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Hey there, everyone.

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Great.

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Well, today is the BitVM takeover of the LayerTwo Labs weekly space.

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And so I'm excited to talk to you guys today about BitVM, compare it with drivechains, and learn some cool stuff about it.

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So, awesome.

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I guess we'll get started, and I'll just give you all a brief overview of BitVM, and then maybe we can get into some questions or something like that.

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Or actually, anyone can just feel free to raise your hand if you have a question, and I'll be happy to answer them at any time.

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But yeah, let's start with what BitVM is.

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So BitVM is a virtual computer that can run any program and render the results of that computation in a way that Bitcoin transactions can understand.

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And this is pretty cool because it allows you to have two parties agree to run a computer together, one of these virtual computers,

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and use the output of that program in a Bitcoin transaction in such a way that if either of them makes a false computation or tries to run bad code through the machine,

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the innocent party can take the guilty party's money, which is pretty cool.

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So that allows us to do a bunch of cool stuff, and basically, as the paper says, validate or verify any computation on Bitcoin.

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So that's what BitVM does.

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It gives us a generic computer that we can run off-chain and use the results of computation on-chain,

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such that you can do stuff like have Alice and Bob put some money in a Bitcoin address, run a program, and the program decides whether Alice gets the money or Bob gets the money.

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You can do something like that with BitVM.

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So yeah, let me go over a little bit of the history of how we got here.

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And once again, by the way, anyone is welcome to ask questions at any time, just raise your hand.

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By the way, I want to let our host know that I did invite Alex Kravitz to join me today.

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So if he raises his hand, I'd particularly appreciate it if you could make him a speaker as well.

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So thank you.

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So let me talk a little bit about the history of BitVM.

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So I think it all started about a year and a half ago when Robin Linus and I started talking online about tricks that you can do with Bitcoin scripts.

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So Robin Linus is a developer with ZeroSync.

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They're trying to bring zero-knowledge proofs to Bitcoin, and I guess now they've finally done it.

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So he's very familiar with trying to hack different things into Bitcoin, and he's got a GitHub that's full of projects where he does that.

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And I'm sort of—I really like stuff like that, so I often implement ideas that do novel and unique things with Bitcoin script.

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So my GitHub is full of actual implementations, and his GitHub's full of research and ideas about how you can do cool stuff.

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So for about a year and a half ago, we started interacting with each other, working with each other's GitHubs.

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I was implementing some of his ideas.

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We were coming up with fresh ones.

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And we met in Bitcoin Miami, the Miami Bitcoin conference.

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And while we were there, we started a Telegram group in which the goal was to figure out a way to hack a zero-knowledge proof system into Bitcoin script.

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That fit well with his area of research because his company, ZeroSync, does zero-knowledge proofs, and they're trying to bring them to Bitcoin.

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And it meets with me because it was a big challenge to try and think of the simplest possible zero-knowledge proof system and bring it into Bitcoin.

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A few other people entered that Telegram channel, notably Sam Parker, who's also very familiar with zero-knowledge proofing systems.

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And we started hacking away at it for probably about a year now.

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Just coming up with ideas, trying to think of ways to do it.

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And it was in that Telegram group that this ended up happening.

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So eventually, Robin came up with this idea.

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And it was immediately apparent to him, but not immediately apparent to us, that it was not only capable of doing zero-knowledge computation, but any computation at all.

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Any desired computation that can run any computable function.

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So he came up with this idea, tried to explain it to us.

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We didn't understand it immediately, but he worked through it with us, and then we saw the potential for this thing.

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So within about five days after he proposed it, he had a white paper ready, and I had some working code that actually demonstrates a proof of concept of how it works.

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And so that's the sort of history of BitVM.

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Then on October 9th, he released the paper, and on the same day I released a proof of concept showing how it works.

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So that's where we're at.

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BitVM is now a thing, and we're working to improve the proof of concept implementation and make it ready for primetime.

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By the way, our host, I also invited Moon Settler to come up and be a speaker with me.

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So if he wants to come up, he can raise his hand, and if you could let him be a speaker as well, that would be wonderful.

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So there's some general background on BitVM, and there is some history of BitVM.

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And one of the things I wanted to get into today was a comparison of BitVM with Drivechain.

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So I'd like to go into that, but before I do, I just wonder if anybody has any questions at this point, because I'm happy to answer those.

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So I'll give a few seconds for anyone to say, hey, I wondered about this or that or the other thing before we move forward here.

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Okay, cool. I don't see any questions, so that's fine.

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Then let's get into a comparison of BitVM with Drivechain.

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So can you make a Drivechain with BitVM?

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I don't think so. I don't think you can.

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But I wouldn't be surprised if you could come up with something similar, or maybe even equivalent.

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So BitVM allows you to run any computer on it.

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And since you can run any computer, you can do any computation with it.

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So a lot of things that might require a software in Bitcoin, we might be able to do with BitVM.

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Because you can run a copy of Bitcoin in BitVM that has that piece of software in it, or that has that opcode activated,

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and then interact with this alternative version of Bitcoin directly on Bitcoin.

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So that's kind of something we're looking into.

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We're certainly not anywhere near there yet.

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It would take a long time for us to get there.

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But in principle, you should be able to integrate any kind of opcode.

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However, some opcodes require multi-party interaction.

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And this is not something we've figured out how to do yet with BitVM, other than in the case of two parties.

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We have a working implementation where someone can run the computer as a prover,

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and someone can run the computer as a verifier, and they can verify each other's computations.

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But this is a two-person setting.

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There's just a prover and a verifier, and no other people are involved.

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And that's what we currently have working.

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We've got some ideas for how to expand it.

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But if we wanted to do something like a sidechain or a drivechain, we would need more than two parties, it seems.

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It seems that you would need to have the ability for all the users of the sidechain to prove things together,

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or verify things together, and have some sort of prover who's proving that the computation is being done correctly.

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And that's not something we've figured out how to do perfectly yet.

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I think Robin might be presenting a theory he came up with at the Amsterdam conference right now,

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on how you might be able to do multi-party.

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But as of right now, the only thing we have working is the two-party setting.

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And that's not enough to build a sidechain or a drivechain by itself.

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So can we get there?

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I think so. I hope so.

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It seems like a lot easier of a problem to solve than the one we did solve, which is to get a computer that runs on Bitcoin.

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But we'll see. It's currently an unsolved problem.

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If we can do it, if we can figure out a way, let's just hand wave away and say we figure out how to get multi-party BitVMs working.

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I say multi-party, but I guess that's the wrong term, because it already has two parties, and that's technically multi-party.

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I'm not sure what's it, like three or more.

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If we can find a way to make three or more people be able to use BitVM, then how would it look if we wanted to do a sidechain on this?

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Well, there's a couple different models that you could use, and one of them is called a rollup, an Ethereum-style rollup.

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So this model would allow a single party, who would be the prover, to effectively run the sidechain, to advance the state of blocks on the sidechain,

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as well as to process deposits into it and withdrawals from it.

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And under this paradigm, every time he processes this information, he would be required by the protocol to post the data that he did this to all of the people who are interacting with him.

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And if he fails to provide the data, or if he provides false data, if he runs the computer incorrectly, any verifier who's got money in this rollup would be able to prove that,

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and thus essentially peg out by taking money from the prover.

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So that's one method you could use, and this is similar to the methods that Ethereum uses for its rollups, its version of sidechains, but this comes with some problems.

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A big problem with this is the data availability problem.

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I said that the prover has to prove that he supplied some data to every member of the group.

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Well, that's an unsolved problem in computer science, is how do you prove that you gave somebody some data?

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If I just ask them and say, did they give you that data, they could lie.

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So you can't just assume that everyone's going to be honest in this scenario.

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It's got to be public somehow.

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So that's an unsolved problem.

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BitVM doesn't fix the data availability problem.

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So if you wanted to do a rollup, you'd have to find somewhere to publish this data that everyone can agree on,

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and hopefully not just dump it all on Bitcoin like some of these sovereign rollups are doing.

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Okay, so that's an unsolved problem.

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Another method that might work for doing a sidechain would be an SPV sidechain.

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So if you look back at the original sidechain's white paper from 2015, it's available on blockstream.com.

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I'm not sure if it's com, org, or info, but one of those, they have the sidechain's white paper hosted at their website.

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And if you read it, they didn't originally talk about making a drivechain.

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They talked about making something called an SPV sidechain.

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So how that works is that you add an opcode to Bitcoin called something like op prove SPV or something like that,

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and it would be able to take as a parameter a block of a sidechain

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and assess whether it has a certain level of proof of work created in the construction of that block.

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And simultaneously, it would also be able to check a transaction and see if a transaction is included in that block.

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So combining those two things, this op SPV proof opcode, if we had it,

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it would allow us to create sidechain blocks, include transactions in them,

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and validate on Bitcoin whether those transactions are included in those blocks.

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And that allows you to do pegouts.

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So if you had some money in a sidechain, you could burn it, you could destroy it,

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and Bitcoin could actually validate that if we had this opcode.

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And once you validate that on Bitcoin, then Bitcoin can allow you to take a corresponding amount of money out of the sidechain.

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So this is the original idea for doing sidechains back when the SPV, back when the sidechain's white paper came out.

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And we might be able to do that with BitVM.

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Because as I mentioned earlier, if it doesn't involve multiple parties, you can emulate pretty much any opcode with it,

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or at least we think you can.

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And that would be an example.

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You'd just have to emulate this op SPV proof opcode.

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So that's currently one of my initial goals with this thing.

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I want to make the tools necessary to validate SPV proofs in BitVM,

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because I think that's a very promising avenue toward getting sidechains out of BitVM.

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It's one of my immediate goals, or medium-term goals, with BitVM.

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Okay, so I've given you two examples of how you might be able to make a sidechain with this.

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A third example of how you might be able to make a sidechain is an improved way of doing a federation.

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So we have sidechains today in Bitcoin, of course.

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We have Liquid and we have Rootstock.

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And both of those are federated sidechains where you deposit money with a group.

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And when you want to leave the sidechain, the group gets to vote on whether you're allowed to take your money out.

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And so far that works pretty well.

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I'm not aware of anyone who's complained that they've not been allowed to leave Liquid or Rootstock.

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But it does involve a considerable amount of trust in the members of this federation.

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You have to trust that they'll validly process withdrawals.

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One potential way that BitVM could improve this situation is by making it so that

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you only need to trust one person in the federation, to be honest, and not the entire federation.

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That would be a big improvement because, I say not the entire federation, but not the core.

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So in today's federations, you typically have something like 11 out of 15, or I think Rootstock uses 8 out of 15,

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where you have to trust a certain number of people to be honest in order to allow you to withdraw your money, either 11 or 8.

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So with BitVM, we think we've come up with a way to make it so that you would only have to trust one person in the federation.

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So you could have a federation of, let's say, 100 people who are processing withdrawals,

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and you only have to trust that one of them will do it.

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And as long as one of them is honest, then you get your peg out.

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Shinobi has outlined a proposal for how this might work in one of his papers for Bitcoin Magazine.

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So if you go to Bitcoin Magazine and search for Sentry, S-E-N-T-R-Y peg, Sentry peg,

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that's what he's calling this idea for how you might be able to do this with BitVM.

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And you can read more about that.

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So there's three proposals.

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We could do an improved federated sidechain.

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We could do an SPV sidechain.

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And we could do a rollup.

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Three different models of doing a sidechain.

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None of them work right now.

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It may be that none of them will ever work, and each of them have downsides.

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But, yeah, that's where we're at, and that's the current state of the art,

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which is to say very early stages, just thinking of ideas.

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The state of the art is just thinking of stuff right now.

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We're not building any of this yet.

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Okay, so there's that.

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And then let's talk about how it compares with drivechains.

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That's the next thing that I wanted to talk about today, but I do want to pause again.

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And if anyone has any questions or would like to comment on any of this or has further thoughts,

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this is a great time to speak them.

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So I'll give a few seconds for that.

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If anyone wants to raise your hand, happy to answer that.

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Or if anyone wants to talk, that's great.

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Okay, so that's where we're at.

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Okay, so now let's compare SPV sidechains with drivechains and see which one's better.

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Spoiler alert.

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In my opinion, drivechains are better than two of the three models I just mentioned.

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So let's talk about with SPVs.

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Drivechain versus an SPV sidechain.

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Well, an SPV sidechain has a similar property to what drivechain has,

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which is that in both a drivechain and in an SPV sidechain,

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if you want to withdraw your money from the sidechain, there's a transaction that you have to post.

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Now, in a drivechain, this transaction is posted on the sidechain itself.

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You post a transaction saying, I want to withdraw.

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And then miners on Bitcoin begin voting on whether to let you do that.

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And if you get enough votes from miners over the course of a three-month voting period,

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then you get to withdraw your coins.

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So this explicitly asks miners, I would like to withdraw, please allow me to do so.

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With SPV, it's more implicit.

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With an SPV model, if you want to withdraw from the sidechain, you would post a transaction on the

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sidechain burning the coins that you have there, and you would take a copy of that proof and post

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it on Bitcoin in a Bitcoin transaction saying, here's my proof that I destroyed X coins on the

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sidechain. Therefore, let me have X coins on Bitcoin from the sidechain aggregator address

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where everyone's funds are. And Bitcoin would validate your proof and then say, okay, he burned

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three bitcoins on the sidechain. Therefore, he's allowed to have three bitcoins from the sidechain

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address on Bitcoin. This has the same issue as drivechain, where miners get to decide whether

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this happens or not. Because in Bitcoin, miners approve all transactions. If you can't get some

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miner somewhere to mine your transaction, then it's not going to happen. So in a sense, the SPV

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sidechain has the exact same issue where miners are still, in some sense, voting to allow your

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withdrawal. Some miner is going to process that transaction, and if the other miners continue

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building blocks on top of his, that is effectively equivalent to them approving that withdrawal,

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or at least this is how, you know, from my perspective as a person who likes drivechain,

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this is how I view a certain equivalency there. But there is something that's kind of nice about

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SPV drivechains, which is that they don't explicitly ask miners to vote. In a drivechain,

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you do. You say, here's my withdrawal request. Miners, please vote on it. If we were able to do

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an SPV sidechain, you wouldn't explicitly ask them to do anything. You would just post a transaction

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and expect Bitcoin to do what it does, which is if you pay enough fees, your transaction gets into

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a block. So I kind of like that. I like the idea of an SPV sidechain a bit better than the idea

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of a drivechain in the sense that it allows you to do this stuff without just assuming Bitcoin

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will work as it has always worked. You're not explicitly asking miners to do anything different.

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So that's my thoughts on that. So maybe we could make an SPV sidechain through that.

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It does have another downside, though, which is that with an SPV withdrawal, if miners decided to,

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you know, not mine your transaction, there's nothing in Bitcoin that like alerts people

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to the fact that there's this issue happening where there's someone getting censored by miners.

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That's a feature that drivechain sort of introduces by explicitly asking miners to vote

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and then having them register their vote in Bitcoin blocks explicitly, like you can see the votes.

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It allows you to actually see what miners are doing. It gives you insight into whether someone's

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being censored on a drivechain. And the same thing isn't exactly true with SPV sidechains.

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You could probably get something similar if someone wrote some software that like,

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you know, allowed people to post a transaction and say, look, I paid a sufficient fee and yet

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it's not being mined. You could maybe do something like that. But drivechain builds

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that into Bitcoin's consensus and SPV sidechains would not. So this is one reason why Paul Sztorc

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often says that drivechain is more secure than the original SPV model,

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because it actually bakes in the consensus of like checking on what miners are doing

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and watching for censorship. It builds that right into Bitcoin, whereas with an SPV sidechain,

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it would not. Okay, so that's some comparison of SPV. Let's also compare rollups for a minute

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with drivechain. And effectively, the argument here is the exact same. If we had rollups,

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then similarly to how they work on Ethereum, the expectation is that you would post a proof

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that you're allowed to withdraw from the sidechain on Bitcoin. And that would be,

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that would be, then you just do it. If Bitcoin would have some need to have some sort of op

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start, verify op code that would then validate that proof. An SPV proof and a zero-knowledge

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proof are a bit different in that a zero-knowledge proof doesn't reveal any information about the

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coins that you're withdrawing, whereas an SPV proof would reveal everything about them. You

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have to say, these are my coins, here's my burn transaction, all of this stuff. With

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zero-knowledge proofs, you could hide a lot of that data. But from a high-level perspective,

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they're doing the same thing. You're proving you're allowed to withdraw, and then if the proof

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is valid, Bitcoin lets you withdraw. But that also means it has the exact same downside, where

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if miners decide to censor that transaction, Bitcoin doesn't have any consensus-level way

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of representing or informing node runners that censorship is happening. And thus, node runners

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can't take action, or they could only take action if they were running extra software that did

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make that information available to them. Drivechain sort of bakes that in and has an

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alert system, or at least I think it has an alert system. I forget I said that because I'm not sure

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that's true. Okay, so that's a comparison. I think the same comparison applies to both rollups and

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SPV sidechains. They both have this similar quality, where in comparison with drivechains,

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there's less information informing the blockchain about what's happening.

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And then there's the last one, which is the federations. So in a federated model today,

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you're trusting eight people or 11 people or whatever the quorum for the multi-sig is. If

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we improved this with BitVM using Shinobi's SentryPig idea or something similar, we could

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get it down to just trusting one person, to be honest. And how does that compare with drivechain?

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Well, in drivechain, you're trusting that miners will be honest, that as a set, miners will process

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transactions faithfully according to the rules of the sidechain and according to the rules of

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Bitcoin. And with this other federated model, you're trusting at least one person in a fixed

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group. So you pick a fixed group of validators, verifiers for this sidechain. They're the ones

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who act as sentries. And whenever someone requests that they want to withdraw from the sidechain,

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the prover would have to prove that they allowed them to do so. And if their proof is invalid,

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the sentries and any one of the sentries can falsify the proof and show that it was wrong

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and thus take money from the prover. But this requires that you trust at least one of the

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sentries. So this is different from drivechain, where in a drivechain, you can't point to any

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particular person and say, I need to trust that person or this member of this group

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in order to withdraw. But with a SentryPig or with any kind of federated sidechain,

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you can. You can identify the group members. You can identify their public keys. You can say,

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these are the people who I have to trust in order for me to withdraw, at least one of them,

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for me to withdraw this money. So that's a point of comparison with them.

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I think for many people, that'd be good enough. Many people don't want or are okay with being

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able to point out and say, I know who I have to trust, and it's at least one of this group.

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Maybe the sentries are Matt Odell, Marty Vend, Peter McCormick, and Guy Swan. And you're saying,

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I just have to trust one of those guys is honest, but I do trust them. Maybe I've met some of them,

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and I don't think they would be dishonest in this, so I'm okay with that.

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Other people would want to say, yeah, I don't want to be able to name the person who I'm trusting.

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I would rather be able to point to the whole amorphous set of miners that constantly changes

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and say, I'm trusting that amorphous blob of people without being able to point to any

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specific one and say, I know that this guy is one of the people I'm trusting. So there's that.

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So I've talked for 30 minutes now about Drivechain, and I'm running out of things to talk

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about, or about the VM, I mean. And I'm running out of things to talk about, so I'd appreciate

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some hands up to give me thoughts and prompt me. Let's go with Satoshi and Joyer. I think that's,

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yeah, Satoshi and Joyer. Looks like you've got your hand up. What have you got to say?

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So I have some questions that might help the audience as well. And so from the three

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versions of sidechains that you mentioned, SPV, Rollup, and Federated, I just joined,

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so I missed the earlier few minutes, but that's from where I heard. And I have an important

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question where, do you see any way to enforce whatever happens on the sidechains of whether

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SPV, Rollup, or Federated, the transaction fees to actually go back to miners?

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Yeah, I do see some ways of doing that. So blind merge mining allows you to accomplish this,

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and so does regular merge mining. If one of the things that the sequencer or the prover has to do

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in order to advance the state of the blockchain is get a transaction mined in Bitcoin, then you

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can use the techniques of blind merge mining or regular merge mining to do that. And then the

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fees that he collects on the sidechain, at least some or maybe even all of them go back to Bitcoin.

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Depending on how the sidechain is modeled, you could even say he has to give like 50,

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60, 90% of the fees to Bitcoin in order to get blocks mined. So there are ways of doing that.

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Do any of these sidechains really need that validity to be like the finality to be a blind

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merge mined? Because really you're just using these three models for the withdrawal. So as

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long as there's something going on, on other chain, and you can prove that this is a withdrawal of

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that other chain, I don't see how you can really enforce the fees to go back to the miners unless

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the miners can say, for example, we're not including any of these withdrawals unless

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you have a sidechain where we can blind merge mine, right?

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Well, I suppose it depends on how you design the model. You could have a consensus rule of

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the sidechain, say, if there are $100 in fees, $90 have to be paid out to Bitcoin miners in

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a transaction fee. You could do something like that. But there are probably several models you

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could use to ensure that money goes back to Bitcoin miners. So, yeah.

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I don't understand what would be the incentive of the sidechain to make this type of model.

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I mean, maybe other than to get more adoption from the miners to include it and then like

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actual finality on the mainchain. But I kind of see like where, why would they even want to give

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any of these fees to the miners at all? Well, ordinarily, one of the reasons why

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it's nice to have things pegged into Bitcoin somehow is that it allows you to inherit some

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of Bitcoin's double spend protection. For example, if in order to follow the sequence of blocks on

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the sidechain, you had to look at Bitcoin and say, you know, what block hashes have been included in

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a Bitcoin transaction in a mine, that would allow you to follow a sequence of transactions that have

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a lot of proof of work behind them, because Bitcoin has a lot of proof of work approving

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all of these transactions. And that would make it so that it's difficult to double spend on

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the sidechain or to like redo a block. Because in order to do that, you'd have to like undo

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a transaction on Bitcoin and replace it with a different one, which of course is really hard and

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really expensive. So in general, that's the reason why merge mining happens, is so that a sidechain

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that otherwise wouldn't have the same amount of validators or block producers,

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the same level of proof of work would inherit it.

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So in essence, you're saying that the finality that they would gain from

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blind merge mining is enough of an incentive for models to use that?

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I think it's a good incentive. Whether it's enough depends on whether it happens,

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but it's a good reason to do it.

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Okay. And there's one more thing I wanted to point out. As far as like the withdrawals of

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SPV rollup or federated, it would be a lot harder. I think it's fair to say that it will be a lot

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harder to, even though, yes, you can, the miners can censor and not include those, right? But as

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long as like, you know, let's say 10% or 5% of a miner hashrate will include it, now the miners

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would just have to, you know, completely ignore and not build off those blocks. And that's a lot

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harder basically to collide, to censor these type of withdrawals from these sidechains. So I think

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these sidechains would have a benefit of a withdrawal from that point of view where a

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drivechain, you actually do need the supermajority approving it, where here, even if the

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supermajority doesn't approve it, it would have to be where the supermajority really doesn't want

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it no matter what and, you know, is not building off any blocks.

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Well, in both cases, it seems to me, whether you're doing an SPV model or a rollup on the one side or a

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drivechain on the other, in order for miners to censor a peg out, they have to collude in both

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cases. Because if any miner is just going to, if you can just trust that some miner will mine your

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withdrawal transaction, then it'll go through and miners aren't going to censor that, then you're

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good. You're not going to get censored. You're good on SPV rollup or federated, but you're not

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good on the drivechain if just any one miner wants to include it. Well, so right, with the

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drivechain, there's a voting mechanism where miners explicitly vote on whether to allow a

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withdrawal. And the only way your transaction is not going through in a drivechain context

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is if a certain percentage of them agree to block your withdrawal and the other miners don't fix

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that situation by booting them out or stopping, not building on their blocks. But in both cases,

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you're still at the mercy of trusting that some percentage of the miners are not going to collude

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to prevent your withdrawal. I think they're very similar in that respect. But with drivechain,

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you actually build that assumption into Bitcoin and you say, we're actually going to keep an eye

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on them and see what they're voting on. We're going to have this as part of Bitcoin that all

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nodes get to see this. And with the SPV model, that's not built into Bitcoin. You could build

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that software separately, but drivechain tries to make that part of Bitcoin's consensus. And I

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think that's wise, personally. Thank you. I can go on about this,

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but I kind of want to let Alex talk. I think I bought in before him.

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No problem. Can you guys hear me? I can hear you, Alex.

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Okay. Super Testnet. I have somewhat of a theoretical question. So far, my understanding

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is that BitVM can emulate an optimistic rollup. Is there a reason why a regular ZK rollup cannot

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be emulated as well if we continue the game between the approver and the verifier to one

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more step, which is to prove that no fraud proof exists and therefore the proof provided by the

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verifier becomes equivalent to the ZK rollup proof of valid computation without needing to

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take anybody's bond or do things like that? I do think you can do a ZKP rollup on

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what's it called? On BitVM. But it would also have characteristics of an optimistic rollup

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because the entire paradigm of BitVM is optimistic. The approver doesn't have to prove anything

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if he's not challenged. And so this model where you assume he's going to act in good faith and you

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only take money from him if he does not gives whatever program you're running the characteristic

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of an optimistic protocol where there's this assumption that the approver will act well and

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it will only be some kind of on-chain proof if that assumption fails. So yeah, you could do a ZKP

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rollup, but it would have characteristics of an optimistic rollup as well.

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When you say it would have characteristics of an optimistic rollup, do you mean that it would

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have to have the same challenge response protocol and only if the protocol succeeds then the coins

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are either withdrawn from the bonded oracle, bonded computer oracle, so to speak, or go

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somewhere else as punishment? It would definitely still need the challenge and response thing,

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but also it would need the verifier. You would need to either be a verifier or trust a verifier

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to make that proof, to make that verification. If the verifiers aren't doing it, then the

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approver can get away with anything. So the optimistic rollup scenario assumes that at least

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one verifier who might be yourself is actually doing their job. But you just stated that

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BitVM can emulate a non-optimistic, in other words, a regular ZK rollup which doesn't have

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a fraud proof, instead it just provides proof of correctness of computation. So how do you

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square that circle? It's like inside the BitVM you'd be running this ZKP thing where from the

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computer that's running this perspective, there's no optimism happening. But all of that's happening

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off-chain. On Bitcoin's blockchain, none of the results of the computer are verified or falsified

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unless a verifier wants to do it. I understand, but what I suggested two minutes ago,

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which is that if you take the game one step further, which is to say that in the optimistic

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rollup, the approver plays with the verifier and then the verifier can manufacture a fraud proof

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that decides which way the coins that are locked up in the contract go. If you take that game

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one more step where the verifier basically says, I have not detected a fraud proof and the

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off-chain BitVM computer produces zero or one output with zero being, you know, let's say

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invalid computation and one being valid computation, can't Bitcoin smart contract

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that's native on Bitcoin L1 decide which way to send the coins without necessarily exposing the

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off-chain game altogether? In other words, then it would be a better emulation of the ZKP roll-up

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than the conventional optimistic roll-up game that so far has been proposed.

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I think it sounds like you could, if I'm understanding you correctly, you could make a program that just outputs a zero or a one using zero knowledge proofs, and there could be a script on Bitcoin that allows the approver to take the money if it's a one and the verifier to take the money if it's a zero.

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However, that script will only activate if the verifier issues a challenge. That's where I'm saying it inherits the characteristics of optimism, where at least one verifier has to do something.

392
00:40:13,502 --> 00:40:24,502
Right. But you mentioned that, like, for example, in the SentryPeg proposal, there is a federation which bonds itself and then there is, you know, a hundred sentries that police the federation. Right.

393
00:40:25,502 --> 00:40:43,502
But visualize that we could relax the assumptions about the economic game a little bit and visualize that instead of a federation that bonds itself, somebody on Bitcoin essentially tries to peg out into a smart contract on another chain.

394
00:40:43,502 --> 00:40:50,502
And then the smart contract on another chain has, you know, hundreds of verifiers that participate in the smart contract on the other chain.

395
00:40:51,502 --> 00:41:02,502
And then when somebody wants to peg back out of that other sidechain, he needs to act as approver to basically peg out his own coins.

396
00:41:03,502 --> 00:41:18,502
And therefore, he has to play a game with a smart contract on the other chain where it would be sufficient for one verifier to play the game out to the end with them and produce a bit that would allow him to release the coins that he locked up himself when he pegged into this other chain.

397
00:41:21,502 --> 00:41:32,502
The idea of using another smart contract on another chain to act as the verifier or I suppose the approver is an interesting and a novel thought to me.

398
00:41:33,502 --> 00:41:34,502
And I'd like to think more about it.

399
00:41:35,502 --> 00:41:38,502
Let me elaborate on that idea a little bit.

400
00:41:38,502 --> 00:41:46,502
The conventional idea that I saw in BitVM assumes that there is a game, economic game played by off-chain actors, right?

401
00:41:47,502 --> 00:42:02,502
My idea is that rather than having liveness assumptions on these off-chain actors, in other words, you know, a federation composed of parties that have to do some stuff and then a bunch of sentries that are off-chain but interactive actors.

402
00:42:02,502 --> 00:42:09,502
You can maybe replace both the federation and a set of verifiers with a single smart contract on another chain.

403
00:42:10,502 --> 00:42:18,502
And the advantage of the smart contract is that anybody participating in that smart contract cannot cheat at all because the rules of the smart contract do not allow cheating, right?

404
00:42:19,502 --> 00:42:20,502
They're locked in.

405
00:42:21,502 --> 00:42:34,502
So therefore, rather than having a bunch of parties that represent the federation and a bunch of parties that represent sentries, what if you could simply have a smart contract on another chain that essentially the peg would work something like this.

406
00:42:35,502 --> 00:42:38,502
I want to peg out, let's say, one Bitcoin to this other chain.

407
00:42:39,502 --> 00:42:40,502
I talk to the smart contract.

408
00:42:41,502 --> 00:42:44,502
I generate a deposit address on Bitcoin.

409
00:42:45,502 --> 00:42:49,502
Then I deposit my own Bitcoin into this deposit address, but I cannot withdraw it yet, right?

410
00:42:50,502 --> 00:43:01,502
Then later I can go back to the smart contract and then talk back to the smart contract and say, look, I'm going to burn this token issue to me by the same smart contract in the same amount as my deposit.

411
00:43:02,502 --> 00:43:16,502
And then anybody who wants to participate as a verifier in that smart contract is a non-interactive party that simply could be anybody else pegging in and out of that smart contract can sort of temporarily assume duties of a verifier.

412
00:43:17,502 --> 00:43:21,502
And when somebody else shows up to peg in or peg out, that verifier can verify my proof.

413
00:43:22,502 --> 00:43:30,502
And that verification would presumably release my peg in to allow me to peg out if the proof is actually valid.

414
00:43:32,502 --> 00:43:36,502
One of the things that sounded a bit dangerous with your idea.

415
00:43:37,502 --> 00:43:39,502
There's something within your idea that sounded a bit dangerous.

416
00:43:40,502 --> 00:43:47,502
Correct me if I'm wrong, but it sounded like you create this Bitcoin address and there's only one key holder in it.

417
00:43:48,502 --> 00:43:49,502
No, it wasn't one key holder.

418
00:43:50,502 --> 00:43:54,502
That would be unsafe because you couldn't store the private key on this other chain safely, right?

419
00:43:55,502 --> 00:43:57,502
That's what I was about to say.

420
00:43:58,502 --> 00:44:04,502
But as a mechanism to guard that deposit, you would need to do some kind of.

421
00:44:05,502 --> 00:44:07,502
And again, this is just sort of a stream conscious.

422
00:44:08,502 --> 00:44:10,502
Don't judge me too harshly because I don't have all the details worked out yet.

423
00:44:11,502 --> 00:44:18,502
But you could have some kind of multi-party computation that generates a deposit address where one party is the depositor on Bitcoin.

424
00:44:19,502 --> 00:44:24,502
And the other party is a collection of passive verifiers as opposed to interactive verifiers.

425
00:44:24,502 --> 00:44:32,502
It's just a collection of people who want to either serve as verifiers inside the smart contract on this other chain.

426
00:44:33,502 --> 00:44:40,502
And therefore, one of them will be sufficient to peg out, assuming that verifier checks the prover who is trying to prove burning of coins on this other chain.

427
00:44:41,502 --> 00:44:51,502
Or anybody who wants to participate in that smart contract to peg in their own Bitcoin assumes the duty of the verifier temporarily.

428
00:44:51,502 --> 00:44:57,502
And has to peg out anybody who's waiting to be pegged out in the queue.

429
00:44:58,502 --> 00:45:07,502
Because the other side of the multi-party computation key was generated by the smart contract and presumably together they generated the deposit address.

430
00:45:08,502 --> 00:45:12,502
And they have to cooperate in order to compute the withdrawal transaction together.

431
00:45:13,502 --> 00:45:19,502
It sounds like there are a couple of ideas in your stream of consciousness there.

432
00:45:19,502 --> 00:45:22,502
One of them sounded a lot like the sentry peg.

433
00:45:23,502 --> 00:45:37,502
At one point you mentioned having anyone who wants to be a verifier on this other chain can do multi-party computation in order to create the private key that's going to be the second key in the 2 of 2 multisig.

434
00:45:38,502 --> 00:45:40,502
And that certainly sounds plausible. I think you could design that.

435
00:45:41,502 --> 00:45:45,502
And I think that's kind of the direction that Shinobi is trying to head in his idea of having sentries.

436
00:45:46,502 --> 00:45:48,502
So maybe look into that for more.

437
00:45:49,502 --> 00:45:57,502
And then because I was thinking of what to say in response to that, I was able to observe that you seemed like you were elucidating some alternative model to that.

438
00:45:58,502 --> 00:45:59,502
But I didn't fully catch it.

439
00:46:00,502 --> 00:46:06,502
I think that there's slight novelty in my idea which you mentioned earlier which is to replace one of the parties in the game.

440
00:46:07,502 --> 00:46:21,502
Instead of having online interactive parties to just designate a smart contract on another chain as a mostly passive non-interactive party that plays the role of the verifier.

441
00:46:21,502 --> 00:46:34,502
Whereas the person who wants to peg in the coins into this other chain will be forced to act as a prover and therefore interactivity assumption is already true by default because they want to peg out their Bitcoin at some point in the future.

442
00:46:35,502 --> 00:46:53,502
So if the smart contract on the other chain acts as a passive verifier, the smart contract could have hundreds of thousands of sentries that just simply sign up to be one of the honest verifiers in exchange for let's say one tenth of a percent fee or something like that.

443
00:46:54,502 --> 00:46:58,502
And as long as one of them shows up and verifies the proof, perhaps that's enough to peg out securely.

444
00:46:59,502 --> 00:47:10,502
Or the extension of that idea was that anybody trying to peg in or peg out has to assume the duties of the verifier temporarily and peg out the previous guy who tried to peg out.

445
00:47:11,502 --> 00:47:18,502
And this is how you eliminate the interactive requirement on this set of verifiers to run as interactive online parties.

446
00:47:19,502 --> 00:47:25,502
I'm not able to fully keep up with your stream of consciousness, but it sounds pretty good.

447
00:47:25,502 --> 00:47:36,502
If you could write some of this out in the Telegram chat, the BitVM Telegram chat, I think that would be really helpful and it sounds really interesting and I might be able to follow along there.

448
00:47:37,502 --> 00:47:44,502
I was thinking of doing that. I'm just too ashamed to do it at this point because the idea, even though it seems novel and interesting, possibly has some fatal flaws.

449
00:47:45,502 --> 00:47:49,502
So maybe I'll write it to you in a private message in Telegram and maybe we can discuss there.

450
00:47:50,502 --> 00:47:56,502
Sure, that's fine. But I will encourage you to not be afraid of failure and of being incorrect.

451
00:47:57,502 --> 00:48:02,502
Thomas Edison was wrong 10,000 times before he figured out the way to make the light bulb.

452
00:48:03,502 --> 00:48:10,502
I admire people who don't have the fear to just say, I'm going to throw out an idea, even if it might have a fatal flaw.

453
00:48:11,502 --> 00:48:16,502
But there you go. Feel free to also DM me if that's a concern for you.

454
00:48:16,502 --> 00:48:26,502
Okay, so cool. We've talked a little bit about Drivechains, about BitVM, its history, its limitations, the kinds of sidechains we might be able to create with it.

455
00:48:27,502 --> 00:48:33,502
We've compared some of them with Drivechain. I think we're at a pretty good position here. This is going really well.

456
00:48:34,502 --> 00:48:40,502
Are there any other hands up or anyone who'd like to contribute some thoughts on this topic?

457
00:48:41,502 --> 00:48:51,502
Not seeing anything. Moonsettler, I'm going to volunteer you. If you would come up here and provide us with some of your thoughts.

458
00:48:52,502 --> 00:49:01,502
I think that you've had some excellent criticism of some of the limitations of BitVM, and I don't feel like we've gone over those sufficiently.

459
00:49:02,502 --> 00:49:04,502
He's not up here, so I guess he doesn't want to.

460
00:49:04,502 --> 00:49:13,502
In that case, let me try to go over one of the limitations that I see with BitVM that has, I think, not perhaps received enough attention yet.

461
00:49:14,502 --> 00:49:28,502
And that is fee costs. So one of the things that affects BitVM and affects most off-chain protocols is that usually you're using Bitcoin as a judge in case something goes wrong.

462
00:49:28,502 --> 00:49:33,502
We do this in Lightning, for example. You have two parties who make a Lightning channel together.

463
00:49:34,502 --> 00:49:42,502
If one of them broadcasts incorrect state, then only then do you go on Bitcoin's blockchain to say, here's the correct state.

464
00:49:43,502 --> 00:49:49,502
But that assumes you're able to do that and that you have a monetary incentive to do that.

465
00:49:49,502 --> 00:50:02,502
For example, you might not if you only have a dollar in that Lightning channel and the fee to actually adjudicate on-chain to make a transaction on-chain would be $30.

466
00:50:03,502 --> 00:50:06,502
You're probably not going to want to do that to save yourself $1.

467
00:50:06,502 --> 00:50:19,502
The cost of some off-chain protocols increases if they require more than one transaction in order to adjudicate.

468
00:50:20,502 --> 00:50:29,502
If you require any multiple of that, let's say you require 10 transactions, then the amount of money you can safely lock up in one of these protocols is multiplied by 10.

469
00:50:29,502 --> 00:50:39,502
If it took 10 transactions to withdraw from the Lightning channel, then it wouldn't just be that you're not going to adjudicate if there's only $1 at issue.

470
00:50:40,502 --> 00:50:44,502
Now it's $10 because now it's going to cost me $10 to adjudicate.

471
00:50:45,502 --> 00:50:50,502
I'm not going to do that unless the amount of money I have is more than $10 at stake.

472
00:50:51,502 --> 00:51:00,502
In the case of BitVM, you could have maybe even 100 transactions depending on the complexity of the program.

473
00:51:01,502 --> 00:51:14,502
If you wanted to withdraw from a BitVM address through the hard path, through the one where you say your counterparty gave some incorrect computation,

474
00:51:14,502 --> 00:51:25,502
then you could have to do, depending on the complexity of the program, a lot of transactions in order to prove that they did something incorrect, that their code was bad.

475
00:51:26,502 --> 00:51:28,502
That makes it really expensive.

476
00:51:29,502 --> 00:51:40,502
If fees are $30 a piece, as they were just last month, then if you have to do 100 transactions, you're talking about a $3,000 fee in order to withdraw from a BitVM.

477
00:51:40,502 --> 00:51:50,502
In the difficult case, or in the problematic case, that means you're not going to do that if you have less than $3,000 in a BitVM address.

478
00:51:51,502 --> 00:51:56,502
That's a limitation of it that I think is worth mentioning.

479
00:51:57,502 --> 00:52:10,502
At least until we come up with a better design, you're probably not going to want to put a small amount of money in a complicated contract because you wouldn't be able to enforce it if you needed to.

480
00:52:15,502 --> 00:52:17,502
I have a question about that limitation, if you don't mind.

481
00:52:18,502 --> 00:52:24,502
Is that a limitation only for the verifier player, as the model stands right now, not for the prover player?

482
00:52:25,502 --> 00:52:27,502
No, the fees are shared between them.

483
00:52:28,502 --> 00:52:36,502
They could be shared. Are they just assumed to be shared, or they could be shared in any way? It's up to the protocol between them, isn't it?

484
00:52:37,502 --> 00:52:40,502
Yeah, it's up to how you design the protocol, and you could design different models.

485
00:52:41,502 --> 00:52:45,502
In fact, the version that I implemented is different from the version in the white paper.

486
00:52:46,502 --> 00:52:50,502
But the version in the white paper is the smarter version, or at least I think it's better than my version.

487
00:52:50,502 --> 00:52:56,502
And in his version, for every step of the computation, there is a challenge and a response.

488
00:52:57,502 --> 00:53:05,502
And so both of the parties, the prover and the verifier, each have to take turns broadcasting a Bitcoin transaction and paying for it.

489
00:53:06,502 --> 00:53:11,502
And if either one of them stops doing it at any point, then that person loses.

490
00:53:12,502 --> 00:53:20,502
You have a certain amount of time to do the challenge or do the response, and if you don't do it, then you're the loser of the game.

491
00:53:21,502 --> 00:53:29,502
So that makes it so that they share costs for doing incorrect—if one of them does an incorrect computation or does a challenge, then they share costs for that.

492
00:53:30,502 --> 00:53:38,502
In my implementation, which is much stupider than Robin's idea, the prover bears the entire burden of all the costs.

493
00:53:38,502 --> 00:53:40,502
The prover has to do everything.

494
00:53:41,502 --> 00:53:47,502
And so I think the challenger just has to make one or possibly two transactions, and everything else has to be done.

495
00:53:48,502 --> 00:53:52,502
Sorry, the verifier just has to make one or two transactions, and the prover does everything else.

496
00:53:53,502 --> 00:54:02,502
When you say everything else, you mean the prover will still have to broadcast 100 transactions, or the prover will have to carry the burden of paying for one?

497
00:54:03,502 --> 00:54:05,502
The prover has to broadcast all of the transactions.

498
00:54:05,502 --> 00:54:08,502
If there's a challenge, he has to prove everything.

499
00:54:09,502 --> 00:54:12,502
He has to go through the whole program in my implementation and prove that everything was correct.

500
00:54:13,502 --> 00:54:24,502
And that's a stupid way of doing it, but I did it that way because it was easy and because I don't know how to implement the hard thing that is in the white paper.

501
00:54:25,502 --> 00:54:27,502
Can I ask you a question, maybe a leading question?

502
00:54:28,502 --> 00:54:40,502
If you assume that the prover and verifier engage in this protocol and assume that the prover has everything to lose by losing the entire bond or half of it gets burned or something like that,

503
00:54:41,502 --> 00:54:47,502
is there a simple way for the prover to prove that the verifier failed to complete the protocol?

504
00:54:48,502 --> 00:54:51,502
Well, time locks are the way that Robin does it.

505
00:54:52,502 --> 00:54:59,502
The prover puts the ball in the challenger's court, in the verifier's court, by saying,

506
00:55:00,502 --> 00:55:04,502
hey, you've got to make a transaction in order to say what part of this you think I messed up.

507
00:55:05,502 --> 00:55:15,502
And if the verifier does not do that, if he just bides his time, a time lock expires and the prover can take his money because the challenger didn't say, here's where I think the mistake was.

508
00:55:15,502 --> 00:55:24,502
But like you said, in order to take his money, the prover has to broadcast the whole sequence of challenge response transactions that preceded that point in the protocol, right?

509
00:55:25,502 --> 00:55:30,502
Not a whole sequence. He just needs to do it once.

510
00:55:31,502 --> 00:55:35,502
The challenger initiates the challenge, says, I think you did the computation incorrectly.

511
00:55:36,502 --> 00:55:42,502
And he does that by saying, I think you got this part of the protocol, or I think you did this step of the execution incorrectly.

512
00:55:42,502 --> 00:55:45,502
The prover can then reply and say, here's my proof that I did it correctly.

513
00:55:46,502 --> 00:55:48,502
Now the ball is in the challenger's court again.

514
00:55:49,502 --> 00:55:55,502
And if the challenger doesn't move from there, if he doesn't make another challenge, then the prover gets to take the money after a time lock.

515
00:55:56,502 --> 00:56:02,502
Which to me is equivalent to what you were asking, is there a way for him to prove that the verifier didn't have anything to say?

516
00:56:03,502 --> 00:56:05,502
Yeah, you just wait until the time lock expires.

517
00:56:06,502 --> 00:56:12,502
Well, but this time lock idea has implicit assumptions on the nature of the game between the prover and the verifier.

518
00:56:13,502 --> 00:56:18,502
For example, it assumes that the prover and the verifier are both online parties engaging in an interactive protocol.

519
00:56:19,502 --> 00:56:29,502
I was just hoping that there would be a way to make the sidechain itself with its own rules or a smart contract on that sidechain be one of the parties.

520
00:56:29,502 --> 00:56:36,502
Namely, I would like that to be a verifier rather than a prover, because a prover would be the person trying to prove that they burned Bitcoin on this other sidechain.

521
00:56:37,502 --> 00:56:44,502
So in that model where you have passive verifier smart contract, let's call it that, with multiple sentries or multiple verifiers perhaps.

522
00:56:45,502 --> 00:56:57,502
In that model, do you think there would be a way not to depend on Bitcoin time locks, but simply to depend on the prover eventually being able to advance the game.

523
00:56:57,502 --> 00:57:06,502
Simply because somebody on this sidechain will interact with that smart contract, which will force the game to be advanced one way or the other.

524
00:57:07,502 --> 00:57:12,502
And the game will bubble up to be either one or zero at the top of the NAND tree, let's say that.

525
00:57:13,502 --> 00:57:17,502
And that will allow the prover to either take the money or not take the money on Bitcoin.

526
00:57:18,502 --> 00:57:26,502
It sounded like you had a very long question, but I think it started out with, do you think there's a way?

527
00:57:27,502 --> 00:57:30,502
I think there's a way to do it without time locks, basically. That's the beginning.

528
00:57:31,502 --> 00:57:34,502
And then I suggested a way to do it without time locks, kind of implicitly suggested a way.

529
00:57:35,502 --> 00:57:47,502
And that would be rather than having a time lock, you simply wait for the game to terminate on the sidechain by prover interacting with the contract, which represents one or more verifiers.

530
00:57:47,502 --> 00:57:55,502
And then that interaction eventually, because the sidechain is progressing and the smart contract has people coming to it and invoking it.

531
00:57:56,502 --> 00:58:08,502
So eventually after a subsequent invocation by the prover himself or somebody else with a smart contract, the smart contract will be forced to complete the game essentially.

532
00:58:09,502 --> 00:58:16,502
And then completion of the game produces 0-1, which allows the prover to peg out his coins and take them back on Bitcoin.

533
00:58:21,502 --> 00:58:29,502
So it seems like you're inviting me to comment on the model that you just proposed as well as asking me if I think there's any other way to do it.

534
00:58:30,502 --> 00:58:32,502
Yes. Sorry for two complicated questions in one.

535
00:58:33,502 --> 00:58:37,502
Yeah. So let me answer them. Let me answer the first one first.

536
00:58:38,502 --> 00:58:44,502
I don't currently think that there is a promising way to do it without time locks.

537
00:58:45,502 --> 00:58:53,502
So that's my answer to the first one. But I guess part of that answer is also I think there might be a way to do it that hasn't occurred to me.

538
00:58:54,502 --> 00:59:01,502
I would like to see additional thoughts on this so that if we could come up with a way to do it without time locks, that'd be great.

539
00:59:02,502 --> 00:59:15,502
So then secondly, your particular proposal involves having the smart contract itself be something that acts as a counterparty in this thing rather than using a time lock.

540
00:59:16,502 --> 00:59:25,502
Rather than using an interactive online federation or an interactive online set of sentries and a federation.

541
00:59:25,502 --> 00:59:32,502
Just a smart contract on the other chain. And the advantage of the smart contract, as you will understand, is that it cannot misbehave.

542
00:59:33,502 --> 00:59:39,502
It can be assumed to be engaging in the protocol perfectly correctly because it cannot deviate from its programming.

543
00:59:40,502 --> 00:59:46,502
So that's an additional advantage to using a smart contract because you can simply assume that the smart contract will never cheat.

544
00:59:48,664 --> 00:59:59,664
I'm not entirely willing to admit that a smart contract can never cheat when we've seen a lot of them that have had bugs in them.

545
00:59:59,664 --> 01:00:02,664
Unless there's a bug, of course, then it's hacked.

546
01:00:02,664 --> 01:00:05,664
Right. That's all I wanted you to say was unless there's a bug.

547
01:00:05,664 --> 01:00:10,664
Setting aside that assumption, of course, there's an assumption of no flaw or a bug in a smart contract.

548
01:00:10,664 --> 01:00:22,664
But setting aside that, the smart contract can be constrained much more than an online interactive federation together with a bunch of online interactive sentries.

549
01:00:23,664 --> 01:00:39,664
From my perspective, a smart contract is effectively the same as a very large multistake because you're relying on the assumption that miners of this alternative chain, as well as the node operators of that alternative chain, are going to run the code of this smart contract.

550
01:00:39,664 --> 01:00:47,664
And so you expand the concept of a federation to include all of the node runners and all of the miners, which is good.

551
01:00:47,664 --> 01:00:49,664
I like the idea of having such a large federation.

552
01:00:49,664 --> 01:00:53,664
Actually, I'm not making that assumption, believe it or not, because it's not necessary.

553
01:00:53,664 --> 01:01:06,664
Because the only thing you need to assume is that there is a smart contract that's programmed to engage in this game with provers and it's programmed with bugs, assuming it has no bugs, of course.

554
01:01:06,664 --> 01:01:23,664
It's programmed to never cheat in this game, but it does need a bunch of sentries or a bunch of participants that enable the game to complete as long as one of them participates by interacting with a smart contract and essentially providing liveness to the smart contract.

555
01:01:23,664 --> 01:01:30,664
It's not necessarily necessary to assume that either miners or node operators of this other chain participate.

556
01:01:30,664 --> 01:01:48,664
It's just that anybody can come up and become a sentry or a verifier by maybe signing up with a smart contract and getting a small fee for verifying the game, but that the verifier will be constrained by the smart contract to simply provide liveness and interactivity, rather than…

557
01:01:48,664 --> 01:01:57,664
We don't need to police any party invoking the smart contract, because the smart contract is already constrained to only do what it's programmed to do.

558
01:01:58,664 --> 01:02:10,664
It sounds pretty good. The more you talk about it, the more I like it, so I hope you give some more details about it in a Telegram post or similar and then we can talk about that.

559
01:02:10,664 --> 01:02:22,664
By the way, Hampus mentioned in the comments that it would be really good if everyone was directed to where they can actually join the BitVM Telegram group that we keep on mentioning.

560
01:02:23,664 --> 01:02:26,664
So I think I'm going to spend a couple of minutes…

561
01:02:26,664 --> 01:02:50,664
Okay, we lost you, so maybe I'll ask a question for now.

562
01:02:51,664 --> 01:03:04,664
Alex, are you saying where anybody can become a verifier, kind of like the auto-compounding contracts work, where anybody can push the auto-compound? Is it something like that?

563
01:03:05,664 --> 01:03:19,664
Well, my initial idea to improve on the sentry peg that I saw being proposed in the brainstorming session of the BitVM hacker group, which was a federation that bonds itself and then there's a bunch of policing sentries.

564
01:03:20,664 --> 01:03:34,664
The problem with that sentry peg is that there is a lot of actors that need to be online and be interactive with each other in order to make the protocol work, which creates these economic incentives that are difficult.

565
01:03:35,664 --> 01:03:44,664
So my idea was that the person who wants to peg into the sidechain has to act as a prover rather than a verifier.

566
01:03:44,664 --> 01:03:56,664
And the verifier simply needs to verify that that person has burned the sidechain Bitcoin that was issued by a smart contract back to the smart contract that verifies the burn.

567
01:03:56,664 --> 01:04:04,664
So you could essentially replace both the federation and a bunch of sentries or verifiers with a single smart contract in theory.

568
01:04:05,664 --> 01:04:27,664
Now, mechanics of how to do this are difficult because it's not really a multi-sig setup where one of the members of the federation has to peg out and a single online sentry can detect the foul play by the federation and therefore they can slash the federation.

569
01:04:27,664 --> 01:04:39,664
That was the proposal. So the details of how the smart contract enables on Bitcoin are a little vague in my head, but this is something that Supertestnet...

570
01:04:40,664 --> 01:04:51,664
I have a question on the original model. From what I understand, the federated and the sentries, are they predetermined beforehand?

571
01:04:52,664 --> 01:05:07,664
Well, there's discussions on making one or both dynamic. That's potentially possible, I think, because you could potentially have multi-sig setups which have dynamic membership in theory as opposed to a fixed membership.

572
01:05:08,664 --> 01:05:28,664
At least that would be desirable for sentries. Whether or not that's possible, there was some talk of doing some kind of frost protocol or something like that where people can come and go as being sentries and therefore it would not be strictly like a white listed set of predetermined sentries or white listed set of predetermined federation members.

573
01:05:29,664 --> 01:05:39,664
That was my understanding that you can start out with a fixed set, but potentially it's possible to generalize it to a dynamic set for either federation or the sentries or both.

574
01:05:40,664 --> 01:05:47,664
I see. Because from what you're saying, it seems like your model would be solving and making it more dynamic.

575
01:05:47,664 --> 01:05:58,664
Well, my model, if it holds any water, and this is why I'm reluctant to post a proposal because I suspect there might be some kind of fundamental flaw in it where it's impossible altogether.

576
01:05:59,664 --> 01:06:14,664
But assuming it's not fatally flawed, my model would be that the person who wants to peg out has to perform the role of approver who proves that he's burned the Bitcoin to a smart contract that issued that Bitcoin on the sidechain.

577
01:06:14,664 --> 01:06:23,664
But the smart contract on the sidechain would need to have a bunch of sentries that at least one of them has to verify the approver.

578
01:06:24,664 --> 01:06:37,664
But rather than having an online interactive sentry that has to participate in the interactive online protocol with the verifier, it's the smart contract itself that participates non-interactively with the verifier.

579
01:06:38,664 --> 01:06:42,664
But the smart contracts are notoriously passive unless they're invoked.

580
01:06:43,664 --> 01:06:57,664
And therefore, you would have a situation where essentially all the invocations would come from the approver while the smart contract would have to respond to the invocations and act as a verifier passively in this challenge response protocol.

581
01:06:57,664 --> 01:07:10,664
And then the game between the approver who is trying to peg out and the smart contract which has to approve the peg out upon proof of burn, that game could be initiated by the person trying to peg out.

582
01:07:11,664 --> 01:07:31,664
But it could be completed with this proof of non-fraud as I kind of call it for now, which is that it produces the right bit 001 which enables the approver to withdraw Bitcoin back to himself on Bitcoin from the contract.

583
01:07:32,664 --> 01:07:33,664
That's not necessarily time locked.

584
01:07:34,664 --> 01:07:40,664
And Supertestnet said that he doesn't see a way to do it without time locks, but I think there may be a way to do it.

585
01:07:41,664 --> 01:07:43,664
It's still an open question.

586
01:07:44,664 --> 01:07:46,664
Maybe Supertestnet will come back and comment on that.

587
01:07:47,664 --> 01:07:49,664
Yeah, I think it's still an open question.

588
01:07:50,664 --> 01:07:52,664
I'm not confident yet that we found a way to do it.

589
01:07:53,664 --> 01:07:54,664
But I like your idea.

590
01:07:55,664 --> 01:07:56,664
I would like to have more thoughts on it.

591
01:07:56,664 --> 01:08:01,664
It's helpful for me if I can see it written down so I can compare earlier parts with later parts, stuff like that.

592
01:08:03,664 --> 01:08:07,664
I want to go to one of the comments from the chat.

593
01:08:08,664 --> 01:08:10,664
So somebody in the chat asked two questions.

594
01:08:11,664 --> 01:08:20,664
His name is BTC Jonas and he says, do you think possible additional features like BitVM will give new government regulatory, regulative attack surface?

595
01:08:21,664 --> 01:08:23,664
So, yes.

596
01:08:24,664 --> 01:08:25,664
No, you said will.

597
01:08:26,664 --> 01:08:28,664
No, I don't think it will, but I do think it might.

598
01:08:29,664 --> 01:08:34,664
An example of something that I hope gives us a new government regulative attack surface.

599
01:08:35,664 --> 01:08:42,664
I would like to make something on BitVM similar to Tornado Cash so that you can send money to like sanctioned countries and stuff.

600
01:08:43,664 --> 01:08:50,664
And if we do that, then I definitely like if we get to a point where you can do that on BitVM, then that would open up a new government regulatory attack surface.

601
01:08:51,664 --> 01:08:55,664
They could try to shut it down on the grounds that that's illegal or something like that.

602
01:08:56,664 --> 01:09:01,664
So I hope something like that happens and I'll be putting in my efforts to make it happen.

603
01:09:02,664 --> 01:09:04,664
But yeah, currently, I don't think we'll right now.

604
01:09:05,664 --> 01:09:06,664
I don't think we'll get there.

605
01:09:07,664 --> 01:09:10,664
So I don't think it will, but I hope it does.

606
01:09:10,664 --> 01:09:23,664
And then secondly, the question is, is there or even is there is will be a security budget issue might be BitVM be a solution to keep miners busy and proceeds sustainable?

607
01:09:24,664 --> 01:09:26,664
Well, it is an off-chain protocol.

608
01:09:27,664 --> 01:09:33,664
So by design, most of the stuff that happens in BitVM happens off-chain and doesn't.

609
01:09:34,664 --> 01:09:39,664
As long as that's happening, as long as everything's happening off-chain, they don't contribute to Bitcoin's fees.

610
01:09:40,664 --> 01:09:47,664
However, if BitVM was popular, then perhaps you have a lot of people adding money into these BitVM addresses.

611
01:09:48,664 --> 01:09:53,664
And so that would result in an increased amount of transactions on Bitcoin and consequently increased fees.

612
01:09:54,664 --> 01:10:05,664
So yeah, if BitVM becomes popular, then yeah, then it could help Bitcoin's security budget by increasing the number of transactions on Bitcoin in order to access this new layer two.

613
01:10:06,664 --> 01:10:08,664
So I hope that answers both of your questions.

614
01:10:08,664 --> 01:10:11,664
Does anyone else have any thoughts on either of those things?

615
01:10:12,664 --> 01:10:18,664
Yeah, I have a thought on the regulatory attack and additional features can add more regulatory attack.

616
01:10:19,664 --> 01:10:25,664
I think the way I look at it, any transaction can have a regulatory attack.

617
01:10:26,664 --> 01:10:36,664
For example, regulation can say this specific UTXO, any miner that adds this UTXO or builds off a block that includes this UTXO, it can just put pressure already right now.

618
01:10:36,664 --> 01:10:44,664
So I don't see how any additional features are really adding pressure when there's already at any moment that can be there.

619
01:10:45,664 --> 01:10:52,664
So either Bitcoin can and will withstand things like that and additional things or there's a bigger issue.

620
01:10:55,664 --> 01:11:04,664
Yeah, and I sort of welcome such attacks because I think we hopefully designed Bitcoin in such a way that it can withstand regulatory pressure.

621
01:11:04,664 --> 01:11:08,664
And so far it's stood up to China, to regulatory pressure in China.

622
01:11:09,664 --> 01:11:16,664
My hope is that it can withstand any regulatory pressure, but I'd like to see that hope tested and find out if we're right.

623
01:11:17,664 --> 01:11:25,664
Because if we're wrong, you know, if Bitcoin can be shut down or if miners will stop mining or censorship people, then we've got to find a solution to that.

624
01:11:26,664 --> 01:11:31,664
And I'd like to know sooner rather than later, personally, if that's going to be an issue.

625
01:11:34,664 --> 01:11:41,664
Super Testnet about the regulatory attack.

626
01:11:42,664 --> 01:11:49,664
So the idea that just came to my head is that we know that there is coin swaps that can improve privacy, right?

627
01:11:50,664 --> 01:11:56,664
Is a coin swap mediated by BitMEDIUM would be superior in any way to a regular coin swap or not?

628
01:11:57,664 --> 01:12:03,664
My initial two thoughts, one was no and then the other one was yes.

629
01:12:04,664 --> 01:12:05,664
So let me tell you both of them.

630
01:12:06,664 --> 01:12:09,664
No, I don't think they would be because coin swaps are already off chain.

631
01:12:10,664 --> 01:12:18,664
When you do a coin swap, the information that you share with your counterparty in order to initiate the swap is done.

632
01:12:19,664 --> 01:12:20,664
It's done out of band.

633
01:12:21,664 --> 01:12:23,664
It's not that information doesn't go on the blockchain.

634
01:12:23,664 --> 01:12:30,664
And in fact, the most common way that coin swaps are done today is over lightning, which is like entirely off chain.

635
01:12:31,664 --> 01:12:35,664
Once you're in the lightning network, your coin swap, you're swapping coins all day long every time you make a transaction.

636
01:12:36,664 --> 01:12:38,664
And unless there's a problem, none of that goes on chain.

637
01:12:39,664 --> 01:12:40,664
So my initial thought was no.

638
01:12:40,664 --> 01:12:48,664
And then my second thought was, well, yeah, actually, it probably would, though, because it could become the same thing where you deposit money into a BitVM address.

639
01:12:49,664 --> 01:12:53,664
And then from inside of there, you're doing coin swaps all day long and they're not on chain.

640
01:12:54,664 --> 01:12:57,664
So isn't that essentially a tornado cash?

641
01:12:58,664 --> 01:13:07,664
As long as you extend the game to end parties where you simply can't have anybody in the world show up, a million people deposit arbitrary amounts into the BitVM address.

642
01:13:07,664 --> 01:13:14,664
And they all participate in this end person game that eventually allows them to withdraw somehow the same exact amount.

643
01:13:15,664 --> 01:13:18,664
But the anonymity set is much larger because there's end participants in the swap.

644
01:13:19,664 --> 01:13:23,664
Yes, I think it is.

645
01:13:24,664 --> 01:13:26,664
It's probably equivalent to tornado cash.

646
01:13:27,664 --> 01:13:29,664
And I think lightning has been doing this for a long time already.

647
01:13:30,664 --> 01:13:39,664
But the problem with lightning is that it's full of cancer nodes by chain analysis companies that actually de-anonymize all the flows, right?

648
01:13:40,664 --> 01:13:50,664
So lightning doesn't actually give you much anonymity because they look at your IP addresses and most of publicly routable lightning nodes are actually cancer nodes of chain analysis companies.

649
01:13:51,664 --> 01:13:55,664
You essentially have illusion of privacy on lightning rather than real privacy.

650
01:13:56,664 --> 01:13:58,664
I don't think that's true.

651
01:13:59,664 --> 01:14:11,664
There's no proof of work needed for 90% of lightning nodes that are publicly routing payments to be launched by chain analysis companies.

652
01:14:12,664 --> 01:14:22,664
It's the same kind of attack that was happening on TOR before TOR introduced proof of work where most TOR nodes were cancer nodes that would DDoS TOR or whatever.

653
01:14:22,664 --> 01:14:31,664
Because there was no work required to cyber attack TOR network and there's still no work required to cyber attack lightning network, right?

654
01:14:32,664 --> 01:14:37,664
Well, I think there is considerable amount of work required to cyber attack the lightning network.

655
01:14:38,664 --> 01:14:45,664
Because in order for you to have an analysis node, it needs to have quite a bit of connections.

656
01:14:46,664 --> 01:14:47,664
It needs to have quite a bit of channels.

657
01:14:47,664 --> 01:14:58,664
And not only that, but it gives you no guarantees that you're getting accurate information because an intermediary node can't tell the sender or the recipient of the transaction.

658
01:14:59,664 --> 01:15:00,664
That's true.

659
01:15:01,664 --> 01:15:08,664
But if you have two nodes that happen to be on the flow and both of them correlate the flow, then essentially you're seeing the whole kind of...

660
01:15:09,664 --> 01:15:11,664
Well, anyways, we're probably digressing from the VM here.

661
01:15:12,664 --> 01:15:13,664
Yeah, definitely.

662
01:15:14,664 --> 01:15:20,664
But yeah, I think BitVM could be another way of doing this.

663
01:15:21,664 --> 01:15:23,664
And so if we have... I like more options.

664
01:15:24,664 --> 01:15:26,664
I would like you to be able to do tornado catch like stuff on lightning.

665
01:15:27,664 --> 01:15:30,664
I would also like you to be able to do tornado catch stuff like stuff on BitVM.

666
01:15:31,664 --> 01:15:34,664
Before we get there, I want to mention...

667
01:15:35,664 --> 01:15:39,664
Before we close out because I think we're about ready to finish up this thing.

668
01:15:39,664 --> 01:15:46,664
I do want to mention that it's something that I have to say every time I talk about BitVM is to mention how early we are in it.

669
01:15:47,664 --> 01:15:58,664
Currently, we have a virtual machine that kind of works, but we only have my implementation, which is the stupid version that does everything wrong.

670
01:15:59,664 --> 01:16:00,664
It doesn't even follow the white paper.

671
01:16:01,664 --> 01:16:04,664
So that's the only thing we currently have working.

672
01:16:05,664 --> 01:16:08,664
And that stupid version of the virtual machine can only...

673
01:16:09,664 --> 01:16:11,664
Currently, there are only three functions that work in it.

674
01:16:12,664 --> 01:16:15,664
I've got addition working in it. I can add two numbers, two 32-bit numbers.

675
01:16:16,664 --> 01:16:22,664
I've got checking if a 64-bit string is all zeros, if there's no ones in that string.

676
01:16:22,664 --> 01:16:29,664
And I've got a function that can check if two 32-bit numbers are equal, which one's bigger and which one's smaller.

677
01:16:30,664 --> 01:16:31,664
I've got a function that can do that.

678
01:16:32,664 --> 01:16:37,664
So that's all we have currently working in the worst possible version of the virtual machine.

679
01:16:38,664 --> 01:16:47,664
And so all of these ideas of building a tornado catch in it or building coin swaps inside of it, building a rollup, building a speedy proof, that's far away.

680
01:16:48,664 --> 01:16:52,664
We need a lot more building blocks in order to make that stuff available.

681
01:16:53,664 --> 01:17:04,664
So yeah, don't get too excited about the capabilities of BitVM yet, or do get excited, but allow that excitement to motivate you to help us build the stuff for it.

682
01:17:05,664 --> 01:17:14,664
So yeah, my GitHub is, I think, if you go to my GitHub, github.com slash supertestnet, it's one of my most recent, most popular repositories.

683
01:17:14,664 --> 01:17:15,664
It's called Tapleaf Circuits.

684
01:17:16,664 --> 01:17:20,664
It's where I'm building out my implementation and adding additional functions to it.

685
01:17:21,664 --> 01:17:22,664
Check that out if you're a builder.

686
01:17:23,664 --> 01:17:28,664
Help me make it improved, like make it actually compatible with the white paper and do things the smart way.

687
01:17:30,664 --> 01:17:37,664
And help me design additional functions that can actually run in this virtual machine so we can get to a point where we can build all this cool stuff.

688
01:17:38,664 --> 01:17:39,664
I think that's it.

689
01:17:39,664 --> 01:17:40,664
I think we can close out the space.

690
01:17:41,664 --> 01:17:43,664
So I thank you everybody for participating.

691
01:17:44,664 --> 01:17:58,664
Of course, the link up there in the description will show you, not the description, but up there in this group chat, shared chat, shared tweet things, will show you the BitVM Telegram group where you can go to get more information.

692
01:17:59,664 --> 01:18:00,664
And yeah, hey guys, let's go.

693
01:18:01,664 --> 01:18:05,664
Let's build this thing out and make all these cool dreams into reality.

694
01:18:06,664 --> 01:18:08,664
I just want to add a little bit.

695
01:18:09,664 --> 01:18:15,664
The Bitcoin address in the white paper, I guess, is where you guys are accepting sats as funding donations.

696
01:18:16,664 --> 01:18:20,664
So I would encourage people to send some sats to that address in the white paper.

697
01:18:21,664 --> 01:18:23,664
That's the only valid address, right?

698
01:18:24,664 --> 01:18:26,664
All others are hacker impersonations.

699
01:18:28,664 --> 01:18:29,664
I don't know.

700
01:18:30,664 --> 01:18:32,664
I haven't actually seen any.

701
01:18:32,664 --> 01:18:34,664
I haven't actually seen any, so I don't know.

702
01:18:35,664 --> 01:18:37,664
But definitely use the one in the white paper though.

703
01:18:41,664 --> 01:18:42,664
All right, great.

704
01:18:42,664 --> 01:18:43,664
Thank you, guys.

705
01:18:43,664 --> 01:18:45,664
And I guess I think that wraps it up.

706
01:18:48,664 --> 01:18:49,664
Thank you, SuperTesla.

707
01:18:49,664 --> 01:18:50,664
Thank you, SuperTesla.

708
01:18:56,664 --> 01:19:03,664
I would encourage Moon Settler to come up to the stage if you want to speak more on the, or Layer 2 host or whatever.

709
01:19:03,664 --> 01:19:04,664
Thank you, SuperTesla.

710
01:19:13,664 --> 01:19:18,664
We also had some others come up to the stage if they have comments or questions.

711
01:19:19,664 --> 01:19:21,664
They can feel free, Sol or Pen5.

712
01:19:22,664 --> 01:19:23,664
Anybody else that wants to come up as well?

713
01:19:24,664 --> 01:19:26,664
Hey, I had come up earlier.

714
01:19:27,664 --> 01:19:34,664
I had a comment or question, but then the conversation kind of set my brain on fire a little bit.

715
01:19:35,664 --> 01:19:47,664
But I think one thing I was going to ask is, or request maybe, a BitVM function to do like a hash string matching.

716
01:19:47,664 --> 01:20:01,664
Because that might be useful to say there's a hash added to the transaction, and then later,

717
01:20:03,715 --> 01:20:08,555
the file, the linked hash file is published

718
01:20:08,555 --> 01:20:11,995
to prove a certain output.

719
01:20:13,795 --> 01:20:17,715
If BitVM can do a hash string match,

720
01:20:17,715 --> 01:20:19,315
adds a little integrity to that.

721
01:20:22,274 --> 01:20:24,195
If I could comment on that for a second.

722
01:20:24,195 --> 01:20:27,274
I think SuperTesla has like a really busy schedule,

723
01:20:27,274 --> 01:20:29,434
so he had to leave, it looks like.

724
01:20:29,434 --> 01:20:32,215
But perhaps I could comment a little bit on that,

725
01:20:32,215 --> 01:20:37,215
which is like my expectations on BitVM

726
01:20:37,415 --> 01:20:41,615
are such that it's an incredibly, incredibly long-term

727
01:20:41,615 --> 01:20:43,615
and super complicated research project.

728
01:20:43,615 --> 01:20:45,134
I mean, it makes the Lightning Network

729
01:20:45,134 --> 01:20:47,455
look trivial by comparison.

730
01:20:47,455 --> 01:20:50,095
So what he said about like we're so early

731
01:20:50,095 --> 01:20:52,255
because we have a single one, two, or three

732
01:20:52,255 --> 01:20:54,775
super primitive functions is very true.

733
01:20:54,775 --> 01:20:57,455
So we might not see anything actually usable

734
01:20:57,455 --> 01:20:59,134
for one, two, three years,

735
01:20:59,134 --> 01:21:02,375
even if 100 people are working on it 24-7.

736
01:21:03,535 --> 01:21:07,134
So all these functions that you might want to request,

737
01:21:07,134 --> 01:21:09,814
in theory, they could be, they're just things

738
01:21:09,814 --> 01:21:12,335
that BitVM could compute in the future,

739
01:21:12,335 --> 01:21:14,535
but to actually build a computer that's usable

740
01:21:14,535 --> 01:21:18,054
on top of BitVM will take a long time.

741
01:21:18,054 --> 01:21:22,814
And if you've been waiting for the Lightning Network

742
01:21:22,814 --> 01:21:27,575
to take off, and it's been in place since 2016,

743
01:21:27,575 --> 01:21:29,375
and it's still not really fully taken off,

744
01:21:29,375 --> 01:21:31,535
I would like encourage you guys

745
01:21:31,535 --> 01:21:33,935
to like lower your expectations of BitVM

746
01:21:33,935 --> 01:21:37,174
because it's a major research project

747
01:21:37,174 --> 01:21:39,215
that is way more complicated than Lightning,

748
01:21:39,215 --> 01:21:40,895
and there's a lot more work there.

749
01:21:40,895 --> 01:21:42,774
Let's, you know, we're talking like a factor of 10

750
01:21:42,774 --> 01:21:46,314
or 100 more work, maybe, than to do a Lightning Network.

751
01:21:53,335 --> 01:21:55,575
But in theory, everything is possible.

752
01:21:56,454 --> 01:22:00,094
But, you know, there's a computer science slang

753
01:22:00,094 --> 01:22:01,134
for this kind of system,

754
01:22:01,134 --> 01:22:02,695
where it's called a Turing tar pit,

755
01:22:02,695 --> 01:22:05,535
where, in theory, you can do a Wikipedia search

756
01:22:05,535 --> 01:22:07,734
for a Turing tar pit to see what's going on,

757
01:22:07,734 --> 01:22:09,475
but in theory, everything is possible.

758
01:22:09,475 --> 01:22:11,554
In practice, everything is extremely difficult,

759
01:22:11,554 --> 01:22:14,134
unless you build up a whole stack

760
01:22:14,134 --> 01:22:16,575
of developer tools bottom-up.

761
01:22:16,575 --> 01:22:18,535
And this is, we're talking about assemblers,

762
01:22:18,535 --> 01:22:20,974
compilers, libraries, this is like,

763
01:22:20,974 --> 01:22:23,575
you have to build a whole operating system bottom-up

764
01:22:23,614 --> 01:22:26,935
in order to get BitVM running and operational.

765
01:22:40,735 --> 01:22:42,295
I had a few comments.

766
01:22:42,295 --> 01:22:43,295
Can anyone hear me?

767
01:22:44,215 --> 01:22:45,694
Yep.

768
01:22:45,694 --> 01:22:46,535
Hey, what's up?

769
01:22:46,535 --> 01:22:47,375
This is Pensa.

770
01:22:47,375 --> 01:22:49,175
Yeah, when you guys mentioned federation

771
01:22:49,175 --> 01:22:51,494
and agreement and smart contracts,

772
01:22:51,494 --> 01:22:54,894
I was recently reading a book by,

773
01:22:54,894 --> 01:22:57,375
it's a very classical book, if you're into sociology,

774
01:22:57,375 --> 01:22:59,334
which correlates with economics.

775
01:23:00,334 --> 01:23:02,175
The Tocqueville, Democracy in America,

776
01:23:02,175 --> 01:23:04,134
in the first 200 pages,

777
01:23:04,134 --> 01:23:07,134
he mentions the decentralization of American government

778
01:23:07,134 --> 01:23:09,974
and how they kind of came to discover

779
01:23:09,974 --> 01:23:11,774
how to separate two sovereignties

780
01:23:11,774 --> 01:23:13,894
and kind of resolve that conflict.

781
01:23:13,894 --> 01:23:15,935
So even though it's like, you know,

782
01:23:15,935 --> 01:23:19,194
outside of, it's not as directly related

783
01:23:19,194 --> 01:23:20,935
to economics and Bitcoin,

784
01:23:20,935 --> 01:23:21,894
I think that, you know,

785
01:23:21,894 --> 01:23:24,815
anyone that is building on the Bitcoin network

786
01:23:24,815 --> 01:23:27,455
can definitely profit from that discussion

787
01:23:27,455 --> 01:23:30,655
of governance and federations

788
01:23:30,655 --> 01:23:32,774
and how we can implement that through code.

789
01:23:32,774 --> 01:23:34,375
So those are just my two cents.

790
01:23:45,974 --> 01:23:49,815
I mean, I have a comment on this whole notion of federation

791
01:23:49,815 --> 01:23:52,935
and the peg is that I don't really see,

792
01:23:52,935 --> 01:23:55,614
for economic reasons, I don't see a federated peg,

793
01:23:55,614 --> 01:23:59,614
even if it can be policed by a bunch of centuries

794
01:24:00,935 --> 01:24:02,694
or verifiers.

795
01:24:02,694 --> 01:24:04,935
I don't see it as workable in practice,

796
01:24:04,935 --> 01:24:07,015
even though in theory it would be much better

797
01:24:07,015 --> 01:24:12,015
than any other two-way peg that we have for Bitcoin

798
01:24:13,494 --> 01:24:16,655
because it would have smaller trust assumptions.

799
01:24:16,655 --> 01:24:21,415
In reality, you would need, for economic reasons,

800
01:24:21,415 --> 01:24:23,655
people would not want to participate in the federation

801
01:24:23,655 --> 01:24:25,375
because there's very little to gain

802
01:24:25,375 --> 01:24:28,294
for participating in it and there's a lot to lose,

803
01:24:28,294 --> 01:24:29,975
which is the whole bond of the federation

804
01:24:29,975 --> 01:24:31,655
or most of it or whatever.

805
01:24:31,655 --> 01:24:34,074
So it may be, in theory, a practical game,

806
01:24:34,074 --> 01:24:36,334
but in practice, I don't think this entry peg

807
01:24:36,334 --> 01:24:40,794
would be viable for practical purposes.

808
01:24:42,975 --> 01:24:45,774
So unfortunately, yeah, it's like more research

809
01:24:45,774 --> 01:24:48,054
needs to be done into how to leverage BitVM

810
01:24:48,054 --> 01:24:51,655
into some other kind of two-way peg, in my humble opinion.

811
01:25:15,774 --> 01:25:20,774
Is anybody out there, or we have only passive listeners?

812
01:25:34,935 --> 01:25:36,535
Henry, Moonsettler?

813
01:25:41,054 --> 01:25:43,415
Yeah, it seems like not much wanna come up.

814
01:25:43,415 --> 01:25:46,574
Maybe Moonsettler can't be active right now.

815
01:25:46,574 --> 01:25:48,614
I'm just a passive listener.

816
01:25:48,614 --> 01:25:51,255
A lot of this stuff is like way too advanced for me,

817
01:25:52,255 --> 01:25:56,334
but I'm loving people innovating new ways to use Bitcoin

818
01:25:56,334 --> 01:25:59,174
and things like that, learning about it.

819
01:26:04,655 --> 01:26:08,334
I mean, I guess people can come and go whenever they want.

820
01:26:08,334 --> 01:26:10,774
I just wanna comment something on BitVM,

821
01:26:10,774 --> 01:26:11,894
which is that initially,

822
01:26:11,894 --> 01:26:13,695
when I saw the idea in the whitepaper,

823
01:26:13,695 --> 01:26:18,695
I was less impressed than I am now.

824
01:26:22,734 --> 01:26:25,614
Because it seemed like a Turing tar pit

825
01:26:25,614 --> 01:26:27,415
where everything was possible in theory,

826
01:26:27,415 --> 01:26:29,834
but nothing is practically possible.

827
01:26:31,255 --> 01:26:32,975
But the more I studied the idea,

828
01:26:32,975 --> 01:26:35,494
the more optimistic I become about it,

829
01:26:35,494 --> 01:26:40,174
because there's just a huge unexplored continent

830
01:26:40,174 --> 01:26:43,695
that was discovered, and we just landed on it right now.

831
01:26:43,695 --> 01:26:48,454
So perhaps a real two-way peg that's truly trust-minimized

832
01:26:48,454 --> 01:26:52,855
or real ZK validity, ZK roll-ups or whatever

833
01:26:52,855 --> 01:26:55,355
will be possible using this idea.

834
01:27:03,014 --> 01:27:04,655
Yeah, that'd be pretty cool.

835
01:27:06,774 --> 01:27:09,135
It kind of reminds me the situation

836
01:27:09,135 --> 01:27:11,215
that quantum programming is right now,

837
01:27:11,215 --> 01:27:14,054
where the only way to program on quantum computing

838
01:27:14,054 --> 01:27:16,215
is very low-level, circuit board level.

839
01:27:23,375 --> 01:27:25,255
You know, the problem is not so much

840
01:27:25,255 --> 01:27:26,815
that it's a low-level computer.

841
01:27:26,815 --> 01:27:31,815
The problem is that we haven't explored all the games

842
01:27:32,915 --> 01:27:36,014
that could be played between one verifier and one prover

843
01:27:36,014 --> 01:27:41,014
or multi-party games between provers and verifiers yet.

844
01:27:41,135 --> 01:27:43,734
The computer being super low-level

845
01:27:43,734 --> 01:27:45,014
is not actually a problem

846
01:27:45,014 --> 01:27:47,855
because the computations never happen on Bitcoin chain,

847
01:27:47,855 --> 01:27:50,774
and they could happen between the parties off-chain,

848
01:27:50,774 --> 01:27:53,274
and it could be super expensive

849
01:27:53,274 --> 01:27:55,454
and take a beefy computer a long time.

850
01:27:55,454 --> 01:27:56,355
It doesn't matter.

851
01:27:57,294 --> 01:27:59,774
It's designing the interactive

852
01:27:59,774 --> 01:28:01,975
and hopefully non-interactive games

853
01:28:01,975 --> 01:28:05,215
that allow the two-way peg to materialize

854
01:28:05,215 --> 01:28:09,054
or Tornado Cache to be developed or something like that.

855
01:28:09,054 --> 01:28:11,815
I think that's the bottleneck,

856
01:28:11,815 --> 01:28:15,614
so not the fact that this is like a primitive computer

857
01:28:15,614 --> 01:28:19,114
that needs a billion leaves in a top-leaf tree.

858
01:28:26,014 --> 01:28:31,014
It's also interesting to think about the timeline of BitVM

859
01:28:31,095 --> 01:28:33,255
and how that coincides with the timeline

860
01:28:33,255 --> 01:28:38,254
of the future role of miners post-halving

861
01:28:41,334 --> 01:28:45,254
and how they may or may not want to start diversifying

862
01:28:45,254 --> 01:28:49,175
their role to expand into things like this,

863
01:28:49,175 --> 01:28:51,334
being verifiers, for example.

864
01:29:03,254 --> 01:29:08,254
Yeah, Alex, I would encourage you to post your idea,

865
01:29:27,334 --> 01:29:30,055
definitely, to others, even if there is a fatal flaw,

866
01:29:31,055 --> 01:29:34,134
like the fact that you post it already shows

867
01:29:34,134 --> 01:29:36,894
that you put thinking into it and whatever it is,

868
01:29:36,894 --> 01:29:40,334
and even more so, there might be a dramatic way

869
01:29:40,334 --> 01:29:42,574
to make it better from other people's experience

870
01:29:42,574 --> 01:29:45,014
and skillset, so why not?

871
01:29:45,014 --> 01:29:46,175
Like, what do you got to lose

872
01:29:46,175 --> 01:29:47,655
that people will see that you had a fatal flaw?

873
01:29:47,655 --> 01:29:51,615
No, I mean, I guess I'm not so much as ashamed

874
01:29:51,615 --> 01:29:53,694
as the idea is too raw to,

875
01:29:55,055 --> 01:29:57,495
for example, if I had a good formulation

876
01:29:57,495 --> 01:29:59,735
that SupertestNet could fully grok,

877
01:30:00,415 --> 01:30:01,254
and I would be ready to post it,

878
01:30:01,254 --> 01:30:04,894
but maybe we'll talk in DMs with SupertestNet

879
01:30:04,894 --> 01:30:06,975
and come up with some kind of formulation that works,

880
01:30:06,975 --> 01:30:10,254
and then one of us will post it into the group.

881
01:30:10,254 --> 01:30:12,535
Oh, so you feel like it's a little too abstract right now?

882
01:30:12,535 --> 01:30:15,615
It's kind of, you know, it hasn't been thought through

883
01:30:15,615 --> 01:30:19,134
entirely, but the basic kind of idea

884
01:30:19,134 --> 01:30:22,574
is to replace interactive verifiers

885
01:30:22,574 --> 01:30:25,055
with a smart contract on another chain,

886
01:30:25,055 --> 01:30:29,254
and if that's possible, then many of the problems

887
01:30:29,855 --> 01:30:34,855
that a federation or a bunch of online interactive centuries

888
01:30:37,295 --> 01:30:40,374
like that whole model is, in my mind,

889
01:30:40,374 --> 01:30:44,334
it's not economically viable because there's just lack

890
01:30:44,334 --> 01:30:46,295
of incentives for parties to participate,

891
01:30:46,295 --> 01:30:49,055
but presumably the one party that's incentivized

892
01:30:49,055 --> 01:30:50,735
is the party that wants to peg out

893
01:30:50,735 --> 01:30:53,894
and get their Bitcoin back, and that would be the prover,

894
01:30:53,894 --> 01:30:56,415
and they would just need to interactively,

895
01:30:56,415 --> 01:30:57,934
interact with a smart contract,

896
01:30:57,975 --> 01:31:02,254
and presumably the protocol could be conducted that way,

897
01:31:02,254 --> 01:31:06,574
and then, again, my hope is that as a result

898
01:31:06,574 --> 01:31:09,694
of this interaction, the Bitcoin is either released

899
01:31:09,694 --> 01:31:11,374
or not released to the prover.

900
01:31:12,334 --> 01:31:17,175
So like the contract would be the one like holding state,

901
01:31:17,175 --> 01:31:19,454
and people withdrawing would be updating the state

902
01:31:19,454 --> 01:31:23,055
on the contract side, and then holding the peg in

903
01:31:23,055 --> 01:31:26,334
would actually finalize that state back to base layer,

904
01:31:26,334 --> 01:31:27,535
or something like that?

905
01:31:28,055 --> 01:31:30,855
No, it's not, I mean, in my mind,

906
01:31:30,855 --> 01:31:35,855
it's more like before you can peg in to the sidechain,

907
01:31:37,175 --> 01:31:38,975
you would have to go to the contract

908
01:31:38,975 --> 01:31:40,334
and interact with the contract

909
01:31:40,334 --> 01:31:42,655
to generate a deposit address.

910
01:31:42,655 --> 01:31:43,495
And this deposit-

911
01:31:43,495 --> 01:31:47,134
But at the same time, the contract might also say,

912
01:31:47,134 --> 01:31:49,814
okay, well, here's the current withdrawals

913
01:31:49,814 --> 01:31:52,014
that you need to add, right?

914
01:31:52,014 --> 01:31:55,574
Right, so my hope was that anybody interacting

915
01:31:55,574 --> 01:31:58,134
with the contract could assume temporarily

916
01:31:58,134 --> 01:32:00,374
the duties of the verifier,

917
01:32:00,374 --> 01:32:03,615
and that's how you would have a dynamic set of verifiers

918
01:32:03,615 --> 01:32:07,615
that in order for the contract to release you back,

919
01:32:07,615 --> 01:32:11,055
you would have to verify prior withdrawal requests

920
01:32:11,055 --> 01:32:14,615
that are pending, and that's how you have, actually,

921
01:32:14,615 --> 01:32:16,095
a dynamic set of verifiers,

922
01:32:16,095 --> 01:32:18,374
as opposed to a whitelist of verifiers

923
01:32:18,374 --> 01:32:21,934
that sort of are officially whitelisted by the contract.

924
01:32:21,934 --> 01:32:24,574
You could have anybody trying to peg in

925
01:32:24,574 --> 01:32:26,694
having to perform the duty of a verifier,

926
01:32:26,694 --> 01:32:30,655
and then essentially engaging in the protocol

927
01:32:30,655 --> 01:32:34,495
to approve pending peg outs.

928
01:32:35,655 --> 01:32:37,735
Right, I'm also thinking as far as like fees, right?

929
01:32:37,735 --> 01:32:40,215
Because fees to withdraw, right,

930
01:32:40,215 --> 01:32:43,615
there might be many output UTXOs,

931
01:32:43,615 --> 01:32:45,495
so you need to have some type of, let's say,

932
01:32:45,495 --> 01:32:47,975
incentive model for the person pegging in

933
01:32:47,975 --> 01:32:51,855
to wanna include all these outputs for the withdrawals.

934
01:32:51,855 --> 01:32:53,934
So the contract side can also have,

935
01:32:54,655 --> 01:32:58,814
some sort of incentive for the person to include these,

936
01:32:58,814 --> 01:33:00,655
but then you go into the issue of,

937
01:33:00,655 --> 01:33:02,735
well, the fees are very volatile,

938
01:33:02,735 --> 01:33:06,814
but maybe you can prove by current block height

939
01:33:06,814 --> 01:33:08,495
or something like that with the current block

940
01:33:08,495 --> 01:33:11,215
what the average fees are of like, let's say,

941
01:33:11,215 --> 01:33:13,134
past whatever many blocks.

942
01:33:13,134 --> 01:33:14,215
So this way the contract would know,

943
01:33:14,215 --> 01:33:17,254
all right, well, this is what the average cost

944
01:33:17,254 --> 01:33:18,855
of transactions are right now,

945
01:33:18,855 --> 01:33:21,655
so this is the incentive we'll give you to include these.

946
01:33:22,215 --> 01:33:24,774
Well, I understand what you're saying,

947
01:33:24,774 --> 01:33:29,574
but in my idea, the incentives would be unnecessary

948
01:33:29,574 --> 01:33:34,134
because anybody who wants to peg out,

949
01:33:34,134 --> 01:33:37,694
peg into the sidechain, right, that's the terminology.

950
01:33:37,694 --> 01:33:39,735
I mean, Bitcoin has its own terminology,

951
01:33:39,735 --> 01:33:42,055
but outside of Bitcoin, it's called bridging out

952
01:33:42,055 --> 01:33:43,334
and bridging back in or whatever,

953
01:33:43,334 --> 01:33:45,495
but basically anybody who wants to send Bitcoin

954
01:33:45,495 --> 01:33:48,894
to the sidechain would have to engage

955
01:33:48,934 --> 01:33:51,095
with this game with the contract

956
01:33:51,095 --> 01:33:53,175
to generate the deposit address,

957
01:33:53,175 --> 01:33:55,735
and then presumably the person,

958
01:33:55,735 --> 01:34:00,014
the same person or somebody else

959
01:34:00,014 --> 01:34:03,095
who can prove destruction of the exactly same amount

960
01:34:03,095 --> 01:34:08,095
of Bitcoin as is pegged in into one of these UTXOs

961
01:34:09,055 --> 01:34:12,134
would then be approved by the verifier

962
01:34:12,134 --> 01:34:14,415
that's implicit in the smart contract

963
01:34:14,454 --> 01:34:19,175
to withdraw one of the UTXOs back out.

964
01:34:19,175 --> 01:34:20,014
So like-

965
01:34:20,014 --> 01:34:23,975
Yeah, I'm still looking at like scalability issues, right,

966
01:34:23,975 --> 01:34:27,254
because if these do continue to go up on layer one,

967
01:34:27,254 --> 01:34:29,055
you're still gonna run into things

968
01:34:29,055 --> 01:34:33,095
that are just too limited as far as like price amounts,

969
01:34:33,095 --> 01:34:35,495
right, so social amounts, peg in or peg out.

970
01:34:35,495 --> 01:34:37,975
Yeah, but that's not really a problem

971
01:34:37,975 --> 01:34:41,175
because if you have something working like this,

972
01:34:41,175 --> 01:34:44,374
then there could be professionals appearing

973
01:34:44,374 --> 01:34:46,295
that do this for other people, right,

974
01:34:46,295 --> 01:34:48,254
so there could be like these liquidity providers

975
01:34:48,254 --> 01:34:50,694
that peg in and peg out all day long.

976
01:34:50,694 --> 01:34:51,535
And then-

977
01:34:51,535 --> 01:34:52,374
True, yeah.

978
01:34:52,374 --> 01:34:55,295
And then they could amortize the fees,

979
01:34:55,295 --> 01:34:58,334
like people could go to them and do, right.

980
01:34:58,334 --> 01:35:00,254
They don't make larger peg in, peg outs.

981
01:35:00,254 --> 01:35:02,894
Exactly, like it would be like 10 Bitcoins peg in

982
01:35:02,894 --> 01:35:04,175
and 10 Bitcoins peg out,

983
01:35:04,175 --> 01:35:07,975
but on the peg out rather than maybe-

984
01:35:07,975 --> 01:35:12,134
What if also like the peg in combined previous UTXOs,

985
01:35:12,134 --> 01:35:14,374
like every peg in combines previous UTXOs,

986
01:35:14,374 --> 01:35:16,855
this way there's less of a UTXO footprint?

987
01:35:18,655 --> 01:35:21,334
But you see, that combination would be difficult

988
01:35:21,334 --> 01:35:23,975
because the only way that this proposal would work

989
01:35:23,975 --> 01:35:25,774
is that there's like two ways, right.

990
01:35:25,774 --> 01:35:29,934
There's the UTXO has to be encumbered by a time lock,

991
01:35:29,934 --> 01:35:33,415
which is the existing model in the BitVM,

992
01:35:33,415 --> 01:35:35,014
or it has to be encumbered

993
01:35:35,055 --> 01:35:38,975
because the private key is not yet known

994
01:35:38,975 --> 01:35:40,694
until the protocol completes.

995
01:35:40,694 --> 01:35:42,495
And only when the protocol completes,

996
01:35:42,495 --> 01:35:44,295
the prover is able to-

997
01:35:44,295 --> 01:35:45,134
Yeah, well, you would first interact-

998
01:35:45,134 --> 01:35:46,774
Deprive the private key, right.

999
01:35:46,774 --> 01:35:49,134
Well, you would first interact with the smart contract,

1000
01:35:49,134 --> 01:35:50,175
right, you would tell the smart contract,

1001
01:35:50,175 --> 01:35:52,615
I wanna peg in this amount of Bitcoin.

1002
01:35:52,615 --> 01:35:54,055
And then the smart contract would tell you,

1003
01:35:54,055 --> 01:35:56,535
okay, fine, you wanna peg in this amount of Bitcoin,

1004
01:35:56,535 --> 01:35:58,055
here's the raw UTXO,

1005
01:35:58,055 --> 01:36:00,415
the raw transaction that you need to broadcast.

1006
01:36:00,415 --> 01:36:02,495
And the raw transaction would already include

1007
01:36:02,495 --> 01:36:04,535
previous UTXOs to combine them,

1008
01:36:04,975 --> 01:36:08,215
and your UTXO as well that you wanna input,

1009
01:36:08,215 --> 01:36:10,694
and it will already determine which address to-

1010
01:36:10,694 --> 01:36:12,454
I see what you're suggesting,

1011
01:36:12,454 --> 01:36:14,254
that would be like a great optimization,

1012
01:36:14,254 --> 01:36:17,095
but presumably to combine previous UTXOs,

1013
01:36:17,095 --> 01:36:20,334
you would essentially need to play all these previous games

1014
01:36:20,334 --> 01:36:21,814
to the successful conclusion

1015
01:36:21,814 --> 01:36:24,894
in order to move these previous UTXOs

1016
01:36:24,894 --> 01:36:26,454
into a new combined UTXO.

1017
01:36:26,454 --> 01:36:29,134
So this would be like a huge amount of computation.

1018
01:36:29,134 --> 01:36:31,415
Yeah, but there can also,

1019
01:36:31,415 --> 01:36:33,774
if this model works from the beginning,

1020
01:36:33,774 --> 01:36:35,215
then there will only ever be like,

1021
01:36:35,215 --> 01:36:36,855
let's say two UTXOs, right?

1022
01:36:36,855 --> 01:36:37,894
Because there's just a previous one

1023
01:36:37,894 --> 01:36:39,735
that you need to add to yours.

1024
01:36:39,735 --> 01:36:40,574
So this is really-

1025
01:36:40,574 --> 01:36:41,415
That's a very, very good point,

1026
01:36:41,415 --> 01:36:42,374
I haven't thought about that,

1027
01:36:42,374 --> 01:36:46,814
because if all the previous UTXOs are always aggregated,

1028
01:36:46,814 --> 01:36:49,855
then it's not that much trouble to-

1029
01:36:51,055 --> 01:36:52,894
Yeah, I just feel like, you know-

1030
01:36:52,894 --> 01:36:53,735
But actually-

1031
01:36:53,735 --> 01:36:57,095
It needs to be thought of for the footprint at the end.

1032
01:36:57,095 --> 01:37:02,095
Your idea sort of fixes the covenant problem

1033
01:37:02,334 --> 01:37:05,694
at the same time as fixing

1034
01:37:05,694 --> 01:37:08,495
the validity rollup problem kind of thing, right?

1035
01:37:08,495 --> 01:37:12,495
Because you're trying to aggregate one or two UTXOs

1036
01:37:12,495 --> 01:37:14,215
to represent the whole,

1037
01:37:16,495 --> 01:37:19,534
all the Bitcoin pegged into the sidechain.

1038
01:37:21,294 --> 01:37:23,095
Yeah, I feel like it's extremely important

1039
01:37:23,095 --> 01:37:25,735
when we start thinking of second layers,

1040
01:37:25,735 --> 01:37:27,895
sidechains, whatever they are,

1041
01:37:27,895 --> 01:37:30,454
for the aggregation of the UTXOs pegging in.

1042
01:37:30,495 --> 01:37:33,615
Otherwise, you end up with a mess, I feel like,

1043
01:37:33,615 --> 01:37:34,454
especially during-

1044
01:37:34,454 --> 01:37:37,095
You would end up with a bunch of fragmented UTXOs

1045
01:37:37,095 --> 01:37:38,294
that have all been-

1046
01:37:38,294 --> 01:37:39,654
Yeah, and it becomes,

1047
01:37:39,654 --> 01:37:40,694
it might not be an issue today,

1048
01:37:40,694 --> 01:37:42,375
but fees go up, let's say,

1049
01:37:42,375 --> 01:37:44,095
just fees go up out of nowhere,

1050
01:37:44,095 --> 01:37:46,174
and they stay up for a few months, right?

1051
01:37:46,174 --> 01:37:48,975
Previous UTXOs might become more cumbersome,

1052
01:37:48,975 --> 01:37:51,775
you have to create incentive models for previous UTXOs.

1053
01:37:51,775 --> 01:37:54,255
Maybe it might be solved, like you said, for aggregators,

1054
01:37:54,255 --> 01:37:56,135
bigger liquidity pools,

1055
01:37:56,135 --> 01:37:59,414
but if you can abstract that away from the beginning,

1056
01:37:59,414 --> 01:38:00,694
it might be better.

1057
01:38:00,694 --> 01:38:03,694
You know, the difficult part in my idea is,

1058
01:38:03,694 --> 01:38:05,255
I mean, like, I like your optimization,

1059
01:38:05,255 --> 01:38:08,054
and it could be added into the idea, for sure, probably,

1060
01:38:08,054 --> 01:38:09,814
assuming that the idea works.

1061
01:38:10,814 --> 01:38:11,654
If it works at all,

1062
01:38:11,654 --> 01:38:13,215
then probably your optimization

1063
01:38:13,215 --> 01:38:15,694
would not be too difficult to add to it.

1064
01:38:15,694 --> 01:38:20,135
The difficult part is encumbering UTXO without a timelock,

1065
01:38:20,135 --> 01:38:23,615
and that would require some kind of multi-party computation

1066
01:38:23,615 --> 01:38:27,615
where neither the person pegging in,

1067
01:38:27,615 --> 01:38:31,934
nor the smart contract can move that UTXO,

1068
01:38:31,934 --> 01:38:35,574
unless they engage in a successful game

1069
01:38:35,574 --> 01:38:37,174
that allows them to generate

1070
01:38:38,414 --> 01:38:40,215
a transfer transaction together,

1071
01:38:40,215 --> 01:38:42,895
and that's very much what this multi-party,

1072
01:38:42,895 --> 01:38:45,735
two out of two multi-party computations do,

1073
01:38:45,735 --> 01:38:48,215
which is that there is like, you know,

1074
01:38:48,215 --> 01:38:49,814
some blockchains use it,

1075
01:38:49,814 --> 01:38:51,654
where you have a multi-party protocol

1076
01:38:51,654 --> 01:38:55,375
where two parties engage in a multi-party computation,

1077
01:38:55,375 --> 01:38:57,255
first to generate a deposit address,

1078
01:38:57,895 --> 01:38:59,855
and then they can engage in a two out of two protocol

1079
01:38:59,855 --> 01:39:03,054
to sign a transaction withdrawing from that address

1080
01:39:03,054 --> 01:39:06,814
in such a way that neither party knows the private key

1081
01:39:06,814 --> 01:39:09,054
that corresponded to that withdrawal transaction,

1082
01:39:09,054 --> 01:39:11,495
but they can engage in a protocol

1083
01:39:11,495 --> 01:39:15,174
to generate the signature, right?

1084
01:39:15,174 --> 01:39:17,775
And of course, from the point of view

1085
01:39:17,775 --> 01:39:19,294
of the person pegging in,

1086
01:39:19,294 --> 01:39:23,015
keeping his secret share to this multi-party protocol

1087
01:39:23,015 --> 01:39:24,215
is incentive compatible,

1088
01:39:24,215 --> 01:39:28,375
because they're trying to not lose their peg in,

1089
01:39:28,375 --> 01:39:30,255
so they wouldn't leak their secret share

1090
01:39:30,255 --> 01:39:32,255
that's required to generate this, right?

1091
01:39:32,255 --> 01:39:33,775
I see, I see, so it's kind of like

1092
01:39:33,775 --> 01:39:35,855
you actually want them to have their own UTXOs,

1093
01:39:35,855 --> 01:39:36,694
because they're-

1094
01:39:36,694 --> 01:39:41,534
Well, no, you cannot have them have their own UTXOs,

1095
01:39:41,534 --> 01:39:44,775
because they cannot be allowed to move UTXOs, right?

1096
01:39:44,775 --> 01:39:48,294
They have to, the only way to move those UTXOs,

1097
01:39:48,294 --> 01:39:49,534
aside from time locks,

1098
01:39:49,534 --> 01:39:51,534
which is what's proposed in the BitVM paper,

1099
01:39:51,534 --> 01:39:56,534
is to somehow decrypt a private key,

1100
01:39:57,174 --> 01:40:01,814
or to generate a moving transaction through this game

1101
01:40:01,814 --> 01:40:03,694
using like multi-party computation,

1102
01:40:03,694 --> 01:40:05,414
or two out of two, or something like that,

1103
01:40:05,414 --> 01:40:07,174
you know, like this is what SuperTestNet called

1104
01:40:07,174 --> 01:40:09,375
two out of two, or another multi-state, but.

1105
01:40:09,486 --> 01:40:14,486
Right, but what I'm saying is, they don't have their own UTXO, but they have their own-

1106
01:40:14,486 --> 01:40:15,486
Share, share.

1107
01:40:15,486 --> 01:40:16,486
Yeah, exactly.

1108
01:40:16,486 --> 01:40:22,326
Secret share to that UTXO, right? And presumably, the, and this is, okay, this is, now you're

1109
01:40:22,326 --> 01:40:26,205
coming to the secret sauce, if there is a secret sauce in my idea, then it would be

1110
01:40:26,205 --> 01:40:32,566
hidden in here, which is, how does a smart contract engage in this multi-party computation

1111
01:40:32,566 --> 01:40:40,846
protocol, where without storing any secrets inside the smart contract, because, hey, it's

1112
01:40:40,846 --> 01:40:46,806
a public blockchain, you still generate a transaction that can allow the, the prover

1113
01:40:46,806 --> 01:40:53,085
to move the UTXO into whatever address he wants when the protocol is successful, yeah.

1114
01:40:53,085 --> 01:40:56,726
Yeah, this, this seems like the core-

1115
01:40:56,726 --> 01:40:57,726
The core problem.

1116
01:40:57,726 --> 01:41:00,886
How to exactly solve that, right?

1117
01:41:00,886 --> 01:41:08,285
But I'm optimistic, because you can have like one out of N types of setups, where anybody

1118
01:41:08,285 --> 01:41:15,325
who, like, for example, there's like a single, single honest verifier assumption in the,

1119
01:41:15,325 --> 01:41:22,685
in the protocol described by Shinobi, where you could set it up in such a way that a single

1120
01:41:22,685 --> 01:41:28,606
honest verifier is all that it takes in order to follow the protocol, even if the others

1121
01:41:28,606 --> 01:41:33,206
are not online or unwilling to cooperate with the prover.

1122
01:41:33,206 --> 01:41:43,566
I'm hopeful that the set of online verifiers or sentries, as Shinobi calls them, could

1123
01:41:43,566 --> 01:41:49,365
be replaced by either people interacting with a smart contract because they need to do their

1124
01:41:49,365 --> 01:41:55,886
own business with it, or by some kind of subscribers to the smart contract that are like, okay,

1125
01:41:55,886 --> 01:42:02,685
for a small fee, I will, you know, provide one out of N services to the smart contract,

1126
01:42:02,685 --> 01:42:11,125
where if I see some withdrawal pending, I will show up and, you know, co-sign, essentially,

1127
01:42:11,125 --> 01:42:16,646
this multi-party computation game that allows you to generate the transaction to move the

1128
01:42:16,646 --> 01:42:24,045
coins, if the smart contract itself is incapable of such a, such a feat.

1129
01:42:24,045 --> 01:42:25,045
But-

1130
01:42:25,206 --> 01:42:28,206
The smart contract holding the keys itself without-

1131
01:42:28,206 --> 01:42:34,086
Right, there was another idea of how not to do this interactively, which is, you could

1132
01:42:34,086 --> 01:42:40,206
pre-generate a million deposit addresses ahead of time by engaging in a massive ceremony

1133
01:42:40,206 --> 01:42:45,926
where, you know, 10,000 people show up, you know, like Ethereum had that KZG ceremony

1134
01:42:45,926 --> 01:42:52,286
where like 200,000 people showed up, and as long as one of them is honest, the combined

1135
01:42:52,286 --> 01:42:56,525
secret generated by 200,000 people is secure.

1136
01:42:56,525 --> 01:43:00,605
You could pre-generate perhaps, you know, a million deposit addresses ahead of time

1137
01:43:00,605 --> 01:43:06,965
by 100,000 participants, and as long as one of them deletes their share, or refuses to

1138
01:43:06,965 --> 01:43:12,726
engage in conspiracy with everybody else, right, then this million deposit addresses

1139
01:43:12,726 --> 01:43:21,885
would remain secure, and hopefully the smart contract can then, and this is part that I

1140
01:43:21,885 --> 01:43:26,125
don't have yet, and this is why I'm not posting my idea, because this is kind of the crucial

1141
01:43:26,125 --> 01:43:32,646
missing part, how to do this non-interactively without online parties, that hopefully the

1142
01:43:32,646 --> 01:43:42,726
smart contract can engage in the game with the prover, and essentially, as a result of

1143
01:43:42,726 --> 01:43:49,006
this game, the spending transaction is generated that the prover can then broadcast and take

1144
01:43:49,006 --> 01:43:50,926
the coins back out.

1145
01:43:50,965 --> 01:43:55,165
I have another idea, first of all, I think it might be interesting to look into Emblem

1146
01:43:55,165 --> 01:44:00,566
Vault and like where the keys are held there, it might just be completely centralized, but

1147
01:44:00,566 --> 01:44:06,045
I'm not sure how Emblem Vault works exactly, I don't know if you know about that, but what

1148
01:44:06,045 --> 01:44:14,165
I'm thinking another model would be is if you basically incentivize over-collateralization

1149
01:44:14,165 --> 01:44:20,286
by giving a tiny fee, right, so you would have like, let's say some type of, you know,

1150
01:44:20,286 --> 01:44:25,405
whatever it is, a federated model, it would be better if it's like a dynamic federated

1151
01:44:25,405 --> 01:44:29,005
model, same thing with the verifiers, they're dynamic, but at the end of the day, whoever's

1152
01:44:29,005 --> 01:44:38,765
signing the outputs, they basically have control, but they're incentivized to do the right thing

1153
01:44:38,765 --> 01:44:43,605
because they're using their own collateral, and the amount that they are able to withdraw

1154
01:44:43,605 --> 01:44:48,686
would be less than their, you know, they basically over-collateralize as far as being,

1155
01:44:48,686 --> 01:44:55,126
you know, proper, honest users, and if they were to, you know, do something incorrect,

1156
01:44:55,126 --> 01:44:58,646
because they're over-collateralized, you know, we can slash them or something like that.

1157
01:44:58,646 --> 01:45:03,086
Right, this is kind of like, there's a few systems that do this already, like I think

1158
01:45:03,086 --> 01:45:09,926
Interlay network on top of Polkadot has a similar kind of tag where you have a bunch

1159
01:45:09,926 --> 01:45:16,486
of proof-of-stake participants that, you know, derive income based on the stake that

1160
01:45:16,486 --> 01:45:24,406
they post into this group bond, and then if they misbehave and fail to peg in and peg

1161
01:45:24,406 --> 01:45:28,845
out the withdrawals, then they get slashed, unfortunately-

1162
01:45:28,845 --> 01:45:33,285
I think ThorSwap might also work like that, I'm not sure, ThorSwap?

1163
01:45:33,285 --> 01:45:36,486
ThorSwap, right, I think ThorSwap is similar, right?

1164
01:45:36,486 --> 01:45:37,486
Similar, yeah.

1165
01:45:37,526 --> 01:45:43,005
But ThorSwap has an interesting trick up its sleeve, it uses its own altcoin as a bridging

1166
01:45:43,005 --> 01:45:44,005
currency and-

1167
01:45:44,005 --> 01:45:49,806
This is where I feel like things can go wrong, once you add more assets, you know, obviously

1168
01:45:49,806 --> 01:45:55,165
assets are volatile, they have different prices, so like the collateralization just, you know,

1169
01:45:55,165 --> 01:45:58,206
can end up really being like fake, it could just be like a market price-

1170
01:45:58,206 --> 01:46:05,605
Well, and worse than that, like ThorSwap recently basically shut itself down because, you know,

1171
01:46:05,605 --> 01:46:10,845
it was like, I don't know, $400 million worth of Ether laundered through it into Bitcoin,

1172
01:46:10,845 --> 01:46:11,845
you know-

1173
01:46:11,845 --> 01:46:15,765
I think that was just the front end, though, that shut down, I don't know, I don't look

1174
01:46:15,765 --> 01:46:16,765
too much into it-

1175
01:46:16,765 --> 01:46:21,406
You're right, they shut down the front end, but the point is that, you know, when the

1176
01:46:21,406 --> 01:46:26,325
government shows up, these people that are running this peg, you know, this blockchain

1177
01:46:26,325 --> 01:46:31,366
as large stakers of ruin, all of a sudden they start disappearing, or like, in other

1178
01:46:31,366 --> 01:46:37,605
words, it's a model vulnerable to regulation precisely because it has interactive online

1179
01:46:37,605 --> 01:46:42,445
parties that have a lot of this, you know, stake-

1180
01:46:42,445 --> 01:46:47,565
A lot of funds under their control, basically, even if they're collateralized, right, which

1181
01:46:47,565 --> 01:46:48,565
funds are under their control-

1182
01:46:48,565 --> 01:46:53,445
Exactly, and the problem is that it's not necessarily the case that you can incentivize

1183
01:46:53,445 --> 01:46:59,206
them properly because whatever modest fees you would charge of people trying to peg in

1184
01:46:59,206 --> 01:47:05,005
and peg out, those fees would not necessarily add up to the cost of locking up capital into

1185
01:47:05,005 --> 01:47:07,806
the bond, like, you know, the cost of-

1186
01:47:07,806 --> 01:47:11,605
Right, and it also doesn't end up being the cost of going to jail, too.

1187
01:47:11,605 --> 01:47:16,725
Exactly, so that's a hidden cost, potentially 10 times larger, right, which is why I see

1188
01:47:16,725 --> 01:47:24,086
all these federated models, even if one honest participant is enough, as not viable because

1189
01:47:24,086 --> 01:47:29,045
the people in the federation don't want to bond, you know, a thousand bitcoins in order

1190
01:47:29,045 --> 01:47:35,005
to enable a thousand bitcoins to be pegged into the sidechain because, you know, it's

1191
01:47:35,005 --> 01:47:38,526
a lot of money to lock up and not be able to use, right?

1192
01:47:38,526 --> 01:47:43,686
So the incentives are, we will do it, but will people pay, let's say, a 5% fee to peg

1193
01:47:43,686 --> 01:47:44,686
in and peg out?

1194
01:47:44,686 --> 01:47:45,686
I doubt that, right?

1195
01:47:45,686 --> 01:47:50,165
So the system is kind of the model of self-defeating in that to make it economically viable, it

1196
01:47:50,165 --> 01:47:54,765
has to have high enough level of fees, but with that high enough level of fees, nobody

1197
01:47:54,765 --> 01:47:57,366
will be interested to use it.

1198
01:47:57,366 --> 01:48:01,126
So you have a classic kind of chick-in-the-neck problem where, you know, the system is not

1199
01:48:01,126 --> 01:48:06,086
usable if the fees are high, and if the system is not usable, then the fees will not appear

1200
01:48:06,086 --> 01:48:08,765
at all because nobody will be using it.

1201
01:48:08,765 --> 01:48:16,246
Yep, you know what, I want to take some time, because I think last time you spoke and you

1202
01:48:16,246 --> 01:48:21,206
had some possible criticisms to drivechain, so I was wondering if we can all switch a

1203
01:48:21,206 --> 01:48:22,206
little bit to that.

1204
01:48:22,206 --> 01:48:25,926
I mean, if everybody's okay with it.

1205
01:48:25,926 --> 01:48:31,966
No, I'm actually, I'm a drivechain supporter, I don't have any criticism to drivechain.

1206
01:48:31,966 --> 01:48:36,725
I think I had a disagreement with Paul about the fee problem, and this is kind of our major

1207
01:48:36,725 --> 01:48:41,645
disagreement, and that Paul believes that there's a security budget problem, and I believe

1208
01:48:41,645 --> 01:48:44,326
that the feepocalypse is inevitable.

1209
01:48:44,326 --> 01:48:50,566
So like, if one of the underlying causes for drivechain to be deployed is that the

1210
01:48:50,566 --> 01:48:56,366
security budget is a problem for Bitcoin, like it may not, like I just don't see a long-term

1211
01:48:56,366 --> 01:49:02,926
security budget problem, because I think yesterday I saw somebody posting all the Wikileaks data

1212
01:49:02,926 --> 01:49:09,965
that was leaked in 2012 or 13, whatever it was, 11, into ordinals, right, into the inscriptions.

1213
01:49:09,965 --> 01:49:16,246
So that my prediction is kind of coming true, that there will be immutable, censorship-resistant,

1214
01:49:16,246 --> 01:49:21,525
a lot of amount of this data that will be essentially dumped into Bitcoin blockchain

1215
01:49:21,525 --> 01:49:24,605
for censorship-resistance and immutability.

1216
01:49:24,605 --> 01:49:30,725
And incidentally, this kind of posting started only recently, because only a few weeks ago

1217
01:49:30,725 --> 01:49:39,845
the ordinals protocol finally specified the collections standard of how you can have ordinals

1218
01:49:39,926 --> 01:49:40,926
The parent-child?

1219
01:49:40,926 --> 01:49:42,926
The parent-child, right, right.

1220
01:49:42,926 --> 01:49:46,645
And before the parent-child, you know, there was no incentive for you to do this, because

1221
01:49:46,645 --> 01:49:50,645
you would just have a bunch of sort of disconnected portals.

1222
01:49:50,645 --> 01:49:55,645
Well, you still have the provenance, it's still on-chain, right, if you have one origin address.

1223
01:49:55,645 --> 01:50:00,645
Yeah, the provenance is on-chain with this new protocol parent-child, but it wasn't...

1224
01:50:00,645 --> 01:50:08,446
Even without this new parent-child protocol, you know, schema, this scheme is really just

1225
01:50:08,446 --> 01:50:11,725
for the explorers and or the indexers.

1226
01:50:11,725 --> 01:50:15,285
But what I'm saying is without it, right, without it, you can still prove provenance

1227
01:50:15,285 --> 01:50:17,886
on-chain if you have like one origin address.

1228
01:50:17,886 --> 01:50:21,686
And that one origin address is the one that created, let's say, 100 inscriptions, right?

1229
01:50:21,686 --> 01:50:25,126
It's obvious that since all the funds came from that one origin, they are really all

1230
01:50:25,126 --> 01:50:26,686
connected by, you know, one entity.

1231
01:50:26,686 --> 01:50:27,686
Right.

1232
01:50:27,686 --> 01:50:31,845
Yeah, I mean, you could prove it, but again, that would be, the standard makes all the

1233
01:50:31,845 --> 01:50:32,845
difference.

1234
01:50:32,845 --> 01:50:33,845
Yeah, the standard makes the difference.

1235
01:50:33,845 --> 01:50:36,085
But what I'm saying is you can have an explorer that just sees that, right?

1236
01:50:36,085 --> 01:50:40,405
So that's why I'm saying that this standard is really more on the explorer side to show

1237
01:50:40,405 --> 01:50:41,405
it, right?

1238
01:50:41,405 --> 01:50:46,766
Even though, yeah, on-chain, you are including the parent in the transaction where the child

1239
01:50:46,766 --> 01:50:47,766
is born.

1240
01:50:47,766 --> 01:50:52,605
Right, but until that standard is specified, right, you know, it was a free-for-all because

1241
01:50:52,605 --> 01:50:57,045
like people would dump whole collections of inscriptions and they would dump inscriptions

1242
01:50:57,045 --> 01:50:58,045
of...

1243
01:50:58,045 --> 01:51:01,845
If you look at like sub-1k inscriptions, what people did is they would just have like a

1244
01:51:01,845 --> 01:51:05,926
sort of manifesto, a text file of all the inscriptions in their collection or a text

1245
01:51:05,926 --> 01:51:10,965
file of all the hash, like the SHA-256 hash of the images they're about to inscribe.

1246
01:51:10,965 --> 01:51:14,845
Right, but then you would lose prominence as soon as you would transfer those inscriptions

1247
01:51:14,845 --> 01:51:16,326
somewhere else, right?

1248
01:51:16,326 --> 01:51:20,326
Because you would basically not necessarily be able to trace it back to the creator.

1249
01:51:20,326 --> 01:51:21,326
Of course you can.

1250
01:51:21,326 --> 01:51:22,326
You could see it on-chain.

1251
01:51:22,326 --> 01:51:28,686
No, again, this is kind of like possible in theory, but not really workable in practice

1252
01:51:28,686 --> 01:51:29,686
that problem.

1253
01:51:29,766 --> 01:51:30,766
Yes, I agree with you.

1254
01:51:30,766 --> 01:51:35,566
You could trace the history back on-chain, but one additional feature that was added

1255
01:51:35,566 --> 01:51:42,525
by this new protocol for provenance or collections is the ability for the creator to burn the

1256
01:51:42,525 --> 01:51:48,486
root inscription or the root ordinal, I don't really know how they do it, and thereby steal

1257
01:51:48,486 --> 01:51:49,486
the collection.

1258
01:51:49,486 --> 01:51:51,285
Yeah, you can burn one of...

1259
01:51:51,285 --> 01:51:55,845
Whatever it is, whatever the parent is, you can burn the parent and then that parent can't

1260
01:51:55,845 --> 01:51:56,845
have any more kids.

1261
01:51:56,845 --> 01:51:57,845
Right.

1262
01:51:58,006 --> 01:52:01,605
So there's no absolute scarcity visible on-chain now, right?

1263
01:52:01,605 --> 01:52:08,045
Right, but it's only as far as people adopt this standard and hold this standard over

1264
01:52:08,045 --> 01:52:09,045
any other standard, right?

1265
01:52:09,045 --> 01:52:14,926
Right, but all other standards are de facto inferior, in other words, they may be superior

1266
01:52:14,926 --> 01:52:15,926
to...

1267
01:52:15,926 --> 01:52:18,486
Yes, but what I'm saying, there's still a social aspect to it.

1268
01:52:18,486 --> 01:52:21,926
Let's say I launch a collection, right, and it's X amount of inscriptions, and I burn

1269
01:52:21,926 --> 01:52:22,926
the parent, right?

1270
01:52:22,926 --> 01:52:27,605
I burn the parent, and then the people in the community, we all agree together we're

1271
01:52:28,366 --> 01:52:29,366
going to add more, right?

1272
01:52:29,366 --> 01:52:34,165
Nothing really stops that, we couldn't add more, because that goes to the point of most

1273
01:52:34,165 --> 01:52:37,766
of the projects are really centralized, they're not really decentralized, because there's

1274
01:52:37,766 --> 01:52:42,605
a coordination between, let's say, just developers, or even if the users agree to whatever the

1275
01:52:42,605 --> 01:52:45,926
developers want, there's no reason to not change the rules at any moment.

1276
01:52:45,926 --> 01:52:54,205
So yes, you're right, it is on-chain limited, but it's still limited to social actors agreeing

1277
01:52:54,205 --> 01:52:56,405
to this, which can change at any moment, right?

1278
01:52:56,446 --> 01:53:01,126
Kind of like Bitcoin, it's 21 million limit, but if everybody does agree, it changes, except

1279
01:53:01,126 --> 01:53:03,285
here, you have way less people that need to agree.

1280
01:53:14,006 --> 01:53:17,766
I don't hear you, I'm not sure if you're losing connectivity, do you guys hear me?

1281
01:53:19,446 --> 01:53:22,085
I'm the one losing connectivity, or you guys are.

1282
01:53:27,366 --> 01:53:28,405
Oh, I can hear you.

1283
01:53:29,686 --> 01:53:31,366
Okay, well then maybe it was Alex.

1284
01:53:33,285 --> 01:53:36,645
Alright, well, Alex, if you do hear us, you can let us know.

1285
01:53:44,085 --> 01:53:50,326
That last conversation you were just having, though, it was kind of funny, it was a little

1286
01:53:50,326 --> 01:53:59,845
contradictive, where the burning is just a native Bitcoin transaction, whereas the

1287
01:53:59,845 --> 01:54:09,686
provenance with the parent-child, obviously, Ordinal's protocol doesn't need to structure

1288
01:54:09,686 --> 01:54:12,566
that to have a parent and child, like you were saying.

1289
01:54:13,366 --> 01:54:16,965
So it's kind of like you guys are on both ends of the spectrum.

1290
01:54:17,045 --> 01:54:18,886
It goes the same as far as limit, right?

1291
01:54:18,886 --> 01:54:22,326
If I launch a collection without parent-child, and I say, hey, this is the limit, right?

1292
01:54:22,326 --> 01:54:24,085
There's not going to be any more, right?

1293
01:54:24,085 --> 01:54:28,725
If I do launch more, the community could just, you know, reject those and be like, oh, those

1294
01:54:28,725 --> 01:54:31,605
aren't part of it, because in the beginning, he said that those are the only ones.

1295
01:54:31,605 --> 01:54:36,246
Really, that's really what's just going on at the same time, except now, you know, it's

1296
01:54:36,246 --> 01:54:37,205
more in a protocol level.

1297
01:54:37,205 --> 01:54:41,686
But at the end of the day, I feel like, you know, that's still very like a social aspect

1298
01:54:41,686 --> 01:54:42,186
anyways.

1299
01:54:42,186 --> 01:54:49,066
Yeah, but I think Ordinal's are really interesting.

1300
01:54:49,066 --> 01:54:52,105
It brought a lot of people over to Bitcoin, for sure.

1301
01:54:52,665 --> 01:54:58,905
And it opened the door to, you know, people learning about Bitcoin and hopefully more

1302
01:54:58,905 --> 01:55:04,025
type of, how do you say, more use cases for Bitcoin.

1303
01:55:04,025 --> 01:55:09,946
And I feel like it definitely opened more talk about, you know, drivechains, for sure,

1304
01:55:09,946 --> 01:55:11,465
and sidechains and things like this, too.

1305
01:55:13,145 --> 01:55:15,145
Alex, I see that, I don't know, you moved.

1306
01:55:16,105 --> 01:55:16,585
There you go.

1307
01:55:16,585 --> 01:55:17,306
You might be back.

1308
01:55:18,186 --> 01:55:19,306
Are you back, Alex?

1309
01:55:19,306 --> 01:55:20,025
You are muted.

1310
01:55:28,746 --> 01:55:29,626
I don't hear Alex.

1311
01:55:29,626 --> 01:55:30,826
Does anybody else hear him?

1312
01:55:31,785 --> 01:55:33,145
Because I know sometimes I glitch out.

1313
01:55:33,145 --> 01:55:34,266
You guys don't hear him either.

1314
01:55:34,266 --> 01:55:34,766
Okay.

1315
01:55:35,386 --> 01:55:35,785
All right.

1316
01:55:35,785 --> 01:55:36,986
Well, we don't hear you, Alex.

1317
01:55:37,946 --> 01:55:42,746
In the meantime, if anybody else has things to talk about or wants to come up, please

1318
01:55:42,746 --> 01:55:48,746
feel free.

1319
01:55:48,746 --> 01:55:50,506
Yes, we see you raise your hand, Alex.

1320
01:55:50,506 --> 01:55:52,266
So, try to unmute yourself and talk.

1321
01:55:54,506 --> 01:55:56,025
You might have had some connectivity issues.

1322
01:55:56,025 --> 01:55:58,746
You still seem like you're muted on my end.

1323
01:56:01,145 --> 01:56:01,705
So, I'm not sure.

1324
01:56:02,506 --> 01:56:02,986
Okay.

1325
01:56:02,986 --> 01:56:07,465
So, I'm going to go ahead and unmute myself, and I'm going to go ahead and unmute Alex.

1326
01:56:07,465 --> 01:56:11,465
So, Alex, I'm going to go ahead and unmute you, and I'm going to go ahead and unmute

1327
01:56:11,465 --> 01:56:14,986
you, and I'm going to go ahead and unmute you, and I'm going to go ahead and unmute

1328
01:56:14,986 --> 01:56:18,426
you, and I'm going to go ahead and unmute you, and I'm going to go ahead and unmute

1329
01:56:18,426 --> 01:56:21,386
you, and I'm going to go ahead and unmute you, and I'm going to go ahead and unmute

1330
01:56:21,386 --> 01:56:23,946
you, and I'm going to go ahead and unmute you, and I'm going to go ahead and unmute you,

1331
01:56:34,466 --> 01:56:39,566
Well, we see your emojis, but it looks like your mute button is stuck.

1332
01:56:42,606 --> 01:56:45,746
I wonder if you hear me or if you hear others.

1333
01:56:47,066 --> 01:56:47,646
Maybe I'll

1334
01:56:47,745 --> 01:56:49,125
message you and see what's going on.

1335
01:56:53,665 --> 01:56:57,005
Maybe I will go down and then come back up.

1336
01:56:57,085 --> 01:56:57,845
don't know if I'm...

1337
01:56:58,785 --> 01:57:00,525
Waiting to be added as a speaker.

1338
01:57:01,145 --> 01:57:02,425
there we go.

1339
01:57:02,585 --> 01:57:03,065
hear you now.

1340
01:57:03,325 --> 01:57:06,545
think LayerTwo host, which is, I'm guessing

1341
01:57:06,585 --> 01:57:11,685
that's Henry, waiting to add me as a speaker for a while because I had to restart

1342
01:57:11,685 --> 01:57:15,285
the web browser to get back in basically.

1343
01:57:17,465 --> 01:57:21,305
So yeah, I was just saying that you're right that on a protocol level, parent -child

1344
01:57:21,305 --> 01:57:25,105
definitely adds something and you're right that the standard is everything, yes,

1345
01:57:25,605 --> 01:57:26,805
as long as people follow it.

1346
01:57:26,905 --> 01:57:31,045
But I just wanted to add that if I launched a collection, know, pre -parent child, and I

1347
01:57:31,045 --> 01:57:32,865
said that there is a 10k limit, right?

1348
01:57:32,985 --> 01:57:35,205
then the next day I added 10k more, right?

1349
01:57:35,325 --> 01:57:39,005
community could just be like, oh, well, the next 10k that he added, we're going to

1350
01:57:39,005 --> 01:57:40,685
reject them. They're not part of the collection, right?

1351
01:57:41,425 --> 01:57:43,945
As far as it's really just like a social layer and an

1352
01:57:44,145 --> 01:57:46,465
explorer to add this social layer.

1353
01:57:47,045 --> 01:57:50,305
I feel like it definitely makes it lot easier for explorers to add it, and especially

1354
01:57:50,305 --> 01:57:52,925
because it's indexed on the protocol level.

1355
01:57:53,245 --> 01:57:58,365
But I still feel like it's very much still, you know, not like

1356
01:57:58,365 --> 01:58:02,945
100 % immutable because, you know, even if I have a parent child and

1357
01:58:02,945 --> 01:58:07,025
I burned the parent I can always add more and say oh well these are part of the

1358
01:58:07,025 --> 01:58:11,585
collection and if I if I convince magic Eden or whoever you know a Marketplace to add

1359
01:58:11,585 --> 01:58:16,525
them as part of collection and and everybody that's part of the arm The the community

1360
01:58:16,525 --> 01:58:17,765
they all agree with it.

1361
01:58:17,765 --> 01:58:22,465
Well, then, you know, they're still added more, you know So but you're right in one

1362
01:58:22,465 --> 01:58:26,105
aspect. I just wanted to point out it is still a social aspect as well.

1363
01:58:26,145 --> 01:58:31,885
But yeah, you can't magic Eden to invent their

1364
01:58:31,885 --> 01:58:37,785
own addition to this meta protocol, the protocol lives or dies by all these indexers

1365
01:58:37,785 --> 01:58:38,765
and marketplace.

1366
01:58:39,065 --> 01:58:41,945
being in sync with each other in this meta protocol.

1367
01:58:42,745 --> 01:58:44,985
So there is like meta consensus going on there?

1368
01:58:45,065 --> 01:58:48,045
Yeah, yes and no, because you can look at previous times, right?

1369
01:58:48,725 --> 01:58:54,665
even before magic eating, the most collections were held on a GitRehub, GitRepo by

1370
01:58:54,665 --> 01:58:58,145
Ordinalzwally. And they had a thing where

1371
01:58:58,179 --> 01:59:01,759
you had to submit a PR of a collection and then they would approve it.

1372
01:59:01,799 --> 01:59:07,259
then other marketplaces would just use their repo as the starting point.

1373
01:59:07,379 --> 01:59:10,619
And then anybody that wanted to add collections, they would talk to the marketplace

1374
01:59:10,619 --> 01:59:14,099
directly. I believe that's how Magic Eden did it.

1375
01:59:14,099 --> 01:59:16,189
I think there was another one.

1376
01:59:17,672 --> 01:59:19,292
Was it in slot?

1377
01:59:20,452 --> 01:59:23,352
What I to say is there have been collections that they added more to.

1378
01:59:23,852 --> 01:59:29,452
This is similar to the early genesis era of Bitcoin, Casey right now is Satoshi.

1379
01:59:30,232 --> 01:59:35,312
once the protocol stabilizes sufficiently, hopefully like within a year or so, and

1380
01:59:35,312 --> 01:59:36,646
Casey officially

1381
01:59:36,726 --> 01:59:42,606
leaves the protocol, it will be quickly sort of ossifying towards nobody being able to

1382
01:59:42,606 --> 01:59:47,386
change much because in this Genesis area you could have all kinds of crazy

1383
01:59:47,386 --> 01:59:52,286
voluntary changes because the community is so small.

1384
01:59:52,466 --> 01:59:55,686
There's two, three, or four big marketplaces that can still

1385
01:59:55,880 --> 01:59:57,560
push it around.

1386
01:59:59,520 --> 02:00:01,900
I think MoonSettler finally showed up.

1387
02:00:02,060 --> 02:00:07,240
Hopefully he will come in and get the speaker position

1388
02:00:07,240 --> 02:00:11,100
by the host and say something.

1389
02:00:11,660 --> 02:00:12,460
Oops, he disappeared.

1390
02:00:13,560 --> 02:00:13,860
around.

1391
02:00:15,114 --> 02:00:33,114
Yeah, so I think this is the early Genesis era of inscriptions and ordinals within a year I think the protocol will start ossifying to a point where this kind of crazy you know add me to a collection, do this do that stuff will stop working basically so this is this is 2009

1392
02:00:33,114 --> 02:00:48,114
2009 of Bitcoin basically. Yeah, I agree with it you know Casey definitely has a huge say these days, and probably hopefully you know later on he would just like leave more and yeah it's kind of like a temp he's kind of like a benevolent dictator but not for life, maybe.

1393
02:00:48,114 --> 02:00:59,114
But it's also examples where he wanted to do something in a community completely was against it and then at the end of the day didn't happen right yeah yeah he decided not to do renumbering and not to erase curse.

1394
02:01:00,114 --> 02:01:09,114
Well, you can also say what if he did push it right but what if you merged it right arm can can like let's say the whole community, or just not use that indexer and use their own.

1395
02:01:09,114 --> 02:01:19,114
My answer to that is it doesn't matter right because what either he wins with the community wins either way it will ossify the winner. Right, so it doesn't really matter who would win.

1396
02:01:20,114 --> 02:01:22,114
It's just a question of stabilizing the protocol.

1397
02:01:22,114 --> 02:01:41,114
Yeah, I agree with this I want to go back to as far as the fees on even before ordinals like even several years ago, I always saw on the fee apocalypse for how you put it as an inevitable thing, because I just felt like on black space on Bitcoin is such a valuable thing it's extremely undervalued, and, you know, to me it was like well it's a no brainer the fees are going to go up.

1398
02:01:42,114 --> 02:01:57,114
Even like, you know, before Ethereum, I always thought as that right like that, and, and over the years, to me it was like wow, why are the fees really like empty for so long, you know, a lot of it could have been because you know old coins, and, you know, and things like that.

1399
02:01:58,114 --> 02:02:16,114
And because of that there's like, you know, less usage on Bitcoin. And I do agree with you where previously anybody can put data on chain but it wasn't as easy for the average user, regular person to put data where now, that's why I feel like ordinals and inscriptions they added a point where this is more interesting to me than, than actual, you know, like the collections or trading or the art.

1400
02:02:16,114 --> 02:02:28,114
The fact that literally anybody can actually just put data on chain, and it makes it very, very easy. And I think that that just raises the floor to, you know, the black space demand.

1401
02:02:29,114 --> 02:02:36,114
I think it's very slow in the beginning but eventually, it will just be like well it's so like why wouldn't I just want to put data on chain versus anywhere else.

1402
02:02:36,114 --> 02:02:56,114
I have an explanation for why the fees have been very low, which is basically comes down to three factors, which is when SegWit was activated as a soft fork in 2017, you had kind of a perfect storm, because what happened was that the fees did spike high briefly.

1403
02:02:56,114 --> 02:03:09,114
And that forced all the exchanges to do batching, right. So batching could essentially eliminate two thirds or three quarters of the demand for block space once adopted by most exchanges. That's number one reason.

1404
02:03:10,114 --> 02:03:19,114
Number two reason is that SegWit quadrupled the amount of block space. So you had this huge additional supply where from one megabyte it went to four megabytes as we know now.

1405
02:03:20,114 --> 02:03:30,114
That's the second factor. And the third factor is before popularity and rise of stable coins, essentially Bitcoin was the bridging currency between exchanges where traders would transfer Bitcoin between exchanges.

1406
02:03:31,114 --> 02:03:42,114
And actually a large percentage of Bitcoin transactions, I don't know, 60-70 percent had to do with inter-exchange transfers done by traders and not actual organic usage by Bitcoin users.

1407
02:03:43,114 --> 02:03:50,114
So the combination of all these three factors essentially quadrupled the supply and divided the demand by a factor of five.

1408
02:03:51,114 --> 02:03:58,114
So you basically had like a huge additional amount of supply of block space and huge increase in the demand for block space.

1409
02:03:59,114 --> 02:04:08,114
And the adoption simply had to take another five years to catch up where there's like this wave of adoption and still strictly limited block space.

1410
02:04:09,114 --> 02:04:18,114
So even without Ordinals, the slowly rising tide of adoption would hit the wall of the block space limit and there would be a hypocalypse with or without Ordinals.

1411
02:04:19,114 --> 02:04:22,114
It's just that Ordinals brought it forward by one, two or three years essentially.

1412
02:04:23,114 --> 02:04:32,114
Yeah, I agree with you. But I also hear Paul's argument where, you know, the way me and you would look at it as, you know, kind of like what happened on Ethereum.

1413
02:04:33,114 --> 02:04:42,114
You know, me and my friends, we called Ethereum the billionaire chain and we were using other layers like during the times of really expensive transactions, you know, or for things that were, you know, that you had liquidity for.

1414
02:04:42,114 --> 02:04:46,114
Right. And there was still demand for, you know, really expensive transactions on Ethereum.

1415
02:04:47,114 --> 02:04:54,114
But I feel like a lot of that was because of the complexity of transactions on Ethereum and because of the liquidity of these contracts.

1416
02:04:55,114 --> 02:05:00,114
Where on Bitcoin, because it's a lot more primitive, it's really just a value transfer.

1417
02:05:01,114 --> 02:05:07,114
And is there going to really be enough of a demand for just simple value transfer to only be on the base layer?

1418
02:05:07,114 --> 02:05:15,114
And I hear you on the point of like nation states and banks trading with each other or big institutions trading with each other.

1419
02:05:16,114 --> 02:05:19,114
They're going to want to settle on base layer because, you know, they're not superior than anything else.

1420
02:05:20,114 --> 02:05:27,114
And that might be enough for the actual, you know, dramatic rise of fees of, you know, I'm talking about hundreds of dollars just to make a simple transaction.

1421
02:05:28,114 --> 02:05:34,114
Right. It might be. But then again, they would be incentivized to build rails between themselves to not pay that much.

1422
02:05:34,114 --> 02:05:41,114
So I think still the base layer demand will go up because I feel like it's extremely undervalued.

1423
02:05:42,114 --> 02:05:49,114
Just from my point of view. But I do hear the like the other argument where people are going to think.

1424
02:05:50,114 --> 02:06:02,114
Yeah. You're expressing Paul's argument about I call it substitutability of block space in that, you know, if it's too expensive here, let's use the Lightning Network in a private channel or let's use some other chain to settle.

1425
02:06:02,114 --> 02:06:10,114
So Paul's argument actually has two flaws in my mind. One, I mentioned earlier in earlier spaces here.

1426
02:06:11,114 --> 02:06:17,114
I said that the first floor is that it has an implicit assumption that the fee market has already existed for years.

1427
02:06:18,114 --> 02:06:23,114
And I claim that it only starts existing the last day that the block the mempool clears. Right.

1428
02:06:24,114 --> 02:06:26,114
That's the beginning of the real fee market. So it hasn't existed.

1429
02:06:26,114 --> 02:06:30,114
Right. I agree. And hopefully it will happen. But we don't know. It might not happen yet.

1430
02:06:31,114 --> 02:06:35,114
Right. We will only know this post factum. But so far it hasn't cleared since April 23rd.

1431
02:06:36,114 --> 02:06:47,114
So you cannot go back five, seven, eight years and do any kind of saying, see, the fees have always been low except for bull markets because there's been no fee market because block space is like instantly perishable commodity.

1432
02:06:47,114 --> 02:06:53,114
So unless unless the blocks are always full, then the price falls to zero immediately.

1433
02:06:54,114 --> 02:06:58,114
And there's essentially no no fee market unless the mempool never clears. Right.

1434
02:06:59,114 --> 02:07:05,114
So that's one. My first objection to Paul's model was that he would actually assume that the fee market has existed all along.

1435
02:07:06,114 --> 02:07:15,114
And I claim it hasn't. The second objection is this perfect substituted ability of block space, which is not all block space or not all settlement mechanism are the same.

1436
02:07:15,114 --> 02:07:20,114
Right. The base chain is the most secure, the most reliable for large transfers.

1437
02:07:21,114 --> 02:07:28,114
It is true that big institutions can create lightning channels which are private and they can settle instantly in those lightning channels.

1438
02:07:29,114 --> 02:07:38,114
But that comes with a trade off because they have to manage liquidity in these lightning channels and liquidity is locked up in the channel and therefore that's cost of capital being locked up.

1439
02:07:38,114 --> 02:07:45,114
So there is like hidden cost of lightning besides the actual close to zero or zero fees and private lightning channels.

1440
02:07:46,114 --> 02:07:50,114
The hidden cost of lightning is the cost of locking up your capital with a counterparty. So there is no free.

1441
02:07:51,114 --> 02:07:57,114
But not only lightning. Another example is like they can use a federated model like Liquid because between exchanges that that might be good enough for them.

1442
02:07:58,114 --> 02:08:05,114
Yeah. But that's Liquid has already failed because it was essentially proposed as a sidechain exactly for that, which is let exchanges settle with each other.

1443
02:08:05,114 --> 02:08:12,114
I think it has a use case. For example, high volatility traders that are, you know, like very high frequency that might want to.

1444
02:08:13,114 --> 02:08:20,114
And by frequency, I mean by, you know, when the volatility price, when the price is very volatile, they need to make, you know, transactions that are very time sensitive. Right.

1445
02:08:21,114 --> 02:08:26,114
So they're incentivized to use something like Liquid because they're already implicitly trusting the exchange anyways.

1446
02:08:27,114 --> 02:08:31,114
So if they're trusting the exchange anyways, they're not really lowering their trust by using something like Liquid.

1447
02:08:32,114 --> 02:08:38,114
You're essentially expressing the official business model of Liquid, right? And Liquid produces blocks exactly once every minute.

1448
02:08:39,114 --> 02:08:44,114
It doesn't have a probabilistic distribution of block times. It's just once every minute there's a new block.

1449
02:08:45,114 --> 02:08:57,114
I'm just giving an example of a federated model that institutions, big players can have within themselves, which would eliminate the pressure of them using the base layer and be just as, you know, between themselves.

1450
02:08:58,114 --> 02:09:02,114
But the whole beauty of base layer as opposed to this kind of thing.

1451
02:09:03,114 --> 02:09:13,114
Like, in other words, what you might have in mind is some kind of euro dollar, Bitcoin euro dollar system where a thousand big banks agree to use some kind of federated chain and settle themselves.

1452
02:09:14,114 --> 02:09:17,114
Even a single custodian like RapidCoin, they might trust that.

1453
02:09:18,114 --> 02:09:21,114
No, I know. I know. I know. The whole point is not to trust anybody. Right.

1454
02:09:22,114 --> 02:09:25,114
So if they actually end up, if they do end up sending Bitcoin.

1455
02:09:25,114 --> 02:09:29,114
Right. So the question is, is there going to be enough demand to not trust anybody? Right.

1456
02:09:30,114 --> 02:09:31,114
Because that's essentially what's going on.

1457
02:09:32,114 --> 02:09:37,114
Absolutely. I mean, look at the world right now. Nobody trusts each other. There's multiple wars going on and nobody can talk to anybody else. Right.

1458
02:09:38,114 --> 02:09:39,114
So this is the whole point of Bitcoin.

1459
02:09:40,114 --> 02:09:46,114
I lean on more with you that I do believe that there will be enough demand to not trust anybody and just use the base layer.

1460
02:09:46,114 --> 02:09:51,114
Even if it's, you know, banks within each other, nation states within each other or big institutions within each other.

1461
02:09:52,114 --> 02:09:56,114
I think that just the base layer will be superior where, you know, it's just they will pay.

1462
02:09:57,114 --> 02:09:58,114
If you're moving a million dollars, you don't mind to pay a thousand dollars.

1463
02:09:59,114 --> 02:10:06,114
Exactly. And also don't forget that, you know, right now, you know, those 50 million global South plebs can't afford to use Bitcoin.

1464
02:10:07,114 --> 02:10:15,114
If the fees rise, many of them will not be able to use Bitcoin, but there will be this sort of like middle class and sub whales or minnows or whatever you want to call it.

1465
02:10:16,114 --> 02:10:18,114
That cohort is also growing with adoption as well.

1466
02:10:19,114 --> 02:10:23,114
So people who want to transfer $5,000 worth of Bitcoin will still pay that $50.

1467
02:10:24,114 --> 02:10:30,114
Yeah, so there's going to be like these and I tweeted about this like in February that there's block space buyers of last resort now due to inscriptions.

1468
02:10:31,114 --> 02:10:34,114
And the mempool did clear that one time after I tweeted that.

1469
02:10:35,114 --> 02:10:37,114
So I was wrong so far. I was wrong like one time.

1470
02:10:38,114 --> 02:10:41,114
But like you said, yeah, there's going to be still demand.

1471
02:10:42,114 --> 02:10:45,114
But if it goes down a little bit, well, now the people that can pay that will pay that.

1472
02:10:46,114 --> 02:10:48,114
And if it goes down even more, there's going to be people that are ready to pay.

1473
02:10:49,114 --> 02:10:50,114
Also, the same logic applies on the way up.

1474
02:10:51,114 --> 02:10:57,114
Right. Like as the fees rise, the only people who still are paying fees will be people who don't care and can afford them.

1475
02:10:58,114 --> 02:11:01,114
Right. Therefore, the fees can rise until they attain some kind of equilibrium.

1476
02:11:02,114 --> 02:11:04,114
And this equilibrium you saw in Ethereum world.

1477
02:11:04,114 --> 02:11:06,114
Once the fees attained equilibrium, they started spilling over.

1478
02:11:07,114 --> 02:11:11,114
But Ethereum is well paid for right now because it has millions of dollars per day in fees.

1479
02:11:12,114 --> 02:11:17,114
And those fees are not dropping back to zero, which is what Paul's model was predicting that as soon as there's competition.

1480
02:11:18,114 --> 02:11:20,114
So Ethereum has a whole bunch of layer twos that are super cheap.

1481
02:11:21,114 --> 02:11:27,114
Yeah, but to give his own view like more, I would say it's just because Ethereum has more complexity.

1482
02:11:28,114 --> 02:11:31,114
It's not really just a regular value transfer that is driving up the fees on Ethereum.

1483
02:11:31,114 --> 02:11:34,114
There's way more complexity that can be done on Ethereum.

1484
02:11:35,114 --> 02:11:38,114
And that's the reason for fees going like staying higher.

1485
02:11:39,114 --> 02:11:40,114
It's possible. Right.

1486
02:11:41,114 --> 02:11:42,114
I agree with that. Right.

1487
02:11:43,114 --> 02:11:52,114
So the only outcome of that, the fact that Bitcoin has a lot lower complexity, is that it takes longer to fill up the bucket with simple use cases and hit the wall.

1488
02:11:53,114 --> 02:11:55,114
At which point there's a nonlinear response in fees.

1489
02:11:56,114 --> 02:12:05,114
Whereas in Ethereum, you can invoke a smart contract that costs $500 to execute, but it's worth it for you because you're aware of an institution swapping $10 million for another stable coin.

1490
02:12:06,114 --> 02:12:08,114
So that ends up eating up the block space in Ethereum.

1491
02:12:09,114 --> 02:12:14,114
Whereas in Bitcoin, you have pleb adoption where, you know, many more simple transactions will still fill up the bucket.

1492
02:12:15,114 --> 02:12:21,114
And once the bucket is full, you know, the fees will respond nonlinearly and start spilling over into second layers and third layers.

1493
02:12:22,114 --> 02:12:29,114
The only thing that changes is the higher complexity of Ethereum just simply means that Bitcoin needs more time in order to reach equilibrium.

1494
02:12:31,114 --> 02:12:40,114
Yeah, hopefully we are right on just the demand for simple value transfers will be enough to secure the chain.

1495
02:12:41,114 --> 02:12:42,114
I believe it will be.

1496
02:12:43,114 --> 02:12:44,114
There's evidence, right?

1497
02:12:45,114 --> 02:12:46,114
Yesterday there was evidence.

1498
02:12:47,114 --> 02:12:50,114
I haven't found the link yet and I haven't seen the collection of these inscriptions, which is posting Wikileaks.

1499
02:12:51,114 --> 02:12:53,114
I don't know how many megabytes that's being posted in there or gigabytes.

1500
02:12:54,114 --> 02:12:55,114
Who the hell knows?

1501
02:12:56,114 --> 02:12:57,114
But that's kind of an opening shot in the use case.

1502
02:12:58,114 --> 02:12:59,114
This gets priced out though.

1503
02:13:00,114 --> 02:13:01,114
This gets priced out if the fees go up.

1504
02:13:02,114 --> 02:13:03,114
No, it doesn't actually.

1505
02:13:04,114 --> 02:13:05,114
It does not.

1506
02:13:06,114 --> 02:13:07,114
Some of it does get priced out.

1507
02:13:07,114 --> 02:13:21,114
The reason why is because if something costs $100 to inscribe versus a $1 transaction, a regular $1 Bitcoin transaction, right?

1508
02:13:22,114 --> 02:13:27,114
10 times higher fees mean it's 100 times 10 or $1 times 10.

1509
02:13:28,114 --> 02:13:29,114
So it actually does price out.

1510
02:13:30,114 --> 02:13:31,114
I agree with your math calculations.

1511
02:13:32,114 --> 02:13:34,114
What I disagree with is the following.

1512
02:13:34,114 --> 02:13:36,114
I have a counter argument to your being priced out argument.

1513
02:13:37,114 --> 02:13:41,114
Do you remember what happened to Julian Assange in 2011 or whatever?

1514
02:13:42,114 --> 02:13:43,114
They started posting this stuff.

1515
02:13:44,114 --> 02:13:47,114
He was running Wikileaks.org website, which itself costs money to run, right?

1516
02:13:48,114 --> 02:13:50,114
And then he was being hunted by whatever.

1517
02:13:51,114 --> 02:13:55,114
And there was basically no way to publish immutable and uncensorable information until the inscriptions.

1518
02:13:56,114 --> 02:14:03,114
So I think that some people would pay $1,000 to post a few megabytes worth of uncensorable data.

1519
02:14:04,114 --> 02:14:06,114
It doesn't get priced out 100%.

1520
02:14:07,114 --> 02:14:11,114
Don't forget the price of going to jail as the cost of not doing it, right?

1521
02:14:12,114 --> 02:14:14,114
It's the opportunity cost of not doing it.

1522
02:14:15,114 --> 02:14:16,114
It's still niche, though.

1523
02:14:17,114 --> 02:14:18,114
It's very niche.

1524
02:14:19,114 --> 02:14:22,114
But if somebody wants to post a video of some war crime, right?

1525
02:14:23,114 --> 02:14:26,114
It's going to be extremely expensive to post videos because that's just so much space.

1526
02:14:27,114 --> 02:14:31,114
No, I know, but it's very cheap compared to not going to jail.

1527
02:14:31,114 --> 02:14:34,114
So therefore, it's not a purely economic consideration.

1528
02:14:35,114 --> 02:14:45,114
If somebody obtains a video of a war crime or a massacre that takes 10 megabytes or 50 megabytes to post but costs $1,000 or $5,000 to post,

1529
02:14:46,114 --> 02:14:53,114
people would rather pay that and post that than run a website that can be taken down and they can be arrested and pursued like Julian Assange, right?

1530
02:14:54,114 --> 02:14:56,114
Yeah, for sure.

1531
02:14:57,114 --> 02:15:00,114
I noticed Troy Cross is in the audience, if it's the real Troy Cross.

1532
02:15:01,114 --> 02:15:03,114
I've seen your content and I've listened to a lot of your episodes.

1533
02:15:04,114 --> 02:15:11,114
I want to give you a chance if you want to come up and share anything, ask questions, comment on BitVM or Drivechains or really anything Bitcoin.

1534
02:15:12,114 --> 02:15:13,114
I think you're an amazing person in this space.

1535
02:15:14,114 --> 02:15:17,114
Sorry for anybody else in here that I don't know or recognize.

1536
02:15:20,114 --> 02:15:23,114
Troy, give us a thumbs up if you hear me or if you want to come up, that'd be great.

1537
02:15:31,114 --> 02:15:37,114
I briefly saw David Siroy, but he came in and out. He would also be a good contributor if he came up to the stage.

1538
02:15:39,114 --> 02:15:42,114
Hey guys, yeah, I'm just listening and I'm just enjoying the conversation.

1539
02:15:43,114 --> 02:15:45,114
Thank you for the shout out, but I'm just listening and learning.

1540
02:15:47,114 --> 02:15:48,114
Cool, cool.

1541
02:15:49,114 --> 02:15:52,114
Earlier, we had Super Testament here that was talking more about BitVM.

1542
02:15:53,114 --> 02:16:03,114
And Alex here had some interesting ways of potentially creating two-way pegs for sidechains with keeping a contract on the other side.

1543
02:16:04,114 --> 02:16:05,114
We were talking about a bunch of stuff.

1544
02:16:06,114 --> 02:16:08,114
Yeah, anybody here that hasn't seen Troy's content, definitely check it out.

1545
02:16:09,114 --> 02:16:10,114
I'm a big fan.

1546
02:16:14,114 --> 02:16:15,114
Yeah, just keep it going, guys.

1547
02:16:16,114 --> 02:16:20,114
I'm just going about my day and listening to experts.

1548
02:16:20,114 --> 02:16:21,114
I'm enjoying it.

1549
02:16:22,114 --> 02:16:23,114
I missed the BitVM part.

1550
02:16:24,114 --> 02:16:25,114
Is it recorded?

1551
02:16:26,114 --> 02:16:28,114
I'm trying to learn everything I can about that project.

1552
02:16:29,114 --> 02:16:34,114
It will be once we terminate the space, then the recording will appear.

1553
02:16:35,114 --> 02:16:38,114
Perhaps that's more friendly content.

1554
02:16:39,114 --> 02:16:45,114
Yeah, I really love that they're recorded because whatever parts I missed later, I can watch at 2x and just listen through.

1555
02:16:46,114 --> 02:16:48,114
After it's done, you can go back and listen through it.

1556
02:16:48,114 --> 02:16:50,114
Security budget is also very interesting to me.

1557
02:16:51,114 --> 02:16:54,114
Henry and I have had long debates in the DMs about it.

1558
02:16:57,114 --> 02:17:06,114
I have opinions, but I'm still trying to formulate exactly what I think about it and what I don't.

1559
02:17:07,114 --> 02:17:18,114
The main thought I've had, actually a year ago, I talked about this on Peter McCormick's show at Blast Pacific Bitcoin.

1560
02:17:19,114 --> 02:17:28,114
I just noticed that Bitcoin mining was going to become a kind of auxiliary business.

1561
02:17:29,114 --> 02:17:31,114
I don't see it as a standalone business long term.

1562
02:17:31,114 --> 02:17:41,114
Because any miner that pairs up with a buyer of heat is going to do better than a miner that doesn't.

1563
02:17:42,114 --> 02:17:43,114
Other things being equal.

1564
02:17:44,114 --> 02:17:52,114
But also because Bitcoin can serve as a load balancer and it can pair up with a firm buyer of energy.

1565
02:17:53,114 --> 02:17:57,114
Like, let's say, Microsoft or Amazon or Google, where they need firm power.

1566
02:17:58,114 --> 02:18:04,114
They can pair up with that firm buyer to finance new build out.

1567
02:18:05,114 --> 02:18:16,114
I didn't say this on the show, but my analogy is that Bitcoin is like the submissive partner in any relationship.

1568
02:18:17,114 --> 02:18:20,114
It always gives way to the other partner.

1569
02:18:20,114 --> 02:18:27,114
I know maxis are not going to want to hear this because it runs against their hyper masculine picture of Bitcoin.

1570
02:18:28,114 --> 02:18:30,114
But I'm thinking about it purely in an economic sense.

1571
02:18:31,114 --> 02:18:39,114
If you have a business that needs a certain amount of heat, then Bitcoin will scale to that need.

1572
02:18:40,114 --> 02:18:45,114
Or if you have a certain amount of excess energy in a location, Bitcoin will scale to that.

1573
02:18:45,114 --> 02:18:52,114
And the reason why Bitcoin is the submissive partner is because it's so price sensitive to electricity price.

1574
02:18:53,114 --> 02:18:55,114
And it's portable and it's flexible and it's scalable.

1575
02:18:56,114 --> 02:18:58,114
And it doesn't have a supply chain.

1576
02:18:59,114 --> 02:19:05,114
You just have to get the miners in place and then you don't have to ship the good and you don't have to ship goods in.

1577
02:19:06,114 --> 02:19:08,114
The only input you need is really power.

1578
02:19:09,114 --> 02:19:14,114
Whereas all other businesses that Bitcoin will pair with will have supply chain needs.

1579
02:19:15,114 --> 02:19:17,114
They're making something and shipping it.

1580
02:19:18,114 --> 02:19:22,114
I shouldn't say all. Maybe the other data centers also don't have this.

1581
02:19:23,114 --> 02:19:32,114
But anything they pair with like wastewater treatment facilities, let's say, or paper mills or any other business that buys low grade heat.

1582
02:19:33,114 --> 02:19:38,114
Or at least they right now pay something to generate low grade heat.

1583
02:19:39,114 --> 02:19:43,114
All of those other businesses have constraints that Bitcoin doesn't have.

1584
02:19:43,114 --> 02:19:50,114
So I realized that Bitcoin will size itself to the need of these other businesses.

1585
02:19:51,114 --> 02:19:52,114
They will dictate the terms.

1586
02:19:53,114 --> 02:20:00,114
And Bitcoin mining will just like flow to fill in the niches of demand for when and where it makes sense.

1587
02:20:01,114 --> 02:20:06,114
And when I realized that, I realized, OK, Bitcoin mining is...

1588
02:20:09,338 --> 02:20:14,398
Not really motivated by the block reward or that's not what's really paying the bill.

1589
02:20:14,418 --> 02:20:21,578
What's paying the bill is that plus these alternative revenue streams such as methane

1590
02:20:21,578 --> 02:20:29,897
mitigation on flare sites, such as reducing the heating costs for firms that are already

1591
02:20:29,897 --> 02:20:37,418
heating. And anyway, that realization made me and I said this on Peter's show a year

1592
02:20:37,418 --> 02:20:45,178
ago, much more relaxed about the near term security budget than I was prior to seeing

1593
02:20:45,178 --> 02:20:52,257
that, because I was like, OK, where does mining flow right now or where is it going to

1594
02:20:52,257 --> 02:20:57,898
flow? It's going to flow into these situations where power is super cheap and in fact,

1595
02:20:57,898 --> 02:21:04,178
they may spend more than a Bitcoin to mine a Bitcoin, but it'll still make sense to do

1596
02:21:04,178 --> 02:21:10,738
that mining. And if you wanted to attack the network, you would have and you wanted to

1597
02:21:10,738 --> 02:21:12,418
get 51 percent.

1598
02:21:12,418 --> 02:21:14,658
You have two choices about how to do that.

1599
02:21:15,058 --> 02:21:21,378
One is you could buy out those existing miners and capture their hash rate.

1600
02:21:22,058 --> 02:21:29,897
And the other is that you could build your own mines, acquire new ASICs, acquire new

1601
02:21:29,897 --> 02:21:31,818
power supplies and deploy them.

1602
02:21:32,338 --> 02:21:40,257
And I realized that that second option would be very expensive, more expensive than you

1603
02:21:40,257 --> 02:21:46,098
might might have thought by just looking at, say, the block reward, the block reward,

1604
02:21:46,937 --> 02:21:53,257
block subsidy and and fees together, because the hash rate will be a lot higher than you

1605
02:21:53,257 --> 02:21:54,897
would imagine just looking at that.

1606
02:21:55,418 --> 02:21:57,058
Why?

1607
02:21:57,138 --> 02:22:02,058
Because the businesses that are mining are also doing this other stuff and they're

1608
02:22:02,058 --> 02:22:09,418
actually spending more on power and ASICs than they are making in Bitcoin.

1609
02:22:10,458 --> 02:22:13,537
And it only makes sense because they have these alternative revenue streams that push

1610
02:22:13,537 --> 02:22:14,658
them over the top. Right.

1611
02:22:15,058 --> 02:22:21,058
But if you set out to do it, if you if you want to spend the same amount that, say, half

1612
02:22:21,097 --> 02:22:24,897
of the miners are spending now or if you want a double hash rate and you spend what the

1613
02:22:24,897 --> 02:22:29,817
miners are spending now and you can't buy from existing miners, let's just let's just

1614
02:22:29,817 --> 02:22:37,298
suppose you can't, then you have this very arduous road ahead of you because you you

1615
02:22:37,298 --> 02:22:44,578
can either build out new power, you can build out new power supplies or buy what is

1616
02:22:44,578 --> 02:22:47,778
available on the market power wise, which is very expensive.

1617
02:22:48,017 --> 02:22:52,897
You're going to spend you're going to spend more than a Bitcoin to mine a Bitcoin like

1618
02:22:52,897 --> 02:22:58,218
everybody else. But you don't have these alternative revenue streams because the

1619
02:22:58,218 --> 02:23:01,817
businesses that needed Bitcoin as a pair have already taken them.

1620
02:23:02,377 --> 02:23:04,097
And so you're just in a green field.

1621
02:23:04,097 --> 02:23:09,457
It's building out power, buying up ASICs and mining Bitcoin for, you know, more than a

1622
02:23:09,457 --> 02:23:12,498
Bitcoin without that alternative revenue stream.

1623
02:23:13,498 --> 02:23:22,058
So so that anyway, that's what made me think maybe we have a cushion here while we work

1624
02:23:22,058 --> 02:23:26,017
on the security budget long term, maybe in the medium term.

1625
02:23:27,377 --> 02:23:30,457
The cost to attack has been underestimated.

1626
02:23:32,257 --> 02:23:37,938
Because we assume something like we assume that either existing miners will sell and

1627
02:23:37,938 --> 02:23:41,377
maybe that's doubtful because miners don't want to sell to an attacker.

1628
02:23:42,977 --> 02:23:49,658
Or or we assume that the price of mining a new Bitcoin, the marginal price of mining

1629
02:23:50,058 --> 02:23:57,817
adding to hash rate is is equivalent to the the marginal price of adding hash rate or

1630
02:23:57,817 --> 02:24:01,457
the mean cost of hash rate, something like that, the mean cost of hash rate right now

1631
02:24:01,457 --> 02:24:06,097
adding hash rate. And and those assumptions look look false.

1632
02:24:06,097 --> 02:24:13,537
So anyway, sorry, I didn't want to jump in here and lecture, but that's where I was a

1633
02:24:13,537 --> 02:24:18,298
year ago. And that's not a solution, I think, in the very long term.

1634
02:24:19,537 --> 02:24:24,498
But it's a consideration in the short term, if you're just thinking practically like an

1635
02:24:24,498 --> 02:24:30,538
attacker, that that is more complex than just looking at what is the security budget.

1636
02:24:30,538 --> 02:24:37,417
And if I can spend, well, it'll be quite quite a bit less than that if I spend enough to

1637
02:24:37,417 --> 02:24:41,897
push other miners underwater, right, if I spend enough to push other miners underwater,

1638
02:24:41,897 --> 02:24:45,098
then they'll turn offline and then I can add more hash rate.

1639
02:24:45,098 --> 02:24:49,538
And that's actually also a complex, you know, that's also a complex calculation.

1640
02:24:49,538 --> 02:24:53,617
It's I don't have to spend I don't have to double the Bitcoin network spend to double

1641
02:24:53,617 --> 02:24:59,177
hash rate, because once I start pouring money into into hash rate, I drive up the hash

1642
02:24:59,177 --> 02:25:04,297
rate, drive up the difficulty and other miners start throwing up a white flag and leaving

1643
02:25:04,297 --> 02:25:08,058
the business and selling their basics back onto the market.

1644
02:25:08,058 --> 02:25:09,218
And that makes things cheaper.

1645
02:25:09,218 --> 02:25:12,338
Right. That's a countervailing consideration.

1646
02:25:12,338 --> 02:25:15,417
Anyway, I'm in the middle of thinking it through.

1647
02:25:15,417 --> 02:25:17,177
Those are preliminary thoughts.

1648
02:25:17,177 --> 02:25:21,818
I don't have worked out thoughts yet, and I don't mean to say anything definitive here.

1649
02:25:21,818 --> 02:25:23,978
I'm I'm in learning mode.

1650
02:25:24,058 --> 02:25:29,218
I think this is a serious consideration and I haven't got to the bottom of it yet.

1651
02:25:29,218 --> 02:25:30,778
So, yeah, I'm just going to sit down.

1652
02:25:34,857 --> 02:25:41,897
I would add to this as well, that the mining incentivizes infrastructure to be built for

1653
02:25:41,897 --> 02:25:46,338
electricity generation in like areas where there's no incentive for electricity

1654
02:25:46,338 --> 02:25:49,617
generation, where it's like stranded energy or things like that.

1655
02:25:49,617 --> 02:25:56,697
But then also I can see a future where like almost all major electricity generation are

1656
02:25:56,697 --> 02:25:58,658
going to be Bitcoin miners as well.

1657
02:25:58,938 --> 02:26:04,697
It's just it seems like it will be an eventuality, like all nuclear plants or any like

1658
02:26:04,938 --> 02:26:10,137
big energy generations are going to have miners on site or, you know, close by or either

1659
02:26:10,137 --> 02:26:15,378
either directly connected or indirectly, but closely connected because they're just the

1660
02:26:15,378 --> 02:26:21,218
buyers of last resort. And and like the biggest points of as well for like the balancing

1661
02:26:21,218 --> 02:26:27,137
the grid, you know, I just feel like there's a lot more things to mining than just the

1662
02:26:27,137 --> 02:26:31,978
reward of the block subsidy and the fees like you're putting up.

1663
02:26:32,338 --> 02:26:33,417
Yeah, I agree.

1664
02:26:33,417 --> 02:26:39,577
And I just want to add to that that the big question is, you know, as once generation

1665
02:26:39,577 --> 02:26:43,577
generation wakes up to the fact that, you know, they will be well served by having

1666
02:26:43,737 --> 02:26:47,978
flexible load on site and running it themselves instead of going through miners like once

1667
02:26:47,978 --> 02:26:52,978
they wake up to that, then the question from an attacker's perspective is how hard would

1668
02:26:52,978 --> 02:27:01,697
it be to. Purchase that hash rate from from those generators, it right now, I think

1669
02:27:01,697 --> 02:27:06,857
miners are just not going to sell their hash rate to an attacker like I think that's a I

1670
02:27:06,857 --> 02:27:09,297
can't see that happening psychologically or socially.

1671
02:27:09,498 --> 02:27:13,457
I can't see like, you know, riot being like, well, you're going to lose a little bit more

1672
02:27:13,457 --> 02:27:16,417
for your hash rate than than its value in Bitcoin.

1673
02:27:16,417 --> 02:27:18,297
So we'll just sell it to you for that.

1674
02:27:19,017 --> 02:27:25,017
But but the question is who holds hash rate in the future and whether that will continue

1675
02:27:25,017 --> 02:27:30,378
to be the case, because once you appreciate that the marginal cost of adding hash rate

1676
02:27:30,538 --> 02:27:34,978
is going to dramatically, I think it pretty dramatically be higher than the cost of

1677
02:27:34,978 --> 02:27:40,617
existing hash rate, then then the gap between those two modes of attack means like

1678
02:27:40,617 --> 02:27:45,338
you're really much better off as an attacker buying existing hash rate than you are

1679
02:27:45,338 --> 02:27:47,177
adding, adding new stuff.

1680
02:27:47,378 --> 02:27:51,897
So then the question is, like, who's who's willing to sell it to you and for for how

1681
02:27:51,897 --> 02:27:57,737
much? And in the short term, I feel pretty comfortable that, yeah, I see Harriet down

1682
02:27:57,737 --> 02:28:03,938
below. Grid is not going to sell to an attacker and neither is, you know, Fred Barathon

1683
02:28:03,938 --> 02:28:08,137
and neither is I mean, even yeah, well, maybe Bitdeer.

1684
02:28:08,137 --> 02:28:11,258
OK, that piece of The New York Times, like maybe if there's enough Chinese mining, maybe

1685
02:28:11,258 --> 02:28:16,098
they sell to attackers because maybe the attacker is the maybe the attacker is like the

1686
02:28:16,098 --> 02:28:17,218
Communist Party of China.

1687
02:28:17,617 --> 02:28:25,177
But but I think by and large, existing miners are are Bitcoiners and they're locked

1688
02:28:25,177 --> 02:28:30,978
into their own their own profit model and they're locked into a vision.

1689
02:28:30,978 --> 02:28:33,218
They're basically all long Bitcoin.

1690
02:28:34,857 --> 02:28:41,098
But in the future, if it becomes if if if hash rate goes to generation and generation is

1691
02:28:41,098 --> 02:28:48,298
highly regulated by governments, then then the government, you know, getting that or an

1692
02:28:48,298 --> 02:28:52,218
attacker getting it with you, if the attacker's interests are aligned with the

1693
02:28:52,218 --> 02:28:58,497
generators and the and the government somehow becomes a new kind of vulnerability.

1694
02:28:58,697 --> 02:29:04,778
I'm just trying to see out that far because I completely agree it'll it'll I think I

1695
02:29:04,778 --> 02:29:09,658
think everybody sees this, that it'll merge eventually with generation in some way.

1696
02:29:11,137 --> 02:29:14,978
But but then how does that change the security?

1697
02:29:15,937 --> 02:29:19,897
Less clear to me on the one hand, the generators like, hey, we need this load.

1698
02:29:19,897 --> 02:29:21,497
It helps us operate.

1699
02:29:21,497 --> 02:29:25,497
If we attack the network, we lose demand for Bitcoin and that's against our interest.

1700
02:29:25,778 --> 02:29:30,098
But on the other hand, like these generators, as we know right now, are not Bitcoiners.

1701
02:29:30,457 --> 02:29:34,457
They don't share our values deeply and they are also highly regulated and controlled by

1702
02:29:34,457 --> 02:29:39,497
governments, which is also different from the Bitcoin mining that we see now.

1703
02:29:39,497 --> 02:29:45,817
So it's just another kind of one of those one of those unknowns we can all have an

1704
02:29:45,817 --> 02:29:47,618
opinion about right now.

1705
02:29:47,618 --> 02:29:49,577
But I can only see darkly.

1706
02:29:56,098 --> 02:30:02,017
Yeah, hopefully the incentive models will will work where, like you're saying, you know,

1707
02:30:02,017 --> 02:30:07,457
if we become an attacker, that's hurting our, you know, baseload and, you know, our other

1708
02:30:07,457 --> 02:30:11,257
potential revenue. And as far as like regulatory and government, I think they're just

1709
02:30:11,257 --> 02:30:13,618
people and they are in their own interest as well.

1710
02:30:13,618 --> 02:30:18,577
And as time goes by, more and more people in the government are going to, in my opinion,

1711
02:30:18,577 --> 02:30:23,057
understand Bitcoin and the electricity generation to the electricity generation to the

1712
02:30:23,057 --> 02:30:27,218
Bitcoin and the electricity generation people, you know, maybe they also don't share the

1713
02:30:27,218 --> 02:30:31,937
values right now. But if they do become, you know, directly connected with mining, they

1714
02:30:31,937 --> 02:30:34,937
are eventually some of them are going to understand the values and they're going to

1715
02:30:34,937 --> 02:30:41,377
adopt it. And, you know, as people grow up, like most kids are growing up with Internet

1716
02:30:41,377 --> 02:30:42,978
money on video games and things like that.

1717
02:30:42,978 --> 02:30:46,137
So I feel like Bitcoin and virtual money is a lot closer to them.

1718
02:30:46,137 --> 02:30:48,017
And eventually they get older and they get into the government.

1719
02:30:48,017 --> 02:30:54,137
Right. And so I think like the future isn't so much of governments attacking.

1720
02:30:54,817 --> 02:30:57,457
I think it's more of like the future is governments adopting.

1721
02:30:58,178 --> 02:30:59,738
Just, you know, my thought.

1722
02:31:00,017 --> 02:31:05,978
Yeah. I mean, just to be just to be totally transparent here, you know, in 2011, I thought

1723
02:31:05,978 --> 02:31:08,218
Bitcoin was going to be 51 percent attacked.

1724
02:31:08,937 --> 02:31:11,497
I thought the likelihood of that was extremely high.

1725
02:31:11,497 --> 02:31:14,338
I don't remember if it was 2011 or 2013.

1726
02:31:14,338 --> 02:31:21,298
But I did this calculation on the cost to attack the network in a sustained way.

1727
02:31:22,978 --> 02:31:28,697
And and the number I came up with so pathetically low and I was looking at Wall Street

1728
02:31:28,697 --> 02:31:34,457
bonuses at the time, you know, in that post 2008 thing, it was so low that one one VP

1729
02:31:34,457 --> 02:31:39,778
bonus from Goldman Sachs was sufficient to like, I can't remember for how long, but to

1730
02:31:39,778 --> 02:31:44,178
attack the network for like seriously attack the network, just a bonus in one year for

1731
02:31:44,178 --> 02:31:46,137
one VP from Goldman.

1732
02:31:46,137 --> 02:31:48,658
And I remember writing something at the time.

1733
02:31:48,937 --> 02:31:50,897
Maybe it was 2013 because it might have been on Reddit.

1734
02:31:50,897 --> 02:31:56,738
Don't search this. But I remember writing something to the time at the time to this

1735
02:31:56,738 --> 02:32:03,057
effect. Like you're telling me this technology is going to upend all the finance.

1736
02:32:03,057 --> 02:32:05,858
We're going to disintermediate like Wall Street.

1737
02:32:06,098 --> 02:32:15,497
And and the world of finance in London and in China, it's like we're going to upend

1738
02:32:15,497 --> 02:32:21,978
everything and empower all humans to transfer peer to peer and disintermediate this this

1739
02:32:21,978 --> 02:32:26,137
entity. And we're also going to disempower governments by like limiting the ability they

1740
02:32:26,137 --> 02:32:27,137
have to print money.

1741
02:32:28,057 --> 02:32:35,577
And you're telling me no one is going to put up like one what like one bonus from a

1742
02:32:35,577 --> 02:32:42,137
major Wall Street firm, like no firm will put up that much money to to long term take

1743
02:32:42,137 --> 02:32:46,538
out this threat. And of course, it wouldn't take it out, but it would like seriously

1744
02:32:46,538 --> 02:32:48,497
damage its rise and slow it.

1745
02:32:48,497 --> 02:32:50,538
And until until it can be dealt with.

1746
02:32:50,538 --> 02:32:54,497
Right. And I was like, I just think the probability of that is extremely low.

1747
02:32:55,497 --> 02:33:00,618
Well, here we are, here we are, whatever it is, 10 or 12 years later, nobody did that.

1748
02:33:00,937 --> 02:33:06,538
The relevant parties like didn't take it seriously for long enough that it became cost

1749
02:33:06,538 --> 02:33:07,778
prohibitive to attack it.

1750
02:33:08,377 --> 02:33:15,098
And so, I mean, I've been on this like pessimistic kick like the entire time.

1751
02:33:15,098 --> 02:33:20,577
And I've been wrong the entire I was wrong the entire way, you know, so I like I like

1752
02:33:20,618 --> 02:33:26,178
what you're saying. And it's, you know, it's really it's a good thing that it's a good

1753
02:33:26,178 --> 02:33:29,697
thing we have adversarial thinkers and skeptics and pessimists like myself.

1754
02:33:30,017 --> 02:33:35,057
And it's also a good thing that, you know, we have people who don't care and who can

1755
02:33:35,057 --> 02:33:38,978
see who can see a brighter future.

1756
02:33:38,978 --> 02:33:41,377
And because they were right, they were right.

1757
02:33:41,377 --> 02:33:47,257
And I was wrong. Well, I'm your I'm your friendly neighborhood radical optimist.

1758
02:33:48,218 --> 02:33:52,497
And I believe in the systems that we're all working on, I'm sorry, a little little bit

1759
02:33:52,497 --> 02:33:53,817
loud in the background, it will get better.

1760
02:33:55,137 --> 02:34:00,538
I just wanted to hit on the sort of energy capture piece a little bit, because I think

1761
02:34:00,538 --> 02:34:07,457
it's misunderstood and more important than we've taken credit for, which is just that

1762
02:34:07,897 --> 02:34:13,978
the the playbook to me is very straightforward, which is that hash rate will become the

1763
02:34:14,298 --> 02:34:18,218
critical enabler for large scale energy systems to function properly.

1764
02:34:18,697 --> 02:34:25,658
And so the only way to continue to utilize mining hash rate within those energy systems

1765
02:34:26,178 --> 02:34:30,817
is for Bitcoin to remain unchanged and uncensored, because ultimately, the quality of

1766
02:34:30,817 --> 02:34:41,738
the economic center of mass that fits on top of Bitcoin will be the critical enabler for

1767
02:34:41,738 --> 02:34:43,098
our power systems to function.

1768
02:34:43,577 --> 02:34:49,618
And so if you think of sort of a hierarchy of economic systems, the base money economic

1769
02:34:49,618 --> 02:34:55,218
system will sit ahead of any single country's direct interest in the economic system.

1770
02:34:55,218 --> 02:34:59,137
And then the energy system sits below the country in that hierarchy.

1771
02:34:59,497 --> 02:35:05,577
And so in order for this to kind of pull out the right way, Bitcoin needs to be the apex

1772
02:35:05,738 --> 02:35:07,178
economic center of mass.

1773
02:35:07,577 --> 02:35:11,457
The United States will become the downstream economic center of mass.

1774
02:35:11,738 --> 02:35:16,618
And then each individual energy system will basically be able to leapfrog that

1775
02:35:16,618 --> 02:35:21,738
intermediary by being enabled by this larger economic actor, which is the Bitcoin

1776
02:35:21,738 --> 02:35:22,137
network.

1777
02:35:22,137 --> 02:35:41,457
Yeah, it makes sense.

1778
02:35:42,457 --> 02:35:47,017
I want to comment on the bankers and attacking Bitcoin early on.

1779
02:35:48,017 --> 02:35:53,778
I had some talks with people that were bankers in 2013, 2014.

1780
02:35:53,778 --> 02:35:57,538
I was telling them about Bitcoin and I was like, this is going to take over your job.

1781
02:35:57,858 --> 02:35:58,858
You know, they laughed at me.

1782
02:35:59,658 --> 02:36:02,457
You know, many years later when it went up, you know, they were like, oh, wow, this guy

1783
02:36:02,457 --> 02:36:04,618
was a wizard. He knew about Bitcoin.

1784
02:36:04,618 --> 02:36:05,577
He was telling us about it. Right.

1785
02:36:06,057 --> 02:36:10,137
But I feel like when it was the early days, it was easy to attack it, but they all laughed

1786
02:36:10,137 --> 02:36:11,457
at it. They felt like it's a toy.

1787
02:36:11,457 --> 02:36:14,017
It's a joke. They didn't take anything serious, you know.

1788
02:36:15,017 --> 02:36:16,937
And it had time to grow.

1789
02:36:17,137 --> 02:36:22,377
I think at this point, people start to realize the benefit of it, like as a human, like a

1790
02:36:22,377 --> 02:36:26,817
humanitarian thing, like it's just there's so many benefits, you know, like the

1791
02:36:26,817 --> 02:36:30,057
electrical grid side, the generation side, you know, the balancing side.

1792
02:36:30,218 --> 02:36:34,618
But like just the value and the censorship resistance and the mutability, I think

1793
02:36:34,618 --> 02:36:38,418
people slowly start to learn that and like they're less incentivized to attack it.

1794
02:36:38,418 --> 02:36:42,738
Even governments like, yeah, sure, governments like collectively might want to attack it

1795
02:36:42,817 --> 02:36:44,577
or a government collectively might want to attack it.

1796
02:36:44,778 --> 02:36:46,338
But it's still individuals in that government.

1797
02:36:46,338 --> 02:36:50,497
And I feel like the individuals in that government are still for their individual

1798
02:36:50,497 --> 02:36:53,338
self-interest. And I feel like they still do learn about Bitcoin.

1799
02:36:53,338 --> 02:36:56,178
And eventually when they do, they see that it's a benefit to themselves.

1800
02:36:56,178 --> 02:36:59,978
They want to hold Bitcoin and it's a benefit for them, for the government to treat it

1801
02:36:59,978 --> 02:37:06,457
nicely. So I think that like, you know, from that point of view, they, you know, maybe

1802
02:37:06,457 --> 02:37:10,338
short term they might want to attack it, but it's just hopefully the cost is going to

1803
02:37:10,338 --> 02:37:14,498
continue to rise. And hopefully they would just start to realize that they're better off

1804
02:37:14,498 --> 02:37:16,738
really joining than even attempting to attack.

1805
02:37:16,817 --> 02:37:18,657
Like they'll benefit more by joining.

1806
02:37:21,657 --> 02:37:25,657
I mean, we haven't seen that so far from the U.S.

1807
02:37:26,098 --> 02:37:28,858
where we've we've seen pockets of the U.S.

1808
02:37:28,858 --> 02:37:36,338
But when we look at how, say, Treasury thinks about it doesn't seem to be that way.

1809
02:37:36,618 --> 02:37:43,738
And I think that's because of something else that Bitcoiners say, which is this thing is

1810
02:37:43,738 --> 02:37:46,057
going to disempower the money printer.

1811
02:37:46,457 --> 02:37:52,657
So I think we have to expect resistance when it starts to do that.

1812
02:37:52,978 --> 02:37:57,657
You know, either either you drop that talking point of saying Bitcoin disempowers the money

1813
02:37:57,657 --> 02:38:00,338
printer or you acknowledge that the money printer.

1814
02:38:01,098 --> 02:38:02,738
You have to drop that talking point.

1815
02:38:02,978 --> 02:38:04,777
I mean, sorry to interrupt.

1816
02:38:05,297 --> 02:38:09,177
Yeah, no, it's got it's got to be one or the other because you can't say I mean, this is I'm

1817
02:38:09,177 --> 02:38:11,498
just channeling my 2011 self here.

1818
02:38:11,978 --> 02:38:15,618
You can't say they're going to welcome us with open arms and also we're going to take all

1819
02:38:15,618 --> 02:38:17,817
their power away in the same breath.

1820
02:38:17,858 --> 02:38:22,018
But I also think that from one point of view, they're the most aligned to adopt it because

1821
02:38:22,018 --> 02:38:24,817
they could just buy it. You know, since they have the money printer, they could buy it and

1822
02:38:24,817 --> 02:38:26,457
they could position themselves really nicely.

1823
02:38:26,858 --> 02:38:28,378
And what are and what are they doing?

1824
02:38:28,417 --> 02:38:29,498
They're selling it right now.

1825
02:38:29,537 --> 02:38:31,138
They don't even need the money printer to buy it.

1826
02:38:31,138 --> 02:38:33,417
They seize it from criminals.

1827
02:38:33,457 --> 02:38:37,177
The FBI is auctioning off the Bitcoin, their Bitcoin as we speak.

1828
02:38:37,657 --> 02:38:39,138
Yeah, but personally, they might be buying it.

1829
02:38:39,498 --> 02:38:42,777
And if they're not, they just haven't learned enough about it, in my opinion, and they

1830
02:38:42,777 --> 02:38:43,577
eventually will. Right.

1831
02:38:45,657 --> 02:38:52,098
I have to try, I have to like disagree with you a little bit because, you know, it's not

1832
02:38:52,098 --> 02:38:54,657
one of the two choices in this dichotomy.

1833
02:38:54,657 --> 02:38:58,738
In other words, either either it disempowers the money printer or it does not.

1834
02:38:58,738 --> 02:39:00,218
There's actually other alternatives.

1835
02:39:00,817 --> 02:39:08,417
And I have a catchy name for one third alternative, which is I call it Bitcoin fixes

1836
02:39:08,417 --> 02:39:12,218
nothing. You know, Bitcoin goes to a million dollars while fixing nothing.

1837
02:39:13,018 --> 02:39:18,898
This is the third alternative to to the money printer being disempowered or not.

1838
02:39:18,978 --> 02:39:26,537
But basically, that's my baseline projection for what will probably happen if nobody

1839
02:39:26,537 --> 02:39:29,018
figures out a way to scale Bitcoin on layer twos.

1840
02:39:29,098 --> 02:39:31,817
And that requires a real two way peg, essentially.

1841
02:39:33,537 --> 02:39:37,817
Bitcoin could go to a million dollars, but remain an exotic, sterile store of value

1842
02:39:37,817 --> 02:39:42,258
worth, you know, 20 trillion dollars, just like gold or like fine art is worth 27

1843
02:39:42,258 --> 02:39:46,858
trillion dollars. And yes, institutions and governments will allocate 1% of their

1844
02:39:46,858 --> 02:39:51,018
portfolio to Bitcoin, just like they allocate 1 or 2% of their portfolio to some gold

1845
02:39:51,018 --> 02:39:56,297
ETF. But the scenario where Bitcoin goes to a million dollars and then it sort of

1846
02:39:56,898 --> 02:40:01,498
gains equilibrium with the existing system and fixes nothing, quote unquote, that's

1847
02:40:01,498 --> 02:40:08,657
kind of my my sort of Cassandra like bad outcome that I'm trying to fight.

1848
02:40:09,683 --> 02:40:13,683
Well, definitely fixes some things, you know, can't say it fixes nothing.

1849
02:40:13,683 --> 02:40:26,683
Well, I mean, the reason I claim that it fixes nothing, because if it goes to a million dollars and the apocalypse happens, as I predict, then it's essentially only a play toy for whales and institutions.

1850
02:40:26,683 --> 02:40:46,683
And it's an exotic store of value like fine art, which can be sent over the Internet. OK, that's nice for whales and institutions. But if the plebs cannot transact and, you know, it's essentially a very overpriced asset that sort of is just an exotic store of value, I don't see what it has actually fixed.

1851
02:40:46,683 --> 02:40:55,683
It still fixes or helps like grid balancing, for example. Right. And like methane emission things.

1852
02:40:55,683 --> 02:41:14,683
I mean, I agree with you. It will have some impact, but not. The reason I call that scenario Bitcoin fixes nothing is to essentially to oppose the laser eyed perspective that Bitcoin will fix everything. Right. This is kind of a provocative name for that outcome.

1853
02:41:15,683 --> 02:41:39,683
I specifically want to provoke the laser eyes who claim that Bitcoin fix the money, fix the world and it will fix everything. Yes, it will fix methane and it will allow some rich whales to have uncensorable wealth, which is highly volatile. But I don't see it as fixing much in this world. That's not much of a fix. It's just another menu item on the menu of store values for rich investors and institutions.

1854
02:41:40,683 --> 02:41:57,683
Yeah, but I would I would challenge that even with today's level of scalability and. I don't know, programmability is a meme, but but those ideas, one of which is that every business is now able to scale to an enormously larger base of users.

1855
02:41:58,683 --> 02:42:10,683
So the ability to start new businesses with more diverse and interesting customer sets is immediately available. The second is the pricing of fair value of labor starts to change as well.

1856
02:42:11,683 --> 02:42:17,683
I have to push back on that. How is it immediately available in a world of permanently high 50 or 100 dollar fees? Can you explain?

1857
02:42:18,683 --> 02:42:40,683
Yeah, no, that that's that's that's fair is that there's a there's a fee environment where some of those customers are priced out. So maybe it migrates to higher quality services first or higher value transactions first. But it still is a huge trade enabler in a way that neither gold nor art could possibly be in their instantiation.

1858
02:42:41,683 --> 02:42:45,683
You mean like for international settlement between institutions, then?

1859
02:42:46,683 --> 02:43:01,683
Well, yeah, there may be a settlement and institutional purpose for that. But it may just mean cars or houses, not subscriptions on the Internet. So it's a huge trade enabler, even at a 50 or 100 dollar fee.

1860
02:43:02,683 --> 02:43:11,683
Do you mean to say that somebody from Brazil will be buying a car from China and paying for it in Bitcoin? I don't see that happening, actually, even at a 50 dollar fee, right?

1861
02:43:13,683 --> 02:43:16,683
Maybe not from China, but maybe from somewhere closer.

1862
02:43:17,683 --> 02:43:28,683
Yeah, but, you know, a close a close manufacturer or retailer of cars will use a local Fiat rail to settle. Why would they use Bitcoin?

1863
02:43:31,683 --> 02:43:35,683
Because the government just said that you can't use people burning cars.

1864
02:43:35,683 --> 02:43:44,683
Well, yes. I mean, you would essentially like the outcome that you're predicting has to assume some kind of version of global North Korea.

1865
02:43:45,683 --> 02:43:52,683
In other words, either it's like the whole world becomes one giant North Korea and then Bitcoin is like resistance money where guerrilla fighters use Bitcoin.

1866
02:43:53,683 --> 02:44:00,683
Or it's a milder version of North Korea where the personal restrictions and etc. etc. don't allow you to buy cars or other things.

1867
02:44:00,683 --> 02:44:04,683
And you have to become like an amateur guerrilla fighter against that.

1868
02:44:05,683 --> 02:44:13,683
And I don't think that's like a good assumption for the happy outcome of Bitcoin, because that may not happen, for example.

1869
02:44:14,683 --> 02:44:22,683
I agree with you. I agree with you. But I think there's a lot more room in between where we stand today and permanently.

1870
02:44:23,683 --> 02:44:26,683
There is. I agree with you there. There is a lot more room for the number to go up.

1871
02:44:27,683 --> 02:44:32,683
But actually, paradoxically, the higher the number goes up, the higher the fees will go up because they go up together.

1872
02:44:33,683 --> 02:44:43,683
And the number going up high and the fees going up high simultaneously prices out larger and larger percentage of the global population out of Bitcoin market.

1873
02:44:44,683 --> 02:44:47,683
And it leaves more and more whales and institutions only.

1874
02:44:48,683 --> 02:44:55,683
And then once you have that 1 percent playing with Bitcoin, how is it different from fine art that you can send over the Internet as a store of value?

1875
02:44:56,683 --> 02:45:00,683
Both are volatile and both are stores of value, but both are sterile, pay no yield.

1876
02:45:01,683 --> 02:45:09,683
And you essentially have nothing but an additional item on the menu for wealthy investors to add to their portfolio as a store of value. That's it.

1877
02:45:10,683 --> 02:45:17,683
But that doesn't change the idea that I'm still able to price my labor. Maybe I'm batching my labor into bigger chunks.

1878
02:45:18,683 --> 02:45:26,683
And so maybe it's a $10,000 labor contract of some kind, but I'm still able to make my time and my work available to an enormously larger market.

1879
02:45:27,683 --> 02:45:33,683
Oh, I see what you're saying. So third world labor providers will be paid by Bitcoin by the first world?

1880
02:45:34,683 --> 02:45:37,683
Absolutely. We're already seeing that.

1881
02:45:37,683 --> 02:45:47,683
We're seeing that. But what we're seeing a lot more of is that these people who work, who want to have their labor offshore, they actually want to be paid in stable coins, not in Bitcoin.

1882
02:45:48,683 --> 02:45:49,683
Today?

1883
02:45:50,683 --> 02:45:59,683
Well, not just today, but I think that that will develop further because stable coins are inherently better ways to settle this kind of transaction.

1884
02:46:00,683 --> 02:46:01,683
Why?

1885
02:46:01,683 --> 02:46:14,683
Well, because if I'm a creative person in India and I want to earn $100 for doing some kind of creative project, assuming that AI doesn't eliminate all those jobs, first of all.

1886
02:46:15,683 --> 02:46:25,683
But if I'm a creative person in India and I want to get paid $100 for doing some kind of graphics project, do I really want to get some sats that may or may not cost $10 to move later?

1887
02:46:25,683 --> 02:46:27,683
Or would I rather be paid in Tether?

1888
02:46:27,683 --> 02:46:29,683
Well, probably I would rather be paid in Tether today.

1889
02:46:29,683 --> 02:46:36,683
But the only problem with Tether is that Tether is a custodial, privately issued currency, which may or may not go bankrupt.

1890
02:46:36,683 --> 02:46:44,683
But you could imagine that Tether and stable coins in general will evolve towards replacing the EURUSD system.

1891
02:46:44,683 --> 02:46:47,683
So you can think of them as being EURUSD system 2.0.

1892
02:46:48,683 --> 02:46:53,683
And then you will have stable coins issued by JPMorgan Chase and Deutsche Bank globally.

1893
02:46:53,683 --> 02:47:01,683
Whether or not the U.S. approves of that, the EURUSD system will provide the stable coins offshore just like they provided EURUSD.

1894
02:47:01,683 --> 02:47:09,683
And those stable coins issued by large commercial banks backed by their respective central banks will be essentially way more competitive than Tether is today.

1895
02:47:09,683 --> 02:47:13,683
And Tether is already empirically seen as preferred for payments.

1896
02:47:14,683 --> 02:47:15,683
I want to push back on this.

1897
02:47:15,683 --> 02:47:23,683
Because in your scenario, right, on one side you're saying they're not going to want sats because the fees will be too expensive for them.

1898
02:47:23,683 --> 02:47:25,683
And volatility as well, right?

1899
02:47:25,683 --> 02:47:27,683
I would say volatility as well, yeah.

1900
02:47:27,683 --> 02:47:32,683
But then on the other side, they will be totally okay with a centralized authority like Tether or even worse, right?

1901
02:47:32,683 --> 02:47:39,683
So I think that there is also space for them to put 5% or 10% or whatever of their earnings into Bitcoin with enough education.

1902
02:47:39,683 --> 02:47:42,683
Possibly with enough education, they might want to put more.

1903
02:47:42,683 --> 02:47:50,683
And if volatility continues to go down over time and the price does continue to rise over time and they do actually do the research.

1904
02:47:50,683 --> 02:47:55,683
Yeah, today, I agree with Harry, they might want a stable coin.

1905
02:47:55,683 --> 02:48:01,683
But I think in the future that there is definitely space for them to learn more and desire Bitcoin over the stable coin.

1906
02:48:01,683 --> 02:48:07,683
And even if it's Bitcoin that's like RapidCoin on another chain or just like a centralized Tether.

1907
02:48:07,683 --> 02:48:14,683
If they're taking the trade off of centralization anyways, they might benefit from taking that trade off with actually Bitcoin.

1908
02:48:14,683 --> 02:48:17,683
And eventually either settling on chain or even if they can't settle.

1909
02:48:17,683 --> 02:48:26,683
I do think that they will be incentivized in the future if the price continues to go up and the volatility continues to decrease and they do enough research.

1910
02:48:26,683 --> 02:48:31,683
Some percentage they would want to put in Bitcoin anyways.

1911
02:48:31,683 --> 02:48:42,683
Well, I agree with you, which is why we've seen 50 million proverbial Nigerian plebs start accumulating Bitcoin savings.

1912
02:48:42,683 --> 02:48:46,683
I mean, of course, they're not just Nigerian, but they're basically all over Africa and Asia.

1913
02:48:46,683 --> 02:48:52,683
But once the fees start rising inexorably, which I'm assuming is going to be the case with or without ordinals.

1914
02:48:52,683 --> 02:48:59,683
You will see those people think twice before actually using Bitcoin for their savings because their savings are not large enough.

1915
02:48:59,683 --> 02:49:01,683
Well, that's just layer one Bitcoin.

1916
02:49:01,683 --> 02:49:02,683
Well, I know, but...

1917
02:49:02,683 --> 02:49:04,683
They will continue to use centralized layers.

1918
02:49:04,683 --> 02:49:09,683
Yes, but well, in theory, they could be using a lightning network today.

1919
02:49:09,683 --> 02:49:25,683
But imagine like my sort of proverbial example is do you really see Nigerian villagers wanting to manage liquidity with adversarial counterparties and essentially be like a Eurodollar bank de facto, which is what it means to run a lightning network.

1920
02:49:25,683 --> 02:49:28,683
But their alternative is a currency that debases.

1921
02:49:28,683 --> 02:49:35,683
No, their alternative is U.S. dollars in one of the million forms and U.S. dollars right now...

1922
02:49:35,683 --> 02:49:37,683
But if U.S. dollars continues to debase...

1923
02:49:37,683 --> 02:49:40,683
But they don't debase.

1924
02:49:40,683 --> 02:49:43,683
Let me push back on the debasement of the U.S. dollar.

1925
02:49:43,683 --> 02:49:57,683
If you've ever been to a country like Russia or Brazil or Turkey, whenever the local currency debases and there's high inflation in local currency, actually prices in dollar terms fall.

1926
02:49:58,683 --> 02:50:06,683
So actually purchasing power of your dollar is rising, even though it debases in the U.S. and over the long term, the global dollar is losing purchasing value.

1927
02:50:06,683 --> 02:50:15,683
But whenever local currency falls, people holding dollars experience not the same purchasing power as before, but increased purchasing power.

1928
02:50:15,683 --> 02:50:19,683
So you're saying if the dollar is debasing, then their local currency is debasing even higher.

1929
02:50:19,683 --> 02:50:22,683
Which is what normal people observe.

1930
02:50:23,683 --> 02:50:24,683
I hear what you're saying.

1931
02:50:24,683 --> 02:50:29,683
But I still think that with enough education and they will still eventually start using...

1932
02:50:29,683 --> 02:50:35,683
Like, for example, the example that you gave of the people in Nigeria, they might get priced out with fees going up.

1933
02:50:35,683 --> 02:50:41,683
They'll get priced out at the base layer, but that doesn't automatically incentivize them to switch over to U.S. dollars.

1934
02:50:41,683 --> 02:50:51,683
Well, it's like they don't need to be incentivized to switch over to U.S. dollars because empirically they all want U.S. dollars today by a margin of 10 to 1 relative to Bitcoin.

1935
02:50:51,683 --> 02:50:54,683
So just because the fees on the base layer are going to go up, you think that's going to...

1936
02:50:54,683 --> 02:50:57,683
No, no, no. Not that. Because the fees are low on the base layer now.

1937
02:50:57,683 --> 02:51:09,683
I'm saying if you go to Turkey where they had high inflation or Argentina or Nigeria or whatever, you actually see people that send millions of USDT tethered transactions on TRON and they never heard or care about Bitcoin at all.

1938
02:51:09,683 --> 02:51:17,683
Let me ask you this way then. If you were in that area, in whatever area, would you prefer with your knowledge Bitcoin or U.S. dollar type currency?

1939
02:51:17,683 --> 02:51:28,683
It depends on my net worth, right? Like if I have enough money to invest into an exotic, highly volatile, uncensorable store of wealth like Bitcoin, then I would stash a certain percentage of my money into it.

1940
02:51:28,683 --> 02:51:36,683
But for those people, they need to have sufficient savings and sufficient knowledge and competition should be absent as well.

1941
02:51:36,683 --> 02:51:43,683
And the U.S. dollar in the form of tether just happens to be very competitive relative to Bitcoin for 95% of them right now.

1942
02:51:43,683 --> 02:51:49,683
I think right now, sure. But I also feel like over time, Bitcoin's stability...

1943
02:51:49,683 --> 02:51:56,683
Well, I agree with you on time. But the problem is that these people don't have long term savings anyways. They can't afford them.

1944
02:51:56,683 --> 02:52:00,683
So for them to have dollars for a few months or a few years is good enough.

1945
02:52:00,683 --> 02:52:09,683
In other words, you can also see that stable coins definitely have a product market fit and you're seeing sort of the genesis of the stable coin era.

1946
02:52:09,683 --> 02:52:14,683
Right now, stable coins are still marginalized and hounded by the regulators.

1947
02:52:14,683 --> 02:52:22,683
But if you saw what's going on in Europe, right, for example, they just issued regulations that allow European banks to issue essentially stable coins.

1948
02:52:22,683 --> 02:52:26,683
And there's already a French bank issuing digital euro and digital dollars.

1949
02:52:26,683 --> 02:52:36,683
So just expect the euro dollar system offshore outside the U.S. to start issuing offshore stable coins that are like a better version of the euro dollar.

1950
02:52:36,683 --> 02:52:41,683
And those will be issued by too big to fail banks that will be backed up by their central banks.

1951
02:52:41,683 --> 02:52:48,683
And therefore, they will be almost as good as Fed's own CDBC, right, which can never default.

1952
02:52:48,683 --> 02:52:52,683
So what I'm saying is that the stable... we haven't seen all the competition from stable coins yet.

1953
02:52:53,683 --> 02:53:12,683
It will intensify. And my sort of nightmare scenario is, first of all, if the apocalypse prices out people, but also there's additional competition that makes Bitcoin less and less relevant for payments and more and more of a store of value only asset, right, unfortunately.

1954
02:53:12,683 --> 02:53:22,683
And that sort of to me, that's all headed to the scenario where, yes, Bitcoin will go to a million dollars because enough whales and institutions will want to have one or five percent of their portfolio in it.

1955
02:53:22,683 --> 02:53:29,683
So Bitcoin will go and stay at a million dollars. But if it's only accessible to institutions in Wales, what does it actually fix?

1956
02:53:29,683 --> 02:53:34,683
So I call that scenario Bitcoin fixes nothing, even though it goes to a million dollars.

1957
02:53:34,683 --> 02:53:46,683
I like the scenario that Bitcoin fixes nothing. And it actually seems kind of bullish to me because it avoids, as you said, the dilemma that I spelled out.

1958
02:53:46,683 --> 02:53:54,683
You know, it destroys the dollar, but they're going to also adopt it. It's a nice response to that.

1959
02:53:55,683 --> 02:54:10,683
I'll give you another model, like the Hal Finney model of potentially, you know, banks or private banks having their own currency that's backed by Bitcoin and some of them are more backed, some of them are less backed.

1960
02:54:10,683 --> 02:54:12,683
You know, that can also potentially happen in the future.

1961
02:54:13,683 --> 02:54:19,683
Yeah. What I was going to say is I think near term that looks to be happening and that looks to be already underway.

1962
02:54:19,683 --> 02:54:29,683
I think, you know, earlier Bitcoin's narrative was as a payment network and we're going to bank the unbanked around the world.

1963
02:54:29,683 --> 02:54:38,683
You know, the Antonopoulos popularized this narrative and stable coins are coming in and really doing it instead of Bitcoin.

1964
02:54:38,683 --> 02:54:44,683
And I think this is upsetting to a lot of Bitcoiners or they're in denial about it. I don't think they should be.

1965
02:54:44,683 --> 02:54:50,683
It's like what we're trying to do here with Bitcoin is turn something into money.

1966
02:54:50,683 --> 02:54:59,683
We've always known we'd go through a period of price discovery as people feel out the technology and determine its odds of becoming money.

1967
02:55:00,683 --> 02:55:03,683
And we've always known that that would mean tremendous volatility.

1968
02:55:03,683 --> 02:55:09,683
And we've always known that tremendous volatility is incompatible with being a medium of exchange that's widely used.

1969
02:55:10,683 --> 02:55:19,683
So we've always known that we would go through a phase like this and we that we couldn't really bootstrap bunny into Bitcoin through the medium of exchange route.

1970
02:55:20,683 --> 02:55:28,683
Because because medium exchange is driven by really it's what buyers and sellers want in an exchange.

1971
02:55:29,683 --> 02:55:35,683
The buyer wants to give away the shit money for a stable good.

1972
02:55:36,683 --> 02:55:41,683
The seller wants to get an appreciating money for a stable good.

1973
02:55:42,683 --> 02:55:47,683
And so buyer and seller have opposite needs in any transaction of what they want from the money.

1974
02:55:48,683 --> 02:55:51,683
A stable money best serves both buyer and seller.

1975
02:55:52,683 --> 02:55:57,683
It's where the buyers needs and the sellers needs compromise against each other perfectly.

1976
02:55:57,683 --> 02:56:01,683
Which is why an ideal medium of exchange is just stable.

1977
02:56:01,683 --> 02:56:03,683
And it also allows you to plan.

1978
02:56:03,683 --> 02:56:04,683
It also allows you to plan.

1979
02:56:04,683 --> 02:56:08,683
You get some money and then you know you can pay for what you need with that money.

1980
02:56:09,683 --> 02:56:11,683
So we've always known that.

1981
02:56:11,683 --> 02:56:16,683
So what's the only route that Bitcoin has to becoming money proper?

1982
02:56:16,683 --> 02:56:23,683
It's that it has to achieve stability relative stability first before becoming a widespread medium of exchange.

1983
02:56:24,683 --> 02:56:27,683
And what what can allow that?

1984
02:56:28,683 --> 02:56:36,683
And they're here like the economist standard refrain is nothing will ever allow it because Bitcoin supply is inelastic and unresponsive to demand.

1985
02:56:37,683 --> 02:56:44,683
And I've heard that I've heard that that was the very first thing out of the first economist that I talked the mouth of the first economist I ever talked to about Bitcoin.

1986
02:56:44,683 --> 02:56:48,683
Was like, but wait, you're telling me it has fixed issuance, then it can't be money.

1987
02:56:48,683 --> 02:56:55,683
Right. To which I've always thought I still think, no, it could become stable over time.

1988
02:56:55,683 --> 02:56:57,683
If you look at, say, gold.

1989
02:56:57,683 --> 02:57:00,683
Yes, the supply of gold is elastic.

1990
02:57:00,683 --> 02:57:07,683
But the elasticity in the supply of gold does not explain the stability in the price of gold because it's slow.

1991
02:57:07,683 --> 02:57:10,683
It's very, very slow to respond.

1992
02:57:10,683 --> 02:57:12,683
Right. Like you have a spike in demand.

1993
02:57:12,683 --> 02:57:15,683
Like right now I see gold is spiking right now.

1994
02:57:15,683 --> 02:57:23,683
Do you think that the mining of gold speeds up in response to this latest spike, like which is only weeks in length?

1995
02:57:23,683 --> 02:57:27,683
Like, no, it just takes much longer to get a gold operation going.

1996
02:57:27,683 --> 02:57:33,683
And then the amount of inflation in gold is so small anyway that it doesn't.

1997
02:57:33,683 --> 02:57:41,683
Basically, the mining dynamic with gold does not explain its stability because it is too slow.

1998
02:57:41,683 --> 02:57:44,683
It can't possibly be responsive to those spikes.

1999
02:57:44,683 --> 02:57:51,683
Or if you look at if you look at Bitcoin's spikes in price, the god candles, the crashes.

2000
02:57:51,683 --> 02:58:01,683
Like if we had gold's level of mining and level of of elasticity, do you think that the price spikes would be any different?

2001
02:58:01,683 --> 02:58:04,683
No, not measurably different on a short time scale.

2002
02:58:04,683 --> 02:58:11,683
No. So what what explains the stability of gold is not its elasticity of supply.

2003
02:58:11,683 --> 02:58:21,683
I just can't buy that. And so anyway, if Bitcoin mining achieves gold like distribution so that, you know, actors are balancing out,

2004
02:58:21,683 --> 02:58:28,683
the bulls and the bears are so widespread and balanced and acting against one another all the time,

2005
02:58:28,683 --> 02:58:31,683
we achieve relative stability in pricing with Bitcoin.

2006
02:58:31,683 --> 02:58:37,683
Then it's suited to be a medium of exchange. And then, you know, Alex, your point, how do we how do we actually enable people to use it?

2007
02:58:37,683 --> 02:58:43,683
If at that point it's a bubble for rich people? Well, and fees are very high.

2008
02:58:43,683 --> 02:58:55,683
Well, you know, we either get some some development where we get a trustless two way peg or we we have as we have varieties of trust levels,

2009
02:58:56,683 --> 02:59:02,683
whether it's FEDI or whether it's, you know, how Finney's banks allow people to use it.

2010
02:59:02,683 --> 02:59:06,683
I agree. I agree with you. Like, I just want to I'm sorry to interrupt, but I agree with you.

2011
02:59:06,683 --> 02:59:11,683
And I like how Finney's idea and FEDI mints and all this other stuff. But guess what?

2012
02:59:11,683 --> 02:59:16,683
We have seen this movie before. This movie was called Classical Gold Standard, right?

2013
02:59:16,683 --> 02:59:23,683
And the classical gold standard, you had gold, which was in theory, the dollar was defined as a certain amount of gold.

2014
02:59:23,683 --> 02:59:30,683
But in practice, you know, the money supply kept rising, even though the amount of gold was the same because there was fractional reserve banking.

2015
02:59:30,683 --> 02:59:34,683
And gold, de facto, was only a reserve standard for commercial and central.

2016
02:59:34,683 --> 02:59:39,683
Well, there were no central banks before the Fed or whatever. But yeah, but there's a difference here.

2017
02:59:39,683 --> 02:59:45,683
The difference is it's a lot easier to transfer and it's a lot easier to custody and it's a lot easier to verify it.

2018
02:59:45,683 --> 02:59:50,683
So it could have similarities to gold centralization of, you know, of large amounts when the price is very high.

2019
02:59:50,683 --> 02:59:55,683
Yeah, but it's not it's not I'm not claiming, you know, there is like a third outcome here.

2020
02:59:55,683 --> 03:00:00,683
I'm not claiming that Bitcoin will centralize like gold and therefore it will end up like gold.

2021
03:00:00,683 --> 03:00:08,683
I'm making a weaker claim. I'm just saying that if the fees are high at $100 or higher, let's say, and the price is high, a million dollars or higher.

2022
03:00:08,934 --> 03:00:17,894
You will not have volatility decline like you might imagine as a thought experiment that Bitcoin hyper Bitcoinizes and replaces all the money in the world.

2023
03:00:18,454 --> 03:00:20,734
Well, in that case, it represents the global economy.

2024
03:00:20,734 --> 03:00:31,493
Right. And in that case, in that best of all possible outcomes of total hyper Bitcoinization, you would still expect the volatility of Bitcoin to be slightly less than the volatility of S&P 500.

2025
03:00:31,493 --> 03:00:34,614
You can think of it as like a global stock index on the whole world economy.

2026
03:00:34,614 --> 03:00:43,454
Right. And I'm saying that an asset that has a terminal volatility like a global stock index will still not be good enough as a unit of account.

2027
03:00:43,733 --> 03:00:53,934
There is like a certain minimal volatility that Bitcoin cannot potentially get lower than even if it's like 10 million dollars of Bitcoin and everybody in the world has adopted it completely.

2028
03:00:53,934 --> 03:01:03,094
Right. No, I think you're missing something where, you know, the example of Troy gave when, you know, more gold is mined doesn't hit instantly affect the price.

2029
03:01:03,294 --> 03:01:09,654
Same of like when, you know, more and more dollars are printed, it doesn't instantly affect the prices of S&P and things.

2030
03:01:09,934 --> 03:01:12,373
No, it does affect the price, you know, down the line.

2031
03:01:12,454 --> 03:01:19,573
Well, the same thing here, you know, just because the productivity or GDP of the world fluctuates, I don't think it instantly affects the price.

2032
03:01:19,893 --> 03:01:27,414
And in the event in the world where you're saying where it does become a standard, I think that it becomes sticky as a unit of account.

2033
03:01:27,694 --> 03:01:31,213
And that was that was just my thought experiment.

2034
03:01:31,213 --> 03:01:36,054
I'm saying in order to get to that hyper bitcoinization, right, it has to go through a bunch of stages first.

2035
03:01:36,294 --> 03:01:40,334
Like it can never become a unit of account until it becomes a medium of exchange first.

2036
03:01:40,334 --> 03:01:42,173
I thought I hope that's not controversial.

2037
03:01:42,173 --> 03:01:46,694
It can. Yeah, but it can become a unit of account in like in bubble areas, right.

2038
03:01:47,213 --> 03:01:53,414
Areas that are not as like connected with trade outside of themselves, like, you know, circular, smaller, circular economy.

2039
03:01:53,734 --> 03:01:55,533
They can be, you know, an account there.

2040
03:01:55,533 --> 03:02:06,614
But if you if you look at the way El Salvadorians use Bitcoin, they don't actually use it as a unit of account, even though it's technically like, you know, a medium of exchange or whatever, like a legal tender in El Salvador.

2041
03:02:06,974 --> 03:02:09,334
They see some of them use Bitcoin for savings.

2042
03:02:09,334 --> 03:02:12,094
That's true. So we're back to the reserve asset, right?

2043
03:02:12,133 --> 03:02:17,973
Like, in other words, my scenario of Bitcoin fixing nothing does not even get it to the reserve asset.

2044
03:02:18,014 --> 03:02:25,374
That scenario is simply an exotic store of value that's that's just sterile, like gold or fine art.

2045
03:02:25,853 --> 03:02:35,413
Now, if Bitcoin overcomes that obstacle of evolving from a sterile store of value, then the next step in its evolution will be a reserve asset.

2046
03:02:35,454 --> 03:02:45,693
And what does that mean? It means that it will be kind of like gold in the classical gold standard, where banks and governments will have it on their balance sheet as some kind of percentage of allocation.

2047
03:02:46,133 --> 03:02:49,853
And against that balance sheet, the euro dollars will be issued like they're issued today.

2048
03:02:49,894 --> 03:03:00,693
Right. So it's not necessarily needed, but the global system will not need to use Bitcoin as a medium of exchange just because it has finally evolved to be five million dollars now.

2049
03:03:00,773 --> 03:03:04,094
And it's become like a reserve asset that people have allocations to.

2050
03:03:04,693 --> 03:03:08,454
It's just more assets on the balance sheet to issue dollars or euros against, right?

2051
03:03:08,454 --> 03:03:18,534
Yeah. Also, I think they'll just become more interest to holding Bitcoin versus other assets, right?

2052
03:03:18,534 --> 03:03:29,613
Over time. At that point, if Bitcoin does evolve to that reserve asset, then it starts competing with the one with all the, you know, first class reserve assets that exist today, such as U.S.

2053
03:03:29,613 --> 03:03:34,053
Treasury bonds, German boons, you know, Japanese bonds and all these other.

2054
03:03:34,573 --> 03:03:39,973
And then eventually also Gresham's law, right, where a better money will drive out other money.

2055
03:03:40,374 --> 03:03:42,053
But it's not money yet, right?

2056
03:03:42,094 --> 03:03:56,654
Because if just being a reserve asset is not good enough to be subject to Gresham's law, if it's just something you keep 5% of your balance sheet and like you can imagine, you know, JPMorgan Chase and the Fed both keeping 5% of their balance sheet in Bitcoin.

2057
03:03:57,133 --> 03:03:58,814
And it still doesn't fix much.

2058
03:03:59,454 --> 03:04:05,973
In other words, in that world, Bitcoin is still a plaything of, I assume, full institutionalization.

2059
03:04:06,454 --> 03:04:09,493
I assume that all banks and central banks have it on their balance sheet.

2060
03:04:09,534 --> 03:04:12,413
But that world, it fixes maybe some things.

2061
03:04:12,413 --> 03:04:15,133
For example, it prohibits U.S.

2062
03:04:15,133 --> 03:04:21,254
government from printing infinite amount of debt because the interest rates will go higher because there will be an alternative to U.S.

2063
03:04:21,254 --> 03:04:22,133
Treasury bonds.

2064
03:04:22,413 --> 03:04:31,013
So that that particular thing might be fixed by Bitcoin being a real reserve asset and not just a volatile, not just a sterile store of value like fine art or gold.

2065
03:04:31,574 --> 03:04:32,934
But what else does it fix?

2066
03:04:33,013 --> 03:04:49,254
I don't see much. In other words, but the good news from Troy's perspective is that in that outcome where Bitcoin fixes nothing, either because it never progresses beyond sterile store of value or because it simply becomes another reserve asset with allocation from commercial and central banks.

2067
03:04:49,534 --> 03:04:53,333
The good news there is that nobody will will consider attacking Bitcoin at all.

2068
03:04:53,333 --> 03:04:59,053
Right. Because it'll be just, you know, just a better version of gold that banks and governments have on their balance sheets.

2069
03:04:59,094 --> 03:05:00,574
Everybody will be a friend of Bitcoin.

2070
03:05:00,613 --> 03:05:05,134
So there's no danger of of the world becoming North Korea and trying to suppress Bitcoin or U.S.

2071
03:05:05,134 --> 03:05:07,213
government attacking miners or any of that.

2072
03:05:07,773 --> 03:05:08,854
That's kind of the good news.

2073
03:05:08,893 --> 03:05:15,374
The bad news is that the plebs and inflation like inflation will remain and government restrictions will remain.

2074
03:05:15,574 --> 03:05:22,773
And I don't see much benefit for the plebs other than the fact that maybe government bond markets will shrink some more.

2075
03:05:22,974 --> 03:05:27,654
Right. They will not be as huge as they are because Bitcoin will be competing with government bonds.

2076
03:05:27,733 --> 03:05:27,934
But.

2077
03:05:28,733 --> 03:05:39,893
Right. But there's also an aspect here that it could also fix another niche where, you know, if inflation does persist, they have another option for a light bulb other than, you know, let's say real estate.

2078
03:05:39,934 --> 03:05:43,654
It has a barrier. You need a lot of a large amount or whatever other barriers.

2079
03:05:43,814 --> 03:05:47,134
Yeah, but it might be easier to get into Bitcoin.

2080
03:05:47,654 --> 03:06:01,053
I know. But you're forgetting the no free lunch part here, which is that if there is full institutionalization of Bitcoin, where banks and governments have it on their balance sheets bank, then the governments will start taxing your Bitcoin, which they're not doing right now.

2081
03:06:01,534 --> 03:06:08,854
Like, in other words, yes, I mean, real estate is a is a great store of value because it's tax advantage and Bitcoin is a better store of value.

2082
03:06:08,893 --> 03:06:15,134
But is Bitcoin really a better store of value when the government forces you to pay like wealth taxes on your Bitcoin holdings?

2083
03:06:15,374 --> 03:06:22,053
I'm not sure. There is an option here, too, but you also got to look at, for example, you know, people that will completely just, you know, go around that.

2084
03:06:22,094 --> 03:06:29,414
Right. Like, for example, though, like weed being illegal for many years or even alcohol during the prohibition, people still did it on the ground.

2085
03:06:29,453 --> 03:06:36,534
Right. And now weed is legal in many places, you know, for tax purposes, you know, you got to pay taxes on buying and selling weed, but people still do it.

2086
03:06:36,974 --> 03:06:44,213
Yeah, but you're talking you're talking about the black market, which will always exist in any legal substance or, you know, there will always be guerrilla fighters.

2087
03:06:44,213 --> 03:06:47,013
And if you start taxing Bitcoin, like that would just incentivize more of a black market.

2088
03:06:47,053 --> 03:06:51,773
Yeah. But imagine if they start taxing Bitcoin only after one million dollars worth of holdings.

2089
03:06:51,773 --> 03:06:55,773
Right now you're taxing rich people that are afraid to go to jail and they will pay the tax.

2090
03:06:56,053 --> 03:07:01,854
And yes, you know, like people with less than one million dollars in Bitcoin, you know, the global plebs will be sending Bitcoin to each other.

2091
03:07:02,333 --> 03:07:08,213
But what I'm saying is that the Bitcoin's competitiveness as a store of value will not necessarily be as good as it is now.

2092
03:07:08,213 --> 03:07:15,053
Yeah. But you also got to look at the incentives here, because most of the government laws are controlled by the people that do have more than millions.

2093
03:07:15,053 --> 03:07:16,173
Right. Well, right.

2094
03:07:16,534 --> 03:07:18,814
So the people usually vote to tax the rich.

2095
03:07:18,814 --> 03:07:22,654
And, you know, the Bitcoin whales will have to bleed some blubber basically in this world.

2096
03:07:22,934 --> 03:07:25,934
It depends because the rich also want to make sure that they're not taxed.

2097
03:07:25,934 --> 03:07:27,733
Right. That there's loopholes for them.

2098
03:07:28,574 --> 03:07:30,974
Right. That's the oligarchic outcome.

2099
03:07:31,213 --> 03:07:37,493
Like, in other words, if Bitcoin becomes fully institutionalized, then the elite becomes the Bitcoin elite gradually.

2100
03:07:38,013 --> 03:07:40,293
And then you're back to sort of fixing very little.

2101
03:07:40,333 --> 03:07:50,934
It's just that the old trad file elite was next to the money printer and the new and the new elite is Bitcoin whales that, you know, between now and 50 years from now, when this outcome may happen.

2102
03:07:52,073 --> 03:07:55,713
still giving the average people a life vault in some way or another, even if it's on a

2103
03:07:55,713 --> 03:07:57,113
second layer or a more trusted layer.

2104
03:07:57,673 --> 03:07:58,833
It's another life vault.

2105
03:07:59,913 --> 03:08:05,813
It's a savings mechanism that may be better than S &P 500 Index Fund or may not be

2106
03:08:05,813 --> 03:08:07,733
better than an &P 500 Index Fund.

2107
03:08:07,733 --> 03:08:08,053
because

2108
03:08:08,254 --> 03:08:12,134
Well, the fact that it's a better asset, right, is just makes it better automatically.

2109
03:08:12,254 --> 03:08:23,053
Yeah. But but we know that 90 percent of people cannot like there's been studies that people who got Bitcoin three, four, five years ago from friends and family, 90 percent of them have lost their keys.

2110
03:08:23,053 --> 03:08:24,254
Right. And they cannot access it.

2111
03:08:24,654 --> 03:08:29,574
I've seen the current generation, but in 50 years, I don't think that that's going to be the case.

2112
03:08:30,134 --> 03:08:34,694
I mean, the other thing is that Bitcoin is a censorship resistant network.

2113
03:08:34,694 --> 03:08:37,574
It's the premier censorship resistant network.

2114
03:08:37,814 --> 03:08:44,733
And if you need censorship resistance, it's not going to be cheap in your scenario because fees are high.

2115
03:08:45,374 --> 03:08:47,774
But that's a need that it can meet.

2116
03:08:47,774 --> 03:08:52,293
So, yeah. Why would you send a payment in Bitcoin rather than this like regulated stable coin?

2117
03:08:52,374 --> 03:08:56,214
Well, maybe you really need the censorship resistance of the network.

2118
03:08:58,774 --> 03:09:05,053
Well, maybe you do and maybe you're a guerrilla fighter and maybe you're trying to avoid taxes, but you're talking about a minority use case.

2119
03:09:05,533 --> 03:09:11,454
Like there is another kind of piece of bad news that I that I could share with you guys for why Bitcoin will fix nothing.

2120
03:09:11,454 --> 03:09:20,653
And that's I mean, recently I saw I heard a podcast between Jeff Booth and George Graham on I think it was on what Bitcoin did.

2121
03:09:20,694 --> 03:09:27,934
And I found George Graham on I think that guy's name is a macro guy with his own with his own podcasting show.

2122
03:09:27,934 --> 03:09:46,454
But I find his arguments for human nature being being the problem for Bitcoin kind of interesting and convincing and novel, which is like all of his arguments can be reduced to the following idea that whenever in human history you have savings, the next thing that appears is collateralization, rehypothecation, leverage and derivatives.

2123
03:09:46,733 --> 03:09:56,293
That's always been the case and it will continue to be the case with Bitcoin because people need, you know, lower rates on their loans and people will have greed to get higher yield.

2124
03:09:56,293 --> 03:10:07,334
And whether or not you have Bitcoin as a reserve asset, collateralization, rehypothecation, financialization in general, including leverage and derivatives will appear on top of those savings.

2125
03:10:07,334 --> 03:10:13,293
So this is not whether or not Bitcoin settles fast in 10 minutes or in lightning network or gold sells slow.

2126
03:10:13,574 --> 03:10:20,973
That's like orthogonal to this human human flaws of wanting, you know, higher yield and lower interest rate to pay.

2127
03:10:20,973 --> 03:10:34,733
Right. And there will be providers that appear and say, hey, would you like to pay somebody, you know, a fraction of a percent per year to store your Bitcoin or would you like us to give you 8 percent annual yield on your Bitcoin?

2128
03:10:34,733 --> 03:10:38,613
Right. And lo and behold, you have Bitcoin banks in the style of Hal Finney.

2129
03:10:38,613 --> 03:10:46,214
Right. And these Bitcoin banks go fractional reserve because, you know, they need profits and they will go fractional reserve and they'll start printing Bitcoin.

2130
03:10:46,733 --> 03:10:48,254
And I don't know how you can stop that.

2131
03:10:49,214 --> 03:10:51,653
I mean, proof of reserves is pretty straightforward.

2132
03:10:52,454 --> 03:11:00,493
Yeah. But if you want to fully backed, but you can get you can ensure it is it's straightforward, but it's also moot.

2133
03:11:00,533 --> 03:11:14,894
You know why? Because if JPMorgan Chase has 1 percent of their balance sheet in Bitcoin and they can prove it, what does it matter to you that it's only 1 percent of their balance sheet and they can prove it because they have other assets and God knows how many other liabilities.

2134
03:11:14,894 --> 03:11:19,413
Right. So the proof of reserve that they have, you know, 50,000 Bitcoins on their balance sheet.

2135
03:11:19,454 --> 03:11:24,694
OK, they can give it to you, but it doesn't mean much in the big picture for JPMorgan Chase.

2136
03:11:24,694 --> 03:11:33,493
And you're still doing business with JPMorgan Chase and they still make markets in the futures markets with Bitcoin perps that print Bitcoin out of thin air.

2137
03:11:33,493 --> 03:11:34,853
And I don't know how you can stop that.

2138
03:11:34,853 --> 03:11:38,254
So, you know, like the real supply of Bitcoin is already higher than 21 million people.

2139
03:11:38,254 --> 03:11:51,173
It's just that the laser eye community wants to be in the denial of that idea that Bitcoin is printed on futures perp exchanges even today, let alone in the euro dollar 2.0 system or 3.0 system where Bitcoin is a reserve asset.

2140
03:11:51,173 --> 03:11:58,574
And everybody's doing collateralization, re-hypothecation, leverage and derivatives all on top of Bitcoin as a reserve asset, right?

2141
03:12:00,574 --> 03:12:02,613
Definitely a good video, the one you're talking about.

2142
03:12:02,814 --> 03:12:05,814
Good episode. It's a good perspective just to see different views.

2143
03:12:05,814 --> 03:12:07,454
I think that there's a lot of counters to it as well.

2144
03:12:08,053 --> 03:12:10,053
I want to give Bitcode a chance to say something else.

2145
03:12:10,214 --> 03:12:11,293
Occasionally has his hand up.

2146
03:12:12,574 --> 03:12:14,413
Oh, what's the name left?

2147
03:12:15,774 --> 03:12:16,574
Yeah, Bitcode, what's up?

2148
03:12:16,574 --> 03:12:17,093
Hi, guys.

2149
03:12:17,733 --> 03:12:18,814
Hi, guys. How are you?

2150
03:12:19,733 --> 03:12:21,134
I love what you're talking about.

2151
03:12:21,454 --> 03:12:24,613
I disagree with some things.

2152
03:12:24,733 --> 03:12:30,694
Why? Because what Alex said, yeah, it's true.

2153
03:12:30,694 --> 03:12:36,533
And everything that we see today is more and more going away from the Bitcoin blockchain.

2154
03:12:37,533 --> 03:12:40,613
And we need to separate the BTC from Bitcoin blockchain.

2155
03:12:40,613 --> 03:12:41,934
That's the first thing.

2156
03:12:41,973 --> 03:12:46,973
So we start talking about, you know, the future.

2157
03:12:47,093 --> 03:12:47,454
Why?

2158
03:12:47,454 --> 03:12:56,454
Because one thing is using the BTC in different form, shapes and, you know, centralized way, derivatives and whatever.

2159
03:12:57,134 --> 03:12:59,853
But different is using the Bitcoin blockchain.

2160
03:13:00,093 --> 03:13:08,134
And only if we want to Bitcoin as a project to be successful.

2161
03:13:08,454 --> 03:13:16,334
I agree mostly with Paul's view and actually the usability of Bitcoin blockchain.

2162
03:13:16,533 --> 03:13:33,254
Because I will ask anybody what means when, if drivechain is enabled, what means when somebody locks up the Bitcoin to open a sidechain?

2163
03:13:34,533 --> 03:13:35,533
It is a reserve.

2164
03:13:36,053 --> 03:13:37,293
It is a reserve currency.

2165
03:13:37,934 --> 03:13:43,653
So automatically you start by using the Bitcoin blockchain, creating the reserve currency.

2166
03:13:44,653 --> 03:13:59,053
Why I'm saying this, because as you know, many, many of the of the Maxis, not OGs, but especially Maxis, they're pre-Bitcoin, they were gold bugs and probably they're still gold bugs.

2167
03:13:59,173 --> 03:14:07,733
So I have gold and silver, but I'm not doing, I'm not pushing the narrative of gold.

2168
03:14:08,214 --> 03:14:14,934
So they created this narrative of gold and they want to replicate the narrative of gold on Bitcoin.

2169
03:14:15,454 --> 03:14:22,214
So gold, for example, like you were talking, I was listening for an hour, maybe even more.

2170
03:14:22,853 --> 03:14:25,014
And I want to interact with you.

2171
03:14:25,014 --> 03:14:43,694
I mean, not to be a monologue, but like I know that, let's say the latest mining, gold mining that was opened and mistakenly they started digging on a different site and they try to sell now.

2172
03:14:44,293 --> 03:14:49,613
They spent two hundred and sixty five million dollars to open the mining.

2173
03:14:50,173 --> 03:15:00,653
So how much cost, you know, Bitcoin, Bitcoin, good facility with hundred thousand miners, you know, just just example.

2174
03:15:01,254 --> 03:15:05,293
So it's it's kind of like, yeah, not not comparable.

2175
03:15:05,293 --> 03:15:07,014
It's still it's still nothing.

2176
03:15:07,014 --> 03:15:30,454
But how we can not infiltrate, but how we can penetrate and change the system, because what I see up to now, because the Satoshi vision was very long time ago abundant and we know what what he planned to do and etc., etc.

2177
03:15:30,934 --> 03:15:34,293
And, you know, this is the thing.

2178
03:15:34,293 --> 03:15:38,454
If the Bitcoin blockchain is not used, this is not my opinion.

2179
03:15:38,454 --> 03:15:49,853
This is like I do a deep research of everything and I understand Bitcoin very well, you know, because the Bitcoin is carrier of the of the digital unit of of the data.

2180
03:15:49,973 --> 03:15:54,814
And that's a bit so that's inside the Bitcoin and nothing else.

2181
03:15:54,814 --> 03:16:00,293
Everything else uses the bit only Bitcoin carries with with with the BTC.

2182
03:16:00,814 --> 03:16:19,694
So the the thing is, if we do not have a way to penetrate with the blockchain in the end, upgrade the system, change the old corrupt system with the new decentralized, you know, even Bitcoin is 15 years.

2183
03:16:19,694 --> 03:16:23,694
That's a new technology, you know, but this is the way.

2184
03:16:23,694 --> 03:16:30,093
And I think the drivechain is the only solution for this to be achieved.

2185
03:16:30,853 --> 03:16:43,533
And the other thing is that I see so many kind of financial people coming into Bitcoin and pushing their narrative from the traditional finance onto Bitcoin, which is wrong.

2186
03:16:43,533 --> 03:16:45,894
We need to push the Bitcoin onto them.

2187
03:16:46,214 --> 03:16:50,613
So we change them and we corrupt all the system.

2188
03:16:50,653 --> 03:16:52,454
And it's not only for the United States.

2189
03:16:52,653 --> 03:16:53,574
It's global.

2190
03:16:53,814 --> 03:16:57,134
And I see many, many people are talking only for the United States.

2191
03:16:57,134 --> 03:16:58,173
Bitcoin is global.

2192
03:16:58,214 --> 03:17:01,814
So and that was the case very early in Bitcoin.

2193
03:17:01,814 --> 03:17:19,494
And Satoshi, you know that, you know, pre 2015, 16, I think pre the ICO era was too different, much more different than than today, even the the people in the community.

2194
03:17:28,974 --> 03:17:38,893
But I mean, I agree with you, Bitcode, and that's why I say that my Bitcoin fixes nothing scenarios assume that there is no scalable L2.

2195
03:17:39,373 --> 03:17:57,094
And I do not consider Lightning to be a scalable L2 because it's naturally centralizing into custodial Lightning because there is like recent research revealed that 93% of of all the Nostr's apps are custodial Lightning's apps.

2196
03:17:57,133 --> 03:18:00,413
So that's a pretty, pretty bad outcome.

2197
03:18:00,413 --> 03:18:10,814
Right. If we see 93% of retail payments being custodial, then Lightning is just another way for institutions to connect to each other.

2198
03:18:11,413 --> 03:18:20,773
And it's not something that plebs or Nigerian villagers will use because they cannot afford to use baseline Bitcoin because the fees are too high.

2199
03:18:20,814 --> 03:18:26,734
They will just use custodial Lightning wallets, maybe that emulate stable coins or simply have stable coins in them.

2200
03:18:27,454 --> 03:18:31,173
But it's not a scalable solution, essentially, in my mind.

2201
03:18:32,454 --> 03:18:36,893
Alex, do you do you agree that anything can be medium of a change?

2202
03:18:37,694 --> 03:18:48,494
Because you see, I mean, like I was listening in the space and this was a financial space, you know, financial people from like serious financial people.

2203
03:18:48,734 --> 03:18:53,053
And they were saying, like, listen, nobody uses Bitcoin for transfer.

2204
03:18:53,053 --> 03:18:59,574
Everybody uses stable coin 60, 70 percent of the of the crypto transfers between this.

2205
03:18:59,734 --> 03:19:08,653
What we are talking, you know, the the country's jail anywhere else, they transfer stable coins.

2206
03:19:09,334 --> 03:19:20,893
So where is this kind of, you know, store of value and, you know, reserve currency and medium of exchange in Bitcoin?

2207
03:19:23,773 --> 03:19:26,773
Telephone.

2208
03:19:27,974 --> 03:19:29,094
Yeah, sorry about that, guys.

2209
03:19:29,934 --> 03:19:31,013
Yeah, it's not there.

2210
03:19:31,053 --> 03:19:32,653
Right. It may never appear.

2211
03:19:32,814 --> 03:19:37,133
I mean, the medium of exchange is a very difficult barrier to scale.

2212
03:19:37,214 --> 03:19:44,694
And I'm saying, like, I mean, at this point, Bitcoin is a volatile, like monetizing commodity.

2213
03:19:44,694 --> 03:19:46,614
It's not even a store of value yet.

2214
03:19:46,934 --> 03:19:55,893
But like the best outcome, which I call Bitcoin goes to a million dollars and fixes nothing that just gets you to a store of value like gold or fine art.

2215
03:19:55,974 --> 03:19:58,574
It's the same market cap, 20 trillion dollars as those two.

2216
03:19:58,932 --> 03:20:03,812
But before you can get to medium of exchange, you still have to go through a bunch of other barriers.

2217
03:20:03,812 --> 03:20:05,332
You have to become a reserve asset.

2218
03:20:05,412 --> 03:20:07,972
Right. You have to start competing with government bonds.

2219
03:20:08,012 --> 03:20:17,491
And then after that, it may not progress like there's another two or three steps before it actually becomes a medium of exchange somewhere, let alone in the world.

2220
03:20:17,491 --> 03:20:21,772
Right. That's a very long journey and it's a very difficult journey.

2221
03:20:21,772 --> 03:20:28,772
Right. And I'm saying that there will be like if Bitcoin doesn't scale on L2s because there is no drivechains or there is no

2222
03:20:29,092 --> 03:20:38,092
decentralized or trust minimized two way peg, then the journey will probably end in the store of value phase and will not even become a reserve asset.

2223
03:20:38,092 --> 03:20:40,412
So, yes, Bitcoin will go to a million dollars.

2224
03:20:40,772 --> 03:20:45,252
It will fluctuate like gold up and down around a million dollars, depending on how many dollars are printed.

2225
03:20:45,252 --> 03:20:48,691
But it will essentially top out somewhere there.

2226
03:20:48,691 --> 03:20:53,812
But it will not become a reserve asset on balance sheets of global banks and governments.

2227
03:20:53,812 --> 03:20:57,652
It will be just an exotic store of value for whales and institutions.

2228
03:20:57,691 --> 03:20:58,691
Yeah, I agree.

2229
03:20:58,932 --> 03:21:10,012
I agree. And I think for me, like looking about the fees and all that kind of, oh, in the future, we will have high fees.

2230
03:21:10,491 --> 03:21:21,451
Like if drivechain is enabled and the let's say decentralized economy starts, I'm not saying doing companies on drivechain.

2231
03:21:21,491 --> 03:21:27,171
I'm saying using the sidechain as an infrastructure for the companies.

2232
03:21:27,332 --> 03:21:32,092
And through that, you create a high volume on transactions for a small fee.

2233
03:21:32,491 --> 03:21:41,612
But on the L1 is a good chunk of fee for the miners, which is will be not expensive on L1 even to transact.

2234
03:21:42,092 --> 03:21:49,131
And both on both L2 drivechains and L1 will be cheap to transact.

2235
03:21:49,451 --> 03:21:59,531
But because you will have a high volume of transactions on L2, you get kind of a good amount of fees for the L1.

2236
03:21:59,932 --> 03:22:08,092
So I think more transactional volume on L2 is much beneficiary for everybody on L1.

2237
03:22:08,932 --> 03:22:10,771
I don't know. What do you think about that?

2238
03:22:11,771 --> 03:22:19,411
Well, yeah, I mean, in my mind, it's basically whatever extends the network effect is beneficial for everyone.

2239
03:22:19,411 --> 03:22:31,652
And if Bitcoin just remains a form of savings for rich people on L1 and occasionally, you know, companies pay each other a million dollars over lightning, that's not a very big network effect.

2240
03:22:31,691 --> 03:22:46,172
But if there is a viable L2 where people can have Bitcoin on their phone all over the world and not pay high fees because they don't transact on level one, which will inevitably have high fees, that network effect is going to be 10 or 100 times larger.

2241
03:22:46,172 --> 03:22:54,252
And that will allow Bitcoin to go from fixing nothing and just being like fine art and gold to maybe the reserve asset.

2242
03:22:54,971 --> 03:23:01,211
And maybe after that, it will go to reserve asset that can be collateralized on chain or something like at some point.

2243
03:23:01,252 --> 03:23:04,092
It has like it's all about extending the network.

2244
03:23:04,131 --> 03:23:11,971
Like in a sense, you can think of my position as being digital scarcity maximalist, not a monetary maximalist.

2245
03:23:12,051 --> 03:23:21,691
You know, like Paul Sztorc was talking about that maxis today are all just thinking of they're all just trying to be Bitcoin is sound money and nothing else.

2246
03:23:22,211 --> 03:23:30,652
But the original position of OGs was that it's digital scarcity that has unbounded number of unknown, unknown applications.

2247
03:23:31,051 --> 03:23:32,331
Money is just one of them.

2248
03:23:32,372 --> 03:23:36,092
So let's extend the network effect to naming, decentralized naming.

2249
03:23:36,452 --> 03:23:39,092
Now, thank God we have that with ordinals and inscriptions.

2250
03:23:39,131 --> 03:23:45,211
But there's like 100 other applications that could extend the network effect and therefore demand and usage of Bitcoin.

2251
03:23:45,211 --> 03:23:46,971
And that helps the number go up.

2252
03:23:47,691 --> 03:23:55,172
And the higher the number goes up, the better all these other use cases become because Bitcoin is more valuable and liquid, etc.

2253
03:23:55,211 --> 03:23:59,611
So it's just the question in my mind is where the network effect stops.

2254
03:24:00,012 --> 03:24:12,092
If it stops just at the sterile store of value, which unless there is some kind of scalable L2 that's trust minimized and not like lightning, that's the path that we're on right now.

2255
03:24:12,131 --> 03:24:18,652
But maybe the BitVM opened up some new possibilities for a two way peg or bridging.

2256
03:24:19,731 --> 03:24:25,812
If Bitcoin goes beyond that, then it becomes like a reserve asset and then it becomes bigger.

2257
03:24:25,812 --> 03:24:32,331
And then there's two or three steps beyond that to get the medium of exchange and then eventually like unit of account for the world.

2258
03:24:32,331 --> 03:24:33,852
That's the full hyper-Bitcoinization.

2259
03:24:35,372 --> 03:24:37,211
Yeah, I agree. I agree with you.

2260
03:24:37,372 --> 03:24:38,972
I mean, I agree in general with you.

2261
03:24:39,171 --> 03:24:49,891
And just, you know, like maybe you were talking about the other guy who was, I think he was talking more financially.

2262
03:24:51,011 --> 03:24:55,092
And what is your criticism about the BitVM?

2263
03:24:55,412 --> 03:25:05,412
Because I have so many criticisms because I know how the other EVM world works and what is going on there.

2264
03:25:05,412 --> 03:25:13,291
I don't, I mean, I don't have criticism of BitVM.

2265
03:25:13,291 --> 03:25:22,771
I'm just a little concerned by its complexity and how much work will need to be done.

2266
03:25:22,771 --> 03:25:31,412
And people who think that, you know, BitVM will solve all Bitcoin's problems probably should go away and come back one to three years from now and see what's happening.

2267
03:25:31,412 --> 03:25:37,572
Because it's going to take one to three years in order for this technology to actually manifest into something.

2268
03:25:39,652 --> 03:25:44,011
It's a very complex, you know, it's very complex.

2269
03:25:44,051 --> 03:25:51,771
It's like Lightning Network took two or three years to deploy and this might take longer even if it does work or it might not work.

2270
03:25:52,812 --> 03:25:59,291
It might not be, it might not amount to anything because of economic problems, like not technical problems.

2271
03:25:59,331 --> 03:26:06,652
Like maybe nobody's interested in running these federations with a single honest member, for example, for economic reasons, right?

2272
03:26:06,652 --> 03:26:08,572
Because you have to look up to make that capital.

2273
03:26:10,092 --> 03:26:13,771
And then decentralization, because federated is not decentralized.

2274
03:26:13,812 --> 03:26:23,852
Also, you can have even a bigger problem that you can have a situation, and I would like to hear your opinion, Satoshi and Jura on this, is that you can have a situation where

2275
03:26:24,412 --> 03:26:38,331
somebody invents a fully trust-minimized two-way peg using BitVM and people deploy one or two sidechains with that peg and nobody cares.

2276
03:26:38,372 --> 03:26:50,011
Essentially, just like nobody cares about RSK sidechain or Liquid sidechain, you might have a situation where nobody cares, even if there is a trustless two-way peg to some sidechain that got deployed.

2277
03:26:50,692 --> 03:26:59,132
Because that sidechain, just like RSK sidechain, doesn't have enough liquidity and people on it in order to compete with Ethereum.

2278
03:26:59,372 --> 03:27:06,812
I heard you saying, I think that there's like a very unfortunate thing that I'm about to say.

2279
03:27:07,572 --> 03:27:18,932
From my experience, like even over the years or whatever, like what actually gains traction is usually the things that are marketed the most or marketed in a bullshit type of way.

2280
03:27:19,692 --> 03:27:24,611
And just has a lot of speculation, gambling, degeneracy.

2281
03:27:24,771 --> 03:27:27,171
Like, for example, how did BitConnect get adopted?

2282
03:27:27,692 --> 03:27:34,252
They promised outrageous things that just weren't true, that they have some kind of back end that's arbitrage trading, complete bullshit.

2283
03:27:34,652 --> 03:27:40,051
Or if you look at even second layer EVMs, which ones actually got adopted?

2284
03:27:40,051 --> 03:27:45,972
The ones that had very high amounts of Ponzi's on top, those got adopted.

2285
03:27:46,011 --> 03:27:49,092
And even if they were temporary, they got adopted for temporary reasons, doesn't matter.

2286
03:27:49,331 --> 03:27:53,011
But the adoption came from like degeneracy.

2287
03:27:53,011 --> 03:27:55,852
And it also came from like flows in the market, right?

2288
03:27:55,852 --> 03:28:04,812
Like whenever certain areas of a market kind of became quiet, those speculators and gamblers were not really getting any gains or whatever in that niche of the market.

2289
03:28:04,812 --> 03:28:06,412
So they would start to flow to another niche.

2290
03:28:06,652 --> 03:28:13,572
Right. And then that other niche would start to gain adoption and it could be a different layer or a different form of contracts or Ponzi's or whatever.

2291
03:28:14,252 --> 03:28:16,611
You can also see something similar to happen in ordinals, right?

2292
03:28:17,171 --> 03:28:20,692
Very beginning, you know, like there wasn't really much adoption.

2293
03:28:21,051 --> 03:28:26,932
But then once other people were interested and then like there wasn't even any marketplaces, right, people were trading it in discords.

2294
03:28:26,932 --> 03:28:32,411
But the fact that people were trading it in discords, other people were speculating on, you know, others trading it and buying it for higher.

2295
03:28:32,411 --> 03:28:38,772
And that brought people. But then you can see that the majority that like entered was really from like BRC20s, which absolutely makes no sense.

2296
03:28:38,812 --> 03:28:47,452
The oldest model, like, you know, just fungible tokens and tokenizing things is like a model that happened in 2013 with like a million different, you know, coins that were just copies of Bitcoin.

2297
03:28:47,812 --> 03:28:50,731
Right. It was very, very old model that happened over and over and over many years.

2298
03:28:50,932 --> 03:29:02,132
But for some reason, this is like I can tell you the reason, because apparently three billion Asians have missed the ICO boom of 2017 and a lot of it went into BRC20 speculation.

2299
03:29:02,411 --> 03:29:08,332
Yeah. But you can also look at in 2013, there was plenty of, you know, old coins that were popping up.

2300
03:29:08,491 --> 03:29:10,491
Right. 2014, 2015, plenty of them.

2301
03:29:10,491 --> 03:29:12,651
2017 ICO bubble, plenty of them.

2302
03:29:12,651 --> 03:29:16,452
Right. And 2021, 2022, meme coins, plenty of them.

2303
03:29:16,651 --> 03:29:20,692
Right. So it seems like it's a cycle where people are really interested in, you know, speculating.

2304
03:29:21,332 --> 03:29:23,611
And it's the new waves of adopt.

2305
03:29:24,012 --> 03:29:29,491
It's a new wave of refugees into crypto that come in and they haven't seen the previous bubbles.

2306
03:29:29,491 --> 03:29:33,291
And apparently BRC20 bubble was just people speculating.

2307
03:29:33,291 --> 03:29:35,892
It was very tiny. It wasn't even, it was like very, very tiny.

2308
03:29:35,892 --> 03:29:41,411
It's very hard to use, very hard to know how to even send the BRC20, you know, there's a lot of limits and barriers there.

2309
03:29:41,731 --> 03:29:43,332
Extremely, you know, like inefficient.

2310
03:29:44,051 --> 03:29:51,372
But what I'm saying is like previously, I thought that like during ICO bubble, I thought, OK, maybe this is just like a dot com bubble to one in a generation type of thing, you know.

2311
03:29:51,372 --> 03:29:53,212
But then the meme coin bubble happened as well.

2312
03:29:53,212 --> 03:29:55,252
And the Ponzi's that that happened later happened again.

2313
03:29:55,572 --> 03:30:05,572
You know, so I came to the point later, my point, like my view kind of evolved where it's more right now like that people always want to gamble at a casino for one reason or another.

2314
03:30:05,572 --> 03:30:07,932
Like their casinos are in business and people always want to gamble.

2315
03:30:08,132 --> 03:30:11,212
Right. And but they know that at a casino that the house always wins.

2316
03:30:11,212 --> 03:30:14,252
They know that. They know that the edge is not on their side, but they still gamble.

2317
03:30:14,411 --> 03:30:17,171
People still do. But in crypto, people don't know that.

2318
03:30:17,171 --> 03:30:18,491
They actually think they have an edge.

2319
03:30:18,731 --> 03:30:26,012
Right. They hear their friend got rich or they hear somebody got rich or they think that they heard the marketing from Coin XYZ.

2320
03:30:26,212 --> 03:30:30,332
Right. Oh, this is the coin that's going to win because of marketing XYZ that I was lied to about.

2321
03:30:30,332 --> 03:30:31,411
Right. But they don't know it's a lie.

2322
03:30:31,772 --> 03:30:33,171
Right. They hear all these buzzwords.

2323
03:30:33,171 --> 03:30:37,012
They hear all this crazy talk from the from the marketing that's extremely misleading.

2324
03:30:37,252 --> 03:30:38,491
And now they think they have an edge.

2325
03:30:38,692 --> 03:30:42,812
Now they think they picked the right one that's going to about about the 200 X and just everybody doesn't know yet.

2326
03:30:43,212 --> 03:30:49,531
Right. So I feel like this whole idea of speculation is it seems like it's just it's going to persist.

2327
03:30:49,611 --> 03:30:52,812
Now, it's a double edged sword because it definitely brings a lot of people to the space.

2328
03:30:53,171 --> 03:30:58,291
Right. And hopefully people do learn and then they learn about Bitcoin or, you know, whatever it is that interests them.

2329
03:30:58,731 --> 03:31:03,892
But then from the other side, it seems like these are the type of things that actually bring adoption.

2330
03:31:04,291 --> 03:31:09,332
And you asked about, you know, if we do have a trustless two way tag or like RSK, how come RSK is not adopted?

2331
03:31:09,731 --> 03:31:12,012
It's to me, it's an unfortunate thing.

2332
03:31:12,252 --> 03:31:13,772
But you just need not need.

2333
03:31:13,772 --> 03:31:23,012
But it's like what people desire is to think that they have an edge to be misled, actually, you know, to be misled and lied to and to think they have an edge to make a million dollars.

2334
03:31:23,012 --> 03:31:24,611
And that's what actually brings adoption.

2335
03:31:25,372 --> 03:31:26,372
Very unfortunate.

2336
03:31:26,731 --> 03:31:31,171
Maybe maybe you can have more fair Ponzi's where people know that this is a Ponzi.

2337
03:31:31,171 --> 03:31:33,812
They know it eventually will collapse, but they know the rules.

2338
03:31:33,812 --> 03:31:34,812
The rules are fair.

2339
03:31:35,132 --> 03:31:37,091
Right. Akin to something like that.

2340
03:31:37,132 --> 03:31:40,812
That might bring adoption, too, because there are participants in a casino, but they know it's a casino.

2341
03:31:41,132 --> 03:31:48,531
They know that Ponzi's are bad or they know that it's a greater fool theory, whatever it is, as long as they understand the mechanisms behind it.

2342
03:31:48,892 --> 03:31:53,651
I feel like that might not be as morally bad than than like completely misleading people.

2343
03:31:53,692 --> 03:31:56,812
Right. But I feel like that both of that happens, right?

2344
03:31:56,812 --> 03:32:01,252
People do get misled. Eventually they get smarter and they start learning more about the mechanics of certain Ponzi's.

2345
03:32:02,731 --> 03:32:08,051
And Juer, I agree with you completely, but I want to add something to what you said.

2346
03:32:08,091 --> 03:32:10,851
It's everything you said I agree with, but it's worse.

2347
03:32:10,932 --> 03:32:15,731
In other words, it's not enough for the sidechain to be a casino, although it helps.

2348
03:32:16,091 --> 03:32:17,531
It's not a sufficient condition.

2349
03:32:18,051 --> 03:32:20,411
The sufficient condition is actually liquidity.

2350
03:32:20,452 --> 03:32:38,772
So you can see this because you had remember all these Ethereum killer L1's that existed that basically said, well, every protocol that works on Ethereum, we just copy paste it to our L1 and instead of paying, you know, a hundred dollar fees to execute contracts on Ethereum, come to Avalanche and execute the same contract for 50 cents.

2351
03:32:38,812 --> 03:32:49,171
Right. So there was speculation in there and these Ethereum killer ones, there was the casino, but they still failed anyways because they didn't have the liquidity of Ethereum.

2352
03:32:49,212 --> 03:32:50,812
Right. So it's not enough.

2353
03:32:51,411 --> 03:32:56,531
Over here there might be a benefit because like what you're saying is, for example, how AVAX incentivized everybody to move over.

2354
03:32:56,572 --> 03:33:02,452
And there was a short period of time where, you know, you can get better gains on AVAX for, you know, simple, similar things that you can do on Ethereum.

2355
03:33:02,851 --> 03:33:09,411
Right. And because they might have incentivized it from like the AVAX team, they might have paid out to certain builders and things like that.

2356
03:33:09,692 --> 03:33:12,091
So the yields was higher and people came there, but it was temporary.

2357
03:33:12,132 --> 03:33:15,692
Eventually the yields dry up, the market dries up and they go back to where Ethereum has been.

2358
03:33:15,692 --> 03:33:16,692
Exactly right.

2359
03:33:16,731 --> 03:33:18,372
Yeah. But over here it's a little bit different.

2360
03:33:18,572 --> 03:33:22,651
The reason why is because Bitcoin does have the liquidity that's higher than everything.

2361
03:33:22,932 --> 03:33:25,812
So in a hypothetical scenario, I create a sidechain.

2362
03:33:25,851 --> 03:33:28,491
Right. And I mislead everybody with a Ponzi.

2363
03:33:28,772 --> 03:33:29,851
I completely lie to people.

2364
03:33:29,932 --> 03:33:37,971
And, you know, I make it seem like this Ponzi is going up with, you know, you know, like I do a Twitter raid with like many, many bots, crazy marketing.

2365
03:33:38,132 --> 03:33:39,692
And I make it seem like there's real users.

2366
03:33:39,731 --> 03:33:40,772
Right. And the price is going up.

2367
03:33:41,051 --> 03:33:42,772
Meanwhile, I own like 99 percent of it.

2368
03:33:43,091 --> 03:33:51,332
Right. Just by showing people that like there's an interest here, even if it's fake, it will automatically drive other people to be interested.

2369
03:33:51,332 --> 03:33:53,291
And obviously it has to be timed perfectly.

2370
03:33:53,291 --> 03:33:56,171
Right. It has to be when the market is looking for something like this or whatever it is.

2371
03:33:56,171 --> 03:33:57,851
Right. Has to be an interesting new Ponzi.

2372
03:33:58,012 --> 03:34:01,171
Doesn't matter. But it's possible to gain the users.

2373
03:34:01,212 --> 03:34:04,332
Now, what you're saying is to keep the users is extremely hard because of the liquidity.

2374
03:34:04,372 --> 03:34:10,171
Right. But over here now, what I'm what I'm thinking is if this sidechain is an EVM compatible.

2375
03:34:10,212 --> 03:34:16,971
Right. The only thing you're really fighting with is number one is the network effect that Ethereum already has.

2376
03:34:17,051 --> 03:34:22,051
Right. Ethereum already has network effect and interoperability between other liquid contracts.

2377
03:34:22,051 --> 03:34:24,171
Right. Other DeFi contracts that have TBL.

2378
03:34:24,411 --> 03:34:25,611
So you're competing with that. Number one.

2379
03:34:25,892 --> 03:34:31,772
Right. But number two, what you're really competing with in the long run is the monetary the monetary policy.

2380
03:34:31,851 --> 03:34:36,091
Right. If you can somehow over time gain liquidity and even if it's small.

2381
03:34:36,372 --> 03:34:42,971
Right. Eventually, the the the biggest difference would be really just the underlying monetary asset.

2382
03:34:43,291 --> 03:34:48,411
And if the monetary asset is the only thing now, eventually being the competition, then people will have a choice.

2383
03:34:48,452 --> 03:34:49,812
Well, the new participants.

2384
03:34:49,851 --> 03:34:51,971
Right. They're like, I'm entering the space.

2385
03:34:52,012 --> 03:34:57,651
I can either have potentially more liquidity on Ethereum or I can have less liquidity or potentially the same liquidity on Bitcoin.

2386
03:34:57,971 --> 03:35:02,491
Most likely, if the education is proper, they would choose the asset that is nominated in Bitcoin.

2387
03:35:02,812 --> 03:35:11,772
I think that's more of the view of LayerTwo Labs thinking of drivechains that, you know, could eventually take over, you know, EVM or Monero or things like that.

2388
03:35:11,971 --> 03:35:14,772
Where, yeah, in the beginning, you might have less liquidity, less network effect.

2389
03:35:15,012 --> 03:35:18,012
But in the end, you're really fighting with just just the monetary policy.

2390
03:35:18,012 --> 03:35:21,372
And hopefully Bitcoin's monetary policy beats them in the long run.

2391
03:35:21,411 --> 03:35:24,651
And it eventually wins on the liquidity side.

2392
03:35:24,651 --> 03:35:31,132
So I again, I agree with everything you said, but I'll kind of add to it.

2393
03:35:31,252 --> 03:35:38,531
One additional necessary condition, which is that, yes, Bitcoin has two advantages in Ethereum right now.

2394
03:35:38,572 --> 03:35:42,452
One advantage is it has more total liquidity because it has larger market cap.

2395
03:35:42,452 --> 03:35:46,051
And second advantage is that it's better collateral because it's less volatile.

2396
03:35:46,051 --> 03:36:00,012
Right. But but also its monetary policy is more, you know, that's that's already that's already debatable because, you know, Ethereum has this sort of like deflationary monetary policy.

2397
03:36:00,171 --> 03:36:06,452
But this deflationary aspect is if you can say from like a more higher level thing, it's current.

2398
03:36:06,452 --> 03:36:07,851
Right. But you can't guarantee in the future.

2399
03:36:07,851 --> 03:36:09,132
Right. No, no, I agree.

2400
03:36:09,132 --> 03:36:14,452
You cannot. You cannot guarantee it, but you can see Ethereum has started also buying already.

2401
03:36:14,452 --> 03:36:17,851
Right. But let's say it has a really good, you know, monetary policy that's better than Bitcoin.

2402
03:36:17,851 --> 03:36:24,611
But the fact that it changed over the years, you can make you can make the argument that, you know, it's not very credible, but it's subject to the Lindy effect.

2403
03:36:24,611 --> 03:36:28,611
Right. Like the longer this current monetary policy is in effect, the more people will trust it.

2404
03:36:28,731 --> 03:36:35,091
And in a sense, there's other issues of like, you know, like, for example, fork risks from, you know, USDC liquidity.

2405
03:36:35,091 --> 03:36:39,531
Right. I want to take your argument, agree with it, but take it to its logical conclusion.

2406
03:36:39,531 --> 03:36:43,452
Like, in other words, you suggested that the sidechain should be EVM sidechain.

2407
03:36:43,452 --> 03:36:46,692
Right. Because you can then copy paste all the Ethereum protocols.

2408
03:36:46,692 --> 03:36:54,651
And, you know, one other mode of protection that Ethereum has besides liquidity is it has composability between protocols.

2409
03:36:54,651 --> 03:36:58,851
Right. Because you can make calls through a bunch of protocols and they're all liquid.

2410
03:36:59,291 --> 03:37:07,251
So it's not enough to copy paste all the protocols the way Avalanche did, because, yes, you can have the shallow, shallow pace that have no liquidity.

2411
03:37:07,251 --> 03:37:09,371
But the protocols will not compose with each other.

2412
03:37:09,371 --> 03:37:12,131
And therefore, there's like an additional mode around Ethereum.

2413
03:37:12,852 --> 03:37:17,852
The third mode you can easily breach by simply adopting the EVM as a virtual machine.

2414
03:37:17,852 --> 03:37:21,251
And therefore, all the Ethereum contracts can run on the sidechain.

2415
03:37:21,812 --> 03:37:24,371
But let's take your argument to the logical conclusion.

2416
03:37:24,852 --> 03:37:32,332
Why would you deploy a sidechain with a trust minimized two way peg and then hope for it to become liquid and usable enough?

2417
03:37:32,812 --> 03:37:35,852
I think it's simply enough to bridge Bitcoin to Ethereum itself.

2418
03:37:35,852 --> 03:37:38,531
And then you co-opt Ethereum's network effect.

2419
03:37:39,011 --> 03:37:41,771
Like, in other words, let Ethereum DeFi take off.

2420
03:37:41,771 --> 03:37:47,651
But if Bitcoin can go back and forth trust minimized, it will essentially out-compete Ether on Ethereum.

2421
03:37:48,212 --> 03:37:49,852
So you don't need to fight Ethereum.

2422
03:37:49,972 --> 03:38:01,492
That's actually a good point. But you still have the issue of Ethereum's, you know, like long term stability and consensus model to actually, you know, work.

2423
03:38:02,371 --> 03:38:03,531
It's more of a concern.

2424
03:38:03,531 --> 03:38:05,572
It's more of a conserved troll, no offense.

2425
03:38:05,572 --> 03:38:09,251
But it's like, yes, it has a potential issue there.

2426
03:38:09,251 --> 03:38:11,972
But I'm saying, if you can't beat them, join them.

2427
03:38:11,972 --> 03:38:14,371
In your model, the issue gets exacerbated.

2428
03:38:14,371 --> 03:38:19,891
Because if you do, you know, bridge over Bitcoin to Ethereum and a trustless two way peg, right.

2429
03:38:20,612 --> 03:38:26,651
And then the economic activity eventually moves to Bitcoin being the collateral reserve into all the DeFi products.

2430
03:38:26,651 --> 03:38:35,612
Right. And let's say the value of Ethereum starts to, even if it goes up, but it doesn't go up as high and as fast as Bitcoin does, it doesn't out-compete it.

2431
03:38:35,972 --> 03:38:41,651
Right. Then the security model of Ethereum, because it's priced in ETH, might become an issue.

2432
03:38:41,651 --> 03:38:45,171
But you can also say then, well, you can start paying the validators in Bitcoin.

2433
03:38:45,371 --> 03:38:52,531
Well, but not only that, but if you actually look at the security budget, the Ethereum security budget is 10x the security budget of Bitcoin today.

2434
03:38:52,531 --> 03:38:54,092
Right. Because the fees are 10x higher.

2435
03:38:54,131 --> 03:38:56,732
Yes. Yes. But that's only that's only in the model today.

2436
03:38:56,771 --> 03:39:02,572
But that's not that's not guaranteed in a model where there's a trustless two way peg and the economic activity eventually goes up.

2437
03:39:03,051 --> 03:39:10,891
What guarantees viability of Ethereum long term is not the fact that ETH as an asset will not be out-competed by somebody else, something else.

2438
03:39:10,932 --> 03:39:16,171
It's it's got such a broad network effects because it has a very viable ecosystem of L2s now.

2439
03:39:16,572 --> 03:39:17,651
Like my thing.

2440
03:39:17,651 --> 03:39:26,131
What's the incentive of you of creating this Bitcoin denominated sidechain when you could just if you have this two way peg, you might as well just do it on Ethereum.

2441
03:39:26,251 --> 03:39:29,452
Not just that, but I'm saying if you can't beat them, join them.

2442
03:39:29,452 --> 03:39:36,572
You just co-opt Ethereum's network effect by simply bridging Bitcoin to Ethereum and let that Bitcoin spread across all of Ethereum's L2s.

2443
03:39:36,612 --> 03:39:37,371
Right. Right.

2444
03:39:37,411 --> 03:39:39,212
Just like any other ERC20 token.

2445
03:39:39,212 --> 03:39:42,051
In this event, you actually Bitcoin gains, right?

2446
03:39:42,051 --> 03:39:45,692
You essentially infiltrate the enemy camp with a Trojan horse.

2447
03:39:45,692 --> 03:39:46,411
Yeah. Yeah.

2448
03:39:46,411 --> 03:39:47,852
This is an interesting toy.

2449
03:39:48,092 --> 03:39:53,492
This is this is the Bitcoin's ultimate network effect sort of.

2450
03:39:55,129 --> 03:40:14,009
Unexpected chess move. Right. Because all that Bitcoin needs to do is to get to get to Ethereum and back and then it doesn't need any other sidechains because at that point it will essentially infect the entire Ethereum layer one and layer two ecosystem with a very trustworthy asset which has higher liquidity in aggregate and lower volatility in aggregate.

2451
03:40:14,009 --> 03:40:15,688
So it's superior collateral.

2452
03:40:15,688 --> 03:40:32,248
Right. And then it will be very competitive because, you know, today you will have you have all these startups that are VC financed that are like creating 50 or 100 or 300 or 500 L2s for Ethereum because they want to create each app is seemingly creating its own L2.

2453
03:40:32,248 --> 03:40:36,889
So some video game can create L2, but they cannot use sats in that video game.

2454
03:40:36,889 --> 03:40:41,369
But once you get Bitcoin trust minimized to Ethereum, there's no reason for them to use ETH.

2455
03:40:41,369 --> 03:40:45,209
They actually want to use sats that will be bridged from ETH to this L2 and back.

2456
03:40:46,568 --> 03:40:51,129
Well, that's interesting. So you're saying the L2s are going to be using the L2s of ETH.

2457
03:40:51,129 --> 03:40:53,768
L2s of ETH are the final frontier of Bitcoin Trojan horse.

2458
03:40:53,768 --> 03:40:58,009
You're saying that they're going to start using Bitcoin as their transaction.

2459
03:40:58,009 --> 03:41:01,448
Exactly. Because it's a more liquid and less volatile collateral.

2460
03:41:01,529 --> 03:41:06,328
The volatility also matters even more than liquidity, potentially, in some DeFi apps.

2461
03:41:07,209 --> 03:41:14,969
So what I'm saying is also like the treasuries of these, you know, whatever protocols that are being built on top games or whatever it is.

2462
03:41:14,969 --> 03:41:17,688
Since their treasury is dependent on longer term, right.

2463
03:41:18,809 --> 03:41:24,088
You can call this model Bitcoin impregnates Ethereum instead of fighting it.

2464
03:41:24,088 --> 03:41:30,569
You know, and then Ethereum and Bitcoin have a baby that's mostly Bitcoin and Bitcoin proliferates on all the Ethereum L2s.

2465
03:41:30,809 --> 03:41:39,048
So you basically don't need RSK or these complicated federations with a single honest member because my hunch is that nobody will care.

2466
03:41:39,048 --> 03:41:44,569
But everybody in the world will care because we've seen them create 300,000 WBTCs.

2467
03:41:44,569 --> 03:41:47,768
Everybody will love Bitcoin on Ethereum. There's already a product market fit there.

2468
03:41:48,569 --> 03:41:54,249
So if you have Bitcoin on Ethereum that you can trustlessly pack back out to Bitcoin, that's game over essentially.

2469
03:41:54,249 --> 03:41:58,809
Bitcoin will never be defeated by Ethereum. That's all you need.

2470
03:41:58,809 --> 03:42:02,328
And you don't even need to launch these EVM chains or anything.

2471
03:42:02,328 --> 03:42:07,049
Because you also got to think of you're adding some sort of credibility to the asset of Ethereum, right?

2472
03:42:07,049 --> 03:42:12,568
Because the asset of Ethereum will have more of a use case, at least in the short term.

2473
03:42:13,208 --> 03:42:18,088
Yes. But, you know, if and when it's so-called flippening happens.

2474
03:42:18,088 --> 03:42:22,728
And in fact, inside Ethereum world, they even call for a lappening, which is flippening multiple times.

2475
03:42:23,368 --> 03:42:31,208
If and when the flippening happens, I can guarantee you that all the laser eyed priests on podcasts will simply rationalize it away by saying,

2476
03:42:31,208 --> 03:42:35,049
well, but wait a second, Ethereum is just a giant tech company like Google or Apple.

2477
03:42:35,049 --> 03:42:40,008
Those have $3 trillion market caps. Who cares? They're just run by dev team, right?

2478
03:42:40,008 --> 03:42:42,809
That will be the rationalization if the flippening happens.

2479
03:42:42,809 --> 03:42:52,088
However, that rationalization also can be used to answer what you just said, which is that if you reinforce Ethereum's own network effect and usability,

2480
03:42:52,088 --> 03:43:01,368
its price can go high, but it will only go high if it actually has high enough usage to justify fee income, to justify its valuation.

2481
03:43:01,368 --> 03:43:09,288
Because Bitcoin will take over the store value part of the Ethereum's valuation on Ethereum if it's bridged there trustlessly, right?

2482
03:43:11,288 --> 03:43:16,169
Like, in other words, Bitcoin bridged to Ethereum might demonetize Ethereum,

2483
03:43:16,169 --> 03:43:21,848
but Ethereum still has a chance to become a big tech with multi trillion dollar market cap if the fees do appear.

2484
03:43:22,648 --> 03:43:25,288
$100 million per day instead of $5 million per day.

2485
03:43:27,288 --> 03:43:34,728
But Alex, do we want that? I see a problem there with centralization because not only

2486
03:43:35,448 --> 03:43:44,169
the amount of nodes or the network is centralized, but also they're hosted and they're hosted on the centralized.

2487
03:43:44,329 --> 03:43:51,769
Again, everything that I've said assumes a trust-minimized peg to Ethereum.

2488
03:43:51,769 --> 03:43:56,488
So if Ethereum experiences any problems, the fact that this peg is trust-minimized

2489
03:43:56,488 --> 03:44:01,208
always allows you to escape back to Bitcoin with your Bitcoin, no matter what problems happen on Ethereum.

2490
03:44:01,848 --> 03:44:09,848
So by the assumption of a trust-minimized peg to Ethereum, these problems are essentially more or less addressed.

2491
03:44:10,809 --> 03:44:21,368
Yeah, I understand. But like, you know, the way how Ethereum works and what's happening on Ethereum,

2492
03:44:22,249 --> 03:44:28,569
it's like no future for that. Smart contracts do not have a future. Everybody's moving from smart contracts.

2493
03:44:28,569 --> 03:44:30,648
Well, you may be right.

2494
03:44:30,648 --> 03:44:35,449
At the end of the day, there's definitely a lot of users, probably even more users than Bitcoin.

2495
03:44:36,088 --> 03:44:42,249
Oh, I mean, look at Ethereum L2s, there's millions of transactions going on on L2s, right?

2496
03:44:42,249 --> 03:44:43,289
And there's going to be billions.

2497
03:44:44,168 --> 03:44:50,488
Yeah, L2s are even more volume than Ethereum, some of them.

2498
03:44:51,368 --> 03:44:59,289
Yeah, there's still some issues because the really good trust-less two-way pegs, in my opinion,

2499
03:44:59,449 --> 03:45:03,048
you want to actually give the fees to the miners.

2500
03:45:04,009 --> 03:45:08,249
You know, that's one of the reasons I really like a potential drivechain type model.

2501
03:45:09,608 --> 03:45:15,289
I was asking SupertestNet earlier about the other two-way models, the two-way pegs,

2502
03:45:15,289 --> 03:45:18,088
for them to have also fees going back to Bitcoin, right?

2503
03:45:18,088 --> 03:45:23,129
So that's a really good thing, because if you don't really have that, I think that the attack

2504
03:45:23,129 --> 03:45:29,368
vectors are like, if you just have the two-way peg, the trust-less two-way peg to Ethereum,

2505
03:45:29,368 --> 03:45:32,249
right, it could still make Ethereum's asset price.

2506
03:45:32,249 --> 03:45:36,488
Like, another thing that I want to say is, I'm trying to wrap my head around it, but

2507
03:45:37,449 --> 03:45:40,249
I agree with you of how they would rationalize it away.

2508
03:45:40,249 --> 03:45:43,449
And I kind of look at it in a similar way, if there's a flippening, right?

2509
03:45:43,449 --> 03:45:48,328
For example, if there is some kind of like really, really good Ponzi that is marketed

2510
03:45:48,328 --> 03:45:52,009
really, really well, you know, like on every, you know, whatever, every commercial on TV,

2511
03:45:52,088 --> 03:45:57,768
everywhere, somehow it gains a lot of traction, and somehow it eventually feeds back to the

2512
03:45:57,768 --> 03:46:00,569
Ethereum loop, the Ethereum asset, and Ethereum flippance, right?

2513
03:46:00,569 --> 03:46:02,409
That's a potential thing that can happen.

2514
03:46:02,409 --> 03:46:05,208
I don't see that not, you know, I don't think there's a zero chance.

2515
03:46:05,208 --> 03:46:07,048
I think there's a non-zero chance of that happening.

2516
03:46:07,048 --> 03:46:09,129
And I think that, you know, it could flip it.

2517
03:46:09,129 --> 03:46:13,289
And you're right, they would look at it as, at least I would look at it as, that's just

2518
03:46:13,289 --> 03:46:13,608
a company.

2519
03:46:13,608 --> 03:46:18,009
Ethereum's a company, and a company can, you know, outperform, you know, Bitcoin in short

2520
03:46:18,009 --> 03:46:19,048
term or whatever.

2521
03:46:19,048 --> 03:46:23,208
Well, yeah, Apple has $3 trillion market cap at some point, so who cares, right?

2522
03:46:23,208 --> 03:46:28,648
I still, yeah, so I still think of it as, because Bitcoin is a different type of asset

2523
03:46:28,648 --> 03:46:35,608
that has different type of, you know, actual, like, its fundamental intrinsic value and

2524
03:46:35,608 --> 03:46:39,928
properties are totally different than Ethereum's, that, you know, the desire for Bitcoin will

2525
03:46:39,928 --> 03:46:40,488
still be there.

2526
03:46:40,488 --> 03:46:44,569
And even if it's, you know, a lower market cap than Bitcoin, and I think that that wouldn't

2527
03:46:44,569 --> 03:46:48,569
automatically legitimize Ethereum to, you know, to the Bitcoin maxes, because I don't

2528
03:46:48,569 --> 03:46:51,608
think they don't, they care about Ethereum or not from its market cap.

2529
03:46:51,608 --> 03:46:54,888
I think they care about Bitcoin because of its properties, right, that Ethereum doesn't

2530
03:46:54,888 --> 03:46:55,449
have.

2531
03:46:55,449 --> 03:46:59,289
But when you say that Ethereum doesn't have these properties, you have an implicit,

2532
03:46:59,289 --> 03:47:02,409
unstated assumption, and I'll try to reveal it.

2533
03:47:02,409 --> 03:47:06,569
Imagine that 10 years from now, Ethereum ossifies completely, and it doesn't change

2534
03:47:06,569 --> 03:47:11,768
organically, not because there's a bunch of priests broadcasting on podcasts all chanting

2535
03:47:11,768 --> 03:47:16,328
ossify, ossify all the time, but every time Ethereum does a hard fork, those hard forks

2536
03:47:16,328 --> 03:47:19,608
take longer and longer because it's undergoing natural ossification.

2537
03:47:19,608 --> 03:47:24,009
So you can see how 10, 15 years from now, Ethereum will naturally ossify, right?

2538
03:47:24,009 --> 03:47:26,969
Yeah, ossify isn't the main thing, though, because you can say ossify is the main point

2539
03:47:26,969 --> 03:47:30,569
for the, you know, the monetary asset to be limited, right?

2540
03:47:30,569 --> 03:47:31,849
You can say that there's scarcity.

2541
03:47:31,849 --> 03:47:32,249
All right.

2542
03:47:32,249 --> 03:47:33,689
But there's still other parts.

2543
03:47:33,689 --> 03:47:39,768
You can still argue other parts of, you know, like the USDC centralization point or fork

2544
03:47:39,768 --> 03:47:41,608
regulations or forks from USDC.

2545
03:47:41,608 --> 03:47:45,849
I think that there's other properties there that make it different, different enough,

2546
03:47:45,928 --> 03:47:46,088
right?

2547
03:47:48,888 --> 03:47:50,088
It's a weirder animal.

2548
03:47:50,088 --> 03:47:51,208
I agree with you.

2549
03:47:51,208 --> 03:47:56,249
But I think, like, it's a mistake to underestimate Ethereum, and it's been consistently made

2550
03:47:56,249 --> 03:47:57,849
this mistake for years and years.

2551
03:47:58,648 --> 03:48:02,729
All I'm saying is that if Bitcoin, OK, so there's two ways you can bridge Bitcoin to

2552
03:48:02,729 --> 03:48:03,208
Ethereum.

2553
03:48:03,208 --> 03:48:06,488
One way is that the one that you are worried about, that nobody gets paid for it because

2554
03:48:06,488 --> 03:48:09,689
you're bridging directly and there's like miners not being paid for this or something

2555
03:48:09,689 --> 03:48:10,088
like this.

2556
03:48:10,729 --> 03:48:12,009
That's one model.

2557
03:48:12,088 --> 03:48:15,849
The other model is that Bitcoin becomes like a layer two to Ethereum.

2558
03:48:15,849 --> 03:48:22,888
There's some kind of bridging as if Bitcoin is a layer two to Ethereum and it can go back

2559
03:48:22,888 --> 03:48:24,088
and forth or something like this.

2560
03:48:24,088 --> 03:48:26,809
This is just a completely novel stream of consciousness.

2561
03:48:26,809 --> 03:48:28,009
So I haven't thought it through.

2562
03:48:28,009 --> 03:48:31,848
But my point is, it doesn't really matter if the miners are paid or not.

2563
03:48:33,449 --> 03:48:38,009
It's like if there is a secure enough bridge to Ethereum one way or the other, it will

2564
03:48:38,569 --> 03:48:42,329
that little tunnel will become a major flooded river, right?

2565
03:48:42,329 --> 03:48:44,488
Like because the demand is incredibly high.

2566
03:48:44,488 --> 03:48:50,249
We saw 300,000 WBTCs that are basically completely custodial, crappy version of Bitcoin on

2567
03:48:50,249 --> 03:48:50,728
Ethereum.

2568
03:48:50,728 --> 03:48:53,288
And it was just it had insane demand, right?

2569
03:48:54,249 --> 03:48:55,848
So it's an interesting thought.

2570
03:48:55,848 --> 03:48:57,689
If we do have a trustless two way peg, right?

2571
03:48:57,689 --> 03:49:01,608
Like most likely the first thing that's going to happen is the peg to Ethereum.

2572
03:49:01,608 --> 03:49:04,488
Like that's just it seems like the most natural thing.

2573
03:49:04,889 --> 03:49:08,809
It would seem to be the most natural product market fit development.

2574
03:49:08,809 --> 03:49:13,288
But if you look in the BitVM hackers group and the Bitcoin community, this is the last

2575
03:49:13,288 --> 03:49:17,449
almost like the last thing on their mind because they're still thinking about, oh, can we

2576
03:49:17,449 --> 03:49:20,488
create a sidechain that will enable this and that?

2577
03:49:20,488 --> 03:49:23,048
And by the way, this is my problem with drivechains too, right?

2578
03:49:23,048 --> 03:49:27,848
Because drivechains assume that they can become popular simply because they're possible.

2579
03:49:28,488 --> 03:49:31,769
But I'm saying that assumption may be unwarranted, right?

2580
03:49:31,848 --> 03:49:34,809
It's not enough to be possible to become usable, useful.

2581
03:49:35,368 --> 03:49:38,089
And it's only usable if it's useful, right?

2582
03:49:38,089 --> 03:49:42,329
It's only valuable if everybody's there, which is, you know, the liquidity, the

2583
03:49:44,649 --> 03:49:47,048
composability of Ethereum, the EVM.

2584
03:49:47,848 --> 03:49:52,168
It's like, you know, I was telling Paul that if you just copy paste Ethereum and launches

2585
03:49:52,168 --> 03:49:57,209
it as a sidechain, even if drivechains were already enabled, I would give it like a very

2586
03:49:57,209 --> 03:49:58,488
low probability of success.

2587
03:49:59,368 --> 03:50:04,809
Like a lot of like Ethereum success, I feel like came from marketing their, you know,

2588
03:50:04,809 --> 03:50:05,928
developer conferences.

2589
03:50:05,928 --> 03:50:08,569
And it's true, but it's it's that's the old story.

2590
03:50:08,569 --> 03:50:12,889
The new story is that it's got its own network effect that's spawning L2s and, you know,

2591
03:50:12,889 --> 03:50:13,608
people are launching.

2592
03:50:13,608 --> 03:50:19,288
But as a new VC in the industry, right, that's looking to raise capital and to build, would

2593
03:50:19,288 --> 03:50:22,809
they be incentivized to build on a on a lower market cap?

2594
03:50:22,809 --> 03:50:32,089
Not a lower market cap, a lower network effect sidechain of Bitcoin denominated versus, you

2595
03:50:32,089 --> 03:50:33,129
know, just building on Ethereum.

2596
03:50:33,848 --> 03:50:37,769
Of course, nobody is incentivized to build on any.

2597
03:50:37,769 --> 03:50:42,249
I mean, we already have evidence that none of the VCs are interested in any of the existing

2598
03:50:42,249 --> 03:50:45,608
sidechains of Bitcoin precisely because that's not what that action is.

2599
03:50:46,488 --> 03:50:51,288
So, like, even if you were to create a brand new drivechain or brand new.

2600
03:50:51,288 --> 03:50:54,329
I don't know if it's really because like you're saying, I don't know if it's really

2601
03:50:54,329 --> 03:50:57,689
because there's not really a trustless two-way model, right?

2602
03:50:58,329 --> 03:50:59,048
Right.

2603
03:50:59,048 --> 03:51:00,329
That's the main reason because.

2604
03:51:00,329 --> 03:51:02,249
No, I'm exactly agreeing with you.

2605
03:51:02,249 --> 03:51:06,968
I'm saying that trustless two-way model may be a necessary condition, but it's not a

2606
03:51:06,968 --> 03:51:08,329
sufficient condition, right?

2607
03:51:08,329 --> 03:51:12,408
Yeah, I also think that because it's like, you know, do they really even care about that?

2608
03:51:12,408 --> 03:51:14,009
You know, why aren't they building on RSK?

2609
03:51:14,569 --> 03:51:19,769
Well, they're not building on RSK because it's a ghost chain, because there's 50 EVML1

2610
03:51:19,769 --> 03:51:21,608
chains that have more activity than RSK.

2611
03:51:21,608 --> 03:51:22,968
So why would you build on RSK?

2612
03:51:23,689 --> 03:51:27,848
Like, in other words, there's 50 Ethereum killer EVM chains that all have higher total

2613
03:51:27,848 --> 03:51:29,689
value locked in activity than RSK.

2614
03:51:30,249 --> 03:51:34,569
Like, yeah, so the argument that, you know, RSK is in trustless two-way peg isn't really

2615
03:51:34,569 --> 03:51:35,048
the.

2616
03:51:35,048 --> 03:51:38,249
No, it's yeah, it doesn't it doesn't explain it.

2617
03:51:38,249 --> 03:51:42,649
It's basically a ghost chain precisely the same way as every other Ethereum killer is

2618
03:51:42,649 --> 03:51:44,728
a ghost chain because that's not nobody's there.

2619
03:51:44,728 --> 03:51:45,848
So nobody wants to be there.

2620
03:51:46,408 --> 03:51:48,809
How do you explain, for example, like BSC?

2621
03:51:48,809 --> 03:51:50,249
Do you think BSC is a ghost chain?

2622
03:51:50,968 --> 03:51:55,129
No, BSC is not a ghost chain because it's actively promoted by Binance, which has like

2623
03:51:55,129 --> 03:51:56,488
100 million accounts on it.

2624
03:51:56,488 --> 03:51:56,728
Right.

2625
03:51:56,728 --> 03:51:58,408
So it's kind of a corporate chain.

2626
03:51:58,408 --> 03:52:02,488
So you end up with, you know, a sidechain of, you know, in the model that we have drive

2627
03:52:02,488 --> 03:52:07,689
chains, you end up with needing some, you know, big company to want to launch.

2628
03:52:08,249 --> 03:52:08,968
Not enough.

2629
03:52:08,968 --> 03:52:09,528
Not necessarily.

2630
03:52:09,528 --> 03:52:13,528
I mean, only like a Binance or an Apple.

2631
03:52:13,528 --> 03:52:18,728
Yes, but only some giant like Binance can launch a corporate chain that everybody

2632
03:52:18,728 --> 03:52:20,009
knows is a corporate chain.

2633
03:52:20,009 --> 03:52:24,889
And in the end of at the end of the day, at the end of the day, like I don't expect BSC

2634
03:52:24,889 --> 03:52:29,129
not to become a ghost chain 5, 10 years, 10, 20 years from now because it's a corporate

2635
03:52:29,129 --> 03:52:29,528
chain.

2636
03:52:29,528 --> 03:52:30,728
So what's it like?

2637
03:52:30,728 --> 03:52:32,249
You might as well be talking to a database.

2638
03:52:32,249 --> 03:52:34,408
Do you expect it to become or not become?

2639
03:52:34,408 --> 03:52:39,928
No, I expect it to become more and more relevant and therefore it will become a ghost chain.

2640
03:52:40,728 --> 03:52:43,449
Well, there's two reasons why it might not.

2641
03:52:43,449 --> 03:52:48,408
If the fees on Ethereum do go up, then, you know, the activity will move over to BSC.

2642
03:52:48,408 --> 03:52:52,809
No, the activity will move over to one of the L2s that's 10 times cheaper than BSC

2643
03:52:52,809 --> 03:52:53,769
because those share...

2644
03:52:53,769 --> 03:52:58,408
Versus a chain that has way more marketing power, right?

2645
03:52:58,408 --> 03:53:03,769
It doesn't matter because those L2s on Ethereum, they share in the Ethereum and ERC20 network

2646
03:53:03,769 --> 03:53:04,408
effect, right?

2647
03:53:04,408 --> 03:53:05,689
Whereas BSC does not.

2648
03:53:06,889 --> 03:53:07,449
But it could.

2649
03:53:07,449 --> 03:53:11,368
You can, you know, you can still bridge over anything from Ethereum to BSC.

2650
03:53:12,408 --> 03:53:16,329
Well, you could in theory, just like there's bridges to every other ghost chain that was

2651
03:53:16,329 --> 03:53:18,408
supposed to be an Ethereum killer and they all failed.

2652
03:53:18,408 --> 03:53:21,848
Yeah, but the difference here, like you pointed out, Binance has the money to market.

2653
03:53:23,368 --> 03:53:27,528
Alex, can you point which chain failed and which chains are good?

2654
03:53:27,528 --> 03:53:30,329
Because I need to push back on this.

2655
03:53:30,329 --> 03:53:35,048
Well, I mean, you can say Avalanche, Avalanche, Cardano, all these.

2656
03:53:36,168 --> 03:53:38,009
No, I disagree.

2657
03:53:38,009 --> 03:53:40,968
I disagree with Avalanche and I will tell you why.

2658
03:53:40,968 --> 03:53:48,968
Because you are working in a C-chain, which is the EVM compatible subnet, which is a side

2659
03:53:48,968 --> 03:53:50,968
chain in Avalanche.

2660
03:53:50,968 --> 03:53:55,048
Avalanche is constructed by three chains.

2661
03:53:55,048 --> 03:53:57,449
That's X-chain, P-chain, C-chain at the moment.

2662
03:53:57,449 --> 03:54:08,569
You can make A to Z chains, parallel scaling, but they have a subnet architecture and that's

2663
03:54:08,569 --> 03:54:10,408
becoming infrastructure.

2664
03:54:10,408 --> 03:54:18,089
And what's meaning this, this is the same what drivechain wants to do on Bitcoin.

2665
03:54:18,089 --> 03:54:26,649
And I believe they took the concept from Paul to implement this technology.

2666
03:54:26,649 --> 03:54:31,689
But I can tell you that you can't see the network effect.

2667
03:54:31,689 --> 03:54:32,009
Why?

2668
03:54:32,009 --> 03:54:39,928
Because on subnets are mostly big corporations and they are doing sidechains.

2669
03:54:39,928 --> 03:54:46,168
Like Lemonade, the biggest insurance settlement company, like Amazon, like many, many others.

2670
03:54:46,889 --> 03:54:51,048
And now they even tokenized assets.

2671
03:54:51,048 --> 03:54:55,608
And JP Morgan, what they are doing, they are doing with subnet on Avalanche.

2672
03:54:55,608 --> 03:55:03,209
So nobody, like those things are a bit hidden from the normal people, you know.

2673
03:55:03,209 --> 03:55:10,009
And for me, when you say Ethereum or BSC, I have a question.

2674
03:55:10,009 --> 03:55:11,368
Where is the usability?

2675
03:55:11,368 --> 03:55:14,488
What is the uniqueness of those chains?

2676
03:55:14,488 --> 03:55:18,408
They don't provide anything else, just digital activity.

2677
03:55:18,408 --> 03:55:18,968
Nothing more.

2678
03:55:19,769 --> 03:55:22,809
No, no, no, any benefit from them.

2679
03:55:22,809 --> 03:55:23,449
They don't.

2680
03:55:23,449 --> 03:55:24,089
But there's demand for that.

2681
03:55:24,089 --> 03:55:30,009
There is demand because you see millions of transactions, right?

2682
03:55:30,649 --> 03:55:32,728
Yeah, but you know what?

2683
03:55:33,528 --> 03:55:36,408
Ethereum today is mostly driven by bots.

2684
03:55:36,408 --> 03:55:37,848
And everybody knows that.

2685
03:55:37,848 --> 03:55:43,689
It doesn't matter if the demand is from a bot, it's still demand.

2686
03:55:43,689 --> 03:55:45,769
Somebody has to pay the fees, right?

2687
03:55:45,769 --> 03:55:47,288
The demand is organic.

2688
03:55:47,288 --> 03:55:52,968
It's like somebody finds it worthwhile to pay Ethereum fees, whatever it is, $3 to send

2689
03:55:52,968 --> 03:55:58,009
an ERC-20 token nowadays and maybe $20 to $15 to execute a large smart contract.

2690
03:55:58,009 --> 03:55:59,608
Somebody's paying for that, right?

2691
03:55:59,608 --> 03:56:01,928
Which is, there is no better indication.

2692
03:56:01,928 --> 03:56:03,928
Yeah, but bot is not organic.

2693
03:56:03,928 --> 03:56:06,488
Bot is organic because somebody's funding the bot.

2694
03:56:07,209 --> 03:56:11,528
Yeah, it's the same thing, you know, you can say that a lot of Bitcoin transactions are

2695
03:56:11,528 --> 03:56:14,488
automated from, you know, exchanges and withdrawals.

2696
03:56:14,488 --> 03:56:15,449
You know, it's a bot doing it.

2697
03:56:15,449 --> 03:56:16,168
It's a script doing it.

2698
03:56:16,168 --> 03:56:17,209
It doesn't matter, right?

2699
03:56:17,209 --> 03:56:21,209
The fact that there's a demand for it is, at the end of the day, what really matters.

2700
03:56:21,209 --> 03:56:25,608
It's like saying, you know, it's like saying Ethereum is no longer cool because, like a

2701
03:56:25,608 --> 03:56:27,608
restaurant, because it's always crowded.

2702
03:56:27,608 --> 03:56:29,769
Well, it's crowded for a reason, because it's cool.

2703
03:56:30,329 --> 03:56:34,329
So, like, just because you don't want to be in the crowd, that doesn't make it unpopular.

2704
03:56:35,928 --> 03:56:41,848
Look, the use case is there's more expressibility.

2705
03:56:41,848 --> 03:56:43,449
There's more you can do with it.

2706
03:56:43,449 --> 03:56:45,129
Now, does anybody want to do with it?

2707
03:56:45,129 --> 03:56:46,168
Yeah, people do want to do it.

2708
03:56:46,168 --> 03:56:47,288
I'll tell you what the use case is.

2709
03:56:47,288 --> 03:56:52,728
The use case is Frax launching its own L2 because they want to have a stable coin ecosystem

2710
03:56:52,728 --> 03:56:53,528
on its own L2.

2711
03:56:53,528 --> 03:56:54,728
That's the use case.

2712
03:56:54,728 --> 03:56:57,528
The use case is nothing but settlement of L2 transactions.

2713
03:56:57,528 --> 03:56:58,969
It doesn't need any other use case.

2714
03:56:58,969 --> 03:57:04,569
It just needs an asset like Ether and ERC20s issued on it, and it needs to do settlement.

2715
03:57:04,569 --> 03:57:09,048
It doesn't like the Ethereum Max is now talking about, like, nothing should ever execute on

2716
03:57:09,048 --> 03:57:09,528
Ethereum.

2717
03:57:09,528 --> 03:57:11,609
It should just have blobs from L2s, period.

2718
03:57:12,329 --> 03:57:13,209
That's the use case.

2719
03:57:13,768 --> 03:57:17,849
The use case is to be the central hub of, you know, one million L2s.

2720
03:57:17,849 --> 03:57:18,648
That's the use case.

2721
03:57:18,648 --> 03:57:24,408
Yeah, but what the L2s are providing?

2722
03:57:24,408 --> 03:57:25,209
Nothing.

2723
03:57:25,209 --> 03:57:25,928
Same thing.

2724
03:57:25,928 --> 03:57:31,849
No, but L2s have to live or die on their own merits.

2725
03:57:31,849 --> 03:57:35,768
So the ones that don't provide anything will die, and the ones that provide something will

2726
03:57:35,768 --> 03:57:36,489
live.

2727
03:57:36,489 --> 03:57:40,648
So you don't need to worry about the L2 ecosystem because it's like Darwinian evolution in there.

2728
03:57:41,288 --> 03:57:45,369
So whatever L2s still exist, you know that they're useful because otherwise they would

2729
03:57:45,369 --> 03:57:45,928
have died off.

2730
03:57:49,288 --> 03:57:54,168
Yeah, but, you know, I see a different way.

2731
03:57:54,168 --> 03:57:59,449
I have a question, like, what can create more volume and network effect?

2732
03:57:59,449 --> 03:58:06,888
The biggest corporations with billions of users or, you know, the digital world where,

2733
03:58:06,888 --> 03:58:07,609
you know.

2734
03:58:07,609 --> 03:58:14,329
But what if you see JP Morgan Chase issue a stablecoin onto Ethereum or one of its L2s?

2735
03:58:14,329 --> 03:58:16,408
You think that will improve Ethereum's network effect?

2736
03:58:16,408 --> 03:58:18,489
I think they might take it 100x.

2737
03:58:20,089 --> 03:58:23,048
They will not issue, first of all, because they want to be private.

2738
03:58:23,048 --> 03:58:25,849
So the only way to be private.

2739
03:58:25,849 --> 03:58:30,809
They don't want to be private because they want to issue dollars offshore as stablecoins,

2740
03:58:30,809 --> 03:58:32,089
just like your dollar banks.

2741
03:58:33,048 --> 03:58:37,768
And they all talked about having their own private Ethereum chains, but they're all

2742
03:58:37,768 --> 03:58:42,008
abandoning that because they need one shared global ledger that all these euro dollars

2743
03:58:42,008 --> 03:58:46,008
are issued on so that they can all interoperate using Kerr protocol, right?

2744
03:58:46,729 --> 03:58:50,248
Yeah, but they can do an avalanche with subnet.

2745
03:58:50,248 --> 03:58:54,168
They can be all those companies can have their subnet.

2746
03:58:54,168 --> 03:58:55,609
They're interconnected.

2747
03:58:57,048 --> 03:59:02,089
I don't know if you're, like, I'm old enough to remember the early days of the internet

2748
03:59:02,089 --> 03:59:04,248
when all these companies said, why do we need the internet?

2749
03:59:04,248 --> 03:59:06,408
We'll just build our own internet with our partners.

2750
03:59:06,408 --> 03:59:08,729
Why do we need to be next to the porn on the internet?

2751
03:59:09,288 --> 03:59:13,689
This is, whenever you say that somebody will build their own avalanche subnet, that sounds

2752
03:59:13,689 --> 03:59:14,168
to me like.

2753
03:59:14,969 --> 03:59:17,209
But that's exactly what you're saying, Alex.

2754
03:59:17,849 --> 03:59:20,408
Subnet I can create in one day in 24 hours.

2755
03:59:20,408 --> 03:59:21,369
I have my blockchain.

2756
03:59:23,689 --> 03:59:24,248
I get it.

2757
03:59:24,248 --> 03:59:31,609
But you can also copy paste, you know, a Linux kernel and run your own private internet.

2758
03:59:31,609 --> 03:59:35,048
But in both cases, you will have a ghost town, right?

2759
03:59:35,048 --> 03:59:39,768
Your private internet will be ghost town and your avalanche subnet will also be a ghost

2760
03:59:39,768 --> 03:59:40,008
town.

2761
03:59:40,648 --> 03:59:40,969
Why?

2762
03:59:40,969 --> 03:59:42,729
Why will be ghost town when I use?

2763
03:59:43,288 --> 03:59:45,528
The only one ghost town is Ethereum.

2764
03:59:45,528 --> 03:59:46,008
That's why.

2765
03:59:47,048 --> 03:59:49,209
That's the only place that's not a ghost town.

2766
03:59:49,209 --> 03:59:49,689
No, seriously.

2767
03:59:51,786 --> 04:00:07,786
It's like, like, like, yeah, but I can I can look, but you need to you need to look from the perspective of a company, because if I want to use and I have an investment bank like JP Morgan, I want to create my blockchain when I want to.

2768
04:00:07,786 --> 04:00:20,786
No, you don't. I'll tell you why you don't want to do that, because, yes, you can create your own blockchain. That's completely private. In that case, why would why do you need to use avalanche, create your own in-house database and have your customers connect to it?

2769
04:00:21,786 --> 04:00:32,786
No, because. No, listen, if JP Morgan wants to interoperate with Japanese banks, they both cannot have their own private blockchain.

2770
04:00:33,786 --> 04:00:48,786
We need to see the blockchain as an infrastructure. First of all, like if you go on what was the measurement for decentralization and you can see Bitcoin is first most decentralized, second is avalanche.

2771
04:00:49,786 --> 04:01:05,786
It's no Ethereum. So like when when you have when you have ability to create something for your company and use as an infrastructure, plus you use decentralized security, there is, you know, you don't need anything else.

2772
04:01:07,786 --> 04:01:11,786
You know, if you want to have partners that are not held hostage by you.

2773
04:01:12,786 --> 04:01:13,786
No, no, no.

2774
04:01:15,786 --> 04:01:30,786
It's like a public square, right? Like you can create your own walled garden. You know, if you're JP Morgan and you can say to all the other banks in the world, come and play inside my blockchain. Or I just created an avalanche subnet. Come and play because I control it. Right. Nobody will come and play.

2775
04:01:31,786 --> 04:01:33,786
What they are using now.

2776
04:01:34,786 --> 04:01:39,786
They cannot own. They both cannot. They need they need neutral infrastructure.

2777
04:01:41,786 --> 04:01:42,786
And what's neutral infrastructure right now?

2778
04:01:43,786 --> 04:01:52,786
No, they don't like neutral infrastructure because even they don't use neutral infrastructure. They have their system in the company and then they interact with others.

2779
04:01:53,786 --> 04:01:59,786
You already have European banks issuing stable coins into Ethereum. You already have Goldman Sachs issuing bonds into Ethereum.

2780
04:02:00,786 --> 04:02:03,786
Yeah, but that's wrong. They will switch.

2781
04:02:05,786 --> 04:02:06,786
Why is that wrong?

2782
04:02:07,786 --> 04:02:20,786
Time will show us because this is the usability of drivechains. If drivechains are enabled, all of this, like JP Morgan, Amazon, everybody can come and create their sidechain.

2783
04:02:20,786 --> 04:02:31,786
And there you have usability. There you have volume of transaction. There you have huge fees, but the L1 will be relaxed. It will be not a high fees environment.

2784
04:02:32,786 --> 04:02:41,786
So this is this is the usability when every every single company, institution, government, whatever in the world start using the blockchain as an infrastructure.

2785
04:02:42,786 --> 04:02:50,786
Creating a token somewhere. It's it's not it's not controlled by these companies. They like centralization.

2786
04:02:51,786 --> 04:03:06,786
But to make a balance, you need to give them opportunity to create their private blockchain, but use the decentralized environment, decentralized security like Bitcoin L1 with sidechain or drivechain.

2787
04:03:06,786 --> 04:03:07,786
And that's the perfect.

2788
04:03:08,786 --> 04:03:18,786
I'm all for it. I mean, I'm a Bitcoin guy. Like I like I like where you're going with this. I'm just saying that you can do that by launching their own L2 on Ethereum.

2789
04:03:19,786 --> 04:03:23,786
They don't need to wait for drivechains or trust minimized sidechains.

2790
04:03:24,786 --> 04:03:36,786
That's what I'm saying. Like Avalanche already has that platform. They don't need to create L2 because L2 to create L2 they need two, three years, four years, five years.

2791
04:03:37,786 --> 04:03:46,786
No, they can take the shelf stacks that are available and essentially within a day or two launch an L2 on Ethereum. There's multiple software stacks.

2792
04:03:46,786 --> 04:03:55,786
You can see it. You guys are both right. You can see that a lot of like, you know, whatever gaming projects, they'll create their own L2 for Ethereum.

2793
04:03:56,786 --> 04:03:57,786
That's what you see that most of that happening.

2794
04:03:58,786 --> 04:03:59,786
Yeah, probably.

2795
04:04:00,786 --> 04:04:03,786
Not just gaming, right? Like I disagree that this is just gaming because.

2796
04:04:04,786 --> 04:04:05,786
Yeah, like the example of Frax that you gave.

2797
04:04:06,786 --> 04:04:12,786
Right. Example of Frax is a good example. But you know what's even a more scary example for Bitcoin?

2798
04:04:13,786 --> 04:04:23,786
It's the example of formerly L1 Ethereum killer blockchains essentially pivoting to become L2s of Ethereum like Swooey and others.

2799
04:04:24,786 --> 04:04:33,786
There's been two or three L1 Ethereum killers that essentially abandoned that game and simply joined the Ethereum network effect because they had to or they died.

2800
04:04:33,786 --> 04:04:42,786
So that's happened before. And, you know, from the perspective of like you have to see why people are doing that, why they're abandoning their own L1.

2801
04:04:43,786 --> 04:04:51,786
How exactly are you defining, you know, their own L1s that are, you know, EVM compatible versus an L2 of Ethereum?

2802
04:04:52,786 --> 04:04:53,786
Because you can say any.

2803
04:04:54,786 --> 04:05:03,786
Well, you're defining it as follows. If you have your own L1, which is EVM compatible, you have your own mining or you have your own like you have to build your own validator set with your own capital locked up to secure the chain.

2804
04:05:04,786 --> 04:05:12,786
Or you can abandon all that and simply get inherited Ethereum security for the same or less money per transaction by simply becoming an L2 of Ethereum, right?

2805
04:05:13,786 --> 04:05:14,786
It's like a no brainer.

2806
04:05:15,786 --> 04:05:21,786
Any L1 of its own can also just, you know, include X amount of blocks, a hash into Ethereum, right?

2807
04:05:22,786 --> 04:05:32,786
That doesn't provide them reorg security, immutability, but worse, it doesn't let them join the network effect of all the Ethereum ERC20s and Ether itself, right?

2808
04:05:33,786 --> 04:05:36,786
They need to be where those liquid protocols are. Otherwise, nobody wants to use them.

2809
04:05:37,786 --> 04:05:40,786
Are you defining L2 that has a trustless two way pack between L1?

2810
04:05:41,786 --> 04:05:47,786
Yes. I mean, like I'm looking at Ethereum ZK rollups or, you know, like there is a table.

2811
04:05:48,786 --> 04:05:49,786
Don't you say Arbitrum is an L2?

2812
04:05:50,786 --> 04:05:52,786
Well, it's an L2, but it's not trustless, right?

2813
04:05:53,786 --> 04:05:54,786
It may or may not be.

2814
04:05:55,786 --> 04:05:58,786
Yes, exactly. So like you can define it as L2 or not. It's up to you.

2815
04:05:59,786 --> 04:06:09,786
But what I'm saying is that in theory, Ethereum has a possible ecosystem of trustless or trust minimized L2s that use validity rollups or optimistic rollups that have been.

2816
04:06:10,786 --> 04:06:15,786
And where Phantom is, you would say Phantom is more of an L1 because it has its own token, its own consensus model.

2817
04:06:16,786 --> 04:06:21,786
Well, it's not more of an L1. It's just an L1 that's trying to compete with Ethereum and it's not really doing very well, right?

2818
04:06:21,786 --> 04:06:27,786
Even though it has superior technology. But Phantom is just one of 10 or 20 Ethereum killers that have failed to manifest.

2819
04:06:28,786 --> 04:06:31,786
And some of them have just decided, instead of dying, to become L2s of Ethereum.

2820
04:06:32,786 --> 04:06:35,786
There's been one or two that I remember in the recent few months that have done that.

2821
04:06:37,786 --> 04:06:38,786
Yeah, you were talking previously about that.

2822
04:06:39,786 --> 04:06:44,786
And I can tell you that there is one other factor on Ethereum that's going to have long strategic consequences.

2823
04:06:45,786 --> 04:06:49,786
This is the whole restaking situation that's going on there. I don't know if you're familiar, Satoshi and Joe, with that or not.

2824
04:06:50,786 --> 04:06:51,786
Eigen layer?

2825
04:06:52,786 --> 04:07:01,786
Eigen layer, exactly. So that essentially makes becoming an Ethereum dependent chain, which now enables not just L2s, but it enables a whole other.

2826
04:07:02,786 --> 04:07:06,786
It enables you to outsource your security to the subset of Ethereum stakers.

2827
04:07:07,786 --> 04:07:11,786
And you can do whatever the hell you want while inheriting all the trust from that subset.

2828
04:07:12,786 --> 04:07:17,786
So it just dramatically expands the Ethereum's network effect because you can have this layer.

2829
04:07:18,786 --> 04:07:35,786
And that's not technically a validity rollup or optimistic rollup, but they will have 10 million transactions per second with 500 millisecond latency while inheriting security from Eigen layer and inheriting data availability from Eigen layer as well.

2830
04:07:36,786 --> 04:07:42,786
And also inheriting the transaction fees of the other layer as well, right? Because they're restaking their Ethereum validators.

2831
04:07:43,786 --> 04:07:47,786
So the Ethereum validators will accrue the fees and additional yield.

2832
04:07:48,786 --> 04:07:54,786
So that creates an economic model that will definitely co-opt Ethereum stakers to join the Eigen layer.

2833
04:07:55,786 --> 04:07:59,786
You think it's a financialization issue where almost everybody will do that?

2834
04:08:00,786 --> 04:08:01,786
It might become essential.

2835
04:08:02,786 --> 04:08:08,786
It's kind of like, I don't know if you remember when MEV appeared on Ethereum a few years ago and nobody knew what the consequences would be.

2836
04:08:09,786 --> 04:08:14,786
But right now they're talking about adding MEV burn and enshrining it in the protocol.

2837
04:08:15,786 --> 04:08:22,786
So eventually they might do the same kind of fix for Eigen layer where they enshrine it into protocol to prevent it from centralizing Ethereum.

2838
04:08:23,786 --> 04:08:28,786
It's too early to tell right now, but a few years down the road it will probably dominate Ethereum.

2839
04:08:29,786 --> 04:08:34,786
You can basically see that you don't even need to be L2 to tap into the network effect.

2840
04:08:35,786 --> 04:08:48,786
You can do any arbitrary system on the side that gets both trust and data availability from Eigen layer while not losing ability to move assets trustlessly back and forth with Ethereum because you can still build that bridge.

2841
04:08:49,786 --> 04:08:51,786
So it's sort of like the best of both worlds.

2842
04:08:52,786 --> 04:08:57,786
You don't really need a full blown L2 sidechain or some kind of chain.

2843
04:08:58,786 --> 04:08:59,786
You can just launch whatever.

2844
04:09:00,786 --> 04:09:06,786
And it could be any arbitrary application that requires decentralized trust.

2845
04:09:09,786 --> 04:09:10,786
Yeah, I think it's really interesting.

2846
04:09:11,786 --> 04:09:14,786
Alex, who controls the protocol Eigen layer?

2847
04:09:15,786 --> 04:09:17,786
Well, I mean, you can look at their docs.

2848
04:09:17,786 --> 04:09:21,786
They still have a dev team and they have a plan to decentralize in the long run.

2849
04:09:22,786 --> 04:09:23,786
It's the usual story in Ethereum.

2850
04:09:24,786 --> 04:09:26,786
But whether or not they will succeed, it doesn't matter to me.

2851
04:09:27,786 --> 04:09:29,786
It's more like this is where things are going, right?

2852
04:09:30,786 --> 04:09:32,786
In other words, they used to be only...

2853
04:09:33,786 --> 04:09:34,786
Things are going there.

2854
04:09:35,786 --> 04:09:44,786
I mean, all L1 chains, they try to move from a smart contract because smart contracts are very risky.

2855
04:09:45,786 --> 04:09:46,786
I mean, we see what's happening.

2856
04:09:47,786 --> 04:09:53,786
The smart contracts like DeFi in general is concentrating more and more on Ethereum because of liquidity, composability.

2857
04:09:54,786 --> 04:09:57,786
And, you know, it's hard to compete with that.

2858
04:09:58,786 --> 04:10:02,786
Like a few years ago when I saw these L1s launching with EVM, I thought, oh, wait a second.

2859
04:10:03,786 --> 04:10:04,786
This is great.

2860
04:10:05,786 --> 04:10:08,786
EVM will have the network effect, but Ethereum will be just another L1 with EVM on top of it.

2861
04:10:09,786 --> 04:10:15,786
And then I realized how stupid I was because I didn't realize that liquidity, composability and other factors

2862
04:10:15,786 --> 04:10:22,786
like presence of other existing L2s, that already creates a multi-core Ethereum, right?

2863
04:10:23,786 --> 04:10:24,786
That's hard to overcome.

2864
04:10:25,786 --> 04:10:28,786
So the more L2s join the party, the more L2s will want to join the party.

2865
04:10:29,786 --> 04:10:35,786
So you don't have any L2s on any other L1 Ethereum killer EVM chain, essentially, that have any usage.

2866
04:10:36,786 --> 04:10:42,786
Yeah, but I said like on Avalanche you don't need to have L2 because Avalanche is a multi-core chain.

2867
04:10:43,786 --> 04:10:47,786
Yeah, but your argument is good in theory.

2868
04:10:48,786 --> 04:10:52,786
Like, yes, everybody can launch another subnet on Avalanche, but in practice, nobody cares.

2869
04:10:53,786 --> 04:10:55,786
Just like nobody cares about existing RSK.

2870
04:10:56,786 --> 04:10:59,786
Why do you think that nobody cares?

2871
04:11:00,786 --> 04:11:02,786
The issue with Bitcode is there's no network effect.

2872
04:11:03,786 --> 04:11:04,786
There's no network effect, so who cares?

2873
04:11:05,786 --> 04:11:07,786
Why do I need network effect, guys?

2874
04:11:08,786 --> 04:11:16,786
Because you want to be able to have your sidechain, L2, whatever it is, instead of the Avalanche.

2875
04:11:17,786 --> 04:11:27,786
The reason why is because you would gain way more by interoperability with the TVL that is already locked in the contracts on Ethereum.

2876
04:11:28,786 --> 04:11:36,786
Yeah, but why do I need TVL when I'm using subnet for my business, for my company, for my...

2877
04:11:38,786 --> 04:11:41,786
Why do you need blockchain for your business?

2878
04:11:42,786 --> 04:11:49,786
No, you need blockchain because they use blockchain because of the instant finality.

2879
04:11:49,786 --> 04:12:03,786
And by the way, I know maybe you don't like, but the only L1 that is in this crypto world is Avalanche that is UTXO-based chain.

2880
04:12:04,786 --> 04:12:06,786
And Xchain on Avalanche is UTXO-based.

2881
04:12:07,786 --> 04:12:18,786
So another thing is that with subnet, you can plug and you can utilize any other VM or script from all the chains, even Bitcoin.

2882
04:12:19,786 --> 04:12:22,786
So on this Ager layer, you cannot do that.

2883
04:12:23,786 --> 04:12:25,786
You can create L2, but you are limited.

2884
04:12:26,786 --> 04:12:31,786
So kind of like, you know, I know very well, I do research so long about this.

2885
04:12:32,786 --> 04:12:40,786
And, you know, I listened that Alex spoke about this Ager layer, but I checked and I don't know.

2886
04:12:41,786 --> 04:12:44,786
I don't like because, first of all, because of centralization.

2887
04:12:45,786 --> 04:12:48,786
That's the main concern.

2888
04:12:53,786 --> 04:12:59,786
But time will tell us, you know, time will tell us what will be much usable.

2889
04:13:00,786 --> 04:13:01,786
It comes down to marketing.

2890
04:13:02,786 --> 04:13:10,786
If Avalanche markets really well and they incentivize TVL to move over to them, there's a possibility that they can compete.

2891
04:13:11,786 --> 04:13:12,786
It's going to be very hard, obviously, because of the network effect.

2892
04:13:12,786 --> 04:13:16,786
They already tried and succeeded for a while and then they fizzled out.

2893
04:13:17,786 --> 04:13:20,786
The thing is, it's temporary because they have to continue to supply more.

2894
04:13:21,786 --> 04:13:23,786
They have to continue to bribe people to come to Avalanche.

2895
04:13:24,786 --> 04:13:25,786
People don't want to go to Avalanche.

2896
04:13:26,786 --> 04:13:27,786
They want to be in Ethereum.

2897
04:13:28,786 --> 04:13:31,786
I remember when Avalanche was marketing itself as a cheap alternative to Ethereum.

2898
04:13:32,786 --> 04:13:33,786
Their basic marketing was…

2899
04:13:34,786 --> 04:13:35,786
And then the fees went up.

2900
04:13:36,786 --> 04:13:37,786
I don't care about fees going up.

2901
04:13:38,786 --> 04:13:39,786
They had two marketing points.

2902
04:13:39,786 --> 04:13:40,786
Number one, our fees are pennies.

2903
04:13:41,786 --> 04:13:45,786
And number two, we don't have a leader election.

2904
04:13:46,786 --> 04:13:48,786
So we don't have MEV while Ethereum has MEV.

2905
04:13:49,786 --> 04:13:55,786
But we have this advanced consensus protocol that converges without somebody publishing a single block with all the transactions.

2906
04:13:56,786 --> 04:14:00,786
And if you looked at Avalanche, yes, indeed, you could do smart contracts for pennies.

2907
04:14:01,786 --> 04:14:07,786
But whenever you would swap $10,000 worth of one stablecoin for $10,000 worth of another, because liquidity wasn't there,

2908
04:14:07,786 --> 04:14:14,786
you would get $50 or $100 worth of slippage, which would be five times higher than the fee you would pay on Ethereum to do the same operation.

2909
04:14:15,786 --> 04:14:21,786
So that's why for economic reasons, people would not abandon Ethereum and go to Avalanche because lower fees is not the whole picture.

2910
04:14:22,786 --> 04:14:23,786
It's like 1% of the picture.

2911
04:14:24,786 --> 04:14:26,786
I agree with you for retail.

2912
04:14:27,786 --> 04:14:28,786
I'm not talking about retail.

2913
04:14:29,786 --> 04:14:30,786
I'm talking about big things.

2914
04:14:31,786 --> 04:14:32,786
Nobody uses Avalanche.

2915
04:14:33,786 --> 04:14:36,786
Amazon didn't come to Avalanche because Avalanche marketed to them.

2916
04:14:37,786 --> 04:14:41,786
Amazon came because they recognized the technology they have.

2917
04:14:42,786 --> 04:14:49,786
First of all, Avalanche is using the Satoshi consensus plus another on classic, I think.

2918
04:14:50,786 --> 04:14:52,786
So it's kind of like, you know, they came from Bitcoin.

2919
04:14:53,786 --> 04:14:58,786
So even I saw a post that even they say, OK, we are Bitcoin L2.

2920
04:14:59,786 --> 04:15:01,786
But anyways, they focus on a big business.

2921
04:15:02,786 --> 04:15:03,786
They don't focus on retail.

2922
04:15:03,786 --> 04:15:07,786
So whatever you want on the C-chain is a playground.

2923
04:15:08,786 --> 04:15:16,786
I know, but if they sell private versions of their blockchain to big businesses, that's not even like a blockchain.

2924
04:15:17,786 --> 04:15:29,786
It's exactly like your private intranet in the early days of intranet where people would say, like, why do I need a global intranet with all the porn and all the problems when my General Motors Corporation can have its own intranet?

2925
04:15:30,786 --> 04:15:31,786
But people quickly...

2926
04:15:32,786 --> 04:15:35,786
What Ager Lair is doing, the same thing.

2927
04:15:36,786 --> 04:15:44,786
Just when you see, I like to have a blockchain that by design have a good technology, then patching like Ethereum.

2928
04:15:45,786 --> 04:15:49,786
Ethereum is like, you know, old car patched all around.

2929
04:15:50,786 --> 04:15:51,786
I agree.

2930
04:15:52,786 --> 04:15:55,786
It's old news in the design space of blockchains.

2931
04:15:55,786 --> 04:15:56,786
But it actually...

2932
04:15:57,786 --> 04:16:01,786
Nobody cares because they just use it as a hub to create one million L2s nowadays.

2933
04:16:02,786 --> 04:16:05,786
Like Ethereum maxis don't care about anything executing on Ethereum much.

2934
04:16:06,786 --> 04:16:10,786
Only whales and institutions run those contracts that cost a lot of money to do.

2935
04:16:11,786 --> 04:16:12,786
Like all the activity is moving to L2s.

2936
04:16:13,786 --> 04:16:17,786
So the fact that Ethereum may be technologically inferior is no longer relevant.

2937
04:16:25,786 --> 04:16:26,786
Wow, we've been going on for a while.

2938
04:16:27,786 --> 04:16:28,786
Went off the rails a lot.

2939
04:16:29,786 --> 04:16:30,786
Yeah, guys.

2940
04:16:31,786 --> 04:16:32,786
It was a fun discussion.

2941
04:16:33,786 --> 04:16:34,786
Thanks for reminding me that there's a world out there.

2942
04:16:35,786 --> 04:16:36,786
I got to go, actually.

2943
04:16:37,786 --> 04:16:38,786
But it was a good discussion, everyone.

2944
04:16:39,786 --> 04:16:40,786
Thanks for hanging out with us.

2945
04:16:41,786 --> 04:16:43,786
And the sooner we end this space...

2946
04:16:44,786 --> 04:16:45,786
What is it called?

2947
04:16:46,786 --> 04:16:47,786
Space?

2948
04:16:48,786 --> 04:16:49,786
Twitter space?

2949
04:16:50,786 --> 04:16:53,786
The sooner the recording will be available to everybody else.

2950
04:16:54,786 --> 04:16:55,786
Yeah.

2951
04:16:56,786 --> 04:16:57,786
All right, guys.

2952
04:16:58,786 --> 04:16:59,786
I'm going to head out, too, guys.

2953
04:17:00,786 --> 04:17:01,786
See you guys later.

2954
04:17:02,786 --> 04:17:03,786
See you.