1 00:00:00,000 --> 00:00:11,960 Okay, we are down at the Bitcoin mining stage. If you have heard the word Drivechains over 2 00:00:11,960 --> 00:00:16,480 the last few weeks or months, then this is a conversation you want to come in and sit 3 00:00:16,480 --> 00:00:22,120 in and listen on. We got Paul Sztorc of LayerTwo Labs. He is the CEO and co-founder, also the 4 00:00:22,120 --> 00:00:27,400 author of BIP300/301. So we have a great presentation coming up here right 5 00:00:27,400 --> 00:00:31,480 now, Collecting Every Transaction Fee on Earth. 6 00:00:31,480 --> 00:00:36,800 Okay, thanks. So yeah, here's the whole talk in one slide. So if you only want to glance 7 00:00:36,800 --> 00:00:42,080 at this one slide, you have the whole talk. I'm the author of these BIPs, and I'm saying 8 00:00:42,080 --> 00:00:48,640 that miners can earn billions of dollars more in revenue if they only do one thing, which 9 00:00:48,640 --> 00:00:55,600 is the morally correct thing of becoming more educated on technical issues. And so these 10 00:00:55,600 --> 00:01:04,240 two BIPs, 300 and 301, BIP300 aims to convert altcoin transactions into Bitcoin transactions, 11 00:01:04,240 --> 00:01:10,600 and BIP301 gives all of those transaction fees to you, the L1 Bitcoin miner. So there's 12 00:01:10,600 --> 00:01:18,440 like an accounting operation that compresses all of the L2 transaction fees onto L1. And 13 00:01:18,440 --> 00:01:23,440 there's other benefits and details. And how to get it is actually very easy. You just 14 00:01:23,440 --> 00:01:29,080 have 51% of the hashrate update their software, but that is a touchy subject. So we'll get 15 00:01:29,080 --> 00:01:34,800 into that slightly. But if you fail to act, there might be a future mismatch between L1 16 00:01:34,800 --> 00:01:39,080 and L2 fees, which would lead to potentially further conflict. So this is the whole thing 17 00:01:39,080 --> 00:01:46,720 in one slide. So if you are... But so what's going to happen now is the tech world and 18 00:01:46,720 --> 00:01:51,760 the mining world are going to collide somewhat. And I just like to comment on how rare this 19 00:01:51,760 --> 00:01:56,280 is. So this is the Miami Convention Center from where we had the big Bitcoin conference 20 00:01:56,280 --> 00:02:02,200 in last year and in 2022. And these are all the different stages. And they always have 21 00:02:02,200 --> 00:02:08,120 the miners far away in their own little room. And open source is also far away. And we're 22 00:02:08,120 --> 00:02:13,440 sort of closer in our own small room. And now I'm going to... I'm coming over here. 23 00:02:13,440 --> 00:02:18,360 So the worlds are colliding, which is a very rare thing, in fact. Before I was into Bitcoin, 24 00:02:18,360 --> 00:02:23,720 I was a statistician at the Yale University Economics Department. And then I described 25 00:02:23,720 --> 00:02:29,880 myself as a Bitcoin researcher. So I've written quite a bit about Bitcoin. And then my big 26 00:02:29,880 --> 00:02:36,240 break, so to speak, was when Atomback linked to my blog. And I wrote this essay down here 27 00:02:36,240 --> 00:02:42,280 that later became this essay with a famous title, Nothing is Cheaper Than Proof of Work. 28 00:02:42,280 --> 00:02:49,300 And so that was sort of big. So I've been around for a very long time. I've done quite 29 00:02:49,300 --> 00:02:56,640 a few things, including given many Bitcoin technical talks. Since that time, I've gone 30 00:02:56,640 --> 00:03:00,760 all around the world. And then I wrote BIP300/301. And then last year, we raised 31 00:03:00,760 --> 00:03:08,400 $3 million to start LayerTwo Labs. So that was the whole first section. So this is the 32 00:03:08,400 --> 00:03:15,960 much longer second section about what is BIP300/301, which is also called Drivechain. 33 00:03:15,960 --> 00:03:23,600 The goals of 300 and 301 are to make every transaction in the world a Bitcoin transaction 34 00:03:23,600 --> 00:03:30,120 and have each of these contribute to minor revenues. But all those secondary goals are 35 00:03:30,120 --> 00:03:33,920 that we want there to be many different networks to accommodate different people and different 36 00:03:33,920 --> 00:03:39,480 use cases. And we also want there to be competition among networks and developers. So like in 37 00:03:39,480 --> 00:03:44,400 other words, they all hate each other. So I'm pro-hate because I'm pro-competition. 38 00:03:44,400 --> 00:03:48,680 And the more people hate each other, the more motivated they will be. And the harder they 39 00:03:48,680 --> 00:03:52,560 will work to make the user happy. And the harder they work for the user, that means 40 00:03:52,560 --> 00:03:59,800 more transaction fees for minors. And it means more Bitcoin adoption. So competition is good. 41 00:03:59,800 --> 00:04:06,440 So BIP300 is the conversion. And BIP301 is pulling the transaction fee from each of 42 00:04:06,440 --> 00:04:11,120 those into Bitcoin minors. So that probably doesn't make any sense at all. So I have a 43 00:04:11,120 --> 00:04:16,680 little bit of an image here, which I'll flesh out, where this is the website cryptofees.info, 44 00:04:16,680 --> 00:04:20,720 if you didn't know, which is a website that has all the different transaction fees paid 45 00:04:20,720 --> 00:04:27,960 by all the different crypto networks. And normally, of course, Ethereum is usually around 46 00:04:28,000 --> 00:04:35,800 10 times the size of Bitcoin, but Bitcoin has been on a tear recently. And so now it's 47 00:04:35,800 --> 00:04:42,360 only about twice as much. So I have some... Let's see here if we can get... Yes. So BIP300 48 00:04:42,360 --> 00:04:46,280 would be to kind of convert... You see converting Ethereum into a different thing that 49 00:04:46,280 --> 00:04:51,160 would call BitEthereum, where it's the same as Ethereum, but you use Bitcoin only and 50 00:04:51,160 --> 00:04:58,920 there's no Ether. And that's BIP300 to do all that. And BIP301 takes all the transaction 51 00:04:58,920 --> 00:05:06,160 fees and compresses them into the L1 Bitcoin network transaction fee. And this is not limited 52 00:05:06,160 --> 00:05:11,480 to altcoins that exist. It can be any network, including a centralized network or a new blockchain 53 00:05:11,480 --> 00:05:17,000 network that we build from scratch to meet whatever use case that we like. And Earth 54 00:05:17,000 --> 00:05:22,680 has 1.1 trillion transactions last year. And at $0.10 each, that would be $100 billion 55 00:05:22,680 --> 00:05:26,800 per year in revenue from just from payments. And that figure doubles every five years. 56 00:05:26,800 --> 00:05:34,360 Now, of course, $0.10 is a completely made-up napkin math figure, but it's not the... That 57 00:05:34,360 --> 00:05:39,520 would make it already much cheaper than the explicit fee paid by every payment network. 58 00:05:39,520 --> 00:05:46,000 And it also means that you can only be undercut by about $0.09. And it's highly unlikely that 59 00:05:46,000 --> 00:05:50,680 the end user would care about $0.09. So it's just much easier also to chase revenues instead 60 00:05:50,680 --> 00:05:55,520 of cutting costs because you get a two-for. You get a two-for-one. More users is more 61 00:05:55,520 --> 00:06:01,280 Bitcoin transaction fees, but also more users is more Bitcoin adoption, which is a higher 62 00:06:01,280 --> 00:06:09,320 price and more of a guarantee that the network is going to survive and make it. So this is 63 00:06:09,440 --> 00:06:16,440 probably hard to believe, but there's really no financial cost to using this idea at all. 64 00:06:16,440 --> 00:06:21,360 You just have to activate BIP300, which I'll get to. There are other costs, which include 65 00:06:21,360 --> 00:06:26,280 that miners have to curate the portfolio of sidechains. But this is very easy since miners 66 00:06:26,280 --> 00:06:33,280 have all the leverage. They can pull the plug on a sidechain at any time. So no one will 67 00:06:33,280 --> 00:06:38,840 pollute the portfolio, so to speak. You also have to moderate disputes with respect to 68 00:06:38,840 --> 00:06:42,680 withdrawals on the sidechain. But this is very, very easy to do because you run a node 69 00:06:42,680 --> 00:06:47,080 and you only run the node if there is a dispute. And nodes are very cheap, even sort of the 70 00:06:47,080 --> 00:06:53,120 worst of the worst networks, Solana, et cetera. Those only cost $3,000 to $5,000 a year, and 71 00:06:53,120 --> 00:06:57,400 they only take a few days to sink. And there will probably not be any disputes because 72 00:06:57,400 --> 00:07:02,080 of the way it's set up, where everything is prepped three months in advance and then it's 73 00:07:02,080 --> 00:07:07,600 compressed to just one hash. So miners can defer to bulls anyway. So basically, there's 74 00:07:07,600 --> 00:07:14,160 no financial cost to actually do this and pick up the $100 billion eventually. And there's 75 00:07:14,160 --> 00:07:17,880 a lot more details about that, but we only have a very short amount of time together, 76 00:07:17,880 --> 00:07:24,000 so we can't get into them. But now I wanted to give an idea that this is not vaporware 77 00:07:24,000 --> 00:07:29,600 and it's actually highly endorsed. So it was a mere blog post in 2015, but there was a 78 00:07:29,600 --> 00:07:35,700 software release in 2019. And then in 2022, we had cloned a few altcoins and even made 79 00:07:35,700 --> 00:07:43,820 our own custom purpose Drivechains. And then in 2023, Luke did his work in progress 80 00:07:43,820 --> 00:07:49,820 pull request to Bitcoin Core, which of course still needs review, but it's far from vaporware. 81 00:07:49,820 --> 00:07:52,780 And we do have a lot of endorsements. So I have some of my three favorite endorsements. 82 00:07:52,780 --> 00:07:57,260 So Adam Back, he said this live on stage in front of everyone at Baltic Honey Badger last 83 00:07:57,260 --> 00:08:00,400 year. He said Drivechains are pretty cool and arguably could have been more important 84 00:08:00,400 --> 00:08:06,080 or useful than let's say Taproot. And then Fiat Jaffa, the creator of Nostar, he said 85 00:08:06,080 --> 00:08:09,200 we need Drivechain or the work of thousands in the last 13 years will be in vain. He's 86 00:08:09,200 --> 00:08:13,320 referring to Bitcoin. He said Drivechain is our only hope. So he's an even bigger fan 87 00:08:13,320 --> 00:08:21,600 of the project than I am. Rene Picard, author of Mastering Lightning, he said we need your 88 00:08:21,600 --> 00:08:24,320 project, of course, for the obvious reasons. But there's actually another endorsement. 89 00:08:24,320 --> 00:08:29,840 It's Robin Linus, founder of Zerosync and the creator of a BitVM. He said this recently. 90 00:08:30,400 --> 00:08:36,880 The brain drain. This is a good microcosm of the whole idea. The brain drain is real, though. 91 00:08:36,880 --> 00:08:40,880 I know dozens of bright researchers and engineers who left the Bitcoin community because it takes 92 00:08:40,880 --> 00:08:46,320 more than a decade of pointless drama to activate even the most simple updates like covenants. 93 00:08:47,280 --> 00:08:52,000 And this is very important because it's miners who do this activation, and it is miners who 94 00:08:52,000 --> 00:08:57,920 have inadvertently created the pointless drama. And it is miners who can bring that to an end, 95 00:08:58,880 --> 00:09:01,760 because we should activate BIP300 and then also the base layer. 96 00:09:02,960 --> 00:09:08,640 So we do have detractors, and the detractors are people who are either hopelessly confused, 97 00:09:08,640 --> 00:09:13,920 or I think there is a Bitcoin death cult, for lack of a better word. So they're hopelessly 98 00:09:13,920 --> 00:09:19,920 confused. For example, Peter Todd, he mistakenly believes that this idea could cost miners as much 99 00:09:19,920 --> 00:09:25,760 as $40,000 a year in software, which he says may harm small miners. That's not true, but it's also 100 00:09:25,840 --> 00:09:31,840 irrelevant since every mining input costs something. And if Bitcoin is to succeed, 101 00:09:31,840 --> 00:09:36,880 the revenues will increase enormously, and then as revenues increase, difficulty will increase, 102 00:09:36,880 --> 00:09:42,160 and costs will increase. So the death cult is there's a lot of people in Bitcoin who think 103 00:09:42,160 --> 00:09:46,800 that it shouldn't improve or can't improve because it's already perfect. Or they think 104 00:09:46,800 --> 00:09:52,960 that Bitcoin shouldn't compete or doesn't compete for users. And they're also unwilling to give 105 00:09:52,960 --> 00:09:57,680 altcoins any credit for innovation. They just kind of want to make Bitcoin part of their personal 106 00:09:57,680 --> 00:10:04,480 brand, and then they want to be like sort of a king of the small pond. And those are the main 107 00:10:05,040 --> 00:10:08,160 detractors in my opinion, but you certainly shouldn't take my word for it. 108 00:10:10,160 --> 00:10:15,760 Now I have some more details. So this idea, by allowing people to switch software networks 109 00:10:15,760 --> 00:10:21,360 whenever they like, we solve all of Bitcoin's biggest problems, which is my bold claim here. 110 00:10:22,320 --> 00:10:27,440 And I'm going to put a little more details on this, but I think I want to get in. Yeah, 111 00:10:27,440 --> 00:10:34,000 the zero risk part is very important to get into because every action should have some risk, but 112 00:10:34,880 --> 00:10:39,440 not really this one. Because what you do is you take Bitcoin Core and you add BIP300, 113 00:10:39,440 --> 00:10:43,840 301 soft fork, you get a new version, but it's interoperable with the old version. 114 00:10:44,800 --> 00:10:53,680 And so the soft fork is easy to add, and it's optional. So people don't have to add it if they 115 00:10:53,680 --> 00:10:59,760 don't want it. And it's also easy to remove. Even being optional, it's easy to subtract it later by 116 00:10:59,760 --> 00:11:04,720 you take the blue thing, and then you add a new soft fork that bans BIP300 messages, and then 117 00:11:04,720 --> 00:11:09,760 you're back to where you started. So you can always control Z this idea. So there really is 118 00:11:09,840 --> 00:11:17,440 not really any risk. And we don't have anywhere near enough time to go into detail on these, 119 00:11:17,440 --> 00:11:21,040 but I have a tiny little line of detail for each, so I'll just read that at you. 120 00:11:22,480 --> 00:11:26,880 And in general, this is the different strokes for different folks kind of situation where 121 00:11:26,880 --> 00:11:32,800 Bitcoin the network has the flexibility to grow and change as needed. And that solves lots of 122 00:11:32,800 --> 00:11:37,040 different problems. So you have people who want different things on the blockchain, but it also 123 00:11:37,040 --> 00:11:42,480 solves scalability, since you have a team of region-specific chains that each have a large 124 00:11:42,480 --> 00:11:46,960 and growing block size. And you can onboard people directly to L2, unlike the Lightning Network. 125 00:11:47,680 --> 00:11:54,080 We can immediately get the Zcash as a Drivechain and achieve Zcash-level privacy. 126 00:11:55,360 --> 00:12:01,440 We can eliminate scams and distractions, since there's no reason to launch a new coin when you 127 00:12:01,440 --> 00:12:06,960 can just launch this instead. It does solve the mining security budget problem, since you collect 128 00:12:06,960 --> 00:12:11,520 revenues from all the chains. It does allow us to help with decentralization, since you can shrink 129 00:12:11,520 --> 00:12:17,840 the L1 block size and then ossify L1. That's what Robin Linus was talking about. And it does actually 130 00:12:17,840 --> 00:12:22,960 increase fundamental value of Bitcoin, since people will be incentivized to create chains 131 00:12:22,960 --> 00:12:29,360 that are actually useful for real-world tasks. And so I'm going to go into, I think I have like 132 00:12:29,360 --> 00:12:33,120 three or four slides about these, since we have nowhere near enough time to go into all of them. 133 00:12:33,200 --> 00:12:39,280 But all these details are available on drivechain.info, and it's easy to find. I've given 134 00:12:39,280 --> 00:12:43,600 many different talks on this. So the heterogeneity thing is that people say, oh, Bitcoin's great, 135 00:12:43,600 --> 00:12:49,200 but can it do smart contracts or whatever? Can it do such and such? And instead of just trying 136 00:12:49,200 --> 00:12:57,440 to explain yourself, you just say, yes, CBIP300. And then relatedly, you have a fringe idea. You 137 00:12:57,440 --> 00:13:01,840 have an idea where you're not actually sure. It may be a genius idea, but you don't know yet. 138 00:13:01,840 --> 00:13:06,400 And they say, well, I have my new idea. It just needs such and such. Can we merge it into Bitcoin? 139 00:13:07,360 --> 00:13:13,440 And instead of trying to say, well, that's very difficult, blah, blah, blah, you just say, 140 00:13:13,440 --> 00:13:21,520 OK, use BIP300, put it on L2. So yeah, with scalability, people will sometimes confuse 141 00:13:21,520 --> 00:13:27,440 this idea with naive L1 large blockism, which is like Bitcoin Cash or whatever. That's not the 142 00:13:27,440 --> 00:13:33,360 idea. The idea is you have an optional section of the Bitcoin network that is larger blocks, 143 00:13:33,360 --> 00:13:38,080 so only the people who wanted them are over there. And that's the best of both worlds, 144 00:13:38,080 --> 00:13:41,680 because those people get exactly what they want. They get cheaper fees, and they get more expensive 145 00:13:41,680 --> 00:13:49,360 full nodes. And so, yes, we're almost at the end of the time. So I said how to get these BIPs. 146 00:13:49,920 --> 00:13:55,760 It's very important that we bring this up and dwell on this slide for a little moment, because 147 00:13:56,560 --> 00:14:00,560 something terrible happened in 2017, for those of you who don't know, where there was this activation 148 00:14:00,560 --> 00:14:09,680 drama regarding SegWit. And that was the number, just a little one over 2017. And so before then, 149 00:14:09,680 --> 00:14:15,200 Bitcoin upgraded in very many different ways, including the soft fork. But after SegWit, 150 00:14:15,200 --> 00:14:24,160 the soft fork has fallen into disuse, and there's a lot of fear and hurt feelings and 151 00:14:24,480 --> 00:14:30,640 and trauma as a result of this. And so we don't upgrade via the soft fork anymore. 152 00:14:31,440 --> 00:14:36,240 Even though it's a very easy thing to do, you just have 51% of the hashrate upgrade the software, 153 00:14:36,240 --> 00:14:44,800 we don't do it. And so this is not good, because BIP-118 is totally uncontroversial, 154 00:14:44,800 --> 00:14:48,320 but it has been sitting around for years because no one wants to take the initiative 155 00:14:48,880 --> 00:14:56,960 to ask miners to merge it. And then 119 had a very similar fate, where it was sitting around 156 00:14:56,960 --> 00:15:01,920 doing nothing, someone tried to activate it. And then even though no one has a problem with the 157 00:15:01,920 --> 00:15:07,360 actual content of the idea, just talking about activating it got this guy run out of town, 158 00:15:07,360 --> 00:15:11,120 and he later quit Bitcoin development, and he actually quit Bitcoin altogether. 159 00:15:11,120 --> 00:15:15,600 So basically, miners have to get involved and learn the issues if they want to potentially 160 00:15:15,600 --> 00:15:20,240 help the Bitcoin network upgrade again, like it did before. And not everyone could be a specialist, 161 00:15:20,240 --> 00:15:24,400 of course, but there are plenty of things you can do, like you're not a doctor either, 162 00:15:24,400 --> 00:15:27,760 but you can get like a second opinion or a third opinion. There's things you can do to 163 00:15:28,880 --> 00:15:34,480 pit different experts against each other and learn. So I'm just trying to say that, people, 164 00:15:34,480 --> 00:15:38,560 we have to solve this soft fork deadlock problem, and someone has to take responsibility, 165 00:15:38,560 --> 00:15:43,040 and it should be the miners, because they are the ones who will actually suffer the most 166 00:15:43,040 --> 00:15:46,880 if Bitcoin underperforms. Okay, cool. Hey, thanks. Thank you very much. 167 00:15:46,880 --> 00:15:51,440 Hey guys, thanks for coming out to the 2023 North American Blockchain Summit. 168 00:15:51,440 --> 00:15:56,720 It was the best summit yet. We look forward to hosting you again next year. If you enjoyed the 169 00:15:56,720 --> 00:16:02,560 summit or like what you saw in this video, be sure to subscribe. If you're interested in learning 170 00:16:02,560 --> 00:16:08,000 more about membership in the TBC, go to TexasBlockchainCouncil.org to learn more.