. That's the wrong way to go. 2:08:08 But yeah, I like the way – so I get high level of what you're talking about. So this is how a lot of market makers operate, right? 2:08:14 So you have a starting price and if you're making markets in futures, for example, you have to put your bids and offers in and if people – if you're trading against the users who are going mega long, then you'll adjust the price as they are getting mega long. 2:08:24 You're going to be going – moving up your bid-offer spread and stuff. So this is very similar to some basic market making algos that you'll see in the markets out there. 2:08:33 So I think it's intriguing. I think we should have a separate talk probably in the future on only this because I think a lot of – we're traders here. 2:08:41 So a lot of us are interested in prediction markets and how you've been tackling this and I think many of us probably want to help you out in testing the development and any other sort of ways that we could help. 2:08:55 But does anyone out there have sort of Drivechain related questions? So I've reduced the talk power in this channel now so that many of you, if not most of you, should be able to just talk. 2:09:06 So if any of you are suspicious or skeptical of some of the things that Paul has said and you want to challenge him, now is your time to sort of challenge anyone that wants to – or has just comments or feedback or anything. 2:09:19 Now is a great time to get that. 2:09:25 Flipper, maybe you or Sean, anyone, Sheffield, anyone out there. 2:09:36 Well, I guess we could just say Drivechains versus merge mining. Is there a difference? 2:09:44 I think yes. Drivechain, again, I think is the – I would describe as the system for moving – for walking the funds back from the sidechain to the main chain. 2:09:56 And so what the sidechain does to produce its own blocks is its own business. So I think they would be different, yes. 2:10:05 Although, again, I say in practice I expect – I think it would be crazy. I don't know why anyone would pass up. 2:10:12 It's like your friend lives in a beautiful mansion and he lets you stay there for free for merge mining. 2:10:19 And it's like – or you have no money and you could just live on the street and do your own thing, but you have no resources because all you have is the – whatever transaction fees you think you might be able to get. 2:10:31 So you're like a beggar in the street or you're a guy who's unemployed, like trying to look for a job. 2:10:35 But so it's like that's your alternative to just staying in your super rich friend's Bitcoin house that has like a ton of hash rate. 2:10:42 I just – I don't know why people would not take that. 2:10:45 Well, what if they want performance? What if they want performance, right? They don't want to suffer under the Bitcoin confirmation time. 2:10:52 Well, it's like – you're talking about the interblock time of 10 minutes? 2:10:57 Yes. 2:10:58 I don't know. Like I think if people want to do those things, I think – 2:11:04 I'm imagining implementing say EOS on a Drivechain to Bitcoin instead of an atomic swap. What would be the difference there? 2:11:16 I think – well, first of all, I think it is possible to do a kind of merged mining that has another layer like in between where you have a second proof of work inside of that. 2:11:27 So it's like building a shed on your person's mansion property or something. 2:11:31 You have like its own tinier thing and you would have to set it up so that ultimately all the fees went to the main chain miners because otherwise it wouldn't be incentive compatible. 2:11:43 But if you did, you could have like interblocks. You could have like blocks that were in between the blocks and then you could increase the interblock time or you could rather – you could decrease. 2:11:54 You could increase the frequency of blocks and you could make it so that there were more blocks in 10 minutes. 2:11:59 But I think most of the people who – no offense to you, sir, but most of the people who try to alter that parameter, I think they are just like toying with powerful forces. 2:12:10 There's not really a lot of upside in my view and a lot of potential craziness. 2:12:17 But that is again exactly why we have the sidechains so that people can try out their crazy ideas. 2:12:23 But I don't see – 2:12:25 You're referring to your criticism of proof of stake for example? 2:12:28 Oh, well, yeah. 2:12:29 I read your article. 2:12:30 I do think proof of stake just is proof of work but like with weird paint on it that says stake and that it ultimately is like kind of – also smuggles in many potential technical issues that are not even relevant to the economic problems that I brought up, which is that it's kind of – basically achieves the same result with similar resource drain on the economy. 2:12:58 But yeah, I don't know why people would want faster blocks. 2:13:02 Usually, you want – you could set something up in a block. 2:13:06 You could do something that's very lightning-like or you can set something up in a block and then you can do things like inside that new layer. 2:13:15 So this would be like layer 2 of a layer 2 if a sidechain is layer 2. 2:13:20 So it would be like a layer 3 I suppose. 2:13:22 And I think that is much more stable way of setting all this stuff up. 2:13:26 But again, I think it would be possible to – I'm not sure. 2:13:31 Again, I can't guarantee the behavior because it's a really strange idea in a couple of ways. 2:13:37 But you should be able to make faster blocks even with merge mining and with Blind Merged Mining. 2:13:43 But yeah, I don't know why. 2:13:44 I really don't recommend that at all. 2:13:47 But like I said, how would you compare say the atomic swap version of transacting between say Bitcoin and EOS versus the Drivechain version? 2:13:57 I don't think I really understood what you mean. 2:14:01 Like atomic swaps are something that I would want in Drivechain. 2:14:06 They would be like helping the Andreas part so that Andreas and his customers didn't have to trust each other. 2:14:11 So they would be a nice thing to have. 2:14:15 Are you referring to just someone atomic swapping with an altcoin? 2:14:19 Is that what you're referring to? 2:14:20 I don't know. 2:14:21 No, it was a bit sideways because I forgot about your Andreas example. 2:14:26 And I guess the Drivechain ecosystem would have to have atomic swaps as part of it to solve that problem for somebody who wants to be the arbiter in the middle. 2:14:37 Yes, that three-month delay would be like a real killer otherwise. 2:14:42 But since you can specialize and have one person, that person would be like – Andreas would be like a patience specialist or something. 2:14:49 It would just be his job to be more patient than other people. 2:14:52 And since you can just do that, then there's no reason why not. 2:14:55 And when I originally wrote the post, I had it at like two weeks or something. 2:14:58 But then over time, we just made it easier and easier for the Andreas character and I just made it longer and longer because you get basically free security out of that in my opinion. 2:15:09 So hypothetically, somebody wins the bet on Trump's reelection in Hivemind. 2:15:15 They get paid out in Truthcoin. 2:15:19 OK, I'll explain because I think this is kind of complicated and there's just a lot of moving pieces even though they are simple I think. 2:15:26 The end point of your explanation, take us from winning the bet in Hivemind to getting the BTC back on your normal mainnet wallet. 2:15:34 OK, no problem. 2:15:35 I'll start even earlier. 2:15:36 So let's say you show up in Bitcoin and you have – let's just say you mine a block and you have 12.5 Bitcoin. 2:15:43 So on mainchain world, and then you would deposit it into the sidechain. 2:15:46 You pay a transaction fee on mainchain Bitcoin. 2:15:49 So now you have 12.49, but it shows up on the sidechain. 2:15:52 It shows up in the Bitcoin Hivemind blockchain. 2:15:55 Then you buy a bunch of shares of Donald Trump's reelection and I don't know what they are now. 2:16:00 I think they're like – he's like 60%. 2:16:02 I don't know. 2:16:03 Actually, someone should check electionbettingodds.com and see what it is. 2:16:07 I think you have to adjust for the other Republican candidates. 2:16:09 It's like divide or something. 2:16:11 So I don't know what it is, but let's just say it's – you buy him for 60%. 2:16:16 So you get whatever that would be, that 12.49 divided by 0.6 number of shares. 2:16:28 Let's say he actually wins. 2:16:30 So you don't actually wait until the bet is resolved. 2:16:32 I wouldn't. 2:16:34 Day after election day or even during at like 8.30 p.m. 2:16:38 when all the major news networks announce that he has won and the challenger calls him to resign. 2:16:45 The price will be – the price of the seesaw, everyone will have been fleeing the loser end of the seesaw. 2:16:53 Or excuse me, the seesaw edge that is up that has less money on it. 2:16:57 Everyone will be withdrawing because those people can still get money for a while. 2:17:00 But eventually that will go to the top and it will hit zero and then those less people will get nothing. 2:17:06 And at that point, you will be able to sell. 2:17:09 As soon as that happens, you will be able to sell your shares that you purchased for 60 cents for – or 60, I would say 0.6. 2:17:17 The shares that you purchased for 60 percentage points, you'd be able to sell them for 100 percentage points. 2:17:21 So then you'll have more Bitcoin. 2:17:23 You will have – in fact, you have exactly whatever it is, 12.49 divided by 0.6 minus any transaction fees you paid. 2:17:32 So you'll have that many shares. 2:17:38 You got cut off there it seems. 2:17:40 Yeah, sorry. I just wanted to divide it. 2:17:42 So you'd have 20.83 roughly. 2:17:46 You have like 20.8 Bitcoin at that point. 2:17:49 And then you would go to Andreas' service, which would hopefully be trustless and have all kinds of cool atomic swaps in it. 2:17:56 Or you'd go to Eric Voorhees or whatever maybe. 2:17:59 Probably Eric Voorhees would have a thing for this. 2:18:02 I don't know about modern Eric Voorhees, right? 2:18:05 I think we all like – what's the fate of ShapeShift? 2:18:09 It's a little unclear at this point. 2:18:11 But whoever it is, you send your 20.83 to them. 2:18:15 They charge you 1 percent. 2:18:17 So then you get 20.6 out on the other end. 2:18:21 And then you've got it back on mainchain Bitcoin. 2:18:23 So you get 20.6. 2:18:24 So that's it. 2:18:25 You went from 12.5 to 20.6. 2:18:27 That's the voyage. 2:18:32 All right. 2:18:38 Well, Swap, are we done? 2:18:41 I mean, yeah. 2:18:42 If anyone has any other questions either on DragTrain or Hivemind stuff, I mean, we've been going at it now like four hours or so. 2:18:52 I'm excited. 2:18:54 I agree with Roger on it. 2:18:57 Yeah, no. 2:18:58 I mean, it's great stuff. 2:18:59 I mean, Augur butchered the whole fucking idea. 2:19:03 And that's why I'm glad I dumped all my fucking 20x to my investment and just got the fuck out of that shit. 2:19:10 And we'll see what the backholders there – what their fate is. 2:19:13 But I'd much rather, yeah, see how this Truthcoin – I still, in my head, think of it Truthcoin. 2:19:20 I got to get used to Hivemind. 2:19:21 That's the sort of name. 2:19:22 But I know it. 2:19:24 I know it from very going back to as a Truthcoin. 2:19:27 And so this is in my head how I still reference it. 2:19:29 But I think it sounds very interesting, the sort of progress you've made since then in terms of how to solve this market-making and stuff. 2:19:36 So I'm going to definitely investigate more. 2:19:39 I think a lot of people here are, in particular, as traders, this is something of very high interest for us. 2:19:46 As well, I got one random question. 2:19:48 Sure, sure. 2:19:49 Paul, do you have any opinion on the new crop of stablecoins coming out? 2:19:54 And if you do have one, how could they interact with Drivechains? 2:19:59 That's an interesting question because stablecoins are – I actually think – I actually wrote about this. 2:20:07 So let me actually find the link and I'll post it in, and then I will talk a little bit. 2:20:13 But let me find it for one second. 2:20:14 Telegram is still down. This is so annoying. 2:20:19 It's back. 2:20:20 Is it? 2:20:21 Why is it still showing – 2:20:22 Fake news! 2:20:23 It's still showing like clocks and shit for me where it's not loading. 2:20:33 Okay, so basically the funny thing is I don't know about – I wrote this a long time ago. 2:20:38 It's from January 2015. 2:20:40 So I don't know how well it's held up given the popularity of Tether, but I suppose I could be vindicated at any moment if Tether explodes. 2:20:47 But the thing is the BitUSD, it tries to be the best of all the worlds. 2:20:53 It tries to say it's the stability of the money you already have plus all the cool blockchain features. 2:21:01 But in my opinion, it kind of ends up being the worst of both worlds instead. 2:21:05 It says there's no upside, so you can't make a ton of money by investing in this. 2:21:11 And it has all these weird technical and trust and new technology kind of hangups and issues. 2:21:19 So I don't really think that it is – but it's funny because the one context that I think it does work is that it works inside of prediction markets very well. 2:21:28 And the other kind of crazy thing is that prediction markets create – they can create stable coins all by themselves that are like fully collateralized and enforced by the blockchain. 2:21:39 So I think they're a major upgrade because what you do is you just have – you deposit money in and then you have someone bet. 2:21:46 You bet that the Bitcoin exchange rate will go down inside of a prediction market. 2:21:52 So will the exchange rate go up or down? 2:21:54 And you bet on down and then other arbitrageurs will bet on up and kind of it will cancel out in the back end when they do arbitrage. 2:22:01 But basically what's happening is the people who bet that the exchange rate will go down, if they're right, they get more Bitcoin. 2:22:11 And they get exactly as much Bitcoin as they lost in US dollar value terms. 2:22:16 So you get more – so it ends up being the same thing. 2:22:18 You get more Bitcoin but you still have – you start with $20 worth of Bitcoin, which is only some amount. 2:22:24 The price of Bitcoin plummets by 70%. 2:22:27 You get much more Bitcoin though when you sell. 2:22:30 So you still end up with $20 worth of Bitcoin. 2:22:33 So it actually kind of ends up doing the same thing and this is the thing I skipped over explaining before, which is that you can have these markets that take on many different questions at once. 2:22:42 So what you do is something really crazy where you bet that Donald Trump would win and the Bitcoin exchange rate would go down and that the US employment rate would go up or something. 2:22:51 And none of these are – they all – not only do they not – there's no liquidity problem but they actually vastly amplify each other's liquidity because it's – again, it's like a – instead of a seesaw, it's like a dish and some of the money is like spilling into the center. 2:23:05 And so it actually ends up being really, really cool. 2:23:08 I think people are going to really like it when they understand it but it's going to be very hard to explain unless you want to look at the Excel sheet and even then it will probably be very hard to explain. 2:23:16 But when people see it – the fun thing about this type of thing is that when people's money is at stake, their ability to learn things just like goes through the roof. 2:23:24 They suddenly become – there's like expert students. 2:23:29 So I think once this is hammered out in the real world, everyone will learn it all very quickly. 2:23:37 But you can in fact construct a stable coin inside of a prediction market world and you can use that to bet. 2:23:43 But you can do even cooler things like if you want to bet on something that's going to happen two or three years from now, you might think something like – what am I going to do? 2:23:52 Because the price of Bitcoin might go way up. 2:23:55 So why should I invest in shares of whatever, something that is going to happen? 2:24:00 Why should I invest in Donald Trump's reelection? 2:24:03 Because sure, I might be able to double my money. 2:24:06 But if I just keep it in crypto, I might multiply it by 10X or who knows what might happen to it. 2:24:13 So maybe you think that's a good idea or maybe you think that's a bad idea. 2:24:17 You want the money in crypto or do you want it in US dollars? 2:24:20 It's like a very confusing knot to untie. 2:24:24 So what you can do is you can bet that the US stock market will go down, like the S&P 500. 2:24:33 You can bet against that while you bet against whatever your prediction market thing is. 2:24:37 And then it's basically as if you transformed your crypto into shares of the industrial average, Dow Jones Industrial Average or the S&P 500, and you wagered those. 2:24:47 You said I'll wager you one Dow Jones Industrial Average share that Donald Trump wins. 2:24:52 And if he wins, you owe me two Dow Jones Industrial Average shares. 2:24:55 And if he loses, then you can take mine. 2:24:58 And in that way, you can bet on things that will happen like five or six years from now in a kind of sane way because otherwise it would be crazy because you'd have to either bet in crypto or you'd have to bet even in stablecoin. 2:25:10 That would also be kind of crazy, right? 2:25:12 Because what if the price of Bitcoin goes really well? 2:25:14 Then you'll really regret having bet in stablecoin because then you'll be getting it back in stablecoin. 2:25:21 And you could have had it in crypto, that 100X or something. 2:25:25 Have you ever considered hiring Swapman to program in some leverage? 2:25:31 It's funny you mentioned that because you can do – you can't do – it's known. 2:25:39 I don't know. 2:25:40 You guys are traders, but I'm an academic kind of from – and I took some financial engineering classes and a call option is equal to just having a lot of leverage in the underlying. 2:25:53 So if you buy a call option to buy something, I don't know, a share of – you buy a share of GE with leverage, that's the same as buying a call option in GE. 2:26:05 It depends on the specific numbers, exactly how much of each you have. 2:26:07 It's not quite, but I understand what you're trying to say. 2:26:10 I trade options and futures, so I know the domains very well. 2:26:14 Yeah, exactly. 2:26:15 So all you need to do – so in this, someone creates a question and you can create the market, but you can also create funny versions of the question. 2:26:23 So you can say here's the underlying question. 2:26:25 It's going to resolve somewhere between zero and one based on the US stock market's performance within some range, a big min-max range. 2:26:32 You could say maybe it will be that number squared or it will be that number logarithm or some other weird other thing. 2:26:39 You could use that for all kinds of fancy things, but one thing is you can just say, okay, we're going to do a call option transform on that. 2:26:47 So if it expires above six, then we recast it where 6.6 is zero and one is one. 2:26:54 But then if it's below six, it's just fixed at zero, and then it has basically become a call option, and then it has basically become leverage. 2:27:04 You would do that on the question side? 2:27:08 No, you would not do it on the question side. 2:27:11 The question is just what is the Dow Jones Industrial Average on this exact date or what was rather because the people who are answering it will be in the future. 2:27:19 So today you would say what will the Dow Jones Industrial Average be on January 5th, 2020? 2:27:25 They would answer that question in like March of 2020. 2:27:28 They'd have to go back and check, but then you would bet on it today, and it would be as if you had owned it because the price should track the whole time. 2:27:37 Because if it doesn't, then you just go – you buy low and sell high. 2:27:40 You do arbitrage. 2:27:41 So it's as if you have the Dow Jones Industrial Average inside of this system the whole time. 2:27:48 Have you ever imagined doing leverage the other way where, say, if it's currently 50-50, I get to 10X a 50 bet, but then I'm busted if the price only moves 10% down. 2:28:02 So let's say to 45. 2:28:06 What you would do is you would not use that particular market. 2:28:10 I mean there's actually other ways of doing it because these things, when you buy the shares, the shares are like themselves tokens, and you can trade those in the real world using any kind of non-blockchain world, but that would be lame. 2:28:24 So you wouldn't want to do that. 2:28:25 But what you would want to do is you would want to hope that someone would make a different type of market where – so the questions show up, and the question is what is the Dow Jones Industrial Average? 2:28:35 And once that's up, someone might make 30 or 40 markets that all have different amounts of leverage and different features, and some might plug in. 2:28:43 Someone would make one. 2:28:44 Would the Dow Jones Industrial Average be higher if we elected Donald Trump? 2:28:48 That would be Donald Trump election cross Dow Jones Industrial Average price. 2:28:53 But other people might just make one that's just Dow Jones Industrial Average with a lot of liquidity in it, and one person might make one that says Dow Jones Industrial Average with a range trimmed so that, as you say, it has much more price volatility within certain real world value ranges of the Dow Jones Industrial Average. 2:29:19 But otherwise, it's just everyone loses their money here or something like that. 2:29:24 So you can kind of try to configure that. 2:29:26 The issue though is that, of course, you always need counterparties. 2:29:29 Otherwise, the liquidity will suck. 2:29:31 It will never go to zero because of this market scoring rule thing that we discussed earlier, but it can still just suck where you can only trade $5 at a time, and that's because you need counterparty. 2:29:41 If you have people that you're going to bet against, you can go all day back and forth. 2:29:48 So it's a challenge. 2:29:50 I think you can go back and forth all day, can't you, Paul? 2:29:55 No, this has been fantastic. Your passion is so clear on this, and you're doing everything for the right reasons. 2:30:03 So the question is, I guess, what's the funding model of both, whether it's Drivechain or Truthcoin? What's the situation there? 2:30:12 I think it doesn't really matter because the – I mean, I would like to, since Roger did actually help out way early on, I would like to cut him in on some of those, what I call vote coins, what would be called rep. 2:30:26 But again, see, actually none of that actually makes any difference because in order to be a user, you don't need any of that. That's only for the employees. 2:30:33 And you're obligated to report on the outcomes, so you're giving someone a task as well. Those things may be valuable, but the true value is in enabling the service, which is all BTC. 2:30:45 But the other thing is that the price of Bitcoin, ever since this stuff has been discussed, everyone has gotten so wealthy that I'm not exactly sure that it's even matters. 2:30:56 That's the point. I mean, Drivechain, do you guys need help with getting developers? 2:31:00 No, we don't need any funding, but I think obviously the more – if you have intrinsically motivated, technically minded people who understand Bitcoin, that is – those people, that's worth more than money. 2:31:14 Money is only worth what it can buy, right? You cannot just go out and say, hey, I'd like to hire someone who knows about Bitcoin and who understands the scaling debate and who understands various people and their concerns about centralization. 2:31:26 That's very difficult. So those people, if you are interested and you want to help, or if you know someone who is interested and want to help, or if you want to hire someone who is qualified and can help, then obviously that would be great if you could go to drivechain.info, download the test DriveNet software, and then play with it and find bugs. 2:31:48 Ideally, fix the bugs also, but just finding the bugs is also helpful and just that kind of thing is very helpful. 2:31:57 I think especially in this space, the best product comes out of people who are just doing it from their heart and people that are driven by passion. 2:32:06 You don't work 80 hours a week because, oh, my salary is really nice and high and I'm super motivated. You work 80 hours a week because you are just super passionate and driven about something, and that's what makes you spend all night not even thinking you're spending all night to work on it. 2:32:34 And that's where you come up with something really great. So I was just sort of curious if there was any gaps in the project that there's – whether there was some kind of need to – like for example, over at Grin, they're doing a security audit fundraiser kind of thing, and Monero does periodic fundraisers. 2:32:51 So I was just curious if you had any sort of coherent funding models there. 2:32:56 Well, we could. I mean I don't know. That type of thing – I mean the skill of being a software developer and the skill of being like a cool blockchain like software architect, those are two different skills. 2:33:12 And then the skill of like managing a team, that's a completely different skill, like a team of managing a programming team or something. These are all very different skills, and I really don't think – I've only got like a few – I've only got a couple of little skills, and I really don't want to – those things, I have no idea if they work or not. 2:33:32 It's not my area of expertise. I do worry a lot when money gets involved, then people spend a lot of time squabbling over who gets the money and how, and it ends up being a distraction. 2:33:44 And especially for stuff like security audit, does that really work or do we just have to just take the bugs as they come and just try to fix them? I don't know. Has a security audit ever really moved the needle from insecure to secure? 2:34:03 I don't know about that. I don't know if it's moved the needle in that sense, but I think – wasn't it Augur or one of these others that they had an audit done and they had to change the entire code language that they used or something from one thing to solidity or something? 2:34:18 Yes, but you see in – that's also – either the needle was secure and then they just did this for appeasement and then they moved it from secure to secure, which is to say not at all, or it was broken and then they found a bunch of things. 2:34:32 But where is the final destination of this needle? It's probably just going to – sure, they rewrite the whole thing as they were instructed, but probably given how they reached that situation in the first place, probably the final destination of that needle is just going to land on insecure again. 2:34:46 That's just the way I kind of – again, I don't really know. Maybe these things work really well and I have no idea what's the best way to get a piece of software produced. 2:34:58 I don't know that at all really. I just try to do the best I can to think about what I think would be really cool, blockchain technology, and work on it like myself and talk to other people who are working on it. 2:35:11 That's all you kind of get from me in that regard. I don't know the best – if we raised a bunch of money, what would I do? Give it to the people who are already working on the software just kind of arbitrarily or it's like a one-time bonus or would I try to hire people? 2:35:25 What criteria would I use? It would just take more time away from me working to interview people. I don't know. I have no idea how to do that. I just – I don't know at all. 2:35:38 Well, I think that when it comes to any of these things, whenever there's a big idea and people want to get involved and they just – people want to – the immediate thing – I mean you have this GoFundMe scam economy that has emerged where people do dumb shit. 2:35:52 They get attention for doing dumb shit and being stupid and they use it to raise money. Like help me. I'm an idiot. Give me money for it. 2:35:59 So people react to this and they want to – people show their care for something by sending money to it, whether it's a good thing or a bad thing. And so immediately people think like, oh, I want to get involved. 2:36:10 I want to – I'm not necessarily – someone thinks maybe they're – I'm not necessarily a coder. I'm not necessarily able to help in these other ways. So how do I – people would want to show it by giving money, right? 2:36:20 How about if you took money and then used it for liquidity? 2:36:23 Right, yeah. I mean some – 2:36:25 Yeah, that would be really cool. That would actually be neat. We could do – but see that – it would almost be better to do that as an ongoing basis though because you could say – I could say – I completely agree with you. 2:36:37 No, I totally agree 100 percent. 2:36:39 Because remember you had that model about the people that could donate to the contracts. 2:36:43 Exactly, yes. 2:36:44 Yeah, you could just make it – especially if you can economically incentivize people to do that. 2:36:50 That would be an ongoing thing though because that's independent of producing this piece of software. 2:36:55 But yeah, I completely agree. I would want to say something like – I would go out there with a microphone at the charity gala or something and I would be like, well, all these other people right now, they're raising all this money. 2:37:11 The RNC, the Republican National Committee, and the Democratic National Committee, they're raising all this money to manipulate public opinion and they're spending all this money on political advertising and they are going to – if they're elected, they're going to get access to a huge budget and direct all these resources around and they're going to give kickbacks to their friends. 2:37:31 And like I'm going to say, this huge amount of money is set against actual human kind of prosperity and like honest elections, for lack of a better word, which unfortunately, they're really – there's not a great word for that, what I'm trying to describe. 2:37:49 But I'd go out there and say, look, there's all that. So if you want to fight back against that, I can guarantee that 100% of all Bitcoin donated will be used exactly for this purpose and this is exactly why it will help fix all those problems. 2:38:07 And yeah, I think if you got – you would be able to get – and again, I don't think people – because I haven't explained it. You'd be able to make a market with many, many dimensions at once. It would be huge. 2:38:19 You'd have like Donald Trump's election, the congressional election, unemployment rate, life expectancy, all these things. You can put them all in one big giant super seesaw and then you dump all the money in that and it would work on all of them at once. It works fantastic. 2:38:34 So I would be able to kind of optimize the use, I think, and I'd say, look, this is what you're buying. It all goes exactly to this purpose. And yeah, I think that would be a really cool fundraising thing. 2:38:46 I do believe also that that is an essential part of the sort of futarky part of the project because it is an issue often. These prediction markets, they do often need – they need like a little bit of money to kind of get them going. 2:39:03 Once they get going, they do well, but there is a kind of vision of prediction markets that they'll just fix everything kind of for free and as someone who has been intensely involved in the prediction market world basically since I was like 12 or 13 years old, it never works that way. 2:39:23 You really do need some money to kickstart the engine, so to speak, and so I definitely would be doing – I think that is a part of the future, the funding for the market liquidity. I think that absolutely will happen. 2:39:37 Yeah, because as you say, there's like a surplus of capital in the system now. There's a lot of us that have been around for a bit and – 2:39:56 Yeah, stop. I mean most of us have been plowing it into scam ICOs and multiplying our money even more. 2:40:21 That game is over now, but it's nice to see quality open source projects and why not give people a chance to help out and maybe sort of like make amends for all of the scams that have been fueled over the years because of us. 2:40:38 You have the – and the Truthcoin model is for the employees of the corporation, right? Would there be any way to tie that in to those who wanted to be say liquidity providers and maybe get a cut of the trading fee? 2:40:52 Nothing prevents you from doing all of them at once. You could buy 1% of the total rep, the total of Voltcoin, and you could create the question. You would buy a question slot and you could create the market and add a bunch of liquidity to it. 2:41:11 At that point, you would be looking at at least 50% because you get 25% from – everyone who uses the question gets the 25%, and everyone who uses the market – the market creator gets 25%, the question creator gets 25% of all the trading fees. 2:41:27 So when people trade, there's a tiny – you got to take your cut to keep everything moving. So there's a – not only is there a transaction fee for the miners, but there's a trading fee, and that is what goes to the people who make the questions and who make the markets. 2:41:44 Yeah, but what if somebody was neutral? Like what if somebody was neutral on the bet but wanted to pile into the liquidity provision that the question creator is in? 2:42:06 I would imagine that some people would specialize in – they would just be like, oh, all I do is I wait for the slots to become available, and I buy the slots, and then I write the best questions, and they're the clearest questions in the world, and I'm like an ex-lawyer, and I love English language, and I write super clear, and I put all the hyperlinks in there or something or blah, blah, blah, whatever. 2:42:30 I know exactly what it is that people want, what they're going to disagree about over the next three months, the next year or something. So I buy the slots, and I write all the questions about what people will disagree about, and I write them very clearly so that they work. 2:42:44 And then you buy the slots, and then in return you get 25% if lots of people use them in markets and those markets have a lot of trading in them. So someone could just do that or someone could just do – they could just create the markets. 2:42:58 So you could have a bunch of great questions already there, and you could say, you know what? I bet people really want to bet on these two things at once or this other thing is not being here. 2:43:08 So let's say here's a market. This is a really good market over there, market number 302. It's a perfect market, but it just doesn't have enough liquidity in it. 2:43:18 So I'm just going to copy that perfectly. I'm just going to copy market 302, and I'm going to make it the new market, market 720. 2:43:26 720 is going to have the exact same questions and the exact same dimensions. So it will be exactly the same, but I'm going to just put a ton of money in there as liquidity, and you'll lose all that money up front, remember? 2:43:38 But you get 25% of any trading in this market. So if you're right about the market, the only thing being wrong with it being that it needed a little bit more liquidity, then you could potentially just on the 25% alone remake the money that you invested. 2:43:54 So it still depends on the trading. You never know. There's a lot of trading sometimes. Like a foreign exchange market has like $5 trillion worth of trading every 24-hour period. That's a ridiculous amount of money if you're taking your tiny, tiny, tiny peanuts, 10,000th of a percent of that and you're splitting it many, many ways. 2:44:16 What if you could just pile on into the one that already exists and get a stake in the amount of trading fees? So it becomes a scale where if you're the original creator, you have 100 of them, 100%. Then let's say, okay, I'm neutral on the question, but I want to pile into that liquidity pool.