This is going to be a good one.

My name is Paul Behringer.

Welcome back into TechPath.

What we're going to try to do is line up what's happening within the ecosystem of Bitcoin.

Obviously, Bitcoin is flying right now with some news, albeit the fake news on ETF.

But at the same time, we'll see a lot happening from the macro perspective, and you know that's

kind of what we cover here on the channel a lot.

But we wanted to dive into the complexities of what's happening inside Bitcoin as a platform.

And I think that's the thing that a lot of people lose track of, is can Bitcoin be used

for payments?

And if so, what would you use?

I want to go to a clip that shows our guest today talking at the Bitcoin conference to

some of the developers within the Lightning Network to kind of frame it in the sense of

whether or not Lightning could be used.

And if you look at this conversation, he pretty much destroys the issue of what Lightning

is standing for.

And this is why I think it's important.

So let's go to this first clip.

They said that if they could get a 1% or 5% boost to revenue by adopting Drivechains,

they would do it in a second.

But the problem is...

It won't be 1%.

It would be 10x, 100x, or even 1,000x.

Hang on.

Let's be clear, though.

There's a misconception there.

It's straightforward.

I asked you what the problem with this idea was.

You just said that you mixed up L1 and L2, and you said that I don't like miners having

control over the L2 withdrawals, even though they already have control over the Lightning

Network justice transaction.

So it's exactly the same thing.

Well, again...

Now we're on this weird odyssey on, like, miner costs.

merge mining the sidechain is essentially free.

Hang on.

They don't even need their own node.

They can just...

Because that's just categorically false.

No, they get 51% hash rate can censor the justice transaction.

The problem with Lightning, though, of course, is that even the proponents don't expect 8

billion people to be able to use it, whereas with this, they could, and so that's a pretty

big difference.

No.

The tech people don't agree with you on that.

Yeah.

This is a silly discussion.

Go read the blog post I just posted.

You may not care about a certain thing, like the EVM or something, but other people care

about it.

And you may not care about large blocks.

This isn't about what other people like.

It's about their ability to choose.

All right.

So, of course, that's Paul Sztorc, who is the CEO of LayerTwo Labs.

And welcome, Paul Sztorc, into the show today.

Great to have you back.

Hey.

Thanks for having me.

All right.

So, obviously, we showed a little bit from the Amsterdam Bitcoin Conference, your engagement

there with the Lightning teams and some of the developers out there, and this is some

of the things that we've kind of talked about here on the channel in general.

And when you look at what Lightning and what you're trying to do, Paul, with LayerTwo Labs

and sidechains, if you can kind of give our audience a breakdown of the inefficiencies

of Lightning versus an alternative, what would that be?

Yeah.

I mean, I like the Lightning Network, but what has happened was, because of the scaling

war, the Lightning Network is like an idea that has collided with the Bitcoin culture

and damaged it a lot.

Because people in Bitcoin are very insecure about Bitcoin's future, they need to tell

a story where Lightning is going to fix everything.

And it might be true someday, but the current idea, the current version of the idea is not.

It's just not the case.

So the Lightning idea is a good enough idea.

The key insight of the Lightning Network is, it's kind of like six degrees of Kevin Bacon

or whatever it is.

So it's like, maybe I have a channel with you and you have a channel with someone else.

And so then maybe I can pay them through you.

That's the idea of the Lightning Network.

And I think, unfortunately, it's probably not going to work out for a couple of different

reasons.

But the bigger issue is that the Lightning Network is like this meme that has collided

with the Bitcoin community and everyone just, people just start talking about it and unfortunately

they stop being honest with themselves.

It's out of my own concern for them that I started speaking up sort of against it.

They're suffering, I think, psychologically, many of them.

It's not quite as bad as something like Theranos or whatever, but it is like there's this big

difference between what the marketing people say, the people on Twitter who don't use Lightning.

They say a certain thing and then they're in the back room trying to make this blood

machine work.

The Lightning Network history here over time, all the way back to 2021, you can kind of

see it's a bit of a stale platform in the sense that we haven't seen a lot of growth

within it.

Obviously, some news here recently with some security concerns.

Can you kind of explain the security concerns that were revealed by some of the developers

in the market?

Yes, I will explain that.

But first, I liked your graph and I wanted to point out something.

The most important thing about the graph is something that hides in plain sight, which

is that at maximum, it's only 5,000 coins, basically.

And there's 19 million coins.

So this is like 0.02% or something.

So it's very small.

And then people try to make arguments about, oh, well, maybe there's a coin in there that

turns over like millions of times a month, blah, blah, blah, you know, that's a bunch

of...

So now to your second point, there was recently a vulnerability in Lightning.

It can be fixed.

But in order to fix it, the people, the current problematic people in Bitcoin, the bad people

and the bad guys, they have to admit that they were wrong about something else.

So it's unclear when these two malicious, we have saving Lightning and then we have

admitting that we still need more soft fork opcodes.

The vulnerability is that when the thing times out, it's still possible to use either of

the two paths.

So one person pulls the payment from you and the other person uses the timeout.

And now the person in the middle is left having routed a payment, but they get nothing.

I tried to get this idea popularized in like 2019, the idea of channel risk, that who you

open the channel with makes a big deal.

But yeah, I think this is not a great bug.

I wouldn't be routing any payments for anyone else personally until the bug is fixed.

And looking at that, yeah, I want to go to, because payments are a big part of this.

I want to go to this next clip right here on Bitcoin payment potentials.

Listen in.

What do you think, Rene?

Like, do you think that we can get to a point where even like the first attempt that someone

makes it, that tries to make a payment should work?

So I think that will hardly be possible without severely changing the protocol.

So this is the way how the protocol is designed.

So payment failures, or at least the failures of attempts are built into the protocol.

The question is, what can we do about this?

Do we have like suggestions on that?

What you could do is you could basically say, well, if I have enough liquidity, let's do

five of them concurrently, and let's hope that statistically at least one arrives.

But then the question is, if we do it in the current protocol, if two arrives, somebody

could claim two payments, and then you would overpay.

You don't want to do that.

So these were some of the challenges that were represented at the conference there.

Just as a kind of a callback to this is, we've talked about this before around, you know,

transactions and the speed of transactions that are needed.

Visa recently did a big test.

One of the things they put in their big report, and we've showed this multiple times.

If you guys want to go back and check some of our videos on the Visa payment systems,

check that out.

But one thing they highlight here is Bitcoin may take up 60 minutes for six additional

blocks to be created.

And then if you look at the ones that were looked at, of course, Solana was selected

for their test at this point.

We don't know if Solana is going to be the one being chosen.

But that's the point, is that these kind of transaction speed issues that we're dealing

with are some of the biggest problems.

When you look at this, Paul, I mean, why didn't Visa just choose Lightning if Lightning was

already in the capacity of being able to do things?

I don't know what Visa's up to.

And the interblock time has always been – I'll come back to that in a second.

You had a Rene Picard on that video, and if everyone would listen to Rene Picard more,

that would be very good for Bitcoin, and very good for the Lightning Network, and very good

for society, because Rene is great.

And Rene wrote, he wrote Mastering Lightning, the book.

What's not helping at all is for people to mindlessly cheer on Lightning Network, and

just say everything is good.

And then if – and think about it, in most contexts, if anyone ever said anything bad

about the Lightning Network, they would be shouted down, and they would be criticized,

and they would get a social backlash.

The Lightning Network is ironically – it's a little bit to unpack, but sometimes the

Lightning Network is slow, or sometimes the payments fail.

People are obviously not going to like that.

When you pay with Visa, it does fail sometimes, but I think it's got to be like 1 in 200

for me or less.

Almost always when I pay, it works.

Sometimes they're like, wait a minute, we need to do it again, or something.

So that's kind of like what most people, I think, will tolerate.

As for Solana being faster, this is a trade-off that Solana has made at enormous cost, enormous

long-run cost.

So they're going to – that's going to be – they're going to have to pay that – repay

that with interest.

But a crucial thing to keep in mind, in the context of like my idea of the Drivechain,

and just the idea of competition among different chains, is that clearly the idea is popular

among some users.

So we should be able to make – it's not really about whether or not Solana is a good

idea or not.

It should really be about, for any idea, good or bad, it should be possible to make that

like a Bitcoin idea.

That's the sidechain idea.

We'll see if I ever prevail in my quest to convert every idea, good and bad, to a

Bitcoin project.

But because, weirdly, people then say, well, we don't like that idea, so we don't want

it to be – we don't want Bitcoin adoption.

So it's very bizarre.

I want to go over to a clip here.

This was by Michael Saylor in reference to streaming payments.

Listen to what he had to say.

Lightning is a chance for us to introduce some really compelling new enterprise applications.

Companies right now spend billions of dollars rewarding their employees.

What if we could give people instant employee rewards for filling out surveys, being at

the meeting, engaging?

Whatever email address you've been using for the past 20 years now is a lightning receiver

that flows into your lightning wallet.

When you show up to your Zoom, you get a Satoshi reward.

Then, of course, if you fill out a book review, Amazon can give you Satoshis.

And if you fill out a survey applying for an Amazon credit card, they can give you Satoshis.

And if you get approved, they can give you more Satoshis.

It's a way to gamify and make fun things.

And the thing that makes it all possible is microtransactions and streaming via the lightning

network.

My question to you, Paul, is that even possible right now within lightning?

I would say it's probably not possible right now.

Certainly, lightning already has an unsolvable onboarding problem where you can't have

8 billion people use it today.

In order to join the lightning network, you need a channel already open on L1.

You know, Michael Saylor, he has this skill I guess I wish I had.

Maybe I do.

Maybe I don't.

I don't know.

He's a great salesman.

He's got this great story.

He's got this great vision.

I think it was Milton Friedman who said there are idea manufacturers, and then there are

idea distributors, and wholesalers, and retailers, and consumers.

So the idea is, you know, he's like, he's good at, he can spin a great little story

there.

And, you know, a lot of, enough of it is true that it is, it sounds plausible and inspiring

enough, where it's true that you could do, you know, with cheaper payments, with micropayments,

you could do that kind of thing.

For example, lightning has another issue of being very sensitive to the L1 fee rate.

If the L1 transaction fee is 80 cents or whatever it is, something around where it is now, now

that the price is going up, it'll probably be higher.

So if it's 80 cents for like a 200 byte transaction, then basically you can't route anything significantly

less than the current L1 fee rate.

So if it's 80 cents, if Bitcoin L1, an L1, is 80 cents, then you really can't, you can't

route something less than 80 cents on the lightning network.

Well, people do.

Well, yeah.

You can't get into microtransactions.

That also would eliminate a lot of retail.

I want to go to another clip here.

This is Bitcoin University.

This is in reference to your Drivechains a little bit.

Listen to this.

Listen to this one.

This is Matthew Cratter from Bitcoin University.

Let's revisit this Drivechains discussion and 10 years from now would be my advice.

It's not appropriate for quote unquote friends of Bitcoin like Paul to advocate for a very

fast changes to Bitcoin and to try to pressure people who needs more tokens, who wants to

make it easy to issue ship coins on sidechains.

These are just things that I'm not interested in.

We have Bitcoin.

We have Bitcoin.

You are going to fail.

You are certainly going to fail.

Ugly Drivechain proponents can attempt to pressure, can attempt to apply pressure to

Bitcoin core devs to try to change the software to include Drivechains.

They won't do this because they know that full nodes like you and me will refuse to

run this changed software, any of this Drivechains nonsense.

And I have some advice to Paul Sztorc.

Why don't you go build your Drivechains on a low value network like Litecoin or Bcash?

BIP300/301 will never be approved.

I predict that Paul will rage quit like a little baby when he finally realizes that

he's not going to get his way and that he's not bigger than the Bitcoin network and that

he can't push through these changes.

Here's some advice for everyone.

If you ever want to offer a new BIP, don't be Paul.

All right.

So you responded to this on Twitter, lengthy and detailed response.

Because I'm rushing it through, of course.

So yeah.

Yeah.

In addition to being very, very rude, almost everything he said was completely false.

Schramed as though getting a BIP is some like favor that he's doing for me when in really

it's just the idea that's best for Bitcoin.

No, he doesn't.

It would never even occur to him that Bitcoin needs ideas.

What is the core argument between Drivechains and what their recommendation is right now

in such a case as the clip we just played?

Well, again, they think that they said we should revisit having adding a new soft fork

in 10 years.

But then Michael Saylor said in the previous clip that Lightning Network is the key to

all this great stuff.

But right before that, I just discussed that you have to have one or the other because

it is actually broken because of this new exploit.

So they'll need a new soft fork.

I think it kind of spoke for itself.

I was just listening to it again.

I was thinking, oh my gosh, does anyone.

And like if anyone did the tiniest amount of research, they would know that the ideas

from 2015, like long before Michael Saylor bought his first Bitcoin.

So like the idea of it being rushed through is like and it doesn't even make any sense.

Yeah.

And I don't need to tell you that.

Obviously, he didn't like give me any kind of like opportunity to comment or he didn't

invite me on the show.

I would love to have a little conversation with him about what I did that Twitter reply.

And I don't know why.

I honestly don't know the people who put that together.

I have no idea what they were thinking because, you know, you go to LayerTwoLabs.com slash friends.

We have an enormous number of supporters.

We have like the creme de la creme.

Rene Picard is a big supporter on that list.

Adam Back, Fiat Joffe.

Yeah.

I don't know.

So you really think this is really just internal strife between the Bitcoin community trying

to get lightning off the ground, understanding its future opportunity, but not yet being

able to apply that technology to Bitcoin today.

And at the same time, we have this massive rush to what will be our next bull run and

most likely some pretty big institutional adoption.

Obviously, we've already seen what just a small hint and whiff of an ETF can do to the

market.

So a lot more people involved in the future.

So there's a lot at risk here, obviously, for both Bitcoiners and the future of what

the Lightning Network can reference.

Beyond that, you know, you look at some of the others.

I wanted to kind of go over to another tweet here, because in reference to Bips, you know,

why would you even bother with this?

I mean, why go this direction?

What's the, I guess, what's the long game if you're continuing to get pushback from

the Bitcoin community?

Well, yeah, the Bip process is, of course, is horrible.

And Jeremy Rubin quit over it when he did 1.19.

And it's, you know, he tried to advocate for his idea.

And again, people interpret it as there's a prestige economy among the Bitcoin developers.

And then years, but the key part of the story is years later, two years later, everyone

was saying this is the best, Bip 1.19 is the best, best Bip around and enables covenants

and it enables ARK and ARK is going to be what saves the Lightning Network.

So that just proves that the idea was good the whole time.

And everyone was, you know, a bullshitter basically.

Yeah.

So that's how it is.

What I didn't even know that people would talk about 1.19, knowing nothing about it one

way or the other.

I wish it weren't the case.

If I could do it over, I would just push the Bip anonymously.

And I would probably do the wrong thing.

I would suck up to people and tell them that their terrible ideas were very good and etc.

etc.

Because I had no idea that it'd be so blatantly corrupt, which is what it is.

Right.

Casey has this Ordinal's Bip that you want to discuss that.

Yeah.

His isn't running the same scenario.

It's the exact same scenario.

Yeah.

He says, what is the, you know, and he's absolutely 100 percent correct.

The Bips are in very different types.

And the informational Bip is the lightest.

And so then they're like, well, we can't do that.

But now, don't you see, like, this is the whole problem in the first place is that shouldn't

the ideas just compete on their merit?

You know, it's just like, OK, if it doesn't have the right prestige or legitimacy, just

explain what the problem is and then just say it's rejected.

Right now, you have to justify every decision you make to people who are not specialists

in the decision.

And that's what we don't have in Bitcoin.

In Bitcoin, it's all run like a USSR style and it sucks.

And it's the worst thing about Bitcoin, of course, that the process is very defective.

It's because it encouraged people to shill the Lightning Network.

Now they're going to have to walk all that back.

You know, all that stuff, unless they want to say the same thing about OpExpire.

I want to play a game with you that, you know, this is a tear maker.

So we're going to tear some ideas here.

And I'm going to zoom in on this a little bit.

So some of our audience can say, but the first one we're going to show is BRC20 Ordinals.

And I'm going to give you, based on your expertise, you've been around in this industry for quite

a while, probably one of the longest reading devs out there, so very arbitrary, just for

fun only in terms of ideas.

But BRC20 Ordinals, where would you put that on the tier list, A through C, D being worst

idea, of course.

Of course, yeah.

I'm going to go with C, but I don't want anyone to be misled by that.

I think it's worth doing.

It's mostly harmless.

It does a lot of great things culturally for Bitcoin.

Those should be on their own sidechain anyway.

They shouldn't really be on L1, but I think it's a good idea.

And let's go to Runes.

I'm not as familiar with Runes.

I'm sorry to say, I'm very familiar with a lot of these other things, but Runes, I think

they're mostly the same as Ordinals.

So maybe we could leave it unranked.

Yeah, I'll leave it unranked right now.

Let's go to Liquid Network.

I think, again, we should do it, but I don't think anyone will like it.

And I think it has taken the air out of the room with sidechains and has misled a lot

of people.

I could give it a C tier also.

Rootstock?

These C tiers are like, you know, we should still do it.

Rootstock, we should do it.

I think they've had trouble executing.

I think Rootstock, we could give them a C tier.

BitVM?

I'm going to give that a B tier.

B tier.

I think one day we'll be doing some cool stuff with that.

Not anytime soon.

Obviously, Drivechains?

Drivechains, I've got to give it an A tier.

There's nothing wrong with it.

It solves every problem.

It has no risk.

We can easily undo it.

It's us counting the 13,000.

Get over it, people.

It's a great idea.

They're going to have to admit sooner or later.

SpiderChain?

SpiderChain.

You know, I've got to say, I think it could be good.

I think it's Liquid.

I gave it the Liquid C tier.

I think it could be great.

I think it could be great.

It could be a B tier, but I think it's a C tier for now.

Lightning Network, of course?

Well, I have to knock on Lightning Network because of the cultural damage it has done.

I think I would have, in the past, been B, but now I'm going to have to give a C tier.

I think it's the same as Liquid, really.

Then we'll go to RGB.

I think RGB is a lost cause.

Thorachain?

You know, it does seem to be ... I'd like to check and see how many people are still

using it.

Is it popular?

It's like a trustless swap.

It's like a decentralized Uniswap thing.

I don't know how much ... I don't know.

If people are using it, then I'm militantly pro.

But if they're not using it that much, then I think it ended up ... I would say B tier.

Interesting.

Okay.

I don't know, but this is conditional on the use.

If someone looks it up and it says no one's using it, then I would say, for whatever reason,

it didn't work out.

Stacks.

What about Stacks?

Stacks, you know, I think Stacks is a lot of self-deception.

I feel bad putting them in the only D tier, but I think that we've got to D tier it.

And then don't change Bitcoin.

Well, this is a sad one because there's a sense in which it's great and necessary, and

there's a complete sense in which it's a total lost cause.

I think in the context of what we've discussed and the way Michael Saylor would interpret

it, I would say lost cause.

Wow.

Okay.

There you go.

What do you think about other ideas?

You know, if you think about David Marcus with LightSpark, what are your thoughts on

other ideas that could make this list as well?

Other ideas that should be on the list?

Yeah.

Well, I think it's a pretty good list.

Not a bad list.

I got...

Well, there is a Rubin-Thompson had a state chain L2.

There are some other L2s that could be on here.

Yeah.

Those are good.

There's lots of good ideas out there.

We should try...

We should be more pluralist, and we should not try to police how it is that people use

Bitcoin that is a path of tyranny, and as long as someone is not interfering with someone

else's use case, and that's exactly what the L1 protocol already does.

So, this is why it's bizarre for someone to be against the soft fork.

You don't have to upgrade your node with a soft fork.

Your node does everything it was doing before, and it doesn't start doing anything new, and

it doesn't stop doing anything it was doing.

So the node...

The soft fork is already an institution that protects Bitcoin's properties.

The fact that you can upgrade via the soft fork, that's also something that Bitcoin has

done.

We did that 16 times in the first seven years of Bitcoin.

I want to play this last clip for you, and then get your opinion on it real quick in

reference to the importance of the halving.

Listen in.

Is the halving the main driver of the Bitcoin price?

In this cycle, no.

I think it's liquidity.

Yeah, I agree.

By definition, there's nothing on it that should impact price.

I think the halving is still bullish.

Let's do a show of hands in the audience.

So I agree with you.

It's a little bit like investing in a company where you know the annual report's coming

out.

You know what date it's coming out on.

We might learn something about competitors to this future monetary asset and the actions

those competitors might take.

You just don't know what actions they will or won't take until the event occurs.

The data points that we have in terms of halving, they're not enough to come to pretty much

any conclusion.

All right, so that question to you.

Is the halving as important as it has been in the past?

Well, you know, what the halving does is it makes like a little event and people can throw

parties and actually it's funny.

I kind of make fun of the halving, but I plan on throwing a little halving party myself

to invite some local Bitcoin friends.

So it's arbitrary, but maybe arbitrary things are important, you know, because it's an excuse

to whatever, meet the family or something.

The ETF also, I think people have expected it for a while.

There are surprises with the ETF where it's like no one knows, the poor Winklevoss twins

have been trying to get this ETF for like 10 years or whatever.

Yeah.

Like maybe even 12 years.

I don't know.

And there's always right around the corner and now BlackRock will probably get the job

done, but no one knows exactly when.

And so it's possible it's ETF related, but I think it has to be something that's a pretty

big surprise usually, or it's just the normal trajectory of people learning about Bitcoin.

Well, yeah.

And, you know, there are a lot of macro pressures, obviously.

We talk about that a lot on the show as well.

But I would agree with you.

I think the ETF between the two, I feel that ETF is probably going to have a little bit

more of an impact, at least in this particular cycle from an institutional.

Paul, it's always fun picking your brain.

I learn something every time we get a chance to talk and anyway, we appreciate you stopping

in today.

Thanks for coming in.

Hey, thanks for having me.

You bet.

All right.

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