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Good morning, good afternoon, good evening, everyone.

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What is up?

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I'm your host, Charlie Shrem, and you're listening and watching another episode of
the Charlie

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Shrem Show powered by Waxman, where together twice a week, we get to dive deep into
the

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heart of the Bitcoin and blockchain revolution, where I have been my whole life.

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As I say it out loud, it's kind of funny, I feel old.

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My whole life, I've been into this Bitcoin and blockchain and crypto world.

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My whole life, since the last days of Satoshi, since shit, 2011.

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But anyways, we're together, we're going to uncover the brilliant minds innovating
behind

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the scenes.

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We'll be discovering the projects that are pushing the boundaries of blockchain
technology.

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And there are a lot of companies out there that you don't know about, right?

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A lot of what gets talked about in the crypto space or what reaches the ears of the
mainstream

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audience is the final end product that a lot of cool technology innovation makes
possible

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behind the scenes.

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But without the geniuses developing behind the scenes, blockchain technology
wouldn't

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be nearly as widely utilized as it is today.

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In this episode, we're talking to three very different people and three different
projects

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that are pushing through the current limitations of blockchain and Bitcoin and
developing what

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we need to turn this technology into the norm for the internet users worldwide.

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We're talking to some really cool people, Neil Samani from Eclipse, who's allowing
everyone

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to have their own roll ups.

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Roll up for you, roll up for you, roll up for you.

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Then we got Leo, co-founder of PEAQ, who's transforming the internet of things into
the

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economy of things.

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Finally, we got an old OG, good friend of mine, he's been involved since the early
days

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of Bitcoin, invented and conceptualized the sidechain back in 2014.

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His name is Paul Sztorc.

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You don't hear about him a lot, co-founder and CEO of LayerTwo Labs, working with
another

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good friend of mine, Austin Alexander, who is a big part of Kraken.

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He's a prominent Bitcoin researcher and developer.

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So chill out, sit back, relax, and let's get started with these insightful
discussions.

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Our guest just got back from ConsenSys today, and we're going to talk to him about
that.

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Every year we kind of use conferences as the litmus test.

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We've had the creators of some conferences, and I think we did a whole thematic
episode

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on how conferences are, if you look at the prices and the markets and the general
feeling

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of what's going on in the space, we use conferences as that kind of litmus test of
how everyone's

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feeling.

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And so last year, I remember ConsenSys, Neil, thank you.

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I'll introduce you in a second, but Neil, thank you so much for coming on the show
today.

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Oh, thank you for having me.

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I remember last year's ConsenSys, it was still the top of the, it was a little bit
later

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in the year.

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It was like maybe June and it was the height of the market.

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And it was still a little bit craziness.

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I remember getting pitched, decentralized email, which is a really cool project at a

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pool party.

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It was like the only time in my life, I felt like I was on a TV show because I'm
putting

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my VC hat on for a second.

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I remember getting like the phone call, Charlie, you got to come downstairs right
now.

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You need to hear about this company.

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And I'm like, this is the worst time, but I feel like this is the one, but this is
like

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happening.

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This was ConsenSys, it was Austin.

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It sounded like this year was a little bit more subdued from the guests that we've
talked

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to that have been there, but subdued in a better way because it sounded like a lot
of

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people were focused on the products and the services and the brand and less on the
parties

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and things like that.

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Neil Samani, you have a super cool story in the space.

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You're the founder and CEO of Eclipse, which gives everyone private roll-ups.

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And I love that because we need the ability to have blockchain as a service.

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I just saw a great statistic today about that and your scaling solutions of being
able to

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do it.

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I'm excited to talk about.

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You worked at Citadel as a quantitative researcher.

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You also worked as a software developer at Airbnb.

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And you kind of got your first foray into our lovely crypto space here in Terra.

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And you talked about it and were excited about it, and then it blew up and things
like that

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happened.

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And then you started Eclipse, and it seems like you've learned a lot of different
lessons

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very, very quickly.

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And it takes a lot of people a lot longer to learn the lessons that you learned in
your

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career going from Citadel to Terra to now Eclipse.

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Tell us about your background and everything like that.

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I'm really excited to hear it.

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Yeah, definitely.

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It was kind of like speed running the life cycle of a company.

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And yeah, I remember ConsenSys last year too, it was right after Terra de-pagged.

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So it was in June, and it was super hot, and I was trying to explore what I was
going

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to build next.

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And that's what I was thinking about at that time, just building another layer one
blockchain

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basically.

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So I was basically thinking, let's take the Solana virtual machine, which is this
highly

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optimized execution layer, lots of folks are using it.

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And let's give people the option to use a different ConsenSys like Tendermint, and
then

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spin up Cosmos layer ones that have the Solana execution layer.

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In the same way that Atmos brought the EVM to the Cosmos ecosystem.

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So just to take a step back, so basically my background was, yeah, I was at Quantum

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Citadel.

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Before that, I was a software engineer over at Airbnb.

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I left in March of last year, and I was briefly building an EVM on Terra.

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So this is a way to run EVM by code on the Terra blockchain.

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So if you have like a theory of a small contract or something, you can deploy it to
Terra.

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And the reason for doing that was that Terra was doing pretty well at the time.

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It was growing really quickly and there were a lot of people migrating there.

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So this is a way for you to take your existing programs and then join that
ecosystem.

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And obviously, once Terra depacked, I scrapped the project and I was thinking about
what

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I would be building next.

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And there was one thought that people just like fly to Ethereum and everything would

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basically be a roll up on Ethereum or a layer two.

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And then the other thought was that there would basically still be like sort of a

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multi-chain future and there'd be lots of layer one blockchains.

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And where we landed was that the right answer is some sort of hybrid between those
two

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answers where people do need their own chain for a variety of applications like
gaming,

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physical infrastructure, lots of highly regulated chains.

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Or I think you mentioned something very briefly at the beginning, which is private

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chains. And that's actually what's a subset.

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But there's a lot of reasons why people want their own dedicated chain, even if it's

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public. Gaming is a really good example of that.

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So that's what we wanted to solve for and chatting with games in the space and just

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understanding what were their constraints on Solana or now we have like Aptos and
Sui

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and all these other chains and understanding what are they able to do very easily
and

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what's really complicated or convoluted for them to do and what's the right path or

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what are some possible paths for the future of on-chain gaming or the future of
on-chain

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physical infrastructure or some of these other categories.

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How can we build those features that are required in order to facilitate those?

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And that's what motivated Eclipse, where we let people spin up their own blockchain.

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And there's other services that have historically let you do this.

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There's sidechains, you could do a Cosmos chain, there's Polkadot, there's a lot of

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stuff, there's Avalanche, Subnets, but the disadvantage of all those ecosystems is

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typically one, those are full layer one blockchains that try to provide for their
own

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security. So they need to bootstrap a bunch of money to make that chain secure.

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They have to get validators, they need to coordinate updates, they need to basically
be

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infrastructure. Yeah, exactly.

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There's a lot of work that goes into it.

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And so it's just highly inconvenient.

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And the second part is that you're tied to that ecosystem.

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So the beauty of a rollup or an Eclipse rollup in particular is that you could
switch

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the layer one that it's kind of pegged to and you're using the layer one for
security

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and for a consensus.

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But it's kind of loosely decoupled in some sense.

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The rollup seems to me like one of the best inventions out of the last really like
where

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rollups are being able to be taken to market like with your company, because all
these

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different real time products, like you said, gaming and real time infrastructure,
you

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can't wait for, you can't be on a layer one.

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And a lot of times you can't be on a layer two that has a very slow block time.

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You need to be able to to verify certain type of actions, certain type of
computations in

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real time. And then potentially later on, you can settle on to like that layer one.

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And you've kind of built this this like plug and play, if you will, service.

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So it's very unique to me about this is like I'm excited that our industry is so
mature

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enough that we need companies and services like yourself, because at the end of the
day,

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game developers from Web2 are going to are coming in day by day and wanting to get
into

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the Web3 space. And they go to you because they need their own like private block

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chains. But at the same time, they they need to utilize and make sure it's faster.

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Yeah, I would actually even veer away from the word private blockchain because it's
not

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private, right? Anyone can access it.

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Anyone can put their smart contracts on it, but it is dedicated, meaning that it's
one

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blockchain for one app.

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And there are some of these chains like what we're doing for Injective or Polygon or
some

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of these folks where it's a general purpose chain and there are multiple apps there.

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But yeah, privacy is like one option.

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But you can even have public blockchains, too.

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I totally agree. And I think the dirty secret is that the industry isn't really
quite

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ready for it because there just isn't enough block space to support even the chains
that we

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have running right now. We have something like 20 of these extremely high throughput

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chains, essentially like Solana scale chain that need that much block space to

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correspond to them. And that's not really going to be available until close to July
when

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some of these DA solutions go mainnet like EigenDA, Celestia and so forth.

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You were at ConsenSys. Who are you looking to meet?

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Are you looking to meet more like people in our industry?

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Are you trying to meet folks who can who can use Eclipse and create their own new

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blockchains or experiment with it and things like that?

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So I was mostly meeting existing customers that I'm really excited about this
company

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called React. It was recently rebranded Daylight.

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And these guys basically stick a meter into your house so it tracks all your
electricity

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consumption. Then they'll track your solar panel, your thermostat, if you have a
battery

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installed in your home. The idea initially started with just batteries, but that's

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become more broad.

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What's it called? Daylight?

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All this data.

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What's that?

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Daylight?

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Daylight. Yeah.

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Or I think if you search React network, that's what it's called right now, but

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they're going to do a rebrand pretty soon.

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OK, cool.

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So, yeah, these guys track all your data.

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Ultimately, it'll all be put on chain, whether that's encrypted or not encrypted.

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And there's just so many things you can do with that, whether it's you can optimize
the

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user's power consumption or, like, for example, maybe you want your house to be cool
by

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6 p.m. or something, but you've been having your thermostat run all day.

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Then they can optimize that and turn off the thermostat in the middle of the day and

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then turn it back on. They can do all kinds of fancy things once they have all that

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data. They can figure out when you should charge your battery, when you should sell

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back to the market. And I have a power background.

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When I was at Quantum Citadel, I mostly did power and natural gas.

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So I just think that the idea is really interesting.

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So it's an example of a decentralized physical infrastructure network.

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Another project that we met over there was Wave, W-A-E-V, and it's kind of like,
yeah,

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on-chain data tracking for, like, regulatory compliance and other reasons.

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So, yeah, that's another project that we're really excited to have on Eclipse.

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Are you finding any constraints with the blockchains of today?

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Do you think people will keep launching new blockchains?

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I think that for these types of applications in particular, definitely, yes.

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Like Wave, it takes hours for them to upload all of their data on-chain.

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But when they have a dedicated blockchain where they can batch some of the

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operations or kind of conserve block space or compress block space in some clever

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ways, then it becomes much more tractable.

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Why are they putting their data on-chain?

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Yeah, they're putting like all, every time you submit a form, every time you really

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do anything online, that's going to be available on-chain for, let's say there's

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another, like another website wants to request access to that data, then this way

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they can enforce that you actually signed off on that website having access to it.

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And then it'll facilitate that data sharing.

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I love that concept.

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And we've been talking about that for so long.

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What's the watershed moment for something like that?

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How do we force, because there's like a little bit of friction there, right?

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How do we force new businesses to use a company like Wave?

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And then we have enough, like you're using it enough places where it actually takes

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over. I would love to, that's what I think it's partly about bootstrapping the
supply

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side of the marketplace first.

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So you just right now, businesses already do some amount of data sharing.

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So first replace their existing solution without any additional like GDPR

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related features where you ask users to share their data or whatever.

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Just ignore that for now.

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And then once you have all this, it's like huge, like warehouse of data, then you
can

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start incorporating users and maybe even letting them monetize their own data and

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getting compensation for sharing their data.

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So unique and so interesting.

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It's how did you how did you learn that our industry needed all

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of this when you were working at Citadel?

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So when I was at Citadel, I definitely was not thinking about it because I was

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actually, I think I had a really naive view toward crypto, which was just that there

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were going to be a lot of chains and they all needed to be EVM compatible.

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And EVM compatibility, if the audience doesn't know, this just means the blockchain

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needs to be able to support Ethereum smart contracts, Ethereum wallets.

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But what I come to realize is that EVM compatibility, such as what Binance Smart

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Chain did or Polygon POS, isn't actually like a reason for people to deploy to a

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chain. It's just a go to market tactic.

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And the quality of applications on these EVM chains has gone down so much.

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On Ethereum, we still have some unique stuff, but a lot of these other chains just

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have forks of other EVM projects.

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And I think that's what's kept like, for example, the Solana community, the average

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quality of project is actually pretty good.

236
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Or if you look at what was going on in Terra, because there's that barrier of entry
to

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use CosmWasm and Rust, the average Terra project was also good.

238
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Even though these blockchains obviously, you know, they've had their ups and downs

239
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from a price perspective and also from like a TBL and user activity perspective.

240
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I'm just saying that the types of apps in terms of uniqueness and just the raw
quality

241
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of the app is probably higher than your average app on Ethereum.

242
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That's a really interesting concept.

243
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So you're seeing that the more, the higher the barrier of the entry, then sometimes

244
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the better the quality of the app.

245
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I mean, you look at the Apple App Store as one example that if you want to have an
app

246
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in the Apple App Store, there's a certain like standard of excellence that you'd
have

247
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to have there. And that's why you don't have that.

248
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But at the same time, there's like pirated, you know, app stores back in the day
when

249
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you'd put them on your phone and you'd download some of those apps, they were like

250
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kind of janky and crappy.

251
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And I have noticed that since EVM compatibility, aka like cross-chain ability, aka

252
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everyone is like chain agnostic all of a sudden, it's kind of funny.

253
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But then what's the point?

254
00:15:11,400 --> 00:15:15,120
That's why I keep asking, what's the point of launching these new chains?

255
00:15:15,120 --> 00:15:20,640
It's kind of funny that at one point, all we did was focus on for so many years from

256
00:15:21,360 --> 00:15:26,360
2014 onward, we just focused on having new blockchains that were so different.

257
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And then now all of a sudden we want to connect all the chains back together.

258
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Yeah, it's such a good point.

259
00:15:31,720 --> 00:15:34,840
And it's also like, why are these people going multi-chain?

260
00:15:34,840 --> 00:15:37,640
It's just because it's the naive advice that someone will give you.

261
00:15:38,160 --> 00:15:42,600
But ultimately, what apps should be focusing on is, one, increasing the user
experience,

262
00:15:42,600 --> 00:15:47,120
like making a better quality app, and two, increasing the number of unique users
that

263
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have access to their chain.

264
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And if you're looking at like the 50th L1 out there, it's unlikely you're actually

265
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accessing new users by deploying there.

266
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And also, users don't come for free.

267
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You're going to have to actively invest in the go-to-market unless you're offering

268
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something unique.

269
00:16:02,920 --> 00:16:06,920
And then, I mean, the whole idea of like build something and they will come is not
as

270
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common as these developers are hoping.

271
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Yeah, no, you're totally right.

272
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And I don't want to outfall entrepreneurs out there.

273
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I want them, I want everyone, myself included, I want us to hear this, that there
was a

274
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decade of like the macro cheap money.

275
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But what that did was create for us is like the constant free user.

276
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So any of our apps and our crypto applications, as long as it was cool and we built
it and

277
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it was fun and it was crypto, users were there ready to use it.

278
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And it was cheap acquisition for new.

279
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That's why some of our companies acquired so many users so quickly and they got into

280
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crazy valuations because it was cheap and easy.

281
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But now it's different.

282
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And now, if you're not building something that's in its category, for example,
you're

283
00:16:45,600 --> 00:16:48,840
an infrastructure and services, very unique category.

284
00:16:48,840 --> 00:16:51,000
You're actually what our fund invests in specifically.

285
00:16:51,360 --> 00:16:55,560
But if you're building out there like a retail application, you need to be building

286
00:16:55,560 --> 00:16:59,360
something that's good for the mass user out there.

287
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Now, the time that we build for the crypto user, it's over.

288
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We need to build out for everyone else because we need to prove our own utility.

289
00:17:08,240 --> 00:17:12,640
Yeah, plus all those users that were just coming there for the hack or just because

290
00:17:12,640 --> 00:17:14,920
they're just being handed money are essentially mercenary.

291
00:17:15,320 --> 00:17:18,720
The moment that money stops, unless you built a good app, they're going to leave

292
00:17:18,720 --> 00:17:23,960
anyway. So it's like that's really good for pumping your metrics and convincing

293
00:17:23,960 --> 00:17:25,800
someone to invest in a crazy valuation.

294
00:17:26,000 --> 00:17:30,240
But the moment you're on the public market and then your users leave, then I think a

295
00:17:30,240 --> 00:17:31,120
lot of that goes away.

296
00:17:31,160 --> 00:17:33,400
That's like token investor loyalty.

297
00:17:33,400 --> 00:17:34,320
How do you gauge that?

298
00:17:35,920 --> 00:17:37,600
Yeah, yeah, really true.

299
00:17:37,600 --> 00:17:41,840
And then I think a lot of people were kind of fallaciously tricking themselves into

300
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thinking that there's an actual community just because their token price went up and

301
00:17:46,360 --> 00:17:47,480
their community loved them.

302
00:17:48,000 --> 00:17:52,240
But that doesn't actually mean if you have like a borrow-lend protocol or something,
I

303
00:17:52,240 --> 00:17:55,240
don't want to like I'm sure there are borrow-lend protocols that have this.

304
00:17:55,480 --> 00:17:59,760
But my point is that in traditional financial infrastructure, like loans or

305
00:17:59,760 --> 00:18:01,640
something, there's no loan community.

306
00:18:01,920 --> 00:18:04,600
There's a little bit of a commodities community, but not really.

307
00:18:05,360 --> 00:18:09,520
Like usually financial instruments don't have communities behind them just because
the

308
00:18:09,520 --> 00:18:11,120
price of the financial instrument went up.

309
00:18:11,760 --> 00:18:16,200
So it's like a unique thing to crypto and I don't think that's, I think a lot of it
is

310
00:18:16,200 --> 00:18:21,120
because it's driven by retail speculation, but I don't think that's a sustainable
source

311
00:18:21,120 --> 00:18:24,640
of community. A sustainable source of community is like, if you look at these
consumer

312
00:18:24,640 --> 00:18:28,720
apps like games, games can have community because people do it as a hobby.

313
00:18:28,960 --> 00:18:31,160
They'll like go home, they'll hop on with their friends.

314
00:18:31,360 --> 00:18:35,040
They know the people they're playing with or even if they don't, but they'll stream
and

315
00:18:35,040 --> 00:18:37,800
they have like there's just a lot of community elements to it.

316
00:18:37,960 --> 00:18:41,520
The same thing doesn't typically apply to like a borrow-lend protocol and therefore
you

317
00:18:41,520 --> 00:18:45,480
need to design your app a little bit differently and your ways of measuring
community

318
00:18:45,480 --> 00:18:47,160
should like be different consequences.

319
00:18:47,360 --> 00:18:53,320
It's brilliant that you said that because it's somewhere along the way crypto became
this

320
00:18:53,320 --> 00:18:58,480
incentive layer and it was decided that all applications need tokens and incentives
and

321
00:18:58,480 --> 00:19:01,360
that's how we're going to build community with financial incentives.

322
00:19:01,600 --> 00:19:06,160
But that's not the way community should be built around hobbies and then maybe
crypto can

323
00:19:06,200 --> 00:19:09,440
be used as what, like a complementary add-on to these communities?

324
00:19:10,560 --> 00:19:14,640
Yeah, it could also be used as like a like network effects bootstrapping tool.

325
00:19:14,640 --> 00:19:18,240
I think that's a really valid use and I know that like crypto people hate this, but
no,

326
00:19:18,240 --> 00:19:22,040
we have to talk about it. Crypto is like, yeah, you give something to someone that's
worth

327
00:19:22,040 --> 00:19:26,520
something to them, but it costs you nothing to give it to them and that asymmetry,
at

328
00:19:26,520 --> 00:19:30,240
least initially, it's worth nothing to you and then eventually like it needs to
actually

329
00:19:30,240 --> 00:19:34,720
grow into that value. But I think that's partly like the beauty of it that we should

330
00:19:34,720 --> 00:19:39,920
lean into. But it's just like you can't be, it's like back in the beginning of Uber,
I

331
00:19:39,920 --> 00:19:42,800
remember Uber rides were like a dollar a ride or something like that.

332
00:19:43,320 --> 00:19:47,880
It was just crazy. I could like, I was using Uber everywhere and that was like the,
to

333
00:19:47,880 --> 00:19:50,280
me, that was like peak VC subsidized days.

334
00:19:50,600 --> 00:19:54,920
And now Uber rides are like super, to get like across the street, it cost me 20, 30

335
00:19:54,920 --> 00:19:59,960
bucks or something. But I think that's like the kind of thing that these other apps
that

336
00:19:59,960 --> 00:20:03,800
were using tokens to bootstrap network effects need to realize that they have to
grow

337
00:20:04,520 --> 00:20:05,520
into Uber today.

338
00:20:05,720 --> 00:20:11,400
I never understood how, like I was a, like you said, when Uber, I grew up in New
York

339
00:20:11,400 --> 00:20:18,600
City and so in 2000, maybe it was like over 10 years ago, 2011, 2010, I was like
using

340
00:20:18,600 --> 00:20:23,000
Uber when it was just, it was all only black cars and it was because my friend from
high

341
00:20:23,000 --> 00:20:26,960
school ended up becoming one of the first New York employees and he's like, hey, you

342
00:20:26,960 --> 00:20:32,880
got to use this. And it was amazing because it was like I was able to have a black
SUV

343
00:20:33,160 --> 00:20:39,440
sitting outside of like a restaurant while I ate for six hours with a chauffeur
driver

344
00:20:39,760 --> 00:20:41,480
for like $10 an hour.

345
00:20:41,840 --> 00:20:42,960
And I was like, this is, I don't know.

346
00:20:42,960 --> 00:20:43,520
It was pretty crazy.

347
00:20:43,520 --> 00:20:44,800
Yeah, like this is the future.

348
00:20:44,800 --> 00:20:46,520
I don't know how they're doing this.

349
00:20:46,920 --> 00:20:50,440
That is this, I don't know how this Travis guy is doing this thing, but God bless
him

350
00:20:50,440 --> 00:20:51,600
for like seven years.

351
00:20:51,600 --> 00:20:53,120
He bootstrapped my transportation.

352
00:20:54,400 --> 00:20:58,080
Yeah. And then it's like you drive to your destination and you can order a coffee to
be

353
00:20:58,080 --> 00:20:59,760
delivered the moment you get there.

354
00:21:00,120 --> 00:21:04,640
So imagine the level of wealth that you'd have to be at to have this just like 30,
40

355
00:21:04,640 --> 00:21:07,320
years ago. And now it's just like accessible to everyone.

356
00:21:07,320 --> 00:21:08,400
It is pretty remarkable.

357
00:21:08,520 --> 00:21:13,000
It sounds like you, one of the things you learned too, is that everything is just
taking,

358
00:21:13,040 --> 00:21:17,320
it's going to take a little bit more time to get where we need to be than what we

359
00:21:17,320 --> 00:21:23,640
thought. I think there's also just like a mismatch between like, I mean, there's a
lot

360
00:21:23,640 --> 00:21:27,280
of great engineers in this industry and I think there's also some guys on the
economic

361
00:21:27,320 --> 00:21:32,040
side. But it's kind of rare that you see like someone who's kind of like a quant
that can

362
00:21:32,040 --> 00:21:35,120
be a hybrid between those two, because as a result, you end up with these weird

363
00:21:35,120 --> 00:21:37,800
constructions. I think choosing a Filecoin is really cool.

364
00:21:37,800 --> 00:21:43,440
And I think there's arguments that it is sustainable, but like a naive argument,
it's

365
00:21:43,440 --> 00:21:47,400
like, oh, it's like someone like the other day was telling me, oh, well, they feel
like

366
00:21:47,840 --> 00:21:50,120
as a Filecoin user, they're paying less.

367
00:21:50,520 --> 00:21:53,760
And the guy who's providing the storage for Filecoin is making more.

368
00:21:54,160 --> 00:21:55,040
So it's a win.

369
00:21:55,560 --> 00:22:00,720
And then like, it's kind of silly because it's like something like obviously the
yield

370
00:22:00,720 --> 00:22:02,320
must be coming into the system somewhere.

371
00:22:02,760 --> 00:22:06,440
And right now, the way it comes in is that we have people speculating on the price
of

372
00:22:06,520 --> 00:22:09,520
the Filecoin token. And that's why the token is worth more.

373
00:22:09,560 --> 00:22:13,680
So when Filecoin compensates the person providing storage, they're able to basically

374
00:22:13,960 --> 00:22:17,920
rely on that speculation and give it as compensation to someone else.

375
00:22:18,200 --> 00:22:22,600
But the moment that yield stops entering the system, and it will eventually, then
you

376
00:22:22,600 --> 00:22:23,840
need other revenue sources.

377
00:22:23,840 --> 00:22:26,040
And Filecoin actually has ways of growing into that.

378
00:22:26,400 --> 00:22:30,560
But yeah, I'm just giving it as like an example of like, if you just left it at that

379
00:22:30,560 --> 00:22:34,880
like simple analysis, then if you put a thousand dollars in for storage and you're

380
00:22:34,880 --> 00:22:38,480
getting five thousand dollars of storage out, obviously there's a mismatch there.

381
00:22:38,520 --> 00:22:41,240
And like crypto people seem to think that that's not an issue.

382
00:22:41,440 --> 00:22:43,960
It's one of the best, I think one of the best projects in the space.

383
00:22:44,000 --> 00:22:48,800
We had like two, we had the two different founders on the show from Protocol Lab.

384
00:22:49,120 --> 00:22:54,320
And the cool thing about Filecoin is it's an actual invention that's taken from the

385
00:22:54,320 --> 00:22:59,600
Byzantine generals problem created, you know, they theorized about IPFS for many

386
00:22:59,600 --> 00:23:04,200
years, applied a lot of different technologies, used crypto as this incentive

387
00:23:04,200 --> 00:23:06,520
layer, and then figured out a way to do it.

388
00:23:06,520 --> 00:23:10,680
And they fully, like you said, understand that this is a long wait.

389
00:23:10,720 --> 00:23:15,160
But the cool thing about their speculators, their speculators, the cool thing about

390
00:23:15,160 --> 00:23:21,080
their speculators is that they are speculating on the value of the future network
that

391
00:23:21,080 --> 00:23:23,680
they can still use and play with today.

392
00:23:24,080 --> 00:23:26,680
And I think that's kind of fair because it's a really cool network.

393
00:23:26,680 --> 00:23:30,960
And when you understand how it all works and that you can actually use it now, a lot

394
00:23:30,960 --> 00:23:34,280
of people are going to are speculating on the on the future value, which is kind of

395
00:23:34,280 --> 00:23:35,480
what stocks are in a way, too.

396
00:23:35,480 --> 00:23:37,280
Right. Yeah, that's what it's supposed to be used for.

397
00:23:37,280 --> 00:23:38,360
That's a good point. Yeah.

398
00:23:39,200 --> 00:23:43,720
But the rest of it is just a lot of it is it's hard, but we're going through we're

399
00:23:43,720 --> 00:23:47,520
going to go through a renaissance, I think, over the next year or two, because the

400
00:23:47,520 --> 00:23:50,720
barrier of entry in our space is not.

401
00:23:51,480 --> 00:23:54,840
And to like what you said, the barrier of entry is a lot harder now.

402
00:23:55,800 --> 00:24:01,640
People to raise money is harder now to to convince yourselves and your family to
that

403
00:24:01,640 --> 00:24:04,680
you're going to leave your job and start a Bitcoin or crypto company is a lot harder

404
00:24:04,680 --> 00:24:08,240
now to grow your company and get users is a lot harder.

405
00:24:08,240 --> 00:24:10,560
Now you see it at these conferences.

406
00:24:10,560 --> 00:24:12,320
It's it's just a lot different.

407
00:24:12,480 --> 00:24:17,680
And so maybe out of that, we'll start to get these like really, really, really good

408
00:24:17,680 --> 00:24:21,520
applications. And we're starting to see like on the Solana chain, you're seeing
really

409
00:24:21,520 --> 00:24:23,640
good applications and and stuff like that.

410
00:24:23,640 --> 00:24:27,360
So so you're giving me optimism for the for the years to come.

411
00:24:27,880 --> 00:24:29,360
Oh, thank you. Good to hear that.

412
00:24:29,360 --> 00:24:32,920
Yeah, I think people will be a little bit more thoughtful about whether what they're

413
00:24:32,920 --> 00:24:34,640
building is actually really unique, too.

414
00:24:34,880 --> 00:24:39,160
But I think that's the last part that I think multi-chain really was a huge
distraction

415
00:24:39,200 --> 00:24:44,040
for, which is people weren't thinking about like whether they're actually building

416
00:24:44,040 --> 00:24:46,000
something new or something zero to one.

417
00:24:46,000 --> 00:24:49,400
And instead they're like, let's just take this protocol and we're building it for

418
00:24:49,400 --> 00:24:52,000
Aptos or we're building this protocol for Solana.

419
00:24:52,240 --> 00:24:56,360
And that's a really bad way of building applications or building things that last,

420
00:24:56,600 --> 00:25:00,400
especially since like when you're building like X for Solana and you just rip it
from

421
00:25:00,400 --> 00:25:05,120
Ethereum, the Solana blockchain is so much it has so much higher throughput and
there's

422
00:25:05,120 --> 00:25:07,640
things that you can do on there that you straight up can't do on Ethereum.

423
00:25:07,880 --> 00:25:11,520
So why don't you do more of those things rather than just fork in AMM, which was

424
00:25:11,520 --> 00:25:13,400
designed with the constraints of Ethereum in mind.

425
00:25:13,792 --> 00:25:28,792
If you were a company or like a blockchain that launched on the premise of just
connect us to as many chains as possible and offer some really cool scaling
solutions and users will come like, and if they're in that space now and they don't
have any real applications, like what advice would you give them?

426
00:25:28,792 --> 00:25:37,792
I'd honestly, I think that a lot, I mean, for these companies that may be like
raised at too high of a valuation and they can't grow into it, there's only a few
options.

427
00:25:38,792 --> 00:25:51,792
But if you're really early on and a lot of the capital is left, I honestly think
maybe just return the capital because that's kind of the situation I was in with the
Terra EVM where the assumptions of what I was building were just no longer true or I
no longer had conviction in them.

428
00:25:51,792 --> 00:26:09,792
And you're better off just not going through with the round or not continuing and
then taking a step back and thinking about what is actually compelling to you. You
can raise again, you're probably going to want to change the cap table too, because
maybe those old investors that you had, had a different thesis on what the future of
crypto scaling looks like.

429
00:26:10,792 --> 00:26:29,792
At the same time, being upfront and public about your history and your career, it
seems like from my own personal history and yours too, it seems like the more
integrity you have to the community that you work in, the more respectful they'll be
back to you. So that's always a good thing too.

430
00:26:30,792 --> 00:26:49,792
Yeah, I think you can also prevent other people from making the same pitfalls. If
you announce really publicly, you're like, look, this thing didn't work out, then I
think people, if someone else tries to do the same thing in the future, they're
going to see that evidence in history and hopefully they learn from it and
understand why. Maybe they could take a totally different approach, but at least
they know that you went down that same path too.

431
00:26:50,792 --> 00:27:03,792
Neil, thank you so much for coming on the show today. Neil Samani from Eclipse. I'll
have all your information in the show notes, but very enlightening conversation,
very eye-opening at the same time. Thanks for taking the time today.

432
00:27:04,792 --> 00:27:05,792
Thanks, Charlie.

433
00:27:20,792 --> 00:27:29,792
And that is why they are producing the show right by my side. What an amazing team
we have now. It's so amazing. You guys have been hearing some great updates and
following along.

434
00:27:29,792 --> 00:27:42,792
If you don't know, Waxman is the leading global strategy and communications firm
advising the next generation of companies in Web3, disruptive technology, Bitcoin,
crypto, fintech, artificial intelligence, and venture capital.

435
00:27:43,792 --> 00:27:53,792
Waxman's clients are ambitious leaders and businesses that are on the frontier of
this whole new economy because they really do believe that the future belongs to us
and we're the ones building it.

436
00:27:53,792 --> 00:28:14,792
With services across everything from digital marketing, public relations, social
media, investor relations, financial communications, recruiting, and public affairs,
they're helping companies and individuals like myself seize the business
opportunities that we deserve, overcome challenges that we all are going to face,
and achieve sustained success.

437
00:28:15,792 --> 00:28:27,792
Head over to Waxman to learn more. You guys are going to love them. We have them in
the show notes. Check it all out. It's W-A-C-H-S-M-A-N.com. That's
W-A-C-H-S-M-A-N.com.

438
00:28:28,792 --> 00:28:43,792
We're on this great, great subject right now, talking about crypto platforms,
development, Bitcoin scaling. We've been on this theme. A lot of what gets talked
about in the crypto space or what reaches the ears of the mainstream audience is the
final end product.

439
00:28:43,792 --> 00:29:03,792
But a lot of this cool technology actually is happening behind the scenes. Without
understanding what is happening behind the scenes, it's really hard to understand
how these things will come together. So I'm excited to introduce my guest today, Leo
Leonard Deloscher. I definitely screwed it up again. I'm so sorry, but Leo, thank
you so much for coming on the show.

440
00:29:03,792 --> 00:29:05,792
Thank you so much for having me, Charlie.

441
00:29:06,792 --> 00:29:19,792
You're a graduate of the Berlin Institute of Technology. You're the co-founder of
Peaq, P-E-A-Q, and a very unique company. You guys are looking at crypto platforms
and scaling in a very different way. Very, very different.

442
00:29:20,792 --> 00:29:37,792
You're working on what you call transforming the Internet of Things into the economy
of things by giving vehicles, machines, robots, devices somewhat of a sovereign
identity, access, and payment capabilities so they can do services and have an
economy between them. And we're already seeing that.

443
00:29:37,792 --> 00:29:58,792
We've got Teslas and all our new refrigerator. A lot of these new washing machines
come built in with chips and having these technologies to be able to talk to each
other. And for me, I look at efficiency. I want all of everything in my house,
refrigerator, dryer, anything, pool heater, whatever, to be just under this hyper,
hyper-efficient kind of mechanism.

444
00:29:59,792 --> 00:30:13,792
And you're trying to build this out using these decentralized physical networks, the
D-PINs. You think they're going to change the blockchain landscape from everything
that we know. How is this different from layer ones? I guess, take me from the top.

445
00:30:13,792 --> 00:30:31,792
Yeah, absolutely. Now, you summarized it super well. And what Peak essentially is,
is a layer one for what you just said, D-PINs, decentralized physical infrastructure
networks. This is a new term in Web3, which just emerged recently. Misari coined it,
actually.

446
00:30:31,792 --> 00:30:55,792
And it's kind of uniting a lot of the efforts that have been going on for a long
time. So there have been many efforts in terms of creating decentralized networks,
so incentivizing individuals, for example, to deploy hotspots at their home. Helium
is an example who did that. Or to offer storage in order to store files and so on.
Filecoin is an example of that.

447
00:30:56,792 --> 00:31:16,792
So there's been a lot of efforts going on already. And we've been looking at that
space starting in 2017, where we had our inception. We did a lot of work with many
big enterprises. Audi called us up one day in the morning and basically said, hey,
we have a massive problem. Our customers don't really have enough charging
infrastructure.

448
00:31:17,792 --> 00:31:35,792
So one of the managers had that brilliant idea of saying, hey, what if all the home
charging stations could be actually made available to the public? And that's another
example of D-PINs, where people can use their private charging stations at home,
deploy them and make them available to their communities.

449
00:31:35,792 --> 00:31:56,792
So it's really essentially incentivizing individuals and enabling individuals to
share the resources they have. And we focus on the IoT resources, like anything that
can transmit data, that can generate or sell energy, that can store files, that can
record video.

450
00:31:57,792 --> 00:32:05,792
This video data can be shared with people and sold. And Peak is really a layer one
network designed for that space.

451
00:32:06,792 --> 00:32:30,792
A lot of people have been trying to do this for a very long time. It's definitely
novel and unique. And it's almost like the Holy Grail of being able to do this. I
remember going back almost like seven, eight years now, when after Ethereum was
first conceptualized, people were talking about doing the Internet of Things of
sharing electricity and solar power, being able to share the helium mesh network and
do decentralized cell phone networks.

452
00:32:31,792 --> 00:32:42,792
But what has been the barrier to entry? Why have none of them? Although you saw
helium did take off, and it helped that people were home a lot during COVID
lockdowns. Why hasn't this really taken off yet?

453
00:32:43,792 --> 00:33:03,792
Absolutely. It's been a long journey also for us. We've done a lot of R&D. We work
with many big firms. And it's taken until now to really get its own name, to become
its own thing in Web3. For many years, we first had to get the infrastructure
scalability right. Like on Ethereum, you couldn't build these things.

454
00:33:04,792 --> 00:33:25,792
Back in 2017, we looked at working with IOTA, because it promised to solve a lot of
issues. But it didn't at that time, right? The technology wasn't ready. So until
2021, I'd say, we didn't have the infrastructure, the blockchain infrastructure tech
to actually build such a layer one, and to really make those use cases come alive.

455
00:33:25,792 --> 00:33:43,792
Now this is solved. We have incredible frameworks. We, for example, built with the
substrate framework that's used to build the Polkadot ecosystem. So that really
provides us with the infrastructure tech on the blockchain level that's required to
build such a layer one with very low fees, high throughput, and so on.

456
00:33:43,792 --> 00:34:03,792
And on the other hand, I think incentives and economics haven't been figured out
really yet. You mentioned Helium as an example. It's a fantastic example of really
creating a massive network of the supply side. But there hasn't been really much
demand yet for using the Helium LoRaWAN network.

457
00:34:04,792 --> 00:34:05,792
Why not?

458
00:34:05,792 --> 00:34:32,792
Because the IOT connectivity through LoRaWAN is not used on massive scale yet. So
the idea was, okay, we're going to deploy this network everywhere. And then Citi is
going to use this LoRaWAN IOT connectivity and companies, but it's not that much
used yet. It might scale up. Helium now switched also to focus more on 5G. But it
hasn't been used so far as promised.

459
00:34:33,792 --> 00:34:41,792
So there's a massive supply side. The model works. You can bootstrap those networks.
You can build up the supply side. But the demand in Helium's case wasn't there yet.

460
00:34:41,792 --> 00:35:10,792
It wasn't there yet. And a lot of this stuff is still experimental. But going back
to the electric cars and that network example, I think that's one of the best ones.
I just read an article somewhere that one of the reasons that Elon Musk actually
opened up the supercharger network to the whole US was because there was pressure
there that electric cars weren't going to continue to grow in the US if it was seen
that Tesla had a monopoly on almost all the superchargers in the whole country.

461
00:35:11,792 --> 00:35:27,792
And so there was almost like government pressure to open that up. And I understand
why. So your solution is like a decentralized version. It's like most people are
charging. They're not going to superchargers. They're charging at their home or
their office. So why not be able to share those resources?

462
00:35:28,792 --> 00:35:54,792
Correct. And the charging use case is one of the use cases. And it's actually the
first deepened use case that was built on the peak network because really Audi as a
massive automotive firm kind of initiated that and said, hey, we need to solve that
problem that end users have 10 to 15 different accounts, charging cards. If they
have a Tesla, they can charge up the Tesla superchargers, but not everywhere else.

463
00:35:55,792 --> 00:36:22,792
And there's so many home charging stations that are not available to the public. And
if you think about like if you give all of those charging stations an identity on an
open blockchain network and then anyone can see them and reserve them and pay for
them peer to peer, that really can massively scale the charging infrastructure and
it can solve this massive fragmentation that we have today. Right now it's super
fragmented.

464
00:36:23,792 --> 00:36:38,792
Not only that, you're looking at it from a very like altruistic perspective, but I'm
looking at it from like a capitalism perspective. And the way I look at it is that
you have this huge multifamily property boom going on right now there.

465
00:36:38,792 --> 00:37:00,792
You have most people who are property real estate investors own, you know, they
don't own really a lot of single family rentals, they own like these buildings or
apartment buildings or homes where you can have multiple families live in them. And
we're seeing the growth of these all over the country. And these are owned by, yeah,
you have private equity and stuff, but they're owned by like, smaller investors,
people are diversifying their assets.

466
00:37:00,792 --> 00:37:21,792
And there's no incentive for me as like an Airbnb operator, you know, or someone who
owns a multiple family unit building to build superchargers, because how many of my
guests are going to pay extra to use it? However, if I had them there, because it's
now part of a network that can give me an extra income stream, I think that's very
promising.

467
00:37:22,792 --> 00:37:47,792
100%. And if you scale that model to different use cases, right, you have the
charging infrastructure, you can utilize your property, wherever you have it, you
can build charging stations and make money by any car that passes by that wants to
charge there. Or you use the roofs of the houses you own and install 5G hotspots,
because traditionally, you have to be a big telco company that builds a massive 5G
network.

468
00:37:48,792 --> 00:38:02,792
But now, it's going to be flipped around and deepens like those decentralized
physical infrastructure networks, enable anyone, any property owner to install 5G
hotspots on their property and provide connectivity to the people to the community
around.

469
00:38:03,792 --> 00:38:29,792
So you're spot on saying that this is an incredible opportunity to decentralize how
money is being made, right? Like, anyone can start making money more on the side,
and it's less concentrated in the hands of a few big companies. And individuals,
investors, or if you own your private property, can start making money. And we like
to call this democratizing the age of automation.

470
00:38:29,792 --> 00:38:53,792
I love that. I love democratizing the age of automation. Do you see like, this world
of multiple blockchains that people are still launching is going to exist in the
future? Or do you think that it'll be more of like, normal people, businesses and
companies and industry will interact with this kind of like, decentralized
middleware that will then filter into whatever blockchains that it wants to use on
its own?

471
00:38:53,792 --> 00:39:22,792
Yeah, like, I do. I do think that the multichain future will exist. And I think
many, many industries will be transformed in terms of many companies that
traditionally exist, will start that will not exist any longer, right? They will, or
they will have to transform a lot in order to continue to exist. And in terms of
many different networks being launched, like on an interoperability level, I see
incredible progress in terms of all

472
00:39:22,792 --> 00:39:51,792
those different networks really being able to talk to each other, being able to
exchange information and also tokens and value. So that is being built a real web
three, which is interconnected. And many business models are being completely
flipped around. So I do believe, for example, telco, and energy, as we talked about
it now, like, I think the energy grids of the future are going to be highly
decentralized, much more in the hands of individuals and people.

473
00:39:51,792 --> 00:40:10,792
Who produce energy, store it, and also sell it. So I think, yeah, many businesses
that we know as of today, in that, for example, field of infrastructure, are going
to be disrupted and transformed. And web three is, yeah, enabling that.

474
00:40:10,792 --> 00:40:34,792
You guys just launched something called Peak Control, which allows users and owners
of the Raspberry Pi computer, which is like a very small computer, half, you know,
it's a tiny one, half the size of my cell phone. It allows owners to connect to your
network and get rewarded for simulating how machines such as electric vehicles and
drones will interact with it. Why are you paying people for simulating data?

475
00:40:34,792 --> 00:40:58,792
That's a good one. And we do this in order to really enable people to start
experimenting. So this is happening on a canary network of ours. So it's not
happening on the main network that will be launched later this year. So this is
really there in order to give people a feeling of how the economy of things is
working and how it functions.

476
00:40:58,792 --> 00:41:17,792
And we're testing basically people to like we're testing how the network behaves,
how people interact with it. And we're using Raspberry Pis because it's basically an
IoT middle layer. You can connect any sensor, any charging station, any car to the
internet, to the peak network using a Raspberry Pi.

477
00:41:17,792 --> 00:41:33,792
So it's basically one IoT middleware with which you enable all the IoT developers
out there to prototype and test deep and use cases very quickly. That's why we
launched initiative to really enable everyone to get started super quickly and try
things out.

478
00:41:33,792 --> 00:41:35,792
How many people are connected?

479
00:41:35,792 --> 00:41:40,792
So right now there are, I think, four to five hundred Raspberry Pis connected.

480
00:41:40,792 --> 00:41:45,792
Can you almost like do a decentralized Mechanical Turk in a way?

481
00:41:46,792 --> 00:41:48,792
Decentralized Mechanical Turk.

482
00:41:48,792 --> 00:42:07,792
Where it's like using, if you have, it's not just about sharing resources, but if
you have hundreds of thousands of Raspberry Pis connected and they're acting as like
decentralized oracles and they're bringing in data, you can build into your network
a mechanism to tell if any outlier data is lying or being dishonest.

483
00:42:07,792 --> 00:42:20,792
You could like ask simple questions like what's the weather where you are and
compare it with the actual weather sources, but then you can use it to like have a
decentralized incoming data oracles from the real world.

484
00:42:20,792 --> 00:42:27,792
A hundred percent. This is like one of the deepness, like sensor networks is a big
part.

485
00:42:27,792 --> 00:42:28,792
Yeah, sensor networks.

486
00:42:28,792 --> 00:42:44,792
Exactly. There are weather sensor networks being built recently. Just today we
announced how a camera sensor network joined our network. So they are having
smartphone cameras and the smartphone cameras are basically the sensors monitoring
traffic, creating real-time maps.

487
00:42:44,792 --> 00:42:45,792
Oh, that's so cool.

488
00:42:45,792 --> 00:43:11,792
Absolutely. Yeah, it's incredible. Like you can get data on anything, anywhere, air
quality, weather data, traffic data. It's crazy. Like this deepened space that's
emerging, the real world impact you can have and crowdsource data and reward
individuals to contribute with sensors they install at home or in their cars. Yeah,
it's crazy what's happening now.

489
00:43:12,792 --> 00:43:28,792
We have this problem here in Florida. It's the bacterial problem called red tide is
the shorthand for it. But what happens is when it rains a lot or there's like sewage
dumpings or there's like situations where there's a lot of fertilizer or just
chemicals in the ground.

490
00:43:28,792 --> 00:43:47,792
It's not man-made. It's a natural reoccurring thing in the water, almost like a
wildfire. But it gets exasperated by man a lot, by us, having like water runoff from
our lawns into the oceans and things. And in Florida, maybe like once or twice a
year, we get this really bad.

491
00:43:47,792 --> 00:44:04,792
They're very regional and almost very local, but you get these outbreaks and like
all the water will turn red and you'll see like millions of fish just layering on
top of the water and it's sad and it's dead and everything dies in the water.

492
00:44:04,792 --> 00:44:20,792
One of the ways to combat it is to find the outbreaks when they're small. And then
the local marine laboratories that we have here that are like public-private funded,
they know how to stop it. But when it gets too big, they can't. When they turn into
fish kills, you can't.

493
00:44:20,792 --> 00:44:39,792
I wonder if there was some like sensory mechanism that we could develop and then the
way to incentivize people that own properties on the water to put them in their
homes, pay them some sort of like incentive. But it doesn't even have to be like a
monetary incentive. It could be like a discount on your tax bill or something like
that.

494
00:44:39,792 --> 00:45:00,792
Absolutely. That's a fantastic, that's a perfect deep and use case really. You need
a sensor or device that can recognize when this is happening. And then like you
said, you incentivize people, you give them a token reward and that token reward
they can use to, like you said, reduce taxes or any other benefit really. But that's
a perfect use case.

495
00:45:01,792 --> 00:45:21,792
I'm going to work on this. I'm very close with the city and then I just got to get
with the aquarium marine laboratory and ask them how they're working on the sensor.
Because right now the way it works is that my friend Jay called the other day and he
offered me, he's like, hey, we need more people just going out into the water and on
the beaches testing.

496
00:45:22,792 --> 00:45:34,792
It's an actual work. Someone has to go out there and do it. And like, how are we
going to stop these outbreaks if we're relying on like eight day old data, hoping
someone did it the right way? No, we need sensor.

497
00:45:35,792 --> 00:45:37,792
Real time sensor network. Absolutely.

498
00:45:38,792 --> 00:45:42,792
Leo, thank you so much for coming on the show today and giving me my next business
idea.

499
00:45:43,792 --> 00:45:52,792
Super happy and super happy to help, Charlie. Like, please, please let us know. And
we're happy to support with everything on the on the deeper level.

500
00:45:53,792 --> 00:45:56,792
Yeah, I'll get in touch. It's really awesome. I'll talk to you soon. Thank you.

501
00:45:56,792 --> 00:45:57,792
Thank you. Cool.

502
00:45:57,792 --> 00:46:24,792
We're on this theme of crypto platforms developing on top of Bitcoin, kind of
connecting all of these blockchains back together because it seems like over the
last year or so, there's just been this push to figure out how to allow for
liquidity to jump from one blockchain to another without having like losing
decentralization.

503
00:46:24,792 --> 00:46:31,792
You know, especially when some blockchains are very are very busy. Like right now,
there's been a huge amount of activity on the Bitcoin blockchain.

504
00:46:32,792 --> 00:46:44,792
And it's been reviving a lot of talks that we had many years ago on back on Bitcoin
scaling, because as much as Bitcoin has grown and scaled into, you know, you have
lightning and we have sidechains and Drivechains today.

505
00:46:44,792 --> 00:47:00,792
We're going to be talking to my guest, Paul Sztorc. Paul, you're the co-founder and
CEO of LayerTwo Labs. You're a well-known Bitcoin researcher and developer. You've
been working on and proposed this concept of the Bitcoin Drivechain on a sidechain
in 2015.

506
00:47:01,792 --> 00:47:18,792
But it was very different times because right now you have these ordinals and
different type of activities that are being built on top of the Bitcoin main chain.
But we should be figuring out how to scale in different ways so we don't see high
congestion and high fees anymore. Paul, welcome to the show.

507
00:47:19,792 --> 00:47:20,792
Hey, thanks for having me.

508
00:47:20,792 --> 00:47:33,792
You were also an economist at Block and a director of research at Tyrion. But what's
interesting is that when you proposed Drivechains in 2015, and I just want to read
like the first few words you wrote, with sidechains, altcoins are obsolete.

509
00:47:34,792 --> 00:47:46,792
Bitcoin smart contracts are possible. Bitcoin Core and Bitcoin XT can coexist and
all hard forks can become soft forks. Cool upgrades to Bitcoin are on the way. Now,
this was eight years ago.

510
00:47:46,792 --> 00:47:50,792
Yeah, that last sentence, the rest of it was spot on.

511
00:47:51,792 --> 00:47:53,792
But what was going on in 2015?

512
00:47:54,792 --> 00:48:07,792
Yeah, I've got a lot of stories. So what happened was there was the block size
dispute and that was going worse and worse. It started a long time ago and it just
got worse and worse every year.

513
00:48:08,792 --> 00:48:21,792
And in 2015, it seemed like it couldn't get any worse, although, of course, it would
go on to get much worse after that. But in 2015, we organized these conferences
called Scaling Bitcoin, which was supposed to be like everyone meeting and we'll
talk this out.

514
00:48:22,792 --> 00:48:32,792
We'll figure this out because Mike Kern had proposed Bitcoin XT along with Gavin
Andreessen, which was a hard fork increasing the block size, the infamous block
size.

515
00:48:33,792 --> 00:48:48,792
Bitcoin was at the time, and this story has been covered a lot, not only on the
show. There's a great book, I think it's by Jonathan Beer from BitMEX, and he wrote
this book called The Block Size War. I didn't read it, but I heard it.

516
00:48:49,792 --> 00:48:51,792
Yeah, I skimmed it, but I was like...

517
00:48:52,792 --> 00:48:54,792
Well, we lived it. I don't want to relive it.

518
00:48:55,792 --> 00:49:08,792
Yeah, I do worry that if I read it, I'll be in the awkward position of having to
publish some kind of memo or something. Because my experience is also very different
than what...

519
00:49:09,792 --> 00:49:16,792
If people show up later, they kind of are fed a very simplified story and it doesn't
match what I lived through.

520
00:49:17,792 --> 00:49:25,792
Since then, has Bitcoin scaled to where you would like to see it scale?

521
00:49:26,792 --> 00:49:36,792
Well, I think scalability is sometimes... It's often under-emphasized. It's very
important, but it should have even more importance.

522
00:49:37,792 --> 00:49:52,792
I think partly this is because anyone who brought up scalability was seen as a large
blocker, and so they're just immediately painted or they're immediately disparaged
because the large blocker side was so wrong for such a long time.

523
00:49:53,792 --> 00:50:02,792
And they tried so hard to win, and then they lost. They're completely humiliated,
really, to this day. So people want to avoid even going in that direction.

524
00:50:03,860 --> 00:50:05,860
It's just too awkward a topic. But people talk about it as though there's privacy,
scalability.

525
00:50:05,860 --> 00:50:10,860
So at Scaling 3 in Milan, Scaling Bitcoin 3, the third conference, the days were
broken into categories.

526
00:50:10,860 --> 00:50:15,860
And there was like fungibility was the first half of day one. And then there was
like...

527
00:50:15,860 --> 00:50:21,860
Scalability was just like one bullet point among many things, like interoperability,
et cetera.

528
00:50:21,860 --> 00:50:26,860
So I think that's kind of a mistake. I mean, that's fine enough to have the bullet
points,

529
00:50:27,860 --> 00:50:32,860
but the scalability is key because of the network effects of money.

530
00:50:32,860 --> 00:50:37,860
Like when you go to Japan, you can only spend yen. You can't spend even the U.S.
dollar.

531
00:50:37,860 --> 00:50:42,860
And then, God forbid, you take yen to Great Britain or something.

532
00:50:42,860 --> 00:50:46,860
It doesn't matter how much yen you pull out of a giant briefcase.

533
00:50:46,860 --> 00:50:49,860
People are going to be really confused, and they will not take it.

534
00:50:49,860 --> 00:50:53,860
It will lose all of its persuasive force. Whereas if you took British pounds,

535
00:50:54,860 --> 00:50:57,860
you took hundreds of thousands of British pounds, and you said,

536
00:50:57,860 --> 00:51:00,860
I need to buy this shirt off your back or something.

537
00:51:00,860 --> 00:51:03,860
You'd persuade all kinds of people to do all kinds of crazy things.

538
00:51:03,860 --> 00:51:09,860
Money has that magical persuasive power, but only the money that the people
recognize socially in their little group.

539
00:51:09,860 --> 00:51:17,860
So the smaller... Each place doesn't really contain...

540
00:51:17,860 --> 00:51:22,860
Each currency area doesn't really contain a rival cryptocurrency.

541
00:51:22,860 --> 00:51:24,860
Excuse me, a rival currency of any kind.

542
00:51:24,860 --> 00:51:29,860
Our industry is in a kind of temporary space where we have many of these

543
00:51:29,860 --> 00:51:32,860
for a wide variety of reasons that are just people scamming.

544
00:51:32,860 --> 00:51:33,860
What?

545
00:51:33,860 --> 00:51:35,860
Just innovation, fringe innovation.

546
00:51:35,860 --> 00:51:40,860
It's hard for people to realize that there was a time where we just had one
blockchain.

547
00:51:40,860 --> 00:51:44,860
There was a time where you would say, yeah, we're going to do it on the blockchain,

548
00:51:44,860 --> 00:51:48,860
and no one would ever say which one. It was just always on the Bitcoin blockchain.

549
00:51:48,860 --> 00:51:53,860
But no one was really talking about this term of smart contracts and doing other
things.

550
00:51:53,860 --> 00:51:58,860
The scaling conversations at the time was mostly around just getting more
transactions for money.

551
00:51:58,860 --> 00:52:00,860
It was just about transactions of money.

552
00:52:00,860 --> 00:52:06,860
It wasn't like new data smart contracts of running an insurance company on a Toric
complete system here.

553
00:52:06,860 --> 00:52:14,860
That's true. I wonder if that has evolved in a very interesting way.

554
00:52:15,860 --> 00:52:22,860
It's worth pointing out that back in 2015, the whole reason why we had the scaling
Bitcoin conferences

555
00:52:22,860 --> 00:52:25,860
was to avoid splitting the community in two.

556
00:52:25,860 --> 00:52:31,860
Because, in fact, at the time, most people believed that that would just kill
Bitcoin.

557
00:52:31,860 --> 00:52:37,860
That's kind of bizarre, which is that it later split into two and basically almost
nothing happened.

558
00:52:37,860 --> 00:52:42,860
And then we had Bitcoin Gold, Bitcoin Diamond, all this other stuff.

559
00:52:42,860 --> 00:52:45,860
Reality played out a little differently.

560
00:52:47,860 --> 00:52:52,860
There's a website. You can go to hardfork.info and you can see all the forks of
Bitcoin.

561
00:52:52,860 --> 00:52:58,860
You can paste in an old Bitcoin address and see if you have any coins that are owed
to you based on that.

562
00:52:58,860 --> 00:53:01,860
But now the conversation's changed.

563
00:53:01,860 --> 00:53:07,860
Even this podcast and during those fateful days when the community did split,

564
00:53:07,860 --> 00:53:13,860
I would argue that Vitalik starting another blockchain, Ethereum,

565
00:53:13,860 --> 00:53:21,860
and then that gave definitely a good amount of wind in the sails of the folks that
wanted to fork Bitcoin into their own.

566
00:53:21,860 --> 00:53:27,860
Because they said, oh, if they can do it with Ethereum, we can do it with this one,
except we'll just call it Bitcoin something else.

567
00:53:27,860 --> 00:53:30,860
But now that conversation has changed.

568
00:53:31,860 --> 00:53:37,860
There were all these splits, but now I'm looking at VC pitch decks all the time.

569
00:53:37,860 --> 00:53:41,860
And all I'm seeing is companies and blockchains and projects.

570
00:53:41,860 --> 00:53:44,860
Very rarely will it be on the Bitcoin blockchain.

571
00:53:44,860 --> 00:53:49,860
They want to be on the Bitcoin blockchain, or they want to connect to the Bitcoin
blockchain or connect Polygon to Bitcoin.

572
00:53:49,860 --> 00:53:56,860
It's like there's this huge renaissance of bringing Bitcoin back into the circle of
all the other blockchains.

573
00:53:56,860 --> 00:53:58,860
What's going on?

574
00:53:58,860 --> 00:54:00,860
I think all those things are related, actually.

575
00:54:00,860 --> 00:54:05,860
There was a time when, again, at the beginning, everyone thought there will only be
one coin that wins.

576
00:54:05,860 --> 00:54:08,860
Anyone who did anything else was disparaged.

577
00:54:08,860 --> 00:54:13,860
So if they do Feathercoin or something, it was all seen as a joke.

578
00:54:13,860 --> 00:54:15,860
So that was the beginning.

579
00:54:15,860 --> 00:54:26,860
And then really after the scaling conference, 1, 2, and 3, in the year 2016, people
kind of lost hope that Bitcoin would resolve its dispute.

580
00:54:26,860 --> 00:54:28,860
And that's when Ethereum kind of broke in a little bit.

581
00:54:28,860 --> 00:54:32,860
And then I think this is all related.

582
00:54:32,860 --> 00:54:37,860
It was because the dispute wasn't resolved quickly enough, Ethereum broke in.

583
00:54:37,860 --> 00:54:42,860
And then it's because after Ethereum broke in, there was kind of like a sour grapes
type of thing.

584
00:54:42,860 --> 00:54:46,860
Where it was kind of like, well, we never wanted smart contracts anyway.

585
00:54:46,860 --> 00:54:48,860
Because now we can't have them.

586
00:54:48,860 --> 00:54:50,860
We never wanted those anyway.

587
00:54:50,860 --> 00:54:52,860
And we, you know, screw larger blocks.

588
00:54:52,860 --> 00:54:54,860
And then the block size war.

589
00:54:54,860 --> 00:55:00,860
And then the fork in 2017 with the large blockers losing the battle for Bitcoin or
whatever you want to call it.

590
00:55:00,860 --> 00:55:03,860
That made everyone extra complacent in the Bitcoin world.

591
00:55:03,860 --> 00:55:07,860
So the Bitcoin world was just like, we will just do nothing.

592
00:55:07,860 --> 00:55:09,860
In fact, we will resist all change.

593
00:55:09,860 --> 00:55:11,860
Change is bad.

594
00:55:11,860 --> 00:55:14,860
Change is like people trying to corrupt the protocol.

595
00:55:14,860 --> 00:55:17,860
And that led to the proliferation of all this other stuff.

596
00:55:17,860 --> 00:55:23,860
And that those people had more freedom since they didn't have to go through the
crazy bureaucracy of Bitcoin Core.

597
00:55:23,860 --> 00:55:27,860
They invented a bunch of stuff that 99% of it was terrible, but some of it is
decent.

598
00:55:27,860 --> 00:55:32,860
And then I think over time, those people have slowly learned that there actually is
no future.

599
00:55:32,860 --> 00:55:34,860
There really will only be one winning coin.

600
00:55:34,860 --> 00:55:36,860
Like what I was saying before with networking.

601
00:55:36,860 --> 00:55:39,860
And that if you invent something, it'll be open source.

602
00:55:39,860 --> 00:55:42,860
Or even if it's not open source, someone will eventually reverse engineer it.

603
00:55:42,860 --> 00:55:43,860
You know what I mean?

604
00:55:43,860 --> 00:55:45,860
It's a community of people learning from each other.

605
00:55:45,860 --> 00:55:48,860
So whatever is invented will be like bolted on.

606
00:55:48,860 --> 00:55:52,860
It'll just be – all the technology will be what was called blockchain agnostic.

607
00:55:52,860 --> 00:55:54,860
It'll just be like whatever.

608
00:55:54,860 --> 00:56:03,860
So now I think people are sort of returning to the idea that stuff should be
attached to the one winning currency, which would be Bitcoin.

609
00:56:03,860 --> 00:56:11,860
I think it's also the case that the complacency after 2017 has actually led us
nowhere.

610
00:56:11,860 --> 00:56:13,860
And people are slowly realizing that.

611
00:56:14,860 --> 00:56:19,860
And 2017 December, we got to whatever, 20,000 a coin in terms of the price.

612
00:56:19,860 --> 00:56:25,860
In terms of the attention, in terms of all this stuff, I think we've actually not
been going anywhere.

613
00:56:25,860 --> 00:56:36,860
And over time, it's installed the wrong podcasts, the wrong speakers, the wrong
conferences have risen to the top temporarily.

614
00:56:36,860 --> 00:56:38,860
And people are getting tired of it.

615
00:56:38,860 --> 00:56:45,860
And they're actually getting bored with the spiel that we should just do nothing.

616
00:56:45,860 --> 00:56:49,860
The good thing is that market forces kind of like are making it happen.

617
00:56:49,860 --> 00:56:54,860
At the time, Bitcoin was like going through this two-year bear market.

618
00:56:54,860 --> 00:57:06,860
And solving this seemingly political problem, coming up into this having that was
happening a year later or something, seemed like the solution that needed to bring
in the next bull market.

619
00:57:06,860 --> 00:57:09,860
So people were more interested in fast scaling.

620
00:57:09,860 --> 00:57:15,860
But at the same time, when I say fast scaling, smart scaling is better than fast
scaling.

621
00:57:15,860 --> 00:57:19,860
Fast scaling is better than slow scaling because that's what happened.

622
00:57:19,860 --> 00:57:20,860
We got complacent.

623
00:57:20,860 --> 00:57:26,860
And I was one of those people that I remember saying like, well, we got SegWit and
Lightning and everything will build on top of that.

624
00:57:26,860 --> 00:57:29,860
And all these other blockchains will just be the experiments.

625
00:57:29,860 --> 00:57:36,860
But we're seeing these experiments be successful as much as we see a lot of failures
and scams and broken chains and things like that.

626
00:57:36,860 --> 00:57:42,860
There are some really unique and cool concepts out there that would be cool to
connect into Bitcoin.

627
00:57:42,860 --> 00:57:44,860
And I think a lot of people want to do that.

628
00:57:44,860 --> 00:57:45,860
That's why we're seeing that again.

629
00:57:45,860 --> 00:57:57,860
And market forces almost are saying that if there is some sort of like huge
breakthrough in a decentralized way, that could bring about the next huge crypto
spring.

630
00:57:57,860 --> 00:57:58,860
Well, that's what I hope.

631
00:57:58,860 --> 00:58:02,860
But the question I have for you is, yeah, right.

632
00:58:02,860 --> 00:58:06,860
But the question I have for you is like Drivechains, right?

633
00:58:07,860 --> 00:58:18,860
When you proposed it, you almost were doing it in a way that didn't require any
changes from Bitcoin software itself.

634
00:58:18,860 --> 00:58:20,860
Therefore, everything can be backward compatible, right?

635
00:58:20,860 --> 00:58:27,860
Like all the propositions that we're seeing now, they're all based around like
Bitcoin not doing any changes.

636
00:58:27,860 --> 00:58:28,860
Well, yeah.

637
00:58:28,860 --> 00:58:30,860
Now, it's interesting.

638
00:58:30,860 --> 00:58:36,860
There were what were called hard and soft changes back in the day.

639
00:58:36,860 --> 00:58:41,860
And that was renamed to the hard and soft fork type of upgrade.

640
00:58:41,860 --> 00:58:44,860
Then hard fork came to describe something else.

641
00:58:44,860 --> 00:58:47,860
So the terminology has gotten horrible.

642
00:58:48,860 --> 00:58:56,860
But the idea like there was a time when it was like the only change you could
propose was a soft fork upgrade.

643
00:58:56,860 --> 00:59:00,860
And then it was discovered that even the soft fork is actually very powerful.

644
00:59:00,860 --> 00:59:02,860
And in fact, SegWit was used.

645
00:59:02,860 --> 00:59:06,860
There was a soft fork that was a block size increase.

646
00:59:06,860 --> 00:59:11,860
So this was part of the problem of, you know, if we go back to scaling.

647
00:59:11,860 --> 00:59:12,860
It was all political.

648
00:59:12,860 --> 00:59:17,860
People didn't understand how is it that we can't do a block size increase.

649
00:59:17,860 --> 00:59:18,860
It's a hard fork.

650
00:59:18,860 --> 00:59:21,860
But, you know, some, you know, essentially Peter Wilde Blockstream.

651
00:59:21,860 --> 00:59:24,860
This is how it was framed, you know, incorrectly.

652
00:59:24,860 --> 00:59:25,860
But that's just how it was perceived.

653
00:59:25,860 --> 00:59:29,860
People just thought, well, Blockstream somehow it's a technological magic.

654
00:59:29,860 --> 00:59:33,860
They can do a block size increase to 2.3 megabytes with SegWit.

655
00:59:33,860 --> 00:59:37,860
But the miners cannot do Bitcoin Classic 1 megabyte to 2 megabytes.

656
00:59:37,860 --> 00:59:42,860
So there was all this, you know, there was all this confusion and kind of mistrust.

657
00:59:42,860 --> 00:59:43,860
It came out to a political thing.

658
00:59:43,860 --> 00:59:51,860
You had this huge civil war, which you could argue that almost every country, like
if you look at America,

659
00:59:51,860 --> 00:59:56,860
or like these, you know, new countries or new technologies or new industries, like
they almost have to go through.

660
00:59:56,860 --> 00:59:58,860
And we, you know, we're looking back and we're sad.

661
00:59:58,860 --> 01:00:04,860
You and I look back at those times in a sad way because we went through it and we
lost friends.

662
01:00:04,860 --> 01:00:07,860
And, you know, relationships were broken apart and businesses and things like that.

663
01:00:07,860 --> 01:00:14,860
But the rest of the world looks at that almost like it's good that Bitcoin went
through it because it brought all of the,

664
01:00:14,860 --> 01:00:19,860
brought everything up, all the dust and all everything on the bottom of the ocean.

665
01:00:19,860 --> 01:00:20,860
It brought it all up.

666
01:00:20,860 --> 01:00:24,860
It's nice to see that finally people are embracing Bitcoin again.

667
01:00:24,860 --> 01:00:28,860
It was almost like a year or two ago, you couldn't talk about being a Bitcoiner.

668
01:00:28,860 --> 01:00:33,860
And now when I talk on the show, I could be literally talking to the founder of any
other blockchain.

669
01:00:33,860 --> 01:00:39,860
And I can say, hey, if being a Bitcoiner means that these core principles, are you a
Bitcoiner?

670
01:00:39,860 --> 01:00:41,860
And people aren't afraid to say yes anymore.

671
01:00:41,860 --> 01:00:45,860
But there was like some sort of like scariness, like you said.

672
01:00:45,860 --> 01:00:47,860
Was it a complacency?

673
01:00:47,860 --> 01:00:50,860
It was like a fear of being considered a big blocker.

674
01:00:50,860 --> 01:00:54,860
Or then it was a fear of being considered like a maximalist, right, for a couple of
years.

675
01:00:54,860 --> 01:00:58,860
Yeah, well, maximalism, again, started as something that was just self-evidently
true.

676
01:00:58,860 --> 01:01:03,860
Like back in like 2013 or 2014, it was just like every other coin was terrible.

677
01:01:03,860 --> 01:01:08,860
The market dominance index was always like 98% or something.

678
01:01:08,860 --> 01:01:10,860
It was like 98% Bitcoin.

679
01:01:10,860 --> 01:01:14,860
And then it was like a thousand other things were like this tiny little thing.

680
01:01:14,860 --> 01:01:19,860
This was like when like BitShares and like whatever, like NXT and all this stuff was
like being invented, you know.

681
01:01:19,860 --> 01:01:20,860
Remember all that?

682
01:01:20,860 --> 01:01:25,860
And then, and that was like before Ethereum was like, you know, it was like just
this tiny thing.

683
01:01:25,860 --> 01:01:28,860
And so they were all, most of those coins just died off.

684
01:01:28,860 --> 01:01:35,860
Only one of them rose to be an actual, you know, sort of challenger to Bitcoin that
people have even heard of.

685
01:01:35,860 --> 01:01:37,860
Which was Ethereum, of course.

686
01:01:37,860 --> 01:01:42,860
And so the maximalism went from being like 110% true.

687
01:01:42,860 --> 01:01:52,860
And then it has traversed a long journey, which is the over-complacency, the
over-confidence, and the complacency of just thinking like all we have to do is
nothing.

688
01:01:52,860 --> 01:01:55,860
And then we will defeat everyone.

689
01:01:55,860 --> 01:02:00,860
So you and I, so we're looking at that from like a scaling perspective and a growth
perspective, right?

690
01:02:00,860 --> 01:02:11,860
And we're looking at it and we're comparing ourselves, Bitcoin, we're comparing
ourselves to all these other chains that are like growing, doing, building,
experimenting, throwing things at the wall, raising money, having a lot of fun.

691
01:02:11,860 --> 01:02:18,860
But let's look at Bitcoin from like a, hey, I'm holding onto Bitcoin forever
perspective.

692
01:02:18,860 --> 01:02:22,860
And I don't want it to ever change too much or not be like backwards compatible.

693
01:02:22,860 --> 01:02:35,860
Where if you're holding Bitcoin now, or if you held Bitcoin in 2009 or 10, or you
buy some Bitcoin tomorrow, you never need to worry about like needing to turn on the
software in a few years to upgrade or do something.

694
01:02:36,860 --> 01:02:41,860
That backwards compatibility is very important, which why people were afraid of
doing those hard forks.

695
01:02:41,860 --> 01:02:52,860
Because Bitcoin was created, yeah, to be, you know, I have almost a white paper like
memorized by now, but it evolved into also being this like safe, hard money that
people can go to.

696
01:02:52,860 --> 01:02:56,860
Because as Americans, we didn't really need that until now.

697
01:02:56,860 --> 01:02:58,860
Now we have banks failing left and right.

698
01:02:58,860 --> 01:03:07,860
But these bank failures and hyperinflations and crazy inflation and nowhere to put
your money has been happening in the rest of the world since Bitcoin's existence and
even beforehand.

699
01:03:07,860 --> 01:03:13,860
So like from that perspective, I look at Bitcoin as a hyper success.

700
01:03:14,860 --> 01:03:25,860
Well, yeah, I mean, you can't be reliant on upgrading the software, because what if
it upgrades to something that is just completely different than what it was, and it
won't have any properties.

701
01:03:25,860 --> 01:03:28,860
And then we want, you know, we want reliability.

702
01:03:28,860 --> 01:03:30,860
All that was very normal to want.

703
01:03:30,860 --> 01:03:33,860
There was a faction that you can, you know, like the Merchant for Pesky.

704
01:03:33,860 --> 01:03:36,860
Remember, there was a faction that said never update the software.

705
01:03:36,860 --> 01:03:39,860
And they ran like a version 0.5 or something.

706
01:03:39,860 --> 01:03:41,860
He passed away or something.

707
01:03:42,860 --> 01:03:46,860
He may have died, you know, surfing in Central America.

708
01:03:46,860 --> 01:03:49,860
Oh yeah, everyone's pretending they're dead nowadays.

709
01:03:49,860 --> 01:03:50,860
He faked his own death.

710
01:03:50,860 --> 01:03:58,860
But his point of view is now like the Michael Cera point of view also, which is
that, you know, this is already a hundred trillion dollar asset.

711
01:03:58,860 --> 01:04:00,860
Is there like a business that does this?

712
01:04:00,860 --> 01:04:03,860
That like Epstein and all these guys use?

713
01:04:03,860 --> 01:04:04,860
To fake their own death?

714
01:04:04,860 --> 01:04:07,860
Yeah, there must be like a plug and play.

715
01:04:07,860 --> 01:04:09,860
It doesn't seem like it's that involved.

716
01:04:09,860 --> 01:04:16,860
Like a couple of journalists involved, you know, you tell them that you just have an
intermediary feed them the story.

717
01:04:16,860 --> 01:04:18,860
Then you have like some stuff.

718
01:04:18,860 --> 01:04:21,860
Maybe even like Go and you get like a fake cadaver and you have like a shark.

719
01:04:23,860 --> 01:04:24,860
Yeah.

720
01:04:24,860 --> 01:04:25,860
Face or something.

721
01:04:25,860 --> 01:04:26,860
It's always based around.

722
01:04:26,860 --> 01:04:28,860
Clothes on this thing and throw it in the ocean.

723
01:04:28,860 --> 01:04:30,860
This person's dead.

724
01:04:30,860 --> 01:04:31,860
A lot of people like that.

725
01:04:31,860 --> 01:04:33,860
Well, like that one guy, the guy who died in India.

726
01:04:35,860 --> 01:04:37,860
I'm pretty sure that guy's still alive, right?

727
01:04:37,860 --> 01:04:43,860
So, yeah, I think everyone knows that guy's still like in their heads, but we don't
have any proof or anything.

728
01:04:43,860 --> 01:04:44,860
Okay.

729
01:04:44,860 --> 01:04:50,860
So in a perfect world, what were you proposing and how is it applicable today?

730
01:04:50,860 --> 01:04:52,860
Because you guys are growing layer two.

731
01:04:52,860 --> 01:04:53,860
You raised.

732
01:04:53,860 --> 01:04:55,860
You just raised a couple million bucks.

733
01:04:55,860 --> 01:04:56,860
Yeah, it's very applicable today.

734
01:04:56,860 --> 01:04:57,860
Yeah.

735
01:04:57,860 --> 01:05:05,860
The point of the project, the Drivechain, the Drivechain concept, which became BIP300/301.

736
01:05:05,860 --> 01:05:06,860
Bitcoin improvement proposal.

737
01:05:06,860 --> 01:05:09,860
And then which became this company in a way.

738
01:05:09,860 --> 01:05:15,860
The goal of that project is to make every single transaction on Earth a Bitcoin
transaction.

739
01:05:15,860 --> 01:05:17,860
And that includes all those payments.

740
01:05:17,860 --> 01:05:25,860
And it also includes any kind of, you know, smart contract or fringe privacy, you
know, zk-SNARK, Zcash thing.

741
01:05:25,860 --> 01:05:27,860
It includes every type of thing.

742
01:05:27,860 --> 01:05:37,860
So that's the goal is to have Bitcoin go from being just one size fits all to this
whole spectrum of sensibility, privacy, you know, even decentralization.

743
01:05:37,860 --> 01:05:39,860
Because, of course, not every.

744
01:05:39,860 --> 01:05:43,860
This is the type of thing that's difficult to say because it breaks with the Bitcoin
orthodoxy.

745
01:05:43,860 --> 01:05:48,860
And most people are not, you know, they're not independent, creative thinkers enough
to wrap their heads around it.

746
01:05:48,860 --> 01:05:51,860
They just think we'll do decentralization is good.

747
01:05:51,860 --> 01:05:55,860
Large, large blockers wanted a central.

748
01:05:55,860 --> 01:06:00,860
It's almost like people are afraid to even bring up these subjects anymore because.

749
01:06:00,860 --> 01:06:02,860
Because of that.

750
01:06:02,860 --> 01:06:07,860
So like the centralization example, people are different and transactions are
different.

751
01:06:07,860 --> 01:06:22,860
So like the coffee transaction, it doesn't need the same level of decentralization
as like, you know, another kind of like someone capital flight out of a tyrannical
country or like an online darknet market.

752
01:06:23,860 --> 01:06:25,860
You know, that would need a lot of privacy.

753
01:06:25,860 --> 01:06:27,860
That would be a lot of decentralization.

754
01:06:27,860 --> 01:06:28,860
Decentralization.

755
01:06:28,860 --> 01:06:30,860
That would be donate to an activist.

756
01:06:30,860 --> 01:06:31,860
Yeah.

757
01:06:31,860 --> 01:06:32,860
Or something.

758
01:06:32,860 --> 01:06:35,860
Now you need the privacy and the decentralization.

759
01:06:35,860 --> 01:06:44,860
But when you're buying coffee in person and you go there every week and every day,
you know, like there's, you know, there's no reason to keep that private per se.

760
01:06:44,860 --> 01:06:52,860
And there's no reason to care about like, no one is going to try to censor that
because that is a very normal thing to do.

761
01:06:52,860 --> 01:06:56,860
So you don't actually need the, you know, there's cases where we compete with like
Venmo.

762
01:06:56,860 --> 01:07:03,860
And we want to make sure that we, you know, on Venmo, everyone is just posting like
exactly whatever they just announced publicly to the whole world.

763
01:07:03,860 --> 01:07:04,860
Like everything, you know.

764
01:07:04,860 --> 01:07:05,860
It's really annoying.

765
01:07:05,860 --> 01:07:09,860
The whole public pizza, like everyone's seeing what you're spending.

766
01:07:09,860 --> 01:07:12,860
But that's what made Venmo so popular, especially during the pump.

767
01:07:12,860 --> 01:07:13,860
Of course, it's the FOMO.

768
01:07:13,860 --> 01:07:17,860
You hang out with your friends and you do the thing and then they see that they
weren't invited.

769
01:07:17,860 --> 01:07:18,860
You're right.

770
01:07:18,860 --> 01:07:20,860
The business model.

771
01:07:20,860 --> 01:07:25,860
Anyway, the point is we have different needs for decentralization.

772
01:07:25,860 --> 01:07:26,860
You know, there's a whole spectrum.

773
01:07:26,860 --> 01:07:28,860
In a perfect world, you'd have like.

774
01:07:28,860 --> 01:07:29,860
So Bitcoin is claimed.

775
01:07:29,860 --> 01:07:33,860
Bitcoin is posted up in the high decentralization part.

776
01:07:33,860 --> 01:07:35,860
We've got like a fortress, which is great.

777
01:07:35,860 --> 01:07:36,860
No one wants to.

778
01:07:36,860 --> 01:07:38,860
No one wants to lose that.

779
01:07:38,860 --> 01:07:39,860
Especially not me.

780
01:07:39,860 --> 01:07:42,860
But we want to be able to go the whole spectrum.

781
01:07:42,860 --> 01:07:48,860
So the idea behind the idea of Drivechain or whatever is that you can use different
systems, different blockchains.

782
01:07:48,860 --> 01:07:50,860
But there's no coin on them.

783
01:07:50,860 --> 01:07:51,860
We just send Bitcoin to them.

784
01:07:51,860 --> 01:07:58,860
And then they come back through like a kind of clever filter where the layer one
node does not need.

785
01:07:58,860 --> 01:08:02,860
You don't need to know what's happening on layer two node in order to process the
withdrawals.

786
01:08:02,860 --> 01:08:05,860
And so that's the trick behind it.

787
01:08:05,860 --> 01:08:07,860
But the idea is that you have all these different blockchains.

788
01:08:07,860 --> 01:08:08,860
You have like a Zcash blockchain.

789
01:08:08,860 --> 01:08:10,860
You have like a Monero blockchain.

790
01:08:10,860 --> 01:08:12,860
But there's no XMR.

791
01:08:12,860 --> 01:08:14,860
There's only BTC.

792
01:08:14,860 --> 01:08:16,860
And so that's the idea.

793
01:08:16,860 --> 01:08:20,860
You created like some slow withdrawal system at the same time.

794
01:08:20,860 --> 01:08:22,860
What does that prevent?

795
01:08:22,860 --> 01:08:23,860
Yeah.

796
01:08:23,860 --> 01:08:25,860
The idea is you don't want.

797
01:08:25,860 --> 01:08:32,860
There's a naive way of accomplishing sidechains, which is just to require everyone
to run a full node of everything.

798
01:08:33,860 --> 01:08:39,860
But that doesn't work because what if someone makes a node that is like has eight
terabyte blocks or that just is impossible to run?

799
01:08:39,860 --> 01:08:45,860
Like the software just doesn't work or it works in a chaotic way or something.

800
01:08:45,860 --> 01:08:52,860
So your question is how do we police the sidechain so that the withdrawals are
accurate?

801
01:08:52,860 --> 01:08:58,860
But we don't actually want to put in the effort of like hiring the police or
whatever, which is running the nodes.

802
01:08:58,860 --> 01:08:59,860
You know what I mean?

803
01:08:59,860 --> 01:09:01,860
We don't want to be on the hook for that.

804
01:09:01,860 --> 01:09:03,860
Because that's why tokens are created in a lot of these chains.

805
01:09:03,860 --> 01:09:04,860
Well, yeah.

806
01:09:04,860 --> 01:09:07,860
So that's how when they're an altcoin, that's how it would work.

807
01:09:07,860 --> 01:09:10,860
But in this, we want to be able to do that with no.

808
01:09:10,860 --> 01:09:13,860
We're not expending any effort or any energy.

809
01:09:13,860 --> 01:09:17,860
So what I do is I have the sidechain summarize what it's been doing.

810
01:09:17,860 --> 01:09:21,860
It checks in at a very rare rate of like once every few months.

811
01:09:21,860 --> 01:09:25,860
And it summarizes everything that it's been doing in one hash.

812
01:09:25,860 --> 01:09:32,860
And then the hash is just a tiny string of characters, which is very, very small and
very easy for the human eye to perceive.

813
01:09:32,860 --> 01:09:41,860
And then we have in the layer one mainchain Bitcoin core blockchain, there is just a
little, the hash is encoded in the Coinbase transaction.

814
01:09:41,860 --> 01:09:45,860
And then the miners can upvote it or downvote it.

815
01:09:45,860 --> 01:09:54,860
And if it takes three months worth of upvoting and they put all their weight behind
this one hash, then that is considered the canonical summary.

816
01:09:54,860 --> 01:09:56,860
Which includes the withdrawals.

817
01:09:56,860 --> 01:09:58,860
So it's very, very slow.

818
01:09:58,860 --> 01:10:08,860
The idea behind it is something like if you're going to take an iPad or something,
an iPhone from the Apple store, it has to move very, very slowly.

819
01:10:08,860 --> 01:10:09,860
So you take it.

820
01:10:09,860 --> 01:10:15,860
So if you're leaving the store, like if you try to steal an iPhone is the
troublesome case.

821
01:10:15,860 --> 01:10:20,860
You grab the iPhone from the person on the counter and then you run for the store.

822
01:10:20,860 --> 01:10:21,860
It's exit.

823
01:10:21,860 --> 01:10:29,860
Now, if you immediately go into slow motion where it takes you three months to get
out the front door, then no one has to worry.

824
01:10:29,860 --> 01:10:30,860
They can go home.

825
01:10:30,860 --> 01:10:31,860
They can call the police.

826
01:10:31,860 --> 01:10:34,860
The police can say, we'll make it there on Tuesday.

827
01:10:34,860 --> 01:10:35,860
It gives it time.

828
01:10:35,860 --> 01:10:37,860
People can be on vacation.

829
01:10:37,860 --> 01:10:39,860
It doesn't matter because it takes three months for them to get out.

830
01:10:39,860 --> 01:10:45,860
So you have a long, long time for the police to show up or for anyone to do anything
about it.

831
01:10:46,860 --> 01:10:51,860
You can take a photograph of this person and send it all around town and say this
person is a thief or whatever.

832
01:10:51,860 --> 01:10:54,860
So it's a deterrent, the speed.

833
01:10:54,860 --> 01:10:59,860
And then the reason why this is not, the flip side of this, isn't it inconvenient
for the user?

834
01:10:59,860 --> 01:11:09,860
But the answer is really no because going into the sidechain, the deposits, going
from layer one to layer two, that is instance and that always works.

835
01:11:09,860 --> 01:11:14,860
It's because it's the asymmetry of requiring the full node, layer two full node to
run the layer one full node.

836
01:11:14,860 --> 01:11:18,860
So that direction always works perfectly and it's instant.

837
01:11:18,860 --> 01:11:24,860
It's only the coming back that is slow and sort of fraught with the risk.

838
01:11:24,860 --> 01:11:25,860
But it's done by design.

839
01:11:25,860 --> 01:11:26,860
It's by design.

840
01:11:26,860 --> 01:11:33,860
When you now allow instant deposits, you are also enabling those coffee type of
transactions that can now be instantaneous.

841
01:11:34,860 --> 01:11:46,860
But then if someone was using double spent Bitcoin or cheating or stealing or
whatever, the mechanism for withdrawing it is like running out of an Apple store
really slowly.

842
01:11:46,860 --> 01:11:55,860
But then a market can be created to let people get their money faster, but then
those middlemen would be taking that risk.

843
01:11:55,860 --> 01:11:58,860
And it creates this kind of market and prevents...

844
01:11:58,860 --> 01:11:59,860
Exactly.

845
01:11:59,860 --> 01:12:05,860
And what it's like is there's people outside the Apple store already and they have a
bunch of iPhones.

846
01:12:05,860 --> 01:12:13,860
And they say, well, listen, if you buy it from the store, you have to walk it out
slowly, but I'll sell it to you for whatever.

847
01:12:13,860 --> 01:12:17,860
And since anyone can do this, anyone can go into the Apple store and do the slow
thing.

848
01:12:17,860 --> 01:12:22,860
Anyone can just buy them.

849
01:12:22,860 --> 01:12:25,860
They can swap the coins out instantly to this person.

850
01:12:25,860 --> 01:12:32,860
And then the specialists, these few numbers of specialists, maybe like 500 or 600
people, they would use the slow withdrawal.

851
01:12:32,860 --> 01:12:35,860
And so those would be the specialists who walk the thing out.

852
01:12:35,860 --> 01:12:37,860
But then it's just time value of money.

853
01:12:37,860 --> 01:12:41,860
It's just an extra fee for you to just withdraw instantly through someone else.

854
01:12:41,860 --> 01:12:44,860
So someone else is basically, they say they have a bunch of Layer 1 coins.

855
01:12:44,860 --> 01:12:47,860
They have 14 Layer 1 coins and they buy...

856
01:12:47,860 --> 01:12:52,860
You have 14.1 or 14.01 Layer 2 coins.

857
01:12:52,860 --> 01:12:54,860
And they say, listen, we'll just swap.

858
01:12:54,860 --> 01:13:00,860
It's the same HTLC that the Lightning Network uses or any exchange, Coinbase or
whatever.

859
01:13:00,860 --> 01:13:04,860
You make it really easy to make all the connections all point together.

860
01:13:04,860 --> 01:13:08,860
And you've been around a long time, so you understand what needs to happen.

861
01:13:08,860 --> 01:13:12,860
And it's not just about math. It's also about socioeconomics too.

862
01:13:12,860 --> 01:13:14,860
But Paul, that's all the time we have today.

863
01:13:14,860 --> 01:13:19,860
Thank you so much for coming on and talking to us about Drivechains and sidechains
and what you're working on at LayerTwo Labs.

864
01:13:19,860 --> 01:13:21,860
Thanks for having me.

865
01:13:25,860 --> 01:13:28,860
I hope you guys liked that.

866
01:13:28,860 --> 01:13:30,860
That brings us to the end of this episode.

867
01:13:30,860 --> 01:13:34,860
A huge thank you to our producers, to our guests, the writers, everyone.

868
01:13:34,860 --> 01:13:39,860
Neil, Leo, Paul, the folks at Waxman, everyone for putting the show together.

869
01:13:39,860 --> 01:13:43,860
For the in-depth discussions about the innovative projects pushing the boundaries of
blockchain technology.

870
01:13:43,860 --> 01:13:48,860
As we continue to explore the world of blockchain, remember your feedback is so
crucial to us.

871
01:13:48,860 --> 01:13:51,860
Your feedback, your views, everything, subscribing.

872
01:13:51,860 --> 01:13:54,860
Please take a moment to leave that review, share this episode.

873
01:13:54,860 --> 01:13:56,860
I love doing this for you guys. I love you all.

874
01:13:56,860 --> 01:13:59,860
Stay tuned for next week's episode, more enlightening conversations.

875
01:13:59,860 --> 01:14:01,860
Until then, I'm Charlie Shrem.

876
01:14:01,860 --> 01:14:03,860
And as always, thank you for listening.

877
01:14:03,860 --> 01:14:07,860
Keep exploring, keep learning, keep questioning, keep challenging the status quo.